KLA-Tencor Reports Fiscal 2016 Third Quarter Results

News provided by

KLA-Tencor Corporation

Apr 26, 2016, 04:15 ET

MILPITAS, Calif., April 26, 2016 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2016, which ended on March 31, 2016, reporting GAAP net income of $176 million and GAAP earnings per diluted share of $1.12 on revenues of $712 million.

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GAAP Results

Q3 FY 2016

Q2 FY 2016

Q3 FY 2015

Revenues

$712 million

$710 million

$738 million

Net Income

$176 million

$152 million

$132 million

Earnings per Diluted Share

$1.12

$0.98

$0.81


Non-GAAP Results

Q3 FY 2016

Q2 FY 2016

Q3 FY 2015

Net Income

$179 million

$162 million

$137 million

Earnings per Diluted Share

$1.15

$1.04

$0.84

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisitions, restructuring, severance and other related charges, merger-related charges, and debt extinguishment loss and recapitalization charges.

In light of the pending merger transaction with Lam Research Corporation, KLA-Tencor has discontinued conducting quarterly earnings conference calls to discuss financial results, but instead publish a quarterly stockholder letter and other supplemental data on the Investor Relations section of the KLA-Tencor website.

About KLA-Tencor:

KLA-Tencor Corporation, a leading provider of process control and yield management solutions, partners with customers around the world to develop state-of-the-art inspection and metrology technologies. These technologies serve the semiconductor, LED and other related nanoelectronics industries. With a portfolio of industry-standard products and a team of world-class engineers and scientists, the company has created superior solutions for its customers for nearly 40 years. Headquartered in Milpitas, California, KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at www.kla-tencor.com. (KLAC-F)

Use of Non-GAAP Financial Information:

The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for, KLA-Tencor's financial results presented in accordance with United States GAAP.

To supplement KLA-Tencor's condensed consolidated financial statements presented in accordance with GAAP, the company provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of KLA-Tencor's operating performance and its prospects in the future. Specifically, KLA-Tencor believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA-Tencor's financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

KLA-Tencor Corporation


Condensed Consolidated Unaudited Balance Sheets






(In thousands)

March 31, 2016

June 30, 2015

ASSETS


Cash, cash equivalents and marketable securities

$

2,241,310

$

2,387,111

Accounts receivable, net

624,818

585,494

Inventories

721,493

617,904

Other current assets

318,852

314,067

Land, property and equipment, net

287,874

314,591

Goodwill

335,205

335,263

Purchased intangibles, net

5,625

11,895

Other non-current assets

246,925

259,687

Total assets

$

4,782,102

$

4,826,012

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

126,322

$

103,342

Deferred system profit

193,219

148,691

Unearned revenue

51,820

71,335

Current portion of long-term debt

—

16,981

Other current liabilities

626,331

661,414

Total current liabilities

997,692

1,001,763

Non-current liabilities:


Long-term debt

3,097,306

3,173,435

Unearned revenue

51,065

47,145

Other non-current liabilities

159,467

182,230

Total liabilities

4,305,530

4,404,573

Stockholders' equity:


Common stock and capital in excess of par value

424,474

474,374

Retained earnings (accumulated deficit)

95,121

(12,362)

Accumulated other comprehensive income (loss)

(43,023)

(40,573)

Total stockholders' equity

476,572

421,439

Total liabilities and stockholders' equity

$

4,782,102

$

4,826,012

KLA-Tencor Corporation





Condensed Consolidated Unaudited Statements of Operations









Three months ended March 31,

Nine months ended March 31,

(In thousands, except per share amounts)

2016

2015

2016

2015

Revenues:






Product

$

530,623

$

565,181

$

1,519,142

$

1,545,663

Service

181,810

173,278

546,180

512,054

Total revenues

712,433

738,459

2,065,322

2,057,717

Costs and expenses:






Costs of revenues

274,599

320,282

825,823

891,962

Engineering, research and development

115,589

124,583

353,804

401,777

Selling, general and administrative

87,407

98,608

275,602

305,125

Interest expense and other, net

24,907

28,532

80,388

67,991

Loss on extinguishment of debt and other, net

—

—

—

131,669

Income before income taxes

209,931

166,454

529,705

259,193

Provision for income taxes

34,154

34,816

96,824

35,054

Net income

$

175,777

$

131,638

$

432,881

$

224,139

Net income per share:






Basic

$

1.13

$

0.81

$

2.78

$

1.37

Diluted

$

1.12

$

0.81

$

2.76

$

1.36

Cash dividends declared per share (including a special cash dividend of $16.50 per share declared during the three months ended December 31, 2014)

$

0.52

$

0.50

$

1.56

$

18.00

Weighted-average number of shares:






Basic

155,690

161,559

155,921

163,494

Diluted

156,429

162,794

156,797

164,930

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

March 31,

(In thousands)

2016

2015

Cash flows from operating activities:


Net income

$

175,777

$

131,638

Adjustments to reconcile net income to net cash provided by operating activities:


Depreciation and amortization

15,780

20,510

Asset impairment charges

1,038

1,698

Non-cash stock-based compensation expense

9,185

12,767

Excess tax benefit from equity awards

(635)

(398)

Net gain on sales of marketable securities and other investments

(2,847)

(60)

Changes in assets and liabilities:


Increase in accounts receivable, net

(186,715)

(1,213)

Decrease (increase) in inventories

(26,065)

23,745

Decrease in other assets

8,322

20,096

Increase (decrease) in accounts payable

3,751

(5,054)

Increase (decrease) in deferred system profit

61,371

(21,732)

Increase in other liabilities

52,535

60,420

Net cash provided by operating activities

111,497

242,417

Cash flows from investing activities:


Capital expenditures, net

(8,954)

(10,326)

Proceeds from sale of assets

2,811

—

Purchases of available-for-sale securities

(249,126)

(339,580)

Proceeds from sale of available-for-sale securities

147,120

223,438

Proceeds from maturity of available-for-sale securities

146,102

181,151

Purchases of trading securities

(13,243)

(9,383)

Proceeds from sale of trading securities

16,162

13,765

Net cash provided by investing activities

40,872

59,065

Cash flows from financing activities:


Repayment of debt

(35,000)

(9,375)

Issuance of common stock

2

175

Tax withholding payments related to vested and released restricted stock units

(1,702)

(1,990)

Common stock repurchases

—

(168,670)

Payment of dividends to stockholders

(82,109)

(82,250)

Excess tax benefit from equity awards

635

398

Net cash used in financing activities

(118,174)

(261,712)

Effect of exchange rate changes on cash and cash equivalents

5,188

(2,743)

Net increase in cash and cash equivalents

39,383

37,027

Cash and cash equivalents at beginning of period

886,591

584,865

Cash and cash equivalents at end of period

$

925,974

$

621,892

Supplemental cash flow disclosures:


Income taxes paid, net

$

22,304

$

8,101

Interest paid

$

3,482

$

4,341

Non-cash activities:


Purchase of land, property and equipment - investing activities

$

2,311

$

2,255

Unsettled common stock repurchase - financing activities

$

—

$

12,862

Dividends payable - financing activities

$

18,827

$

41,412

KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share amounts)


Reconciliation of GAAP Net Income to Non-GAAP Net Income

Three months ended

Nine months ended

March 31, 2016

December 31, 2015

March 31, 2015

March 31, 2016

March 31, 2015

GAAP net income

$

175,777

$

152,207

$

131,638

$

432,881

$

224,139

Adjustments to reconcile GAAP net income to non-GAAP net income










Acquisition-related charges

a

1,309

1,309

3,928

6,199

11,758

Restructuring, severance and other related charges

b

137

1,742

3,636

8,945

10,992

Merger-related charges

c

3,582

8,820

—

12,402

—

Debt extinguishment loss and recapitalization charges

d

—

—

—

—

134,147

Income tax effect of non-GAAP adjustments

e

(1,535)

(2,321)

(1,840)

(7,204)

(52,099)

Non-GAAP net income

$

179,270

$

161,757

$

137,362

$

453,223

$

328,937

GAAP net income per diluted share

$

1.12

$

0.98

$

0.81

$

2.76

$

1.36

Non-GAAP net income per diluted share

$

1.15

$

1.04

$

0.84

$

2.89

$

1.99

Shares used in diluted shares calculation

156,429

155,996

162,794

156,797

164,930

Pre-tax impact of items included in Condensed Consolidated Unaudited Statements of Operations

Acquisition-related charges

Restructuring, severance and other related charges

Merger-related charges

Total pre-tax GAAP to non-GAAP adjustments

Three months ended March 31, 2016






Costs of revenues

$

663

$

121

$

238

$

1,022

Engineering, research and development

—

5

508

513

Selling, general and administrative

646

11

2,836

3,493

Total in three months ended March 31, 2016

$

1,309

$

137

$

3,582

$

5,028

Three months ended December 31, 2015






Costs of revenues

$

663

$

470

$

67

$

1,200

Engineering, research and development

—

479

—

479

Selling, general and administrative

646

793

8,753

10,192

Total in three months ended December 31, 2015

$

1,309

$

1,742

$

8,820

$

11,871

Three months ended March 31, 2015






Costs of revenues

$

2,507

$

211

$

—

$

2,718

Engineering, research and development

700

680

—

1,380

Selling, general and administrative

721

2,745

—

3,466

Total in three months ended March 31, 2015

$

3,928

$

3,636

$

—

$

7,564

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of our operating performance and our prospects in the future. Specifically, we believe that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

a.   

Acquisition-related charges includes amortization of intangible assets associated with acquisitions. Management believes that the expense associated with the amortization of acquisition related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and exclusion of these expenses allows comparisons of operating results that are consistent over time for both KLA-Tencor's newly acquired and long-held businesses. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

b.   

Restructuring, severance and other related charges include costs associated with employee severance and other exit costs, impairment of certain long-lived assets. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

c.     

Merger-related charges that are directly related to the pending merger between KLA-Tencor and Lam as announced on October 21, 2015. Charges primarily includes costs for advisory services, appraisals, legal services, employee-related expense and auditing services. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability and excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

d.    

Debt extinguishment loss and recapitalization charges include a pre-tax loss on early extinguishment of debt related to the 6.900% Senior Notes due in 2018, net and certain other expenses incurred in connection with the leveraged recapitalization plan which was completed in the second quarter of fiscal year ended June 30, 2015. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability and excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

e.  

Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

SOURCE KLA-Tencor Corporation