KLA-Tencor Reports Fiscal 2017 First Quarter Results

October 20, 2016 at 4:15 PM EDT

MILPITAS, Calif., Oct. 20, 2016 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2017, which ended on September 30, 2016, and reported GAAP net income of $178 million and GAAP earnings per diluted share of $1.13 on revenues of $751 million.

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"KLA-Tencor's Q1 results finished above the midpoint of the range of guidance for shipments and revenue for the quarter, and exceeded the range for Non-GAAP diluted earnings per share," commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor. "Our performance in Q1 was fueled by strong customer acceptance of new products and a business model that consistently delivers superior operating leverage, providing the resources to rank KLA-Tencor among the top tier of all companies in tech in terms of cash returns to stockholders."

GAAP Results


Q1 FY 2017

Q4 FY 2016

Q1 FY 2016

Revenues

$751 million

$919 million

$643 million

Net Income

$178 million

$272 million

$105 million

Earnings per Diluted Share

$1.13

$1.73

$0.66





Non-GAAP Results


Q1 FY 2017

Q4 FY 2016

Q1 FY 2016

Net Income

$182 million

$277 million

$112 million

Earnings per Diluted Share

$1.16

$1.77

$0.71

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, and merger-related charges. KLA-Tencor will discuss the results for its fiscal year 2017 first quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Daylight Time. A webcast of the call will be available at: www.kla-tencor.com.

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 40 years. Headquartered in Milpitas, Calif., KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at http://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)

September 30, 2016


June 30, 2016

ASSETS




Cash, cash equivalents and marketable securities

$

2,494,621



$

2,491,294


Accounts receivable, net

654,699



613,233


Inventories

703,262



698,635


Other current assets

76,580



64,870


Land, property and equipment, net

272,351



278,014


Goodwill

335,198



335,177


Deferred income taxes, non-current

267,793



302,219


Purchased intangibles, net

3,065



4,331


Other non-current assets

188,529



174,659


Total assets

$

4,996,098



$

4,962,432


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

105,066



$

106,517


Deferred system profit

185,640



174,551


Unearned revenue

54,841



59,147


Other current liabilities

629,194



662,208


Total current liabilities

974,741



1,002,423


Non-current liabilities:




Long-term debt

3,018,567



3,057,936


Unearned revenue

60,279



56,336


Other non-current liabilities

161,002



156,623


Total liabilities

4,214,589



4,273,318


Stockholders' equity:




Common stock and capital in excess of par value

447,018



452,974


Retained earnings

381,124



284,825


Accumulated other comprehensive income (loss)

(46,633)



(48,685)


Total stockholders' equity

781,509



689,114


Total liabilities and stockholders' equity

$

4,996,098



$

4,962,432


 

KLA-Tencor Corporation




Condensed Consolidated Unaudited Statements of Operations






Three months ended September 30,

(In thousands, except per share amounts)

2016


2015

Revenues:




Product

$

561,753



$

460,739


Service

188,920



181,905


Total revenues

750,673



642,644


Costs and expenses:




Costs of revenues

277,836



270,244


Research and development

129,233



119,943


Selling, general and administrative

94,388



91,663


Interest expense and other, net

26,996



26,495


Income before income taxes

222,220



134,299


Provision for income taxes

44,119



29,402


Net income

$

178,101



$

104,897


Net income per share:




Basic

$

1.14



$

0.67


Diluted

$

1.13



$

0.66


Cash dividends declared per share

$

0.52



$

0.52


Weighted-average number of shares:




Basic

156,129



156,820


Diluted

157,021



157,984


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



Three months ended

September 30,

(In thousands)

2016


2015

Cash flows from operating activities:




Net income

$

178,101



$

104,897


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




Depreciation and amortization

14,422



19,735


Asset impairment charges

358




Non-cash stock-based compensation expense

11,478



12,248


Excess tax benefit from equity awards



(10,159)


Net gain on sales of marketable securities and other investments

(204)



(1,233)


Changes in assets and liabilities:




Decrease (increase) in accounts receivable, net

(38,241)



124,925


Decrease (increase) in inventories

1,187



(31,243)


Decrease in other assets

19,477



34,381


Increase (decrease) in accounts payable

(1,547)



4,158


Increase (decrease) in deferred system profit

11,089



(14,504)


Decrease in other liabilities

(26,343)



(49,423)


Net cash provided by operating activities

169,777



193,782


Cash flows from investing activities:




Acquisition of non-marketable securities

(1,470)




Capital expenditures, net

(9,883)



(7,341)


Purchases of available-for-sale securities

(457,512)



(343,358)


Proceeds from sale of available-for-sale securities

111,106



200,353


Proceeds from maturity of available-for-sale securities

197,100



184,973


Purchases of trading securities

(52,465)



(18,267)


Proceeds from sale of trading securities

45,301



15,540


Net cash provided by (used in) investing activities

(167,823)



31,900


Cash flows from financing activities:




Repayment of debt

(40,000)



(40,000)


Tax withholding payments related to vested and released restricted stock units

(17,376)



(21,526)


Common stock repurchases



(142,592)


Payment of dividends to stockholders

(89,313)



(101,674)


Excess tax benefit from equity awards



10,159


Net cash used in financing activities

(146,689)



(295,633)


Effect of exchange rate changes on cash and cash equivalents

2,572



(4,377)


Net decrease in cash and cash equivalents

(142,163)



(74,328)


Cash and cash equivalents at beginning of period

1,108,488



838,025


Cash and cash equivalents at end of period

$

966,325



$

763,697


Supplemental cash flow disclosures:




Income taxes paid, net

$

39,411



$

7,844


Interest paid

$

3,243



$

3,149


Non-cash activities:




Purchase of land, property and equipment - investing activities

$

1,974



$

1,490


Unsettled common stock repurchase - financing activities

$



$

9,610


Dividends payable - financing activities

$

12,045



$

20,892


 

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




September 30, 2016


June 30, 2016


September 30, 2015

GAAP net income


$

178,101



$

271,541



$

104,897


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








Acquisition-related charges

a

1,267



1,294



3,581



Restructuring, severance and other related charges

b





7,066



Merger-related charges

c

3,605



5,795





Income tax effect of non-GAAP adjustments

d

(1,259)



(1,795)



(3,348)


Non-GAAP net income


$

181,714



$

276,835



$

112,196


GAAP net income per diluted share


$

1.13



$

1.73



$

0.66


Non-GAAP net income per diluted share


$

1.16



$

1.77



$

0.71


Shares used in diluted shares calculation


157,021



156,618



157,984


 

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 September 30, 2016








Costs of revenues

$

650



$



$

260



$

910


Research and development





982



982


Selling, general and administrative

617





2,363



2,980


Total in three months ended September 30, 2016

$

1,267



$



$

3,605



$

4,872


Three months ended June 30, 2016








Costs of revenues

$

658



$



$

346



$

1,004


Research and development





1,223



1,223


Selling, general and administrative

636





4,226



4,862


Total in three months ended June 30, 2016

$

1,294



$



$

5,795



$

7,089


Three months ended September 30, 2015








Costs of revenues

$

2,285



$

2,770



$



$

5,055


Research and development

650



1,010





1,660


Selling, general and administrative

646



3,286





3,932


Total in three months ended September 30, 2015

$

3,581



$

7,066



$



$

10,647


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.

    1. 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.
    2. Restructuring, severance and other related charges include costs associated with employee severance and other exit costs. 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.
    3. Merger-related charges that are directly related to the proposed merger between KLA-Tencor and Lam that was terminated on October 5, 2016. Charges primarily includes employee-related expenses, legal expenses and other costs. 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.
    4. 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.

 

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SOURCE KLA-Tencor Corporation

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