KLA-Tencor Reports Fiscal 2017 Second Quarter Results

January 26, 2017 at 4:15 PM EST

MILPITAS, Calif., Jan. 26, 2017 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2017, which ended on December 31, 2016, and reported GAAP net income of $238 million and GAAP earnings per diluted share of $1.52 on revenues of $877 million.

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"I am pleased to announce that KLA-Tencor's business continues to perform at a very high level, as we delivered another quarter of outstanding results in Q2 of fiscal 2017, exceeding our guidance for shipments, revenue and Non-GAAP earnings per diluted share for the period," commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor. "In addition, new orders topped $1 billion for the first time in the December quarter, reflecting KLA-Tencor's market leadership and the critical role process control plays in enabling our customers' success at the leading edge. These outstanding results are against the backdrop of a healthy overall demand environment for wafer fab equipment in the marketplace today, and position KLA-Tencor with good momentum heading into calendar 2017."

GAAP Results


Q2 FY 2017

Q1 FY 2017

Q2 FY 2016

Revenues

$877 million

$751 million

$710 million

Net Income

$238 million

$178 million

$152 million

Earnings per Diluted Share

$1.52

$1.13

$0.98





Non-GAAP Results


Q2 FY 2017

Q1 FY 2017

Q2 FY 2016

Net Income

$238 million

$182 million

$162 million

Earnings per Diluted Share

$1.52

$1.16

$1.04

 

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisitions, restructuring, severance, merger and other related charges and certain discrete tax items. KLA-Tencor will discuss the results for its fiscal year 2017 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Standard 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 (benefits), 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 (benefits) 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 (benefits) 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)

December 31, 2016


June 30, 2016

ASSETS




Cash, cash equivalents and marketable securities

$

2,592,977



$

2,491,294


Accounts receivable, net

663,852



613,233


Inventories

671,172



698,635


Other current assets

103,638



64,870


Land, property and equipment, net

279,966



278,014


Goodwill

335,170



335,177


Deferred income taxes, non-current

259,507



302,219


Purchased intangibles, net

2,551



4,331


Other non-current assets

185,623



174,659


Total assets

$

5,094,456



$

4,962,432


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

116,163



$

106,517


Deferred system profit

193,942



174,551


Unearned revenue

56,750



59,147


Current portion of long-term debt

249,958




Other current liabilities

570,923



662,208


Total current liabilities

1,187,736



1,002,423


Non-current liabilities:




Long-term debt

2,729,239



3,057,936


Unearned revenue

62,619



56,336


Other non-current liabilities

149,766



156,623


Total liabilities

4,129,360



4,273,318


Stockholders' equity:




Common stock and capital in excess of par value

483,077



452,974


Retained earnings

534,175



284,825


Accumulated other comprehensive income (loss)

(52,156)



(48,685)


Total stockholders' equity

965,096



689,114


Total liabilities and stockholders' equity

$

5,094,456



$

4,962,432


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations










Three months ended December 31,


Six months ended December 31,

(In thousands, except per share amounts)

2016


2015


2016


2015

Revenues:








Product

$

683,733



$

527,780



$

1,245,486



$

988,519


Service

193,152



182,465



382,072



364,370


Total revenues

876,885



710,245



1,627,558



1,352,889


Costs and expenses:








Costs of revenues

318,507



280,980



596,343



551,224


Research and development

130,912



118,272



260,145



238,215


Selling, general and administrative

93,532



96,532



187,920



188,195


Interest expense and other, net

27,089



28,986



54,085



55,481


Income before income taxes

306,845



185,475



529,065



319,774


Provision for income taxes

68,594



33,268



112,713



62,670


Net income

$

238,251



$

152,207



$

416,352



$

257,104


Net income per share:








Basic

$

1.52



$

0.98



$

2.66



$

1.65


Diluted

$

1.52



$

0.98



$

2.65



$

1.64


Cash dividends declared per share

$

0.54



$

0.52



$

1.06



$

1.04


Weighted-average number of shares:








Basic

156,335



155,252



156,232



156,036


Diluted

157,123



155,996



157,071



156,971


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows




Three months ended

December 31,

(In thousands)

2016


2015

Cash flows from operating activities:




Net income

$

238,251



$

152,207


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




Depreciation and amortization

14,892



16,529


Asset impairment charges



358


Non-cash stock-based compensation expense

12,444



11,325


Excess tax benefit from equity awards



(1,382)


Net gain on sales of marketable securities and other investments

(681)



(25)


Changes in assets and liabilities:




Decrease (increase) in accounts receivable, net

(24,386)



32,098


Decrease (increase) in inventories

13,132



(36,668)


Increase in other assets

(28,315)



(38,044)


Increase in accounts payable

11,786



15,047


Increase (decrease) in deferred system profit

8,302



(2,339)


Decrease in other liabilities

(23,012)



(48,782)


Net cash provided by operating activities

222,413



100,324


Cash flows from investing activities:




Acquisition of non-marketable securities

(900)




Capital expenditures, net

(8,629)



(7,938)


Proceeds from sale of assets

2,582



1,215


Purchases of available-for-sale securities

(372,950)



(281,503)


Proceeds from sale of available-for-sale securities

78,136



284,734


Proceeds from maturity of available-for-sale securities

159,077



141,362


Purchases of trading securities

(20,813)



(16,738)


Proceeds from sale of trading securities

23,164



20,036


Net cash provided by (used in) investing activities

(140,333)



141,168


Cash flows from financing activities:




Repayment of debt

(40,000)



(20,000)


Issuance of common stock

23,694



21,908


Tax withholding payments related to vested and released restricted stock units

(79)



(495)


Common stock repurchases



(39,119)


Payment of dividends to stockholders

(84,529)



(81,380)


Excess tax benefit from equity awards



1,382


Net cash used in financing activities

(100,914)



(117,704)


Effect of exchange rate changes on cash and cash equivalents

(10,458)



(894)


Net increase (decrease) in cash and cash equivalents

(29,292)



122,894


Cash and cash equivalents at beginning of period

966,325



763,697


Cash and cash equivalents at end of period

$

937,033



$

886,591


Supplemental cash flow disclosures:




Income taxes paid, net

$

71,164



$

51,631


Interest paid

$

56,773



$

56,711


Non-cash activities:




Purchase of land, property and equipment - investing activities

$

1,985



$

2,253


Dividends payable - financing activities

$

12,763



$

20,284


 

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


Six months ended




December
31, 2016


September
30, 2016


December
31, 2015


December
31, 2016


December
31, 2015

GAAP net income


$

238,251



$

178,101



$

152,207



$

416,352



$

257,104


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












Acquisition-related charges

a

513



1,267



1,309



1,780



4,890



Restructuring, severance and other related charges

b





1,742





8,808



Merger-related charges

c

4,069



3,605



8,820



7,674



8,820



Income tax effect of non-GAAP adjustments

d

(1,580)



(1,259)



(2,321)



(2,839)



(5,669)



Discrete tax items

e

(3,064)







(3,064)




Non-GAAP net income


$

238,189



$

181,714



$

161,757



$

419,903



$

273,953


GAAP net income per diluted share


$

1.52



$

1.13



$

0.98



$

2.65



$

1.64


Non-GAAP net income per diluted share


$

1.52



$

1.16



$

1.04



$

2.67



$

1.75


Shares used in diluted shares calculation


157,123



157,021



155,996



157,071



156,971


 

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 December 31, 2016








Costs of revenues

$

500



$



$

348



$

848


Research and development





1,054



1,054


Selling, general and administrative

13





2,667



2,680


Total in three months ended December 31, 2016

$

513



$



$

4,069



$

4,582


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 December 31, 2015








Costs of revenues

$

663



$

470



$

67



$

1,200


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


 

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, and 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.
    3. Merger-related charges associated with the terminated merger agreement between KLA-Tencor and Lam Research Corporation ("Lam") primarily includes employee retention-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.
    5. Discrete tax items includes the tax impact of certain merger-related charges that only became deductible during the three months ended December 31, 2016 as a result of the termination of the proposed merger between KLA-Tencor and Lam. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability.  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.

 

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SOURCE KLA-Tencor Corporation

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