KLA-Tencor Reports Fiscal 2017 Third Quarter Results

April 27, 2017 at 4:15 PM EDT

MILPITAS, Calif., April 27, 2017 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2017, which ended on March 31, 2017, and reported GAAP net income of $254 million and GAAP earnings per diluted share of $1.61 on revenues of $914 million.

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"KLA-Tencor delivered excellent results in Q3 of fiscal 2017, thanks to another outstanding performance by our employees in executing the Company's growth strategies in an exciting and dynamic period for the Company, and for the semiconductor industry," commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor. "These outstanding results are the product of KLA-Tencor's market leadership and continued track record of successful execution of our strategic objectives."

GAAP Results

 

Q3 FY 2017

Q2 FY 2017

Q3 FY 2016

Revenues

$914 million

$877 million

$712 million

Net Income

$254 million

$238 million

$176 million

Earnings per Diluted Share

$1.61

$1.52

$1.12

       

Non-GAAP Results

 

Q3 FY 2017

Q2 FY 2017

Q3 FY 2016

Net Income

$256 million

$238 million

$179 million

Earnings per Diluted Share

$1.62

$1.52

$1.15

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 third quarter, along with its outlook, on a conference call today beginning at 3:00 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 (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)

March 31, 2017

 

June 30, 2016

ASSETS

     

Cash, cash equivalents and marketable securities

$

2,703,514

   

$

2,491,294

 

Accounts receivable, net

734,717

   

613,233

 

Inventories

696,784

   

698,635

 

Other current assets

118,315

   

64,870

 

Land, property and equipment, net

285,740

   

278,014

 

Goodwill

335,236

   

335,177

 

Deferred income taxes, non-current

258,005

   

302,219

 

Purchased intangibles, net

2,038

   

4,331

 

Other non-current assets

190,096

   

174,659

 

Total assets

$

5,324,445

   

$

4,962,432

 

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current liabilities:

     

Accounts payable

$

139,452

   

$

106,517

 

Deferred system profit

189,367

   

174,551

 

Unearned revenue

51,849

   

59,147

 

Current portion of long-term debt

249,971

   

 

Other current liabilities

618,547

   

662,208

 

Total current liabilities

1,249,186

   

1,002,423

 

Non-current liabilities:

     

Long-term debt

2,704,856

   

3,057,936

 

Unearned revenue

62,515

   

56,336

 

Other non-current liabilities

160,576

   

156,623

 

Total liabilities

4,177,133

   

4,273,318

 

Stockholders' equity:

     

Common stock and capital in excess of par value

493,899

   

452,974

 

Retained earnings

702,297

   

284,825

 

Accumulated other comprehensive income (loss)

(48,884)

   

(48,685)

 

Total stockholders' equity

1,147,312

   

689,114

 

Total liabilities and stockholders' equity

$

5,324,445

   

$

4,962,432

 

 

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)

2017

 

2016

 

2017

 

2016

Revenues:

             

Product

$

721,016

   

$

530,623

   

$

1,966,502

   

$

1,519,142

 

Service

192,793

   

181,810

   

574,865

   

546,180

 

Total revenues

913,809

   

712,433

   

2,541,367

   

2,065,322

 

Costs and expenses:

             

Costs of revenues

343,274

   

274,599

   

939,617

   

825,823

 

Research and development

130,170

   

115,589

   

390,315

   

353,804

 

Selling, general and administrative

96,252

   

87,407

   

284,172

   

275,602

 

Interest expense and other, net

24,964

   

24,907

   

79,049

   

80,388

 

Income before income taxes

319,149

   

209,931

   

848,214

   

529,705

 

Provision for income taxes

65,587

   

34,154

   

178,300

   

96,824

 

Net income

$

253,562

   

$

175,777

   

$

669,914

   

$

432,881

 

Net income per share:

             

Basic

$

1.62

   

$

1.13

   

$

4.28

   

$

2.78

 

Diluted

$

1.61

   

$

1.12

   

$

4.26

   

$

2.76

 

Cash dividends declared per share

$

0.54

   

$

0.52

   

$

1.60

   

$

1.56

 

Weighted-average number of shares:

             

Basic

156,749

   

155,690

   

156,402

   

155,921

 

Diluted

157,746

   

156,429

   

157,297

   

156,797

 

 

KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows

   
 

Three months ended

March 31,

(In thousands)

2017

 

2016

Cash flows from operating activities:

     

Net income

$

253,562

   

$

175,777

 

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

     

Depreciation and amortization

14,198

   

15,780

 

Asset impairment charges

   

1,038

 

Non-cash stock-based compensation expense

12,536

   

9,185

 

Excess tax benefit from equity awards

   

(635)

 

Net gain on sales of marketable securities and other investments

53

   

(2,847)

 

Changes in assets and liabilities:

     

Increase in accounts receivable, net

(64,509)

   

(186,715)

 

Increase in inventories

(28,288)

   

(26,065)

 

Decrease (increase) in other assets

(18,751)

   

8,322

 

Increase in accounts payable

23,017

   

3,751

 

Increase (decrease) in deferred system profit

(4,426)

   

61,371

 

Increase in other liabilities

37,446

   

52,535

 

Net cash provided by operating activities

224,838

   

111,497

 

Cash flows from investing activities:

     

Capital expenditures, net

(9,414)

   

(8,954)

 

Proceeds from sale of assets

   

2,811

 

Purchases of available-for-sale securities

(382,138)

   

(249,126)

 

Proceeds from sale of available-for-sale securities

175,188

   

147,120

 

Proceeds from maturity of available-for-sale securities

115,547

   

146,102

 

Purchases of trading securities

(14,553)

   

(13,243)

 

Proceeds from sale of trading securities

16,999

   

16,162

 

Net cash provided by (used in) investing activities

(98,371)

   

40,872

 

Cash flows from financing activities:

     

Repayment of debt

(25,000)

   

(35,000)

 

Issuance of common stock

   

2

 

Tax withholding payments related to vested and released restricted stock units

(1,714)

   

(1,702)

 

Payment of dividends to stockholders

(85,514)

   

(82,109)

 

Excess tax benefit from equity awards

   

635

 

Net cash used in financing activities

(112,228)

   

(118,174)

 

Effect of exchange rate changes on cash and cash equivalents

4,535

   

5,188

 

Net increase in cash and cash equivalents

18,774

   

39,383

 

Cash and cash equivalents at beginning of period

937,033

   

886,591

 

Cash and cash equivalents at end of period

$

955,807

   

$

925,974

 

Supplemental cash flow disclosures:

     

Income taxes paid, net

$

79,590

   

$

22,304

 

Interest paid

$

3,117

   

$

3,482

 

Non-cash activities:

     

Purchase of land, property and equipment - investing activities

$

3,218

   

$

2,311

 

Dividends payable - financing activities

$

12,643

   

$

18,827

 

 

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,
2017

 

December 31,
2016

 

March 31,
2016

 

March 31,
2017

 

March 31,
2016

GAAP net income

 

$

253,562

   

$

238,251

   

$

175,777

   

$

669,914

   

$

432,881

 

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

                   
 

Acquisition-related charges

a

513

   

513

   

1,309

   

2,293

   

6,199

 
 

Restructuring, severance and other related charges

b

   

   

137

   

   

8,945

 
 

Merger-related charges

c

3,221

   

4,069

   

3,582

   

10,895

   

12,402

 
 

Income tax effect of non-GAAP adjustments

d

(1,272)

   

(1,580)

   

(1,535)

   

(4,111)

   

(7,204)

 
 

Discrete tax items

e

   

(3,064)

   

   

(3,064)

   

 

Non-GAAP net income

 

$

256,024

   

$

238,189

   

$

179,270

   

$

675,927

   

$

453,223

 

GAAP net income per diluted share

 

$

1.61

   

$

1.52

   

$

1.12

   

$

4.26

   

$

2.76

 

Non-GAAP net income per diluted share

 

$

1.62

   

$

1.52

   

$

1.15

   

$

4.30

   

$

2.89

 

Shares used in diluted shares calculation

 

157,746

   

157,123

   

156,429

   

157,297

   

156,797

 

 

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, 2017

             

Costs of revenues

$

500

   

$

   

$

362

   

$

862

 

Research and development

   

   

997

   

997

 

Selling, general and administrative

13

   

   

1,862

   

1,875

 

Total in three months ended March 31, 2017

$

513

   

$

   

$

3,221

   

$

3,734

 

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 March 31, 2016

             

Costs of revenues

$

663

   

$

121

   

$

238

   

$

1,022

 

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

 

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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