KLA-Tencor Reports Fiscal 2018 First Quarter Results

October 26, 2017 at 4:15 PM EDT

MILPITAS, Calif., Oct. 26, 2017 /PRNewswire/ -- KLA-Tencor Corporation(NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2018, which ended on Sept. 30, 2017, and reported GAAP net income of $281 million and GAAP earnings per diluted share of $1.78 on revenues of $970 million.

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"I am very pleased to report that KLA-Tencor delivered record shipments, revenues and non-GAAP earnings per diluted share in Q1 of fiscal 2018," commented Rick Wallace, president and chief executive officer of KLA-Tencor. "These results demonstrate successful execution of our long term strategies, and the critical nature process control plays in enabling semiconductor industry growth."

GAAP Results


Q1 FY 2018

Q4 FY 2017

Q1 FY 2017

Revenues

$970 million

$939 million

$751 million

Net Income

$281 million

$256 million

$178 million

Earnings per Diluted Share

$1.78

$1.62

$1.13





Non-GAAP Results


Q1 FY 2018

Q4 FY 2017

Q1 FY 2017

Net Income

$284 million

$259 million

$182 million

Earnings per Diluted Share

$1.80

$1.64

$1.16

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 2018 first 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 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 more than 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)

Sept. 30, 2017


June 30, 2017

ASSETS




Cash, cash equivalents and marketable securities

$

3,056,484



$

3,016,740


Accounts receivable, net

666,738



571,117


Inventories

762,401



732,988


Other current assets

73,873



71,221


Land, property and equipment, net

279,872



283,975


Goodwill

349,678



349,526


Deferred income taxes, non-current

282,302



291,967


Purchased intangibles, net

17,763



18,963


Other non-current assets

201,287



195,676


Total assets

$

5,690,398



$

5,532,173


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

138,657



$

147,380


Deferred system profit

209,267



180,861


Unearned revenue

61,484



65,507


Current portion of long-term debt

249,996



249,983


Other current liabilities

806,636



649,431


Total current liabilities

1,466,040



1,293,162


Non-current liabilities:




Long-term debt

2,524,842



2,680,474


Unearned revenue

60,456



59,713


Other non-current liabilities

175,104



172,407


Total liabilities

4,226,442



4,205,756


Stockholders' equity:




Common stock and capital in excess of par value

518,223



529,283


Retained earnings

996,514



848,457


Accumulated other comprehensive income (loss)

(50,781)



(51,323)


Total stockholders' equity

1,463,956



1,326,417


Total liabilities and stockholders' equity

$

5,690,398



$

5,532,173


 

KLA-Tencor Corporation




Condensed Consolidated Unaudited Statements of Operations






Three months ended Sept. 30,

(In thousands, except per share amounts)

2017


2016

Revenues:




Product

$

760,787



$

561,753


Service

208,794



188,920


Total revenues

969,581



750,673


Costs and expenses:




Costs of revenues

353,449



277,836


Research and development

146,732



129,233


Selling, general and administrative

107,713



94,388


Interest expense and other, net

25,535



26,996


Income before income taxes

336,152



222,220


Provision for income taxes

55,216



44,119


Net income

$

280,936



$

178,101


Net income per share:




Basic

$

1.79



$

1.14


Diluted

$

1.78



$

1.13


Cash dividends declared per share

$

0.59



$

0.52


Weighted-average number of shares:




Basic

156,826



156,129


Diluted

157,846



157,021


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



Three months ended

Sept. 30,

(In thousands)

2017


2016

Cash flows from operating activities:




Net income

$

280,936



$

178,101


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




Depreciation and amortization

15,282



14,422


Asset impairment charges

1,000



358


Non-cash stock-based compensation expense

14,031



11,478


Net gain on sales of marketable securities and other investments

(20)



(204)


Changes in assets and liabilities, net of business acquisition:




Accounts receivable, net

(95,621)



(38,241)


Inventories

(20,194)



1,187


Other assets

(2,235)



19,477


Accounts payable

(8,877)



(1,547)


Deferred system profit

28,406



11,089


Other liabilities

160,921



(26,343)


Net cash provided by operating activities

373,629



169,777


Cash flows from investing activities:




Acquisition of non-marketable securities



(1,470)


Business acquisition

(710)




Capital expenditures, net

(15,756)



(9,883)


Purchases of available-for-sale securities

(191,744)



(457,512)


Proceeds from sale of available-for-sale securities

50,095



111,106


Proceeds from maturity of available-for-sale securities

268,665



197,100


Purchases of trading securities

(11,876)



(52,465)


Proceeds from sale of trading securities

14,320



45,301


Net cash provided by (used in) investing activities

112,994



(167,823)


Cash flows from financing activities:




Repayment of debt

(156,250)



(40,000)


Tax withholding payments related to vested and released restricted stock units

(23,628)



(17,376)


Common stock repurchases

(39,927)




Payment of dividends to stockholders

(100,327)



(89,313)


Net cash used in financing activities

(320,132)



(146,689)


Effect of exchange rate changes on cash and cash equivalents

1,155



2,572


Net increase (decrease) in cash and cash equivalents

167,646



(142,163)


Cash and cash equivalents at beginning of period

1,153,051



1,108,488


Cash and cash equivalents at end of period

$

1,320,697



$

966,325


Supplemental cash flow disclosures:




Income taxes paid, net

$

23,858



$

39,411


Interest paid

$

3,005



$

3,243


Non-cash activities:




Purchase of land, property and equipment - investing activities

$

4,734



$

1,974


Business acquisition holdback amounts - investing activities

$

4,780



$


Unsettled common stock repurchase - financing activities

$

848



$


Dividends payable - financing activities

$

7,011



$

12,045


 

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




Sept. 30,
2017


June 30,
2017


Sept. 30,
2016

GAAP net income


$

280,936



$

256,162



$

178,101


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








Acquisition-related charges

a

1,587



1,029



1,267



Merger-related charges

b

3,015



3,072



3,605



Income tax effect of non-GAAP adjustments

c

(1,599)



(1,295)



(1,259)


Non-GAAP net income


$

283,939



$

258,968



$

181,714


GAAP net income per diluted share


$

1.78



$

1.62



$

1.13


Non-GAAP net income per diluted share


$

1.80



$

1.64



$

1.16


Shares used in diluted shares calculation


157,846



157,931



157,021


 

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



Acquisition-
related charges


Merger-related
charges


Total pre-tax
GAAP to non-
GAAP
adjustments

Three months ended Sept. 30, 2017






Costs of revenues

$

1,530



$

405



$

1,935


Research and development



1,147



1,147


Selling, general and administrative

57



1,463



1,520


Total in three months ended Sept. 30, 2017

$

1,587



$

3,015



$

4,602


Three months ended June 30, 2017






Costs of revenues

$

708



$

9



$

717


Research and development



995



995


Selling, general and administrative

321



2,068



2,389


Total in three months ended June 30, 2017

$

1,029



$

3,072



$

4,101


Three months ended Sept. 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 Sept. 30, 2016

$

1,267



$

3,605



$

4,872


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 include amortization of intangible assets and inventory fair value adjustments, and transaction costs associated with acquisitions. Management believes that the expense associated with the amortization of acquisition related intangible assets and acquisition related costs are 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 performances with our results in prior periods as well as with the performance of other companies.

b.      

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.

c.       

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

Investor Relations: Ed Lockwood, Sr. Director, Investor Relations, (408) 875-9529, ed.lockwood@kla-tencor.com; Media Relations: Becky Howland, Ph.D., Sr. Director, Corporate Communications, (408) 875-9350, becky.howland@kla-tencor.com