KLA-Tencor Reports Fiscal 2018 Third Quarter Results

April 26, 2018 at 4:15 PM EDT

MILPITAS, Calif., April 26, 2018 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2018, which ended on March 31, 2018, and reported GAAP net income of $307 million and GAAP earnings per diluted share of $1.95 on revenues of $1,021 million.

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"KLA-Tencor delivered another record performance in the March quarter, with revenue topping $1 billion in the period, and finishing at the upper end of the range of guidance," commented Rick Wallace, president and chief executive officer of KLA-Tencor. "This was driven by our ongoing focus on customer success and technology leadership, and reflects the strong momentum we are experiencing in the marketplace across each of our major product groups, and in services."

GAAP Results


Q3 FY 2018

Q2 FY 2018

Q3 FY 2017

Revenues

$1,021 million

$976 million

$914 million

Net Income (Loss)

$307 million

$(134) million

$254 million

Earnings (Loss) per Diluted Share

$1.95

$(0.86)

$1.61





Non-GAAP Results


Q3 FY 2018

Q2 FY 2018

Q3 FY 2017

Net Income

$318 million

$309 million

$256 million

Earnings per Diluted Share

$2.02

$1.97

$1.62

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 or pending acquisitions, restructuring, severance, merger and other related charges and certain discrete tax items. KLA-Tencor will discuss the results for its fiscal year 2018 third quarter, along with its outlook, on a conference call today beginning at 3:00 p.m. Pacific 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)

March 31, 2018


June 30, 2017

ASSETS




Cash, cash equivalents and marketable securities

$

2,889,982



$

3,016,740


Accounts receivable, net

660,455



571,117


Inventories

858,924



732,988


Other current assets

131,153



71,221


Land, property and equipment, net

284,496



283,975


Goodwill

349,998



349,526


Deferred income taxes, non-current

193,953



291,967


Purchased intangibles, net

15,376



18,963


Other non-current assets

213,847



195,676


Total assets

$

5,598,184



$

5,532,173


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

169,459



$

147,380


Deferred system profit

258,142



180,861


Unearned revenue

56,141



65,507


Current portion of long-term debt



249,983


Other current liabilities

716,693



649,431


Total current liabilities

1,200,435



1,293,162


Non-current liabilities:




Long-term debt

2,461,914



2,680,474


Unearned revenue

70,934



59,713


Other non-current liabilities

494,758



172,407


Total liabilities

4,228,041



4,205,756


Stockholders' equity:




Common stock and capital in excess of par value

561,677



529,283


Retained earnings

862,743



848,457


Accumulated other comprehensive income (loss)

(54,277)



(51,323)


Total stockholders' equity

1,370,143



1,326,417


Total liabilities and stockholders' equity

$

5,598,184



$

5,532,173


 

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)

2018


2017


2018


2017

Revenues:








Product

$

797,797



$

721,016



$

2,320,171



$

1,966,502


Service

223,497



192,793



646,526



574,865


Total revenues

1,021,294



913,809



2,966,697



2,541,367


Costs and expenses:








Costs of revenues

368,688



343,274



1,069,471



939,617


Research and development

153,284



130,170



456,761



390,315


Selling, general and administrative

113,518



96,252



326,777



284,172


Interest expense and other, net

19,821



24,964



64,246



79,049


Income before income taxes

365,983



319,149



1,049,442



848,214


Provision for income taxes

59,102



65,587



595,944



178,300


Net income

$

306,881



$

253,562



$

453,498



$

669,914


Net income per share:








Basic

$

1.96



$

1.62



$

2.90



$

4.28


Diluted

$

1.95



$

1.61



$

2.88



$

4.26


Cash dividends declared per share

$

0.59



$

0.54



$

1.77



$

1.60


Weighted-average number of shares:








Basic

156,221



156,749



156,547



156,402


Diluted

157,201



157,746



157,539



157,297


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows




Three months ended

March 31,

(In thousands)

2018


2017

Cash flows from operating activities:




Net income

$

306,881



$

253,562


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




Depreciation and amortization

16,283



14,198


Non-cash stock-based compensation expense

16,210



12,536


Net (gain) loss on sales of marketable securities and other investments

(2)



53


Changes in assets and liabilities, net of business acquisition:




Accounts receivable, net

90,906



(64,509)


Inventories

(65,238)



(28,288)


Other assets

(65,350)



(18,751)


Accounts payable

19,183



23,017


Deferred system profit

9,313



(4,426)


Other liabilities

24,421



37,446


Net cash provided by operating activities

352,607



224,838


Cash flows from investing activities:




Capital expenditures, net

(14,994)



(9,414)


Purchases of available-for-sale securities

(112,661)



(382,138)


Proceeds from sale of available-for-sale securities

58,429



175,188


Proceeds from maturity of available-for-sale securities

97,809



115,547


Purchases of trading securities

(34,370)



(14,553)


Proceeds from sale of trading securities

31,681



16,999


Net cash provided by (used in) investing activities

25,894



(98,371)


Cash flows from financing activities:




Repayment of debt

(25,000)



(25,000)


Issuance of common stock

(8)




Tax withholding payments related to vested and released restricted stock units

(428)



(1,714)


Common stock repurchases

(84,724)




Payment of dividends to stockholders

(92,128)



(85,514)


Net cash used in financing activities

(202,288)



(112,228)


Effect of exchange rate changes on cash and cash equivalents

6,075



4,535


Net increase in cash and cash equivalents

182,288



18,774


Cash and cash equivalents at beginning of period

1,073,394



937,033


Cash and cash equivalents at end of period

$

1,255,682



$

955,807


Supplemental cash flow disclosures:




Income taxes paid, net

$

74,314



$

79,590


Interest paid

$

2,330



$

3,117


Non-cash activities:




Purchase of land, property and equipment - investing activities

$

9,728



$

3,218


Dividends payable - financing activities

$

8,408



$

12,643


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share amounts)







Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income










Three months ended


Nine months ended




March 31,
 2018


Dec. 31,
 2017


March 31,
 2017


March 31,
 2018


March 31,
 2017

GAAP net income (loss)


$

306,881



$

(134,319)



$

253,562



$

453,498



$

669,914

Adjustments to reconcile GAAP net income (loss) to non-GAAP net income:












Acquisition-related charges

a

7,413



1,608



513



10,608



2,293


Merger-related charges

b





3,221



3,015



10,895


Income tax effect of non-GAAP adjustments

c

(343)



(465)



(1,272)



(2,407)



(4,111)


Discrete tax items

d

4,184



441,894





446,078



(3,064)

Non-GAAP net income


$

318,135



$

308,718



$

256,024



$

910,792



$

675,927

GAAP net income (loss) per diluted share


$

1.95



$

(0.86)



$

1.61



$

2.88



$

4.26

Non-GAAP net income per diluted share


$

2.02



$

1.97



$

1.62



$

5.78



$

4.30

Shares used in diluted shares calculation


157,201



156,587



157,746



157,539



157,297

 

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 March 31, 2018






Costs of revenues

$

1,122



$



$

1,122


Selling, general and administrative

6,291





6,291


Total in three months ended March 31, 2018

$

7,413



$



$

7,413


Three months ended Dec. 31, 2017






Costs of revenues

$

1,530



$



$

1,530


Selling, general and administrative

78





78


Total in three months ended Dec. 31, 2017

$

1,608



$



$

1,608


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


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 or pending acquisitions, including the pending acquisition of Orbotech. 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.



d.

Discrete tax item during the three and nine months ended March 31, 2018 includes the income tax effects of an income tax expense from the enacted tax reform legislation through the Tax Cuts and Jobs-Act ("the Act"), which was signed into law on Dec. 22, 2017, of which the impact is primarily related to the provisional tax amounts recorded for the transition tax on accumulated foreign earnings and the re-measurement of certain deferred tax assets and liabilities as a result of the enactment of the Act. Discrete tax item during the nine months ended March 31, 2017 include the tax impact of certain merger-related charges that only became deductible during the three months ended Dec. 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

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