KLA-Tencor Reports Fiscal Year 2010 Second Quarter Results

January 28, 2010 at 4:15 PM EST

MILPITAS, Calif., Jan 28, 2010 /PRNewswire via COMTEX News Network/ -- KLA-Tencor Corporation (Nasdaq: KLAC) today announced operating results for its second quarter of fiscal year 2010, which ended on December 31, 2009, and reported GAAP net income of $22 million and GAAP earnings per diluted share of $0.13 on revenues of $440 million.

"KLA-Tencor delivered strong results for the quarter from improved demand from foundry customers ramping leading edge capacity and continued investment by logic and memory customers pursuing technology transition roadmaps," said Rick Wallace, KLA-Tencor's president and chief executive officer. "We see growing momentum in our financial performance as we execute our strategy of delivering high-performance process control solutions that create value for our customers and help them solve their mission-critical production challenges."



                                          GAAP Results

                               Q2 FY 2010      Q1 FY 2010      Q2 FY 2009
    Revenues                  $440 million    $343 million    $397 million
    Net Income (Loss)         $22 million     $20 million     $(434) million
    Earnings (Loss) per
     Diluted Share            $0.13           $0.12           $(2.57)

                                         Non-GAAP Results

                               Q2 FY 2010      Q1 FY 2010      Q2 FY 2009
    Net Income (Loss)         $49 million     $26 million     $(20) million
    Earnings (Loss) per
     Diluted Share            $0.28           $0.15           $(0.12)


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 acquisition, goodwill and intangible asset impairment, restatement, restructuring related, and certain discrete tax items.

KLA-Tencor will discuss the results for its fiscal year 2010 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

Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements regarding perceived momentum in KLA-Tencor's financial performance and KLA-Tencor's ability to successfully innovate, develop and sell new technologies and products that meet customer demands are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations, and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product offerings by competitors; cancellation of orders by customers; the ability of KLA-Tencor's research and development teams to successfully innovate and develop technology that is responsive to customer demands; KLA-Tencor's ability to successfully integrate and manage businesses that it acquires; and changing customer demands. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this release, please refer to KLA-Tencor's Annual Report on Form 10-K for the year ended June 30, 2009 and other subsequent filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA-Tencor assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About KLA-Tencor:

KLA-Tencor Corporation (NASDAQ: KLAC), 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, data storage, compound semiconductor, photovoltaic, 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 over 30 years. Headquartered in Milpitas, California, KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at 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. 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, 2009       June 30, 2009
                                        -----------------       -------------
    ASSETS
    Cash and short-term investments            $1,522,344          $1,329,884
    Accounts receivable, net                      298,071             210,143
    Inventories, net                              352,241             370,206
    Other current assets                          414,605             488,384
    Land, property and equipment, net             261,942             291,878
    Goodwill                                      333,984             329,379
    Purchased intangibles, net                    132,462             149,080
    Other non-current assets                      410,092             440,584
                                                  -------             -------
    Total assets                               $3,725,741          $3,609,538
                                               ==========          ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                              $87,632             $63,485
    Deferred system profit                        147,578              95,820
    Unearned revenue                               38,811              46,236
    Other current liabilities                     339,084             341,441
                                                  -------             -------
    Total current liabilities                     613,105             546,982

    Non-current liabilities:
    Income tax payable                             51,787              49,738
    Unearned revenue                               24,589              23,059
    Other non-current liabilities                  63,851              60,163
    Long-term debt                                745,475             745,204
                                                  -------             -------
    Total liabilities                           1,498,807           1,425,146

    Stockholders' equity:
    Common stock and capital in excess
     of par value                                 886,860             835,477
    Retained earnings                           1,357,049           1,370,132
    Accumulated other comprehensive loss          (16,975)            (21,217)
                                                  -------             -------
    Total stockholders' equity                  2,226,934           2,184,392
                                                ---------           ---------
    Total liabilities and stockholders' equity $3,725,741          $3,609,538
                                               ==========          ==========





    KLA-Tencor Corporation
    Condensed Consolidated Unaudited Statements of Operations

                                  Three months ended      Six months ended
                                 ---------------------  --------------------
    (In thousands, except per     Dec. 31,   Dec.  31,   Dec. 31,   Dec. 31,
     share data)                    2009        2008       2009       2008
                                 ---------  ----------  ---------  ---------
    Revenues:
    Product                       $314,946    $273,072   $544,197   $678,568
    Service                        125,409     123,517    238,845    250,534
                                   -------     -------    -------    -------
    Total revenues                 440,355     396,589    783,042    929,102

    Costs and operating expenses:
    Costs of revenues              207,286     238,167    379,178    490,980
    Engineering, research and
     development                    83,301      95,266    161,510    209,627
    Selling, general and
     administrative                102,673     133,954    180,309    252,444
    Goodwill and purchased
     intangible asset impairment         -     434,833          -    446,744
                                       ---     -------        ---    -------
    Total costs and operating
     expenses                      393,260     902,220    720,997  1,399,795
    Income (loss) from
     operations                     47,095    (505,631)    62,045   (470,693)

    Interest income and other,
     net                            (9,079)    (12,472)    (1,237)    (8,295)
                                    ------     -------     ------     ------
    Income (loss) before income
     taxes                          38,016    (518,103)    60,808   (478,988)
    Provision for (benefit from)
     income taxes                   16,222     (83,849)    18,609    (64,023)


    Net income (loss)              $21,794   $(434,254)   $42,199  $(414,965)
                                   =======   =========    =======  =========

    Net income (loss) per share:
    Basic                            $0.13      $(2.57)     $0.25     $(2.43)
                                     -----      ------      -----     ------
    Diluted                          $0.13      $(2.57)     $0.24     $(2.43)
                                     -----      ------      -----     ------

    Cash dividend paid per share     $0.15       $0.15      $0.30      $0.30
                                     -----       -----      -----      -----

    Weighted average number of
     shares:
    Basic                          171,408     169,022    171,053    170,552
    Diluted                        173,808     169,022    173,292    170,552




    KLA-Tencor Corporation
    Condensed Consolidated Unaudited Statements of Cash Flows

                                                       Three months ended
                                                           December 31,
    (In thousands)                                    2009              2008
                                                      ----              ----
      Cash flows from operating activities:
        Net income (loss)                           $21,794         $(434,254)
        Adjustments to reconcile net
         income (loss) to net cash
         provided by operating activities:
           Depreciation and amortization             23,240            35,646
           Goodwill, purchased intangible
            asset and long-lived asset
            impairment charges                       10,592           436,833
           Provision for doubtful accounts                -            23,887
           Non-cash stock-based compensation         20,855            22,303
           Tax charge from equity awards                  -            (3,294)
           Excess tax benefit from equity awards          -                (2)
           Net loss (gain) on sale of
            marketable securities and
            other investments                        (1,582)              641
           Gain on sale of real estate assets          (160)           (1,997)
           Changes in assets and liabilities,
            net of assets acquired and liabilities
            assumed in business combinations:
              Decrease (increase) in accounts
               receivable, net                      (55,564)           31,119
              Decrease (increase) in inventories     (2,621)           30,322
              Decrease (increase) in other assets   101,550           (16,314)
              Increase in accounts payable           12,328               736
              Increase in deferred system profit     32,856             1,302
              Increase (decrease) in other
               liabilities                              313          (162,528)
                                                        ---          --------
                    Net cash provided by (used in)
                     operating activities           163,601           (35,600)

      Cash flows from investing activities:
           Acquisitions of businesses, net
            of cash received                              -           (13,952)
           Capital expenditures, net                (10,735)           (6,967)
           Proceeds from sale of long-lived assets    5,878            19,348
           Purchase of available-for-sale
            securities                             (337,025)         (124,775)
           Proceeds from sale and maturity
            of available-for-sale securities        182,799           129,770
           Purchase of trading securities           (15,001)          (19,206)
           Proceeds from sale of trading
            securities                               17,476            18,707
                                                     ------            ------
                    Net cash provided by (used in)
                     investing activities          (156,608)            2,925

      Cash flows from financing activities:
           Issuance of common stock                  20,545            21,164
           Tax withholding payments related to
            vested and released restricted stock
            units                                   (10,371)              (46)
           Common stock repurchases                       -           (49,046)
           Payment of dividends to stockholders     (25,686)          (25,335)
           Excess tax benefit from stock-based
            compensation                                  -                 2
                                                        ---               ---
                    Net cash used in financing
                     activities                     (15,512)          (53,261)

      Effect of exchange rate changes on cash and
       cash equivalents                                (876)            8,807


      Net decrease in cash and cash equivalents      (9,395)          (77,129)

      Cash and cash equivalents at beginning of
       period                                       540,839           733,459


      Cash and cash equivalents at end of period   $531,444          $656,330
                                                   ========          ========

      Supplemental cash flow disclosures:
           Income tax refunds (received), net      $(68,491)          $(7,176)
           Interest paid                            $26,084           $28,887




    KLA-Tencor Corporation
    Condensed Consolidated Unaudited Supplemental Information
    (In thousands, except per share data)

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

                                  Three months ended        Six months ended
                             Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                                2009     2009       2008     2009       2008
                                ----     ----       ----     ----       ----
    GAAP net income
     (loss)                   $21,794  $20,405  $(434,254) $42,199  $(414,965)
    Adjustments to
     reconcile GAAP net
     income (loss) to
     non-GAAP net
     income (loss)
    -------------------

    Acquisition related
     charges                a   8,104    8,095     22,590   16,199     51,008
    Restructuring,
     severance and other
     related charges        b  14,450   (4,409)    23,621   10,041     27,782
    Restatement related
     charges                c   7,077    5,188      9,190   12,265     12,974
    Goodwill and purchased
     intangible asset
     impairment             d       -        -    434,833        -    446,744
    Income tax effect of
     non-GAAP adjustments   e (10,762)  (3,121)   (75,882) (13,883)   (88,096)
    Discrete tax items      f   8,693        -          -    8,693          -
                               ------    -----     ------   ------     ------
    Non-GAAP net income
     (loss)                   $49,356  $26,158   $(19,902) $75,514    $35,447
                              =======  =======   ========  =======    =======

    GAAP net income (loss)
     per diluted share          $0.13    $0.12     $(2.57)   $0.24     $(2.43)
                                =====    =====     ======    =====     ======
    Non-GAAP net income
     (loss) per diluted share   $0.28    $0.15     $(0.12)   $0.44      $0.21
                                =====    =====     ======    =====      =====
    Shares used in diluted
     Shares calculation       173,808  172,718    169,022  173,292    170,552
                              =======  =======    =======  =======    =======



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

                                   Restructuring,         Goodwill
                                      severance              and      Total
                                         and    Restate-  purchased  pre-tax
                          Acquisition   other     ment   intangible  GAAP to
                             related   related  related     asset    non-GAAP
                             charges   charges  charges  impairment adjustment
                             -------   -------  -------  ---------- ----------
    Costs of revenues         $5,727    $2,052       $-         $-    $7,779
    Engineering, research and
     development                 898       566        -          -     1,464
    Selling, general and
     administrative            1,479    11,832    7,077          -    20,388
                               -----    ------    -----        ---    ------
    Total in three months
     ended Dec. 31, 2009      $8,104   $14,450   $7,077         $-   $29,631
                              ======   =======   ======        ===   =======

    Total in three months
     Ended Sept. 30, 2009     $8,095   $(4,409)  $5,188         $-    $8,874
                              ======   =======   ======        ===    ======

    Total in three months
     ended Dec. 31, 2008     $22,590   $23,621   $9,190   $434,833  $490,234
                             =======   =======   ======   ========  ========



                                            Three months ended
                                            ------------------
                               December 31,      September 30,  December 31,
                                    2009               2009          2008
                               ------------      -------------  ------------
    Stock-based compensation
    ------------------------
    Costs of revenues                $3,325             $3,288        $4,679
    Engineering, research and
     development                      6,667              6,603         6,981
    Selling, general and
     administrative                  10,863             10,308        10,643
                                     ------             ------        ------
    Total                           $20,855            $20,199       $22,303
                                    =======            =======       =======


    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. 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,
       inventory fair value adjustments, and in-process research and
       development 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 the
       amortization expense allows comparisons of operating results that are
       consistent over time for both KLA-Tencor's newly acquired and long-held
       businesses.  Management believes that it is appropriate to exclude
       acquisition related inventory fair value adjustments and in-process
       research and development 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.

    b  Restructuring, severance and other related charges include gains and
       costs associated with the company's facilities divestment and
       consolidation program, reductions in force, entry into a severance and
       consulting agreement with the company's former president/chief
       operating officer, gains and losses from sales of facilities, and asset
       impairment (other than impairment of goodwill and purchased intangible
       assets, which is included within the category described in note (d)
       below) from discontinuing or making available for sale certain acquired
       product lines.  Management believes that it is appropriate to exclude
       those 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.

    c  Restatement related charges include legal and other expenses related to
       the stock option investigation, shareholder litigation and related
       matters.  Management believes that it is appropriate to exclude those
       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.

    d  Goodwill and purchased intangible asset impairment includes non-cash
       expense recognized as a result of the company's annual evaluation of
       goodwill or the testing for intangible asset impairment driven by
       certain company-specific triggering events, as well as the impairment
       of goodwill and intangible assets as a result of discontinuing acquired
       products and making acquired products available for sale. Management
       believes that it is appropriate to exclude those 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.

    e  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.

    f  Discrete tax items include the tax impact of shortfalls in excess of
       cumulative windfall tax benefits recorded as provision for income taxes
       during the quarter. Windfall tax benefits arise when a company's tax
       deductions for employee stock activity exceeds book compensation for
       the same activity.  A shortfall arises when the tax deduction is less
       than book compensation.  Windfalls are recorded as increases to capital
       in excess of par value.  Shortfalls are recorded as decreases to
       capital in excess of par value to the extent that cumulative windfalls
       exceed cumulative shortfalls.  Shortfalls in excess of cumulative
       windfalls are recorded as provision for income taxes.  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.



SOURCE KLA-Tencor Corporation

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