Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 29, 2019

KLA-TENCOR CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
000-09992
04-2564110
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
One Technology Drive, Milpitas, California
95035
(Address of principal executive offices)
(Zip Code)
 
 
Registrant’s telephone number, including area code: (408) 875-3000
 
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))























Item 2.02
Results of Operations and Financial Condition.
On January 29, 2019, KLA-Tencor Corporation (the “Company”) issued a press release announcing selected financial and operating results for its second quarter of fiscal year 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 of this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits
The following exhibit is filed herewith:
 
 
 
Exhibit No.
 
Description
 
 
 






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
 
KLA-TENCOR CORPORATION
 
 
 
 
 
Date: January 29, 2019
 
 
 
By:
 
/s/ TERI A. LITTLE
 
 
 
 
 
Name:
 
Teri A. Little
 
 
 
 
 
Title:
 
Executive Vice President and Chief Legal Officer



Exhibit




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

KLA-TENCOR REPORTS FISCAL 2019 SECOND QUARTER RESULTS

MILPITAS, Calif., January 29, 2019 -KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2019, which ended on December 31, 2018, and reported GAAP net income of $369 million and GAAP earnings per diluted share of $2.42 on revenues of $1,120 million.

“KLA reported excellent results for the December quarter, with shipments, revenue, and earnings per share each closing above the range of guidance in the period, capping the third consecutive year of double-digit growth for the company in calendar 2018,” commented President and Chief Executive Officer Rick Wallace. “Our strong performance highlights the strength and resilience of the KLA business model, and demonstrates the company’s ability to consistently drive long-term growth, and deliver top-tier financial performance and strong cash returns to stockholders.”

GAAP Results
 
Q2 FY 2019
Q1 FY 2019
Q2 FY 2018
Revenues
$1,120 million
$1,093 million
$976 million
Net Income (Loss)
$369 million
$396 million
$(134) million
Earnings (Loss) per Diluted Share
$2.42
$2.54
$(0.86)
 
 
 
 
Non-GAAP Results
 
Q2 FY 2019
Q1 FY 2019
Q2 FY 2018
Net Income
$372 million
$384 million
$309 million
Earnings per Diluted Share
$2.44
$2.46
$1.97
Effective on the first day of fiscal 2019, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASC 606”). Prior periods were not retrospectively restated, and accordingly, the condensed consolidated unaudited balance sheet as of June 30, 2018, and the condensed consolidated unaudited statements of operations for the three and six months ended December 31, 2017 and cash flows for the three months ended December 31, 2017 were prepared using accounting standards that were different than those in effect for the three and six months ended December 31, 2018.
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 will discuss the results for its fiscal year 2019 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla.com.
About KLA:
KLA-Tencor Corporation (aka “KLA Corporation” or “KLA”) develops industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control solutions for manufacturing wafers and reticles, integrated circuits and packaging. In close collaboration with leading customers across the globe, our expert teams of physicists, engineers, data scientists and problem-solvers design solutions that move the world forward. Additional information may be found at www.kla.com (KLAC-F).

1



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’s financial results presented in accordance with United States GAAP.
To supplement KLA’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’s operating performance and its prospects in the future. Specifically, KLA believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA’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.

2




KLA-Tencor Corporation
 
 
 
Condensed Consolidated Unaudited Balance Sheets
 
 
 
 
 
 
 
(In thousands)
December 31, 2018
 
June 30,
2018
ASSETS
 
 
 
Cash, cash equivalents and marketable securities
$
2,694,094

 
$
2,880,318

Accounts receivable, net
658,080

 
651,678

Inventories
1,005,990

 
931,845

Other current assets
127,350

 
85,159

Land, property and equipment, net
306,351

 
286,306

Goodwill
360,480

 
354,698

Deferred income taxes, non-current
225,124

 
193,200

Purchased intangible assets, net
23,818

 
19,333

Other non-current assets
204,000

 
216,819

Total assets
$
5,605,287

 
$
5,619,356

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
152,491

 
$
169,354

Deferred system revenue
196,242

 

Deferred service revenue
168,936

 
69,255

Deferred system profit

 
279,581

Current portion of long-term debt
249,996

 

Other current liabilities
714,873

 
699,893

Total current liabilities
1,482,538

 
1,218,083

Non-current liabilities:
 
 
 
Long-term debt
1,988,382

 
2,237,402

Deferred service revenue
90,466

 
71,997

Other non-current liabilities
446,279

 
471,363

Total liabilities
4,007,665

 
3,998,845

Stockholders’ equity:
 
 
 
Common stock and capital in excess of par value
619,265

 
617,999

Retained earnings
1,048,804

 
1,056,445

Accumulated other comprehensive income (loss)
(70,447
)
 
(53,933
)
Total stockholders’ equity
1,597,622

 
1,620,511

Total liabilities and stockholders’ equity
$
5,605,287

 
$
5,619,356



3



 
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)
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Product
$
852,201

 
$
761,587

 
$
1,681,428

 
$
1,522,374

Service
267,697

 
214,235

 
531,730

 
423,029

Total revenues
1,119,898

 
975,822

 
2,213,158

 
1,945,403

Costs and expenses:
 
 
 
 
 
 
 
Costs of revenues
408,260

 
347,002

 
789,647

 
700,119

Research and development
165,903

 
156,700

 
319,433

 
303,387

Selling, general and administrative
112,462

 
105,265

 
226,900

 
212,697

Interest expense and other, net
17,310

 
19,548

 
33,647

 
45,741

Income before income taxes
415,963

 
347,307

 
843,531

 
683,459

Provision for income taxes
46,863

 
481,626

 
78,487

 
536,842

Net income (loss)
$
369,100

 
$
(134,319
)
 
$
765,044

 
$
146,617

Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
2.43

 
$
(0.86
)
 
$
4.98

 
$
0.94

Diluted
$
2.42

 
$
(0.86
)
 
$
4.96

 
$
0.93

Weighted-average number of shares:
 
 
 
 
 
 
 
Basic
152,148

 
156,587

 
153,684

 
156,707

Diluted
152,648

 
156,587

 
154,389

 
157,688



4



KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows
 
Three months ended
December 31,
(In thousands)
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income (loss)
$
369,100

 
$
(134,319
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
15,806

 
16,130

Loss (gain) on unrealized foreign exchange and other
895

 
(4,154
)
Stock-based compensation expense
15,695

 
13,739

Changes in assets and liabilities, net of business acquisitions:
 
 
 
Accounts receivable
(55,869
)
 
(73,877
)
Inventories
(15,109
)
 
(24,240
)
Other assets
34,978

 
86,512

Accounts payable
(2,440
)
 
11,069

Deferred system revenue
(19,723
)
 

Deferred service revenue
12,211

 

Deferred system profit

 
40,773

Other liabilities
(73,372
)
 
197,738

Net cash provided by operating activities
282,172

 
129,371

Cash flows from investing activities:
 
 
 
Acquisition of non-marketable securities

 
(3,377
)
Businesses acquisitions, net of cash acquired

 
(4,780
)
Capital expenditures
(26,366
)
 
(13,369
)
Purchases of available-for-sale securities
(2,686
)
 
(134,268
)
Proceeds from sale of available-for-sale securities
107,370

 
56,506

Proceeds from maturity of available-for-sale securities
128,052

 
123,095

Purchases of trading securities
(27,481
)
 
(18,914
)
Proceeds from sale of trading securities
29,722

 
21,062

Net cash provided by investing activities
208,611

 
25,955

Cash flows from financing activities:
 
 
 
Proceeds from revolving credit facility, net of debt issuance costs

 
248,693

Repayment of debt

 
(540,000
)
Issuance of common stock
20,556

 
20,579

Tax withholding payments related to equity awards
(3,233
)
 
(2,567
)
Common stock repurchases
(250,213
)
 
(40,427
)
Payment of dividends to stockholders
(114,562
)
 
(92,575
)
Net cash used in financing activities
(347,452
)
 
(406,297
)
Effect of exchange rate changes on cash and cash equivalents
1,137

 
3,668

Net increase (decrease) in cash and cash equivalents
144,468

 
(247,303
)
Cash and cash equivalents at beginning of period
1,649,514

 
1,320,697

Cash and cash equivalents at end of period
$
1,793,982

 
$
1,073,394

Supplemental cash flow disclosures:
 
 
 
Income taxes paid
$
87,854

 
$
123,625

Interest paid
$
51,136

 
$
55,693

Non-cash activities:
 
 
 
Accrued purchase of land, property and equipment - investing activities
$
7,705

 
$
5,548

Business acquisition holdback amounts - investing activities
$
440

 
$

Contingent consideration payable - financing activities
$
2,529

 
$

Unsettled common stock repurchase - financing activities
$

 
$
1,289

Dividends payable - financing activities
$
5,404

 
$
7,590


5



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
 
Six months ended
 
 
 
December 31,
2018
 
September 30,
2018
 
December 31,
2017
 
December 31,
2018
 
December 31,
2017
GAAP net income (loss)
 
$
369,100

 
$
395,944

 
$
(134,319
)
 
$
765,044

 
$
146,617

Adjustments to reconcile GAAP net income (loss) to non-GAAP net income:
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related charges
a
4,281

 
5,551

 
1,608

 
9,832

 
3,195

 
Merger-related charges
b

 

 

 

 
3,015

 
Income tax effect of non-GAAP adjustments
c
(276
)
 
(310
)
 
(465
)
 
(586
)
 
(2,064
)
 
Discrete tax items
d
(765
)
 
(17,106
)
 
441,894

 
(17,871
)
 
441,894

Non-GAAP net income
 
$
372,340

 
$
384,079

 
$
308,718

 
$
756,419

 
$
592,657

GAAP net income (loss) per diluted share
 
$
2.42

 
$
2.54

 
$
(0.86
)
 
$
4.96

 
$
0.93

Non-GAAP net income per diluted share
 
$
2.44

 
$
2.46

 
$
1.97

 
$
4.90

 
$
3.76

Shares used in diluted shares calculation
 
152,648

 
156,083

 
156,587

 
154,389

 
157,688

Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations
 
Acquisition- related charges
 
Three months ended December 31, 2018
 
 
Costs of revenues
$
967

 
Selling, general and administrative
3,314

 
Total in three months ended December 31, 2018
$
4,281

 
Three months ended September 30, 2018
 
 
Costs of revenues
$
890

 
Selling, general and administrative
4,661

 
Total in three months ended September 30, 2018
$
5,551

 
Three months ended December 31, 2017
 
 
Costs of revenues
$
1,530

 
Selling, general and administrative
78

 
Total in three months ended December 31, 2017
$
1,608

 

6



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’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 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 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 December 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. 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.



7