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): August 5, 2019

KLA 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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
KLAC
The Nasdaq Stock Market, LLC
 
 
The Nasdaq Global Select Market


















Item 2.02
Results of Operations and Financial Condition.
On August 5, 2019, KLA Corporation (the “Company”) issued a press release announcing selected financial and operating results for its fourth 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 CORPORATION
 
 
 
 
 
Date: August 5, 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 CORPORATION REPORTS FISCAL 2019 FOURTH QUARTER AND FULL YEAR RESULTS

MILPITAS, Calif., August 5, 2019 -KLA Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2019. KLA reported GAAP net income attributable to KLA of $218 million and GAAP earnings per diluted share attributable to KLA of $1.35 on revenues of $1,258 million for the fourth quarter of fiscal year 2019. For the fiscal year ended June 30, 2019, the company reported GAAP net income attributable to KLA of $1,176 million and GAAP earnings per diluted share attributable to KLA of $7.49 on revenues of $4.6 billion.

“In the fourth fiscal quarter KLA delivered results above the midpoint of our range of guidance, reflecting solid execution in a challenging business environment,” commented Rick Wallace, President and Chief Executive Officer. “These results demonstrate KLA is benefitting from our strategies for growth and market leadership, which in combination with the recent acquisition of Orbotech, is translating to good relative performance for the company in calendar year 2019.”

GAAP Results
 
Q4 FY 2019
Q3 FY 2019
Q4 FY 2018
Revenues
$1,258 million
$1,097 million
$1,070 million
Net Income Attributable to KLA Corporation
$218 million
$193 million
$349 million
Earnings per Diluted Share Attributable to KLA Corporation
$1.35
$1.23
$2.22
 
 
 
 
Non-GAAP Results
 
Q4 FY 2019
Q3 FY 2019
Q4 FY 2018
Net Income Attributable to KLA Corporation
$289 million
$283 million
$348 million
Earnings per Diluted Share Attributable to KLA Corporation
$1.78
$1.80
$2.22

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 twelve months ended June 30, 2018 and cash flows for the three months ended June 30, 2018 were prepared using accounting standards that were different from those in effect for the three and twelve months ended June 30, 2019.
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 fourth quarter and full year, 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 Corporation, formerly known as KLA-Tencor Corporation, (aka “KLA”) develops industry-leading equipment and services that enable innovation throughout the electronics industry. We provide advanced process control and process-enabling solutions for manufacturing wafers and reticles, integrated circuits, packaging, printed circuit boards and flat panel displays. 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 http://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 Corporation (formerly known as KLA-Tencor Corporation)
 
 
 
Condensed Consolidated Unaudited Balance Sheets
 
 
 
 
 
 
 
(In thousands)
June 30, 2019
 
June 30, 2018
ASSETS
 
 
 
Cash, cash equivalents and marketable securities
$
1,739,385

 
$
2,880,318

Accounts receivable, net
990,113

 
651,678

Inventories
1,262,500

 
931,845

Other current assets
323,077

 
85,159

Land, property and equipment, net
448,799

 
286,306

Goodwill
2,211,858

 
354,698

Deferred income taxes, non-current
206,141

 
193,200

Purchased intangibles, net
1,560,670

 
19,333

Other non-current assets
265,973

 
236,082

Total assets
$
9,008,516

 
$
5,638,619

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS EQUITY
 
 
Current liabilities:
 
 
 
Accounts payable
$
202,416

 
$
169,354

Deferred system revenue
282,348

 

Deferred service revenue
206,669

 
69,255

Deferred system profit

 
279,581

Current portion of long-term debt
249,999

 

Other current liabilities
827,054

 
696,080

Total current liabilities
1,768,486

 
1,214,270

Non-current liabilities:
 
 
 
Long-term debt
3,173,383

 
2,237,402

Deferred tax liabilities
702,285

 
1,197

Deferred service revenue
98,772

 
71,997

Other non-current liabilities
587,897

 
493,242

Total liabilities
6,330,823

 
4,018,108

Stockholders’ equity:
 
 
 
Common stock and capital in excess of par value
2,017,312

 
617,999

Retained earnings
714,825

 
1,056,445

Accumulated other comprehensive income (loss)
(73,029
)
 
(53,933
)
Total KLA stockholders’ equity
2,659,108

 
1,620,511

Non-controlling interest in consolidated subsidiary
18,585

 

Total stockholders’ equity
2,677,693

 
1,620,511

Total liabilities and stockholders’ equity
$
9,008,516

 
$
5,638,619


3



KLA Corporation (formerly known as KLA-Tencor Corporation)
 
 
 
 
 
 
Condensed Consolidated Unaudited Statements of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
(In thousands, except per share amounts)
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenues:
 
 
 
 
 
 
 
Product
$
917,591

 
$
840,500

 
$
3,392,243

 
$
3,160,671

Service
340,844

 
229,504

 
1,176,661

 
876,030

Total revenues
1,258,435

 
1,070,004

 
4,568,904

 
4,036,701

Costs and expenses:
 
 
 
 
 
 
 
Costs of revenues
592,785

 
377,566

 
1,869,377

 
1,446,041

Research and development
206,710

 
151,905

 
711,030

 
608,531

Selling, general and administrative
190,040

 
116,370

 
599,124

 
442,304

Interest expense and other, net
37,590

 
17,674

 
93,142

 
83,894

Income before income taxes
231,310

 
406,489

 
1,296,231

 
1,455,931

Provision for income taxes
13,982

 
57,722

 
121,214

 
653,666

Net income
217,328

 
348,767

 
1,175,017

 
802,265

Less: Net loss attributable to non-controlling interest
(517
)
 

 
(600
)
 

Net income attributable to KLA
$
217,845

 
$
348,767

 
$
1,175,617

 
$
802,265

Net income per share attributable to KLA:
 
 
 
 
 
 
 
Basic
$
1.36

 
$
2.24

 
$
7.53

 
$
5.13

Diluted
$
1.35

 
$
2.22

 
$
7.49

 
$
5.10

Weighted-average number of shares:
 
 
 
 
 
 
 
Basic
160,546

 
155,740

 
156,053

 
156,346

Diluted
161,937

 
156,822

 
156,949

 
157,378


4



KLA Corporation (formerly known as KLA-Tencor Corporation)
Condensed Consolidated Unaudited Statements of Cash Flows
 
Three months ended
June 30,
(In thousands)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
217,328

 
$
348,767

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
127,886

 
14,989

(Gain) loss on unrealized foreign exchange and other
(812
)
 
11,107

Stock-based compensation expense
28,168

 
18,804

Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
 
 
 
Accounts receivable
(53,565
)
 
2,095

Inventories
13,179

 
(74,684
)
Other assets
(89,691
)
 
40,737

Accounts payable
(3,832
)
 
403

Deferred system revenue
51,754

 

Deferred service revenue
31,549

 

Deferred system profit

 
20,309

Other liabilities
3,497

 
(9,014
)
Net cash provided by operating activities
325,461

 
373,513

Cash flows from investing activities:
 
 
 
Business acquisitions, net of cash acquired

 
(11,913
)
Capital expenditures
(55,846
)
 
(22,828
)
Purchases of available-for-sale securities
(78,847
)
 
(27,657
)
Proceeds from sale of available-for-sale securities
16,867

 
68,229

Proceeds from maturity of available-for-sale securities
146,217

 
118,877

Purchases of trading securities
(18,594
)
 
(12,762
)
Proceeds from sale of trading securities
20,642

 
14,829

Net cash provided by investing activities
30,439

 
126,775

Cash flows from financing activities:
 
 
 
Payments of debt issuance costs
(2,478
)
 

Repayment of debt

 
(225,000
)
Issuance of common stock
44,272

 
40,873

Tax withholding payments related equity awards
(6,942
)
 
(2,133
)
Common stock repurchases
(344,986
)
 
(38,091
)
Payment of dividends to stockholders
(121,363
)
 
(117,035
)
Payment of contingent consideration payable
(649
)
 

Net cash used in financing activities
(432,146
)
 
(341,386
)
Effect of exchange rate changes on cash and cash equivalents
77

 
(10,202
)
Net (decrease) increase in cash and cash equivalents
(76,169
)
 
148,700

Cash and cash equivalents at beginning of period
1,092,163

 
1,255,682

Cash and cash equivalents at end of period
$
1,015,994

 
$
1,404,382

Supplemental cash flow disclosures:
 
 
 
Income taxes paid
$
15,769

 
$
31,331

Interest paid
$
51,544

 
$
53,210

Non-cash activities:
 
 
 
Contingent consideration payable - financing activities
$
6,905

 
$

Dividends payable - financing activities
$
7,340

 
$
9,571

Unsettled common stock repurchase - financing activities
$
8,000

 
$

Accrued purchase of land, property and equipment - investing activities
$
6,353

 
$
7,418


5



KLA Corporation (formerly known as KLA-Tencor Corporation)
Segment Information (Unaudited)
The following is a summary of results for each of our four reportable segments and reconciliation to total revenues for the indicated periods:
 
Three months ended
 
Twelve months ended
(In thousands)
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenues:
 
 
 
 
 
 
 
Semiconductor Process Control
$
1,002,544

 
$
1,043,714

 
$
4,080,822

 
$
3,944,015

Specialty Semiconductor Process
66,775

 

 
151,164

 

PCB, Display and Component Inspection(1)
184,625

 
26,160

 
332,810

 
92,516

Other
4,525

 

 
4,676

 

Total revenues for reportable segments
$
1,258,469

 
$
1,069,874

 
$
4,569,472

 
$
4,036,531

Corporate allocation and effects of foreign exchange rates
(34
)
 
130

 
(568
)
 
170

Total revenues
$
1,258,435

 
$
1,070,004

 
$
4,568,904

 
$
4,036,701

__________
(1)
Revenues in the three and twelve months ended June 30, 2019 include the contribution from the Orbotech business from the February 20, 2019 acquisition date. Revenues in the 2018 periods include the component inspection business only.

KLA Corporation (formerly known as KLA-Tencor Corporation)
Condensed Consolidated Unaudited Supplemental Information
Reconciliation of GAAP Net Income to Non-GAAP Net Income
 
 
Three months ended
 
Twelve months ended
(In thousands, except per share amounts)
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
GAAP net income attributable to KLA
 
$
217,845

 
$
192,728

 
$
348,767

 
$
1,175,617

 
$
802,265

Adjustments to reconcile GAAP net income to non-GAAP net income
 
 
 
 
 
 
 
 
 
 
Acquisition-related charges
a
102,807

 
103,755

 
3,973

 
216,394

 
14,581

Merger-related charges
b

 

 

 

 
3,015

Income tax effect of non-GAAP adjustments
c
(32,930
)
 
(21,127
)
 
(300
)
 
(54,643
)
 
(2,707
)
Discrete tax items
d
983

 
7,482

 
(4,402
)
 
(9,406
)
 
441,676

Non-GAAP net income attributable to KLA
 
$
288,705

 
$
282,838

 
$
348,038

 
$
1,327,962

 
$
1,258,830

GAAP net income per diluted share attributable to KLA
 
$
1.35

 
$
1.23

 
$
2.22

 
$
7.49

 
$
5.10

Non-GAAP net income per diluted share attributable to KLA
 
$
1.78

 
$
1.80

 
$
2.22

 
$
8.46

 
$
8.00

Shares used in diluted shares calculation
 
161,937

 
157,182

 
156,822

 
156,949

 
157,378


6



Pre-tax impact of items included in Condensed Consolidated Unaudited Statements of Operations
(In thousands)
Acquisition-related charges
Three months ended June 30, 2019
 
Costs of revenues
$
75,805

Selling, general and administrative
27,002

Total in three months ended June 30, 2019
$
102,807

Three months ended March 31, 2019
 
Costs of revenues
$
47,659

Research and development
3,328

Selling, general and administrative
52,768

Total in three months ended March 31, 2019
$
103,755

Three months ended June 30, 2018
 
Costs of revenues
$
729

Selling, general and administrative
3,244

Total in three months ended June 30, 2018
$
3,973


7



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 primarily include amortization of intangible assets, amortization of inventory fair value adjustments and backlog, certain employee compensation arrangements, acceleration of certain stock-based compensation arrangements, and transaction costs associated with our acquisitions, primarily Orbotech. 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’s newly acquired and long-held businesses. Management believes that the other acquisition-related expenses are appropriate to be excluded because such costs would not have otherwise been incurred in the periods presented. 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 items include charges associated with the acquisition of Orbotech as well as 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.



8