Document
false408Q120200000319201875-3000 0000319201 2019-10-30 2019-10-30


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): October 30, 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 October 30, 2019, KLA Corporation (the “Company”) issued a press release announcing selected financial and operating results for its first quarter of fiscal year 2020. 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: October 30, 2019
 
 
 
By:
 
/s/ BREN D. HIGGINS
 
 
 
 
Name:
 
Bren D. Higgins
 
 
 
 
Title:
 
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)



Exhibit


FOR IMMEDIATE RELEASE
Investor Relations:
 
Media Relations:
Kevin Kessel, CFA

 
Becky Howland, Ph.D.
Vice President, Investor Relations

 
Sr. Director, Corporate Communications
(408) 875-6627
 
(408) 875-9350
kevin.kessel@kla.com

 
becky.howland@kla.com

KLA CORPORATION REPORTS FISCAL 2020 FIRST QUARTER RESULTS

Record quarterly revenue of $1.4 billion, above the guidance range of $1.31 to $1.39 billion
GAAP EPS of $2.16 per share; record non-GAAP EPS of $2.48 per share, also above the guidance range of $2.04 to $2.34 per share
Recently announced a 13% increase in the quarterly dividend level to $0.85 per share, the tenth consecutive annual dividend increase

MILPITAS, Calif., October 30, 2019 -KLA Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2020, which ended on September 30, 2019, and reported GAAP net income attributable to KLA of $347 million and GAAP earnings per diluted share attributable to KLA of $2.16 on revenues of $1,413 million.

“KLA delivered a strong result in the September quarter, with revenue and GAAP and non-GAAP EPS finishing above the range of guidance, a result of solid execution in what continues to be a challenging overall industry environment,” commented Rick Wallace, president and CEO of KLA. “As a global leader in process control and supplier of process-enabling solutions for the data era, KLA is at the forefront of the most important industry trends and technology inflections in the electronics industry. Our performance in the September quarter demonstrates KLA is benefiting from our long-term strategies for growth, technology leadership and operational excellence.”
GAAP Results
 
Q1 FY 2020
Q4 FY 2019
Q1 FY 2019
Revenues
$1,413 million
$1,258 million
$1,093 million
Net Income Attributable to KLA
$347 million
$218 million
$396 million
Earnings per Diluted Share Attributable to KLA
$2.16
$1.35
$2.54
 
 
 
 
Non-GAAP Results
 
Q1 FY 2020
Q4 FY 2019
Q1 FY 2019
Net Income Attributable to KLA
$398 million
$289 million
$384 million
Earnings per Diluted Share Attributable to KLA
$2.48
$1.78
$2.46
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 recurring 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 2020 first 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 Corporation, formerly known as KLA-Tencor Corporation, (“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: www.kla.com.

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
 
 
 
Condensed Consolidated Unaudited Balance Sheets
 
 
 
 
 
 
 
(In thousands)
September 30, 2019
 
June 30, 2019
ASSETS
 
 
 
Cash, cash equivalents and marketable securities
$
1,751,522

 
$
1,739,385

Accounts receivable, net
1,066,188

 
990,113

Inventories
1,254,240

 
1,262,500

Other current assets
283,799

 
323,077

Land, property and equipment, net
475,210

 
448,799

Goodwill
2,263,689

 
2,211,858

Deferred income taxes, non-current
216,629

 
206,141

Purchased intangible assets, net
1,549,201

 
1,560,670

Other non-current assets
368,921

 
265,973

Total assets
$
9,229,399

 
$
9,008,516

LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
221,388

 
$
202,416

Deferred system revenue
277,515

 
282,348

Deferred service revenue
201,245

 
206,669

Current portion of long-term debt
250,000

 
249,999

Other current liabilities
993,299

 
827,054

Total current liabilities
1,943,447

 
1,768,486

Non-current liabilities:
 
 
 
Long-term debt
3,174,130

 
3,173,383

Deferred tax liabilities
688,170

 
702,285

Deferred service revenue
101,001

 
98,772

Other non-current liabilities
643,032

 
587,897

Total liabilities
6,549,780

 
6,330,823

Stockholders’ equity:
 
 
 
Common stock and capital in excess of par value
1,999,845

 
2,017,312

Retained earnings
733,173

 
714,825

Accumulated other comprehensive income (loss)
(71,855
)
 
(73,029
)
Total KLA stockholders' equity
2,661,163

 
2,659,108

Non-controlling interest in consolidated subsidiary
18,456

 
18,585

Total stockholders’ equity
2,679,619

 
2,677,693

Total liabilities and stockholders’ equity
$
9,229,399

 
$
9,008,516



3



 
KLA Corporation
 
 
 
Condensed Consolidated Unaudited Statements of Operations
 
 
 
 
 
Three Months Ended September 30,
(In thousands, except per share amounts)
2019
 
2018
Revenues:
 
 
 
Product
$
1,057,975

 
$
829,227

Service
355,439

 
264,033

Total revenues
1,413,414

 
1,093,260

Costs and expenses:
 
 
 
Costs of revenues
604,241

 
381,387

Research and development
210,580

 
153,530

Selling, general and administrative
188,345

 
114,438

Interest expense and other, net
38,732

 
16,337

Income before income taxes
371,516

 
427,568

Provision for income taxes
25,120

 
31,624

Net income
346,396

 
395,944

Less: Net loss attributable to non-controlling interest
(129
)
 

Net income attributable to KLA-Tencor
$
346,525

 
$
395,944

Net income per share attributable to KLA-Tencor:
 
 
 
Basic
$
2.18

 
$
2.55

Diluted
$
2.16

 
$
2.54

Weighted-average number of shares:
 
 
 
Basic
158,697

 
155,221

Diluted
160,131

 
156,083



4



KLA Corporation
Condensed Consolidated Unaudited Statements of Cash Flow
 
Three months ended
September 30,
(In thousands)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
346,396

 
$
395,944

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
98,588

 
16,087

Loss (gain) on unrealized foreign exchange and other
12,794

 
3,895

Stock-based compensation expense
26,944

 
16,138

Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
 
 
 
Accounts receivable
(75,214
)
 
36,079

Inventories
(5,091
)
 
(55,738
)
Other assets
(8,930
)
 
(16,853
)
Accounts payable
18,885

 
(14,765
)
Deferred system revenue
(4,833
)
 
(79,810
)
Deferred service revenue
(4,337
)
 
(13,325
)
Other liabilities
91,043

 
93,753

Net cash provided by operating activities
496,245

 
381,405

Cash flows from investing activities:
 
 
 
Businesses acquisitions, net of cash acquired
(78,530
)
 
(11,787
)
Capital expenditures
(32,566
)
 
(22,330
)
Proceeds from disposition of non-marketable securities
1,086

 

Purchases of available-for-sale securities
(263,767
)
 

Proceeds from sale of available-for-sale securities
25,449

 
91,238

Proceeds from maturity of available-for-sale securities
198,751

 
254,757

Purchases of trading securities
(9,021
)
 
(4,619
)
Proceeds from sale of trading securities
11,905

 
7,612

Net cash (used in) provided by investing activities
(146,693
)
 
314,871

Cash flows from financing activities:
 
 
 
Common stock repurchases
(228,496
)
 
(299,974
)
Payment of dividends to stockholders
(121,636
)
 
(122,757
)
Issuance of common stock
114

 

Tax withholding payments related to equity awards
(23,538
)
 
(26,961
)
Payment of contingent consideration payable
(57
)
 

Net cash used in financing activities
(373,613
)
 
(449,692
)
Effect of exchange rate changes on cash and cash equivalents
(3,585
)
 
(1,452
)
Net (decrease) increase in cash and cash equivalents
(27,646
)
 
245,132

Cash and cash equivalents at beginning of period
1,015,994

 
1,404,382

Cash and cash equivalents at end of period
$
988,348

 
$
1,649,514

Supplemental cash flow disclosures:
 
 
 
Income taxes paid
$
19,862

 
$
24,962

Interest paid
$
26,347

 
$
537

Non-cash activities:
 
 
 
Business acquisition holdback amounts - investing activities
$

 
$
440

Contingent consideration payable - financing activities
$
9,366

 
$
3,102

Dividends payable - financing activities
$
1,552

 
$
4,783

Unsettled common stock repurchase - financing activities
$
8,000

 
$
7,812

Accrued purchase of land, property and equipment - investing activities
$
16,074

 
$
9,242


5



KLA 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
(In thousands)
September 30,
2019
 
September 30,
2018
Revenues:
 
 
 
Semiconductor Process Control
$
1,163,632

 
$
1,069,959

Specialty Semiconductor Process
69,139

 

PCB, Display and Component Inspection(1)
178,552

 
23,615

Other
2,231

 

Total revenues for reportable segments
1,413,554

 
1,093,574

Corporate allocation and effects of foreign exchange rates
(140
)
 
(314
)
Total revenues
$
1,413,414

 
$
1,093,260

__________
(1) Revenues in the three months ended September 30, 2019 include a contribution from the Orbotech business. Revenues in the three months ended September 30, 2018 include the component inspection business only.

KLA 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
 
 
 
September 30,
2019
 
June 30,
2019
 
September 30,
2018
GAAP net income attributable to KLA
 
$
346,525

 
$
217,845

 
$
395,944

Adjustments to reconcile GAAP net income to non-GAAP net income:
 
 
 
 
 
 
 
Acquisition-related charges
a
73,363

 
102,807

 
5,551

 
Income tax effect of non-GAAP adjustments
b
(22,266
)
 
(32,930
)
 
(310
)
 
Discrete tax items
c

 
983

 
(17,106
)
Non-GAAP net income attributable to KLA
 
$
397,622

 
$
288,705

 
$
384,079

GAAP net income (loss) per diluted share attributable to KLA
 
$
2.16

 
$
1.35

 
$
2.54

Non-GAAP net income per diluted share attributable to KLA
 
$
2.48

 
$
1.78

 
$
2.46

Shares used in diluted shares calculation
 
160,131

 
161,937

 
156,083


6



Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations
 
Acquisition - Related Charges
Three months ended September 30, 2019
 
Costs of revenues
$
49,999

Selling, general and administrative
$
23,364

Total in three months ended September 30, 2019
$
73,363

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 September 30, 2018
 
Costs of revenues
$
890

Selling, general and administrative
$
4,661

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


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 and other acquisition-related adjustments including adjustments for the fair valuation of inventory and backlog, 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, 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.
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.
c.
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