July 27, 2017

KLA-Tencor Reports Fiscal 2017 Fourth Quarter And Full Year Results

MILPITAS, Calif., July 27, 2017 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2017. KLA-Tencor reported GAAP net income of $256 million and GAAP earnings per diluted share of $1.62 on revenues of $939 million for the fourth quarter of fiscal year 2017. For the fiscal year ended June 30, 2017, the company reported GAAP net income of $926 million and GAAP earnings per diluted share of $5.88 on revenues of $3.5 billion .

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"We're very pleased to report that June marked another exceptional quarter for KLA-Tencor. New orders exceeded the $1 billion mark and shipments were a record $971 million," commented Rick Wallace, president and chief executive officer of KLA-Tencor.  "These results were driven by KLA-Tencor's ongoing execution of our strategic objectives and are reflective of the strength of demand in today's industry environment."

GAAP Results


Q4 FY 2017

Q3 FY 2017

Q4 FY 2016

Revenues

$939 million

$914 million

$919 million

Net Income

$256 million

$254 million

$272 million

Earnings per Diluted Share

$1.62

$1.61

$1.73





Non-GAAP Results


Q4 FY 2017

Q3 FY 2017

Q4 FY 2016

Net Income

$259 million

$256 million

$277 million

Earnings per Diluted Share

$1.64

$1.62

$1.77

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, restructuring, severance, merger and other related charges and certain discrete tax items. KLA-Tencor will discuss the results for its fiscal year 2017 fourth quarter and full year, 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)

June 30, 2017


June 30, 2016

ASSETS




Cash, cash equivalents and marketable securities

$

3,016,740



$

2,491,294


Accounts receivable, net

571,117



613,233


Inventories

732,988



698,635


Other current assets

71,221



64,870


Land, property and equipment, net

283,975



278,014


Goodwill

349,526



335,177


Deferred income taxes, non-current

291,967



302,219


Purchased intangibles, net

18,963



4,331


Other non-current assets

195,676



174,659


  Total assets

$

5,532,173



$

4,962,432


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

147,380



$

106,517


Deferred system profit

180,861



174,551


Unearned revenue

65,507



59,147


Current portion of long-term debt

249,983




Other current liabilities

649,431



662,208


  Total current liabilities

1,293,162



1,002,423


Non-current liabilities:




Long-term debt

2,680,474



3,057,936


Unearned revenue

59,713



56,336


Other non-current liabilities

172,407



156,623


  Total liabilities

4,205,756



4,273,318


Stockholders' equity:




Common stock and capital in excess of par value

529,283



452,974


Retained earnings

848,457



284,825


Accumulated other comprehensive income (loss)

(51,323)



(48,685)


  Total stockholders' equity

1,326,417



689,114


  Total liabilities and stockholders' equity

$

5,532,173



$

4,962,432


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations










Three months ended


Twelve months ended

(In thousands, except per share amounts)

June 30, 2017


June 30, 2016


June 30, 2017


June 30, 2016

Revenues:








Product

$

737,432



$

731,118



$

2,703,934



$

2,250,260


Service

201,215



188,053



776,080



734,233


Total revenues

938,647



919,171



3,480,014



2,984,493


Costs and expenses:








Costs of revenues

347,930



337,568



1,287,547



1,163,391


Research and development

136,555



127,454



526,870



481,258


Selling, general and administrative

105,164



103,797



389,336



379,399


Interest expense and other, net

23,966



21,865



103,015



102,253


Income before income taxes

325,032



328,487



1,173,246



858,192


Provision for income taxes

68,870



56,946



247,170



153,770


Net income

$

256,162



$

271,541



$

926,076



$

704,422


Net income per share:








Basic

$

1.64



$

1.74



$

5.92



$

4.52


Diluted

$

1.62



$

1.73



$

5.88



$

4.49


Cash dividends declared per share

$

0.54



$

0.52



$

2.14



$

2.08


Weighted-average number of shares:








Basic

156,668



155,712



156,468



155,869


Diluted

157,931



156,618



157,481



156,779


 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



Three months ended

June 30,

(In thousands)

2017


2016

Cash flows from operating activities:




Net income

$

256,162



$

271,541


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




Depreciation and amortization

14,324



14,888


Non-cash stock-based compensation expense

14,485



12,292


Excess tax benefit from equity awards



240


Net gain on sales of marketable securities and other investments

(375)



(1,782)


Changes in assets and liabilities, net of business acquisition:




Decrease in accounts receivable, net

167,034



21,400


Decrease (increase) in inventories

(32,464)



26,397


Decrease in other assets

5,000



29,758


Increase (decrease) in accounts payable

6,844



(19,847)


Decrease in deferred system profit

(8,655)



(18,668)


Increase in other liabilities

40,282



17,874


Net cash provided by operating activities

462,637



354,093


Cash flows from investing activities:




Acquisition of non-marketable securities

(1,060)




Business acquisition, net of cash acquired

(28,560)




Capital expenditures, net

(10,668)



(7,508)


Proceeds from sale of assets

365



3,050


Purchases of available-for-sale securities

(414,383)



(301,733)


Proceeds from sale of available-for-sale securities

70,443



105,610


Proceeds from maturity of available-for-sale securities

227,569



130,009


Purchases of trading securities

(9,694)



(20,130)


Proceeds from sale of trading securities

11,629



21,449


Net cash used in investing activities

(154,359)



(69,253)


Cash flows from financing activities:




Repayment of debt

(25,000)



(40,000)


Issuance of common stock

21,665



16,388


Tax withholding payments related to vested and released restricted stock units



(219)


Common stock repurchases

(25,002)




Payment of dividends to stockholders

(84,637)



(81,120)


Excess tax benefit from equity awards



(240)


Net cash used in financing activities

(112,974)



(105,191)


Effect of exchange rate changes on cash and cash equivalents

1,940



2,865


Net increase in cash and cash equivalents

197,244



182,514


Cash and cash equivalents at beginning of period

955,807



925,974


Cash and cash equivalents at end of period

$

1,153,051



$

1,108,488


Supplemental cash flow disclosures:




Income taxes paid, net

$

43,888



$

23,408


Interest paid

$

56,865



$

57,091


Non-cash activities:




Purchase of land, property and equipment - investing activities

$

3,299



$

2,035


Business acquisition holdback amounts- investing activities

$

5,318



$


Dividends payable - financing activities

$

13,772



$

19,556


 

KLA-Tencor 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


Twelve months ended



June 30,
2017


March 31,
2017


June 30,
2016


June 30,
2017


June 30,
2016

GAAP net income


$

256,162



$

253,562



$

271,541



$

926,076



$

704,422


Adjustments to reconcile GAAP net income to non-GAAP net income











Acquisition-related charges

a

1,029



513



1,294



3,322



7,493


Restructuring, severance and other related charges

b









8,945


Merger-related charges

c

3,072



3,221



5,795



13,967



18,197


Income tax effect of non-GAAP adjustments

d

(1,295)



(1,272)



(1,795)



(5,406)



(8,999)


Discrete tax items

e







(3,064)




Non-GAAP net income


$

258,968



$

256,024



$

276,835



$

934,895



$

730,058


GAAP net income per diluted share


$

1.62



$

1.61



$

1.73



$

5.88



$

4.49


Non-GAAP net income per diluted share


$

1.64



$

1.62



$

1.77



$

5.94



$

4.66


Shares used in diluted shares calculation


157,931



157,746



156,618



157,481



156,779


 

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
adjustment

Three months ended June 30, 2017






Costs of revenues

$

708



$

9



$

717


Research and development



995



995


Selling, general and administrative

321



2,068



2,389


Total in three months ended June 30, 2017

$

1,029



$

3,072



$

4,101


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


Three months ended June 30, 2016






Costs of revenues

$

658



$

346



$

1,004


Research and development



1,223



1,223


Selling, general and administrative

636



4,226



4,862


Total in three months ended June 30, 2016

$

1,294



$

5,795



$

7,089


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 transaction costs associated with acquisitions. 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. 

Restructuring, severance and other related charges include costs associated with employee severance and other exit costs, and  impairment of certain long-lived assets. 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. 

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.

d. 

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.

e. 

Discrete tax items include the tax impact of certain merger-related charges that only became deductible during the three months ended December 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

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