KLA-Tencor Reports Fiscal 2009 Fourth Quarter and Full Year Results

MILPITAS, Calif.--(BUSINESS WIRE)-- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended on June 30, 2009. KLA-Tencor reported GAAP net loss of $26 million and GAAP loss per share of $0.15 on revenue of $282 million for the fourth quarter of fiscal year 2009. For the year ended June 30, 2009, the company reported GAAP net loss of $523 million and GAAP loss per diluted share of $3.07 on revenue of $1.5 billion.

"We are encouraged by investments in technology development programs by customers at the leading edge as well as improved demand from our foundry customers," commented Rick Wallace, president and CEO of KLA-Tencor. "We continue to manage our business to align our cost structure with projected revenue levels and are focused on achieving non-GAAP breakeven by the end of calendar year 2009, while at the same time maintaining a high level of R&D investment to support our customers' next-generation process control needs."


GAAP Results

                           Q4 FY 2009      Q3 FY 2009     Q4 FY 2008

Revenues                   $ 282 million   $ 310 million  $ 591 million

Net (Loss) Income          $(26) million   $(83) million  $76 million

(Loss) Earnings per Share  $ (0.15)        $ (0.49)       $ 0.43

Non-GAAP Results

                           Q4 FY 2009     Q3 FY 2009      Q4 FY 2008

Net (Loss) Income          $ (15) million $ (58) million  $ 107 million

(Loss) Earnings per Share  $ (0.09)       $ (0.34)        $ 0.60



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, and restructuring related items.

KLA-Tencor will discuss the results for its fourth quarter and fiscal year 2009, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Daylight 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 the encouragement derived from the investment in technology development programs witnessed in the June quarter (including without limitation the potential success of such technology development programs and whether such programs will result in future sales for KLA-Tencor) and from the improved demand seen in the June quarter from foundry customers (including without limitation the possibility that such improved demand will be sustained in future periods); the company's ability to align its cost structure with projected revenue levels so as to achieve non-GAAP breakeven operating results by the end of the calendar year; future levels of investment in research and development by KLA-Tencor; 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; the impact of local labor and employment laws on KLA-Tencor's ability to complete, and realize the anticipated cost savings from, its recent global workforce reductions; unanticipated delays in the completion of KLA-Tencor's facilities consolidation efforts or the implementation of other cost-reduction efforts; 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, 2008, subsequently filed Quarterly Reports on Form 10-Q and other 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 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)                                  June 30, 2009     June 30, 2008

ASSETS

Cash and short- and long-term investments     $   1,329,884     $   1,579,383

Accounts receivable, net                          210,143           492,488

Inventories, net                                  370,206           459,449

Other current assets                              488,384           546,591

Land, property and equipment, net                 291,878           355,474

Goodwill                                          329,379           601,882

Purchased intangibles, net                        149,080           297,778

Other long-term assets                            440,584           515,345

Total assets                                  $   3,609,538     $   4,848,390

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                              $   63,485        $   104,315

Deferred system profit                            95,820            150,797

Unearned revenue                                  63,237            56,692

Other current liabilities                         341,441           638,528

Total current liabilities                         563,983           950,332

Non-current liabilities:

Income tax payable                                49,738            63,634

Unearned revenue                                  6,058             31,745

Other non-current liabilities                     60,163            76,288

Long-term debt                                    745,204           744,661

Total liabilities                                 1,425,146         1,866,660

Stockholders' equity:

Common stock and capital in excess of par         835,477           729,629
value

Retained earnings                                 1,370,132         2,204,417

Accumulated other comprehensive income (loss)     (21,217     )     47,684

Total stockholders' equity                        2,184,392         2,981,730

Total liabilities and stockholders' equity      $ 3,609,538       $ 4,848,390




KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations

                              Three months ended        Twelve months ended

(In thousands, except per     June 30,     June 30,     June 30,       June 30,
share data)                   2009         2008         2009           2008

Revenues:

Product                     $ 176,226    $ 462,069    $ 1,062,126    $ 2,030,224

Service                       105,276      128,625      458,090        491,492

Total revenues                281,502      590,694      1,520,216      2,521,716

Costs and operating
expenses:

Costs of revenues             164,621      264,146      864,824        1,134,856

Engineering, research and     79,227       116,470      371,463        409,973
development

Selling, general and          72,621       100,209      415,126        464,890
administrative

Goodwill and intangible       -            6,458        446,744        12,621
asset impairment

Total costs and operating     316,469      487,283      2,098,157      2,022,340
expenses

Income (loss) from            (34,967 )    103,411      (577,941  )    499,376
operations

Interest income and other,    (11,409 )    (5,894  )    (24,590   )    60,858
net

Income (loss) before income   (46,376 )    97,517       (602,531  )    560,234
taxes

Provision (benefit) for       (20,800 )    21,507       (79,163   )    201,151
income taxes

Net income (loss)           $ (25,576 )  $ 76,010     $ (523,368  )  $ 359,083

Net income (loss) per
share:

Basic                       $ (0.15   )  $ 0.43       $ (3.07     )  $ 1.99

Diluted                     $ (0.15   )  $ 0.43       $ (3.07     )  $ 1.95

Cash dividend paid per      $ 0.15       $ 0.15       $ 0.60         $ 0.60
share

Weighted average number of
shares:

Basic                         169,981      175,143      170,253        180,594

Diluted                       169,981      178,090      170,253        184,259




KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

                                                       Three months ended

                                                       June 30,

(In thousands)                                         2009          2008

Cash flows from operating activities:

Net income (loss)                                    $ (25,576  )  $ 76,010

Adjustments to reconcile net income (loss) to net
cash provided by operating activities:

Depreciation and amortization                          25,732        46,469

Goodwill, intangible assets and long-lived asset       638           7,522
impairment

Provision for doubtful accounts                        (818     )    -

Non-cash, stock-based compensation                     26,092        29,279

Tax benefit from stock-based compensation              (13,223  )    (924      )

Excess tax benefit from stock-based compensation       -             (354      )

Net loss on sale of marketable securities and other    160           12,813
investments

Net gain on sale of real estate assets                 (353     )    (2,480    )

Changes in assets and liabilities, net of assets
acquired and liabilities assumed in business
combinations:

Decrease in accounts receivable, net                   37,261        93,081

Decrease in inventories                                53,111        13,059

Increase in other assets                               (40,943  )    (73,548   )

Increase (decrease) in accounts payable                6,720         (5,730    )

Increase (decrease) in deferred system profit          21,632        (37,503   )

Increase (decrease) in other liabilities               (16,995  )    29,121

Net cash provided by operating activities              73,438        186,815

Cash flows from investing activities:

Proceeds from restricted cash                          -             581,540

Acquisition of business, net of cash received          -             (488,545  )

Capital expenditures, net                              (1,980   )    (9,629    )

Proceeds from sale of real estate assets               -             5,497

Purchase of available-for-sale securities              (349,358 )    (406,210  )

Proceeds from sale and maturity of                     137,127       87,008
available-for-sale securities

Purchase of trading securities                         (20,402  )    (33,618   )

Proceeds from sale of trading securities               27,525        35,177

Net cash used in investing activities                  (207,088 )    (228,780  )

Cash flows from financing activities:

Issuance of common stock                               12,971        24,607

Tax withholding payments related to released           (549     )    -
restricted stock units

Common stock repurchases                               -             (121,510  )

Issuance of long term debt, net of discount            -             744,570

Debt issuance costs                                    -             (7,351    )

Payment of dividends to stockholders                   (25,490  )    (26,354   )

Excess tax benefit from stock-based compensation       -             354

Net cash provided by (used in) financing activities    (13,068  )    614,316

Effect of exchange rate changes on cash and cash       6,756         (7,727    )
equivalents

Net increase (decrease) in cash and cash equivalents   (139,962 )    564,624

Cash and cash equivalents at beginning of period       664,929       563,482

Cash and cash equivalents at end of period           $ 524,967     $ 1,128,106

Supplemental cash flow disclosures

Income taxes paid, net                                 (5,274   )    59,720

Interest paid                                        $ 26,474      $ 417




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                   Twelve months ended

                   June 30,    March 31,   June 30,     June 30,     June 30,
                   2009        2009        2008         2009         2008

GAAP net income    $ (25,576 ) $ (82,827 ) $ 76,010     $ (523,368 ) $ 359,083
(loss)

Adjustments to
reconcile GAAP
net income
(loss) to
non-GAAP net
income (loss)

Acquisition      a   11,561      16,718      43,919       79,287       69,852
related charges

Restructuring,
severance and    b   7,007       19,330      (1,391  )    54,119       8,379
other

Restatement      c   (1,731  )   2,018       2,660        13,261       76,940
related charges

Goodwill and
intangible asset d   -           -           6,458        446,744      12,621
impairment

Income tax
effect of        e   (5,883  )   (13,524 )   (12,038 )    (107,503 )   (53,315 )
non-GAAP
adjustments

Non-recurring    f   -           -           (8,438  )    -            38,175
tax item

Non-GAAP net       $ (14,622 ) $ (58,285 ) $ 107,180    $ (37,460  ) $ 511,735
income (loss)

GAAP net income
(loss) per         $ (0.15   ) $ (0.49   ) $ 0.43       $ (3.07    ) $ 1.95
diluted share

Non-GAAP net
income (loss)      $ (0.09   ) $ (0.34   ) $ 0.60       $ (0.22    ) $ 2.78
per diluted
share

Shares used in
diluted shares       169,981     169,934     178,090      170,253      184,259
calculation




Impact of items included in Condensed Consolidated Unaudited Statements of
Operations:

                                            Restatement  Goodwill    Total
               Acquisition  Restructuring,  related      and         pre-tax
               related      severance and                intangible  GAAP to
               charges      other           charges      asset       non-GAAP
                                                         impairment  adjustment

Costs of       $ 9,314      $ 3,662         $ -          $ -         $ 12,976
revenues

Engineering,
research and     742          4               -            -           746
development

Selling,
general and      1,505        3,341           (1,731 )     -           3,115
administrative

Goodwill and
intangible       -            -               -            -           -
asset
impairment

Total in three
months ended   $ 11,561     $ 7,007         $ (1,731 )   $ -         $ 16,837
June 30, 2009

Total in three
months ended   $ 16,718     $ 19,330        $ 2,018      $ -         $ 38,066
March 31, 2009

Total in three
months ended   $ 43,919     $ (1,391 )      $ 2,660      $ 6,458     $ 51,646
June 30, 2008




                          Three months ended

                            June 30, 2009    March 31, 2009    June 30, 2008

Stock-based compensation

Costs of revenues         $ 5,091          $ 4,706           $ 5,417

Engineering, research and   8,650            7,524             8,870
development

Selling, general and        12,351           10,528            14,992
administrative

Total                     $ 26,092         $ 22,758          $ 29,279



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 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, in-process research and development associated with acquisitions, and realized and unrealized gains resulting from Euro call option contracts entered into in connection with our acquisition of ICOS Vision Systems Corporation NV. 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 inventory fair value adjustments, in-process research and development and gains and losses on foreign exchange contracts associated with business acquisitions 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 includes 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, and gains from sale of facilities, one-time inventory write off associated with the disposal of service inventory in excess of future need, and asset impairment (other than impairment of goodwill and 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 compensation related to reimbursement payments by KLA-Tencor to non-executive employees for penalty taxes under section 409A of the Internal Revenue Code, as well as 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 intangible asset impairment includes non-cash expense recognized as a result of the company's annual testing for goodwill impairment performed in the second quarter of every fiscal year and testing for intangible asset impairment driven by certain macroeconomic and 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 Non-recurring tax item includes the U.S. tax impact associated with the implementation of our global manufacturing strategy and a benefit from revision of the amount of undistributed earnings of foreign subsidiaries considered to be permanently reinvested outside the United States. 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 help investors compare our operating performance with our results in prior periods as well as with the performance of other companies.


    Source: KLA-Tencor Corporation