Exhibit 99.1 KLA-Tencor Reports Earnings of $116 Million on Revenue of $519 Million for First Quarter of Fiscal Year 2005 SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 21, 2004--KLA-Tencor Corporation (Nasdaq:KLAC) today announced operating results for its first quarter of fiscal 2005, ended September 30, 2004. Net income and earnings per diluted share rose to $116 million and $0.58 on revenues of $519 million, as the company reported sequential and year-over-year improvements in operating results. Revenues rose 15 percent from $450 million in the prior quarter and 63 percent from $318 million compared to the same period last year. Net income was also significantly higher, increasing from $96 million or $0.48 per diluted share in the prior quarter and $37 million or $0.18 per diluted share in the first quarter of fiscal 2004. "Our strong financial results reflect leading chipmakers' strategic investments in process control technology to help them stay on Moore's law and reduce the time and costs associated with producing next-generation chips," explained Ken Schroeder, President and Chief Executive Officer of KLA-Tencor. "Our customers know that process control technology is instrumental to increasing their competitiveness and production success. Going forward we remain focused on investing in the solutions our customers will need to accelerate their development and production ramps at future nodes, while also optimizing the performance of their existing tools and technologies." KLA-Tencor reported that it ended the quarter with approximately six months of backlog at current shipping levels. Geographically, the strongest order activity originated from Japan, which was above its historical share. Korea, China, and Singapore were also above historical levels while order levels for the United States, Europe and Taiwan were below their historical averages during the quarter. Rising revenues and improved cost-structure resulted in record level gross margin, pretax, and operating margin percentages in the current quarter. Operating expenses increased from $141 million in the prior quarter to $146 million in the current quarter. Cash, cash equivalents, and marketable securities increased by $10 million to $1.89 billion and the company repurchased $74 million of its shares during the quarter. Accounts receivable decreased by $7 million to $366 million on strong collections, while inventory increased by $36 million to $373 million on new product introductions and higher planned production levels. Forward Looking Statements: Statements in this press release regarding the company's positioning for future industry growth, impact of process control technology, investment decisions by the Company and the benefits derived from future investments by the Company, current order backlog, rising demand for semiconductor process control equipment and cost-saving measures 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: delays or cancellations of orders by customers; shipments or acceptances; inability by the company to meet its production and/or product development schedules; the demand for semiconductors; and new and enhanced product offerings by competitors. For other factors that may cause actual results to differ from those projected, please refer to the company's Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the company's SEC filings. About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., with operations around the world, KLA-Tencor ranked #6 on S&P's 2002 index of the top 500 companies in the U.S. KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC. Additional information about the company is available on the Internet at http://www.kla-tencor.com. KLA-Tencor Corporation CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS September 30, June 30, 2004 2004 - ---------------------------------------------------------------------- (In thousands) ASSETS Cash, short-term investments and marketable securities $1,886,256 $1,876,356 Accounts receivable, net 365,529 372,773 Inventories 373,484 337,414 Land, property and equipment, net 380,239 376,052 Other assets 584,499 576,584 ---------- ---------- Total assets $3,590,007 $3,539,179 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 53,132 $ 63,991 Deferred system profit 281,455 284,813 Unearned revenue 58,971 57,318 Other current liabilities 511,571 505,507 ---------- ---------- Total current liabilities 905,129 911,629 ---------- ---------- Stockholders' equity: Common stock and capital in excess of par value 918,331 984,804 Retained earnings 1,756,992 1,640,587 Accumulated other comprehensive income 9,555 2,159 ---------- ---------- Total stockholders' equity 2,684,878 2,627,550 ---------- ---------- Total liabilities and stockholders' equity $3,590,007 $3,539,179 ========== ========== KLA-Tencor Corporation CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS Three months ended September 30, 2004 2003 - ---------------------------------------------------------------------- (In thousands, except per share data) Revenues: Product $442,296 $250,145 Service 76,477 67,825 ---------- ---------- Total revenues 518,773 317,970 ---------- ---------- Costs and operating expenses: Costs of revenues 215,469 155,541 Engineering, research and development 77,147 65,452 Selling, general and administrative 69,190 60,009 ---------- ---------- Total costs and operating expenses 361,806 281,002 ---------- ---------- Income from operations 156,967 36,968 Interest income and other, net 6,985 8,401 ---------- ---------- Income before income taxes 163,952 45,369 Provision for income taxes 47,547 8,532 ---------- ---------- Net income $116,405 $ 36,837 ========== ========== Net income per share: Basic Basic net income per share $ 0.59 $ 0.19 ========== ========== Diluted Diluted net income per share $ 0.58 $ 0.18 ========== ========== Weighted average number of shares; Basic 196,110 192,699 ========== ========== Diluted 199,969 200,334 ========== ========== CONTACT: John Kispert, 408-875-6224 (Chief Financial Officer) john.kispert@kla-tencor.com Cary Halsted, 408-875-4094 (Investment Community) cary.halsted@kla-tencor.com Uma Subramaniam, 408-875-5473 (Media) uma.subramaniam@kla-tencor.com