KLA-Tencor Reports Fiscal 2018 First Quarter Results

MILPITAS, Calif., Oct. 26, 2017 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2018, which ended on Sept. 30, 2017, and reported GAAP net income of $281 million and GAAP earnings per diluted share of $1.78 on revenues of $970 million.

Logo - http://photos.prnewswire.com/prnh/20140123/SF50413LOGO

"I am very pleased to report that KLA-Tencor delivered record shipments, revenues and non-GAAP earnings per diluted share in Q1 of fiscal 2018," commented Rick Wallace, president and chief executive officer of KLA-Tencor. "These results demonstrate successful execution of our long term strategies, and the critical nature process control plays in enabling semiconductor industry growth."

                                   GAAP Results

                 Q1 FY 2018                     Q4 FY 2017             Q1 FY 2017

    Revenues              $970 million                   $939 million           $751 million
    --------              ------------                   ------------           ------------

    Net Income            $281 million                   $256 million           $178 million
                          ------------                   ------------           ------------

    Earnings per
     Diluted
     Share                       $1.78                           $1.62                   $1.13
    ------------                 -----                           -----                   -----


                               Non-GAAP Results

                 Q1 FY 2018                     Q4 FY 2017             Q1 FY 2017

    Net Income            $284 million                   $259 million           $182 million
                          ------------                   ------------           ------------

    Earnings per
     Diluted
     Share                       $1.80                           $1.64                   $1.16
    ------------                 -----                           -----                   -----

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 2018 first quarter, along with its outlook, on a conference call today beginning at 3:00 p.m. Pacific Daylight 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) Sept. 30, 2017            June 30, 2017
    -------------  --------------            -------------

    ASSETS

    Cash, cash
     equivalents
     and
     marketable
     securities                   $3,056,484                     $3,016,740

    Accounts
     receivable,
     net                  666,738                        571,117

    Inventories           762,401                        732,988

    Other current
     assets                73,873                         71,221

    Land, property
     and
     equipment,
     net                  279,872                        283,975

    Goodwill              349,678                        349,526

    Deferred
     income taxes,
     non-current          282,302                        291,967

    Purchased
     intangibles,
     net                   17,763                         18,963

    Other non-
     current
     assets               201,287                        195,676

    Total assets                  $5,690,398                     $5,532,173
                                  ==========                     ==========

    LIABILITIES
     AND
     STOCKHOLDERS'
     EQUITY

    Current
     liabilities:

    Accounts
     payable                        $138,657                       $147,380

    Deferred
     system profit        209,267                        180,861

    Unearned
     revenue               61,484                         65,507

    Current
     portion of
     long-term
     debt                 249,996                        249,983

    Other current
     liabilities          806,636                        649,431
                          -------                        -------

    Total current
     liabilities        1,466,040                      1,293,162

    Non-current
     liabilities:

    Long-term debt      2,524,842                      2,680,474

    Unearned
     revenue               60,456                         59,713

    Other non-
     current
     liabilities          175,104                        172,407
                          -------                        -------

    Total
     liabilities        4,226,442                      4,205,756

    Stockholders'
     equity:

    Common stock
     and capital
     in excess of
     par value            518,223                        529,283

    Retained
     earnings             996,514                        848,457

    Accumulated
     other
     comprehensive
     income (loss)       (50,781)                      (51,323)
                          -------                        -------

    Total
     stockholders'
     equity             1,463,956                      1,326,417
                        ---------                      ---------

    Total
     liabilities
     and
     stockholders'
     equity                       $5,690,398                     $5,532,173
                                  ==========                     ==========

    KLA-Tencor Corporation

    Condensed Consolidated Unaudited Statements of Operations


                                                                  Three months ended Sept. 30,

    (In thousands, except per share
     amounts)                                                    2017                           2016
    -------------------------------                              ----                           ----

    Revenues:

    Product                                                              $760,787                      $561,753

    Service                                                   208,794                          188,920
                                                              -------                          -------

    Total revenues                                            969,581                          750,673

    Costs and expenses:

    Costs of revenues                                         353,449                          277,836

    Research and development                                  146,732                          129,233

    Selling, general and administrative                       107,713                           94,388

    Interest expense and other, net                            25,535                           26,996
                                                               ------                           ------

    Income before income taxes                                336,152                          222,220

    Provision for income taxes                                 55,216                           44,119
                                                                                               ------

    Net income                                                           $280,936                      $178,101
                                                                         ========                      ========

    Net income per share:

    Basic                                                                   $1.79                         $1.14

    Diluted                                                                 $1.78                         $1.13

    Cash dividends declared per share                                       $0.59                         $0.52
                                                                            -----                         -----

    Weighted-average number of shares:

    Basic                                                     156,826                          156,129

    Diluted                                                   157,846                          157,021

    KLA-Tencor Corporation

    Condensed Consolidated Unaudited Statements of Cash Flows


                                                                Three months ended

                                                      Sept. 30,

    (In thousands)                                           2017                  2016
    -------------                                            ----                  ----

    Cash flows from operating activities:

    Net income                                                         $280,936                      $178,101

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

    Depreciation and amortization                          15,282                           14,422

    Asset impairment charges                                1,000                              358

    Non-cash stock-based
     compensation expense                                  14,031                           11,478

    Net gain on sales of marketable
     securities and other
     investments                                             (20)                           (204)

    Changes in assets and liabilities, net of business
     acquisition:

    Accounts receivable, net                             (95,621)                        (38,241)

    Inventories                                          (20,194)                           1,187

    Other assets                                          (2,235)                          19,477

    Accounts payable                                      (8,877)                         (1,547)

    Deferred system profit                                 28,406                           11,089

    Other liabilities                                     160,921                         (26,343)
                                                          -------                          -------

    Net cash provided by operating
     activities                                           373,629                          169,777

    Cash flows from investing activities:

    Acquisition of non-marketable
     securities                                                 -                         (1,470)

    Business acquisition                                    (710)                               -

    Capital expenditures, net                            (15,756)                         (9,883)

    Purchases of available-for-
     sale securities                                    (191,744)                       (457,512)

    Proceeds from sale of available-
     for-sale securities                                   50,095                          111,106

    Proceeds from maturity of
     available-for-sale securities                        268,665                          197,100

    Purchases of trading securities                      (11,876)                        (52,465)

    Proceeds from sale of trading
     securities                                            14,320                           45,301
                                                           ------                           ------

    Net cash provided by (used in)
     investing activities                                 112,994                        (167,823)

    Cash flows from financing activities:

    Repayment of debt                                   (156,250)                        (40,000)

    Tax withholding payments related
     to vested and released
     restricted stock units                              (23,628)                        (17,376)

    Common stock repurchases                             (39,927)                               -

    Payment of dividends to
     stockholders                                       (100,327)                        (89,313)


    Net cash used in financing
     activities                                         (320,132)                       (146,689)

    Effect of exchange rate changes
     on cash and cash equivalents                           1,155                            2,572
                                                            -----                            -----

    Net increase (decrease) in cash
     and cash equivalents                                 167,646                        (142,163)

    Cash and cash equivalents at
     beginning of period                                1,153,051                        1,108,488
                                                        ---------                        ---------

    Cash and cash equivalents at end
     of period                                                       $1,320,697                      $966,325
                                                                     ==========                      ========

    Supplemental cash flow disclosures:

    Income taxes paid, net                                              $23,858                       $39,411

    Interest paid                                                        $3,005                        $3,243

    Non-cash activities:

    Purchase of land, property and
     equipment -investing
     activities                                                          $4,734                        $1,974

    Business acquisition holdback
     amounts -investing activities                                       $4,780                    $        -

    Unsettled common stock
     repurchase -financing
     activities                                                            $848                    $        -

    Dividends payable -financing
     activities                                                          $7,011                       $12,045

    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

                                                                                                               Sept. 30,           June 30,         Sept. 30,
                                                                                                                    2017                 2017              2016
                                                                                                                    ----                 ----              ----

    GAAP net income                                                                                             $280,936                              $256,162                    $178,101

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

                                                                     Acquisition-related charges               a           1,587                         1,029              1,267

                                                                     Merger-related charges                    b           3,015                         3,072              3,605

                                                                     Income tax effect of non-GAAP adjustments c         (1,599)                      (1,295)           (1,259)

    Non-GAAP net income                                                                                         $283,939                              $258,968                    $181,714
                                                                                                                ========                              ========                    ========

    GAAP net income per diluted share                                                                              $1.78                                 $1.62                       $1.13
                                                                                                                   =====                                 =====                       =====

    Non-GAAP net income per diluted share                                                                          $1.80                                 $1.64                       $1.16
                                                                                                                   =====                                 =====                       =====

    Shares used in diluted shares calculation                                                          157,846                        157,931                   157,021
                                                                                                       =======                        =======                   =======

    Pre-tax impact of items included in Condensed Consolidated Unaudited Statements of Operations
    ---------------------------------------------------------------------------------------------


                                            Acquisition-               Merger-related             Total pre-tax
                                          related charges                  charges                GAAP to non-
                                                                                                       GAAP
                                                                                                   adjustments
                                                                                                   -----------

    Three months ended
     Sept. 30, 2017
    ------------------

    Costs of revenues                                         $1,530                                              $405        $1,935

    Research and
     development                                        -                                 1,147                        1,147

    Selling, general
     and administrative                                57                                  1,463                        1,520

    Total in three
     months ended Sept.
     30, 2017                                                 $1,587                                            $3,015        $4,602
                                                              ======                                            ======        ======

    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
     Sept. 30, 2016
    ------------------

    Costs of revenues                                           $650                                              $260          $910

    Research and
     development                                        -                                   982                          982

    Selling, general
     and administrative                               617                                  2,363                        2,980

    Total in three
     months ended Sept.
     30, 2016                                                 $1,267                                            $3,605        $4,872
                                                              ======                                            ======        ======

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 inventory fair value
                           adjustments, 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.     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.

                    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.

View original content:http://www.prnewswire.com/news-releases/kla-tencor-reports-fiscal-2018-first-quarter-results-300544256.html

SOURCE KLA-Tencor Corporation