KLA Corporation Reports Fiscal 2019 Fourth Quarter And Full Year Results

MILPITAS, Calif., Aug. 5, 2019 /PRNewswire/ -- KLA Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2019. KLA reported GAAP net income attributable to KLA of $218 million and GAAP earnings per diluted share attributable to KLA of $1.35 on revenues of $1,258 million for the fourth quarter of fiscal year 2019. For the fiscal year ended June 30, 2019, the company reported GAAP net income attributable to KLA of $1,176 million and GAAP earnings per diluted share attributable to KLA of $7.49 on revenues of $4.6 billion.

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"In the fourth fiscal quarter KLA delivered results above the midpoint of our range of guidance, reflecting solid execution in a challenging business environment," commented Rick Wallace, president and chief executive officer. "These results demonstrate KLA is benefitting from our strategies for growth and market leadership, which in combination with the recent acquisition of Orbotech, is translating to good relative performance for the company in calendar year 2019."


                             
         
              GAAP Results


                                   Q4 FY 2019                    Q3 FY 2019          Q4 FY 2018


        Revenues         
         $1,258 million          
         $1,097 million  
       $1,070 million

                                                                                            ---

        Net Income
         Attributable to
         KLA Corporation   
         $218 million            
         $193 million    
       $349 million

    ---                                                                                     ---

        Earnings per
         Diluted Share
         Attributable to
         KLA Corporation                $1.35                          $1.23                $2.22

    ---



                           
         
              Non-GAAP Results


                                   Q4 FY 2019                    Q3 FY 2019          Q4 FY 2018


        Net Income
         Attributable to
         KLA Corporation   
         $289 million            
         $283 million    
       $348 million

    ---

        Earnings per
         Diluted Share
         Attributable to
         KLA Corporation                $1.78                          $1.80                $2.22

    ---

Effective on the first day of fiscal 2019, the company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASC 606"). Prior periods were not retrospectively restated, and accordingly, the condensed consolidated unaudited balance sheet as of June 30, 2018, and the condensed consolidated unaudited statements of operations for the three and twelve months ended June 30, 2018 and cash flows for the three months ended June 30, 2018 were prepared using accounting standards that were different from those in effect for the three and twelve months ended June 30, 2019.

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 or pending acquisitions, restructuring, severance, merger and other related charges and certain discrete tax items. KLA will discuss the results for its fiscal year 2019 fourth quarter and full year, along with its outlook, on a conference call today beginning at 2 p.m. PT. A webcast of the call will be available at: www.kla.com.

About KLA:

KLA Corporation, formerly known as KLA-Tencor Corporation, (aka "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 http://www.kla.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'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.



       
                KLA Corporation (formerly known as KLA-Tencor Corporation)



       
                Condensed Consolidated Unaudited Balance Sheets





       
                
                  (In thousands)                                  June 30, 2019                          June 30, 2018

    ---                                                                                                             ---


       
                ASSETS



       Cash, cash equivalents and marketable securities                                          $
       1,739,385                         $
       2,880,318



       Accounts receivable, net                                                          990,113                  651,678



       Inventories                                                                     1,262,500                  931,845



       Other current assets                                                              323,077                   85,159



       Land, property and equipment, net                                                 448,799                  286,306



       Goodwill                                                                        2,211,858                  354,698



       Deferred income taxes, non-current                                                206,141                  193,200



       Purchased intangibles, net                                                      1,560,670                   19,333



       Other non-current assets                                                          265,973                  236,082




       Total assets                                                                              $
       9,008,516                         $
       5,638,619




       
                LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY



       Current liabilities:



       Accounts payable                                                                            $
       202,416                           $
       169,354



       Deferred system revenue                                                           282,348



       Deferred service revenue                                                          206,669                   69,255



       Deferred system profit                                                                  -                 279,581



       Current portion of long-term debt                                                 249,999



       Other current liabilities                                                         827,054                  696,080




       Total current liabilities                                                       1,768,486                1,214,270



       Non-current liabilities:



       Long-term debt                                                                  3,173,383                2,237,402



       Deferred tax liabilities                                                          702,285                    1,197



       Deferred service revenue                                                           98,772                   71,997



       Other non-current liabilities                                                     587,897                  493,242




       Total liabilities                                                               6,330,823                4,018,108



       Stockholders' equity:



       Common stock and capital in excess of par value                                 2,017,312                  617,999



       Retained earnings                                                                 714,825                1,056,445



       Accumulated other comprehensive income (loss)                                    (73,029)                (53,933)




       Total KLA stockholders' equity                                                  2,659,108                1,620,511



       Non-controlling interest in consolidated subsidiary                                18,585




       Total stockholders' equity                                                      2,677,693                1,620,511




       Total liabilities and stockholders' equity                                                $
       9,008,516                         $
       5,638,619


                     KLA Corporation (formerly known as KLA-Tencor Corporation)


                     Condensed Consolidated Unaudited Statements of Operations




                                                                                                        Three months ended                                                     Twelve months ended


                                    (In thousands, except per
                                     share amounts)                             June 30, 2019                              June 30, 2018           June 30, 2019                                   June 30, 2018

    ---                                                                                                                                                                                        ---


       Revenues:



       Product                                                                               $
        917,591                                                      $
        840,500                                   $
        3,392,243  $
          3,160,671



       Service                                                                       340,844                                              229,504                               1,176,661                                876,030




       Total revenues                                                              1,258,435                                            1,070,004                               4,568,904                              4,036,701



       Costs and expenses:


        Costs of revenues                                                             592,785                                              377,566                               1,869,377                              1,446,041


        Research and development                                                      206,710                                              151,905                                 711,030                                608,531


        Selling, general and
         administrative                                                               190,040                                              116,370                                 599,124                                442,304


        Interest expense and
         other, net                                                                    37,590                                               17,674                                  93,142                                 83,894



        Income before income
         taxes                                                                        231,310                                              406,489                               1,296,231                              1,455,931


        Provision for income
         taxes                                                                         13,982                                               57,722                                 121,214                                653,666



       Net income                                                                    217,328                                              348,767                               1,175,017                                802,265


        Less: Net loss
         attributable to non-
         controlling interest                                                           (517)                                                                                      (600)



        Net income attributable
         to KLA                                                                               $
        217,845                                                      $
        348,767                                   $
        1,175,617    $
          802,265



        Net income per share attributable to KLA:



       Basic                                                                                    $
        1.36                                                         $
        2.24                                      $
          7.53       $
          5.13




       Diluted                                                                                  $
        1.35                                                         $
        2.22                                      $
          7.49       $
          5.10



        Weighted-average number of shares:



       Basic                                                                         160,546                                              155,740                                 156,053                                156,346



       Diluted                                                                       161,937                                              156,822                                 156,949                                157,378



              
                KLA Corporation (formerly known as KLA-Tencor Corporation)



              
                Condensed Consolidated Unaudited Statements of Cash Flows


                                                                                                                           Three months ended


                                                                              
              
              June 30,



              
                
                  (In thousands)                                                         2019                              2018

    ---                                                                                                                                             ---


              Cash flows from operating activities:



              Net income                                                                                                $
              217,328                   $
         348,767



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



              Depreciation and amortization                                                                   127,886                            14,989



              (Gain) loss on unrealized foreign exchange and other                                              (812)                           11,107



              Stock-based compensation expense                                                                 28,168                            18,804



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



              Accounts receivable                                                                            (53,565)                            2,095



              Inventories                                                                                      13,179                          (74,684)



              Other assets                                                                                   (89,691)                           40,737



              Accounts payable                                                                                (3,832)                              403



              Deferred system revenue                                                                          51,754



              Deferred service revenue                                                                         31,549



              Deferred system profit                                                                                -                           20,309



              Other liabilities                                                                                 3,497                           (9,014)

                                                                                                                                                    ---


              Net cash provided by operating activities                                                       325,461                           373,513



              Cash flows from investing activities:



              Business acquisitions, net of cash acquired                                                           -                         (11,913)



              Capital expenditures                                                                           (55,846)                         (22,828)



              Purchases of available-for-sale securities                                                     (78,847)                         (27,657)



              Proceeds from sale of available-for-sale securities                                              16,867                            68,229



              Proceeds from maturity of available-for-sale securities                                         146,217                           118,877



              Purchases of trading securities                                                                (18,594)                         (12,762)



              Proceeds from sale of trading securities                                                         20,642                            14,829

                                                                                                                                                    ---


              Net cash provided by investing activities                                                        30,439                           126,775



              Cash flows from financing activities:



              Payments of debt issuance costs                                                                 (2,478)



              Repayment of debt                                                                                     -                        (225,000)



              Issuance of common stock                                                                         44,272                            40,873



              Tax withholding payments related equity awards                                                  (6,942)                          (2,133)



              Common stock repurchases                                                                      (344,986)                         (38,091)



              Payment of dividends to stockholders                                                          (121,363)                        (117,035)



              Payment of contingent consideration payable                                                       (649)



              Net cash used in financing activities                                                         (432,146)                        (341,386)



              Effect of exchange rate changes on cash and cash equivalents                                         77                          (10,202)



              Net (decrease) increase in cash and cash equivalents                                           (76,169)                          148,700



              Cash and cash equivalents at beginning of period                                              1,092,163                         1,255,682



              Cash and cash equivalents at end of period                                                              $
              1,015,994                 $
         1,404,382

                                                                                                                                                                         ===


              Supplemental cash flow disclosures:



              Income taxes paid                                                                                          $
              15,769                    $
         31,331



              Interest paid                                                                                              $
              51,544                    $
         53,210



              Non-cash activities:



              Contingent consideration payable - financing activities                                                     $
              6,905             
     $



              Dividends payable - financing activities                                                                    $
              7,340                     $
         9,571



              Unsettled common stock repurchase - financing activities                                                    $
              8,000             
     $



              Accrued purchase of land, property and equipment - investing activities                                     $
              6,353                     $
         7,418



              
                KLA Corporation (formerly known as KLA-Tencor 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                                                                  Twelve months ended



              
                
                  (In thousands)                                                                                                           June 30, 2019                                                   June 30, 2018                     June 30, 2019                June 30, 2018

    ---                                                                                                                                                                                                                                                                                        ---


              Revenues:



              Semiconductor Process Control                                                                                                                                        $
              1,002,544                                                $
     1,043,714                                            $
     4,080,822  $
     3,944,015



              Specialty Semiconductor Process                                                                                                                             66,775                                                                                        151,164



              PCB, Display and Component Inspection(1)                                                                                                                   184,625                                           26,160                                        332,810                                       92,516



              Other                                                                                                                                                        4,525                                                                                          4,676




              Total revenues for reportable segments                                                                                                                               $
              1,258,469                                                $
     1,069,874                                            $
     4,569,472  $
     4,036,531



              Corporate allocation and effects of foreign exchange rates                                                                                                    (34)                                             130                                          (568)                                         170




              Total revenues                                                                                                                                                       $
              1,258,435                                                $
     1,070,004                                            $
     4,568,904  $
     4,036,701




              __________



              (1) Revenues in the three and twelve months ended June 30, 2019 include the contribution from the Orbotech business from the Feb. 20, 2019 acquisition date. Revenues in the 2018 periods include the component inspection business only.



              
                KLA Corporation (formerly known as KLA-Tencor Corporation)



              
                Condensed Consolidated Unaudited Supplemental Information





              
                
                  Reconciliation of GAAP Net Income to Non-GAAP Net Income

    ---

                                                                                                                             
     
     Three months ended                                                       Twelve months ended



              
                
                  (In thousands, except per share amounts)                   June 30,                      March 31,              June 30,                                 June 30,                                       June 30,
                                                                                                          2019                            2019                   2018                         2019                                         2018

    ---


              GAAP net income attributable to KLA                                                             $
         217,845                                         $
        192,728                                $
             348,767                               $
         1,175,617    $
          802,265



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

    ---


              Acquisition-related charges                                                          a                 102,807                                103,755                          3,973                                        216,394                             14,581



              Merger-related charges                                                               b                                                                                                                                                                       3,015



              Income tax effect of non-GAAP adjustments                                            c                (32,930)                              (21,127)                         (300)                                      (54,643)                           (2,707)



              Discrete tax items                                                                   d                     983                                  7,482                        (4,402)                                       (9,406)                           441,676




              Non-GAAP net income attributable to KLA                                                         $
         288,705                                         $
        282,838                                $
             348,038                               $
         1,327,962  $
          1,258,830




              GAAP net income per diluted share attributable to KLA                                              $
         1.35                                            $
        1.23                                   $
             2.22                                  $
           7.49       $
          5.10




              Non-GAAP net income per diluted share attributable to                                              $
         1.78                                            $
        1.80                                   $
             2.22                                  $
           8.46       $
          8.00
    KLA




              Shares used in diluted shares calculation                                               161,937                                     157,182                          156,822                                    156,949                      157,378


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

    ---



                             (In thousands)                                Acquisition-
                                                                              related
                                                                  charges

    ---

                             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
                              March 31, 2019

    ---

        Costs of revenues                                                                $
         47,659


        Research and
         development                                                              3,328


        Selling, general and
         administrative                                                          52,768


        Total in three
         months ended March
         31, 2019                                                                       $
         103,755



                             Three months ended
                              June 30, 2018

    ---

        Costs of revenues                                                                   $
         729


        Selling, general and
         administrative                                                           3,244


        Total in three
         months ended June
         30, 2018                                                                         $
         3,973

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, amortization of inventory fair value adjustments and backlog, certain employee compensation arrangements, acceleration of certain stock-based compensation arrangements, 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 that have short lives, 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. Merger-related charges associated with the terminated merger agreement between KLA 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. d. 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 Dec. 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.

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SOURCE KLA Corporation