| [July 31, 2008] |
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KLA-Tencor Reports Fiscal 2008 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, 2008. The Company reported GAAP net income of $76 million and GAAP earnings per diluted share of $0.43 on revenue of $591 million for the fourth quarter of fiscal 2008. For the year ended June 30, 2008, the Company reported GAAP net income of $359 million and GAAP earnings per diluted share of $1.95 on revenue of $2.5 billion.
"This was a year of solid execution for KLA-Tencor in a tough overall market environment. We expanded our potential market opportunity through the acquisition of ICOS Vision Systems, and delivered good operating performance in a very challenging demand environment. Our strong performance in the face of these challenges reflects the strength of our market leadership, the superior value we deliver to our customers in helping them meet their yield demands, and the resilience of the KLA-Tencor team," said Rick Wallace, CEO of KLA-Tencor.
GAAP Results
Q4 FY 2008 Q3 FY 2008 Q4 FY 2007
Revenues $ 591 million $ 602 million $ 736 million
Net Income $ 76 million $ 111 million $ 147 million
Diluted Earnings per Share $ 0.43 $ 0.61 $ 0.75
Non-GAAP Results
Q4 FY 2008 Q3 FY 2008 Q4 FY 2007
Net Income $ 107 million $ 121 million $ 179 million
Diluted Earnings per Share $ 0.60 $ 0.67 $ 0.91
A reconciliation between GAAP net income and non-GAAP net income 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, restatement or restructuring related items.
Highlights for the fourth quarter of fiscal 2008
-- Completed the acquisition of ICOS Vision Systems Corporation NV, a leading supplier of packaging and interconnect inspection solutions for the semiconductor industry, as well as a leader in the inspection of photovoltaic solar technologies and LED lighting products.
-- Completed the issuance of $750 million aggregate principal amount of Senior Notes due May 1, 2018, with a coupon of 6.90%.
-- Declared and paid dividends of $26 million and repurchased 2.9 million shares for $122 million under the previously authorized repurchase program
-- Announced that the Company's Board of Directors authorized the repurchase of an additional 15 million shares of the Company's common stock.
-- Generated cash flow from operations of $188 million.
-- Introduced Wafer Plane Inspection (WPI), a mask inspection technology that provides the unique versatility in a single system to find defects on a mask and also show the defects that will print on the wafer. WPI is able to overcome yield-critical 32nm mask defect challenges and can also operate up to 40% faster than previous inspection systems, potentially reducing the percentage of total mask manufacturing time devoted to inspection.
-- Introduced Archer 200(TM), the Company's latest overlay metrology system featuring an enhanced optical system that provides significant performance improvements that are critical to help customers meet the much tighter overlay requirements for double-patterning lithography at the 32nm design rule node.
KLA-Tencor will discuss its fiscal 2008 fourth quarter results, along with its outlook for the first quarter of fiscal 2009, 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 benefit to customers of KLA-Tencor's products, anticipated performance of the Company's products, anticipated market conditions, potential market opportunities for KLA-Tencor, benefits anticipated to be realized in connection with KLA-Tencor's acquisition of ICOS Vision Systems Corporation NV and demand for KLA-Tencor's products, 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; new and enhanced product offerings by competitors; cancellation of orders by customers; our inability to successfully integrate and manage businesses that we acquire, including ICOS Vision Systems Corporation NV; 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 the Company's Annual Report on Form 10-K for the year ended June 30, 2007, 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).
About KLA-Tencor:
KLA-Tencor is the world's leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries. Headquartered in Milpitas, California, the Company has sales and service offices around the world. An S&P 500 Company, KLA-Tencor is traded on the NASDAQ Global Select Market under the symbol KLAC. Additional information about the Company is available on the Internet 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, our financial results presented in accordance with GAAP.
To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide 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 this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.
KLA-Tencor Corporation
Condensed Consolidated Unaudited Balance Sheets
(In thousands) June 30, June 30,
2008 2007
--------- ---------
ASSETS
Cash and short- and long-term investments $1,579,383 $1,710,629
Accounts receivable, net 492,488 581,500
Inventories, net 459,449 535,370
Other current assets 546,591 425,272
Land, property and equipment, net 355,474 382,240
Goodwill 601,882 311,856
Purchased intangibles, net 297,778 175,432
Other long-term assets 515,345 500,950
--------- ---------
Total assets $4,848,390 $4,623,249
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 104,315 $ 92,165
Deferred system profit 150,797 201,747
Unearned revenue 56,692 52,304
Other current liabilities 638,528 659,346
--------- ---------
Total current liabilities 950,332 1,005,562
Non-current liabilities:
Income tax payable 63,634 -
Unearned revenue 31,745 46,950
Other non-current liabilities 76,288 20,695
Long-term debt 744,661 -
--------- ---------
Total liabilities 1,866,660 1,073,207
Stockholders' equity:
Common stock and capital in excess of par value 729,629 967,886
Retained earnings 2,204,417 2,570,751
Accumulated other comprehensive income 47,684 11,405
--------- ---------
Total stockholders' equity 2,981,730 3,550,042
--------- ---------
Total liabilities and stockholders' equity $4,848,390 $4,623,249
========= =========
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) 2008 2007 2008 2007
-------- -------- --------- ---------
Revenues:
Product $462,069 $ 626,323 $2,030,224 $2,308,942
Service 128,625 110,065 491,492 422,287
-------- -------- --------- ---------
Total revenues 590,694 736,388 2,521,716 2,731,229
Costs and operating expenses:
Costs of revenues 268,868 315,681 1,145,416 1,190,323
Engineering, research and
development 116,470 123,854 409,973 437,513
Selling, general and
administrative 101,945 121,989 466,951 513,525
-------- -------- --------- ---------
Total costs and operating
expenses 487,283 561,524 2,022,340 2,141,361
-------- -------- --------- ---------
Income from operations 103,411 174,864 499,376 589,868
Interest income and other,
net (5,894) 21,436 60,858 87,367
-------- -------- --------- ---------
Income before income taxes and
minority interest 97,517 196,300 560,234 677,235
Provision for income taxes 21,507 48,958 201,151 150,509
-------- -------- --------- ---------
Income before minority
interest 76,010 147,342 359,083 526,726
Minority interest - - - 1,372
-------- -------- --------- ---------
Net income $ 76,010 $ 147,342 $ 359,083 $ 528,098
======== ======== ========= =========
Net income per share:
Basic $ 0.43 $ 0.77 $ 1.99 $ 2.68
======== ======== ========= =========
Diluted $ 0.43 $ 0.75 $ 1.95 $ 2.61
======== ======== ========= =========
Cash dividend paid per share $ 0.15 $ 0.12 $ 0.60 $ 0.48
======== ======== ========= =========
Weighted average number of
shares:
Basic 175,143 191,370 180,594 197,126
Diluted 178,090 197,062 184,259 202,204
KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows
Three months ended
June 30,
(In thousands) 2008 2007
------------------------------------------------ --------- --------
Cash flows from operating activities:
Net income $ 76,010 $ 147,342
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 46,469 36,138
Impairment charges 7,522 10,720
Non-cash, stock-based compensation 29,279 26,394
Tax benefit from employee stock options (924) 1,570
Excess tax benefit from stock-based
compensation (354) (3,224)
Net (gain) loss on sale of marketable
securities and other investments 12,813 (3,473)
Net gain on sale of real estate (2,480) -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable, net 93,081 (67,608)
Decrease in inventories 13,059 40,690
Increase in other assets (73,548) (6,336)
Decrease in accounts payable (5,730) (34,564)
Decrease in deferred system profit (37,503) (15,485)
Increase in other liabilities 30,680 23,306
---------------------
Net cash provided by operating
activities 188,374 155,470
---------------------
Cash flows from investing activities:
Proceeds from restricted cash 581,540 -
Acquisitions of businesses, net of cash
received (488,545) (82,503)
Capital expenditures, net (9,629) (29,141)
Proceeds from sale of real estate 5,497 -
Purchase of available-for-sale securities (406,210) (387,615)
Proceeds from sale of available-for-sale
securities 87,008 343,606
Proceeds from maturity of available-for-sale
securities - 34,345
---------------------
Net cash used in investing
activities (230,339) (121,308)
---------------------
Cash flows from financing activities:
Issuance of long-term debt, net of discounts 744,570 -
Issuance of common stock 24,607 140,449
Common stock repurchases (121,510) (44,879)
Payment of dividends to stockholders (26,354) (23,037)
Excess tax benefit from stock-based
compensation 354 3,224
Debt issuance costs (7,351) -
---------------------
Net cash provided by financing
activities 614,316 75,757
---------------------
Effect of exchange rate changes on cash and cash
equivalents (7,727) 8,177
---------------------
Net increase (decrease) in cash and cash
equivalents 564,624 118,096
Cash and cash equivalents at beginning of period 563,482 604,415
---------------------
Cash and cash equivalents at end of period $1,128,106 $ 722,511
=====================
Supplemental cash flow disclosures:
Income taxes paid, net $ 59,720 $ 46,988
Interest paid $ 417 $ 658
KLA-Tencor Corporation
Condensed Consolidated Unaudited Supplemental Information
(In thousands except per share data)
Reconciliation of GAAP Net Income to Non-GAAP Net Income
---------------------------------------------------------------
-------
Three months ended Twelve months ended
-------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
-------------------------------------------------
GAAP net income $76,010 $110,980 $147,342 $359,083 $528,098
Adjustments to
reconcile GAAP net
income to non-GAAP
net income
-------------------
Acquisition related
charges a 50,377 (2,174) 37,875 82,473 74,790
Restructuring,
severance and
other b (1,391) 13,477 10,808 8,379 77,988
Restatement related
charges c 2,660 5,169 1,179 76,940 34,328
Income tax effect
of non-GAAP
adjustments d (12,038) (6,210) (18,555) (53,315) (68,058)
Non recurring tax
item e (8,438) - - 38,175 -
--------- --------- --------- --------- ---------
Non-GAAP net income $107,180 $121,242 $178,649 $511,735 $647,146
========= ========= ========= ========= =========
GAAP net income per
diluted share $0.43 $0.61 $0.75 $ 1.95 $ 2.61
========= ========= ========= ========= =========
Non-GAAP net income
per diluted share $0.60 $0.67 $0.91 $ 2.78 $ 3.20
========= ========= ========= ========= =========
Shares used in
diluted shares
calculation 178,090 180,617 197,062 184,259 202,204
========= ========= ========= ========= =========
Impact of items included in Condensed Consolidated Unaudited
Statements of Operations:
----------------------------------------------------------
------------
Acquisition Restructuring, Restatement Total pre-
related severance and related tax GAAP
charges other charges to non-
GAAP
adjustment
----------- -------------- ----------- -----------
Costs of revenues $12,822 $ (121) $ - $12,701
Engineering,
research and
development 19,151 101 - 19,252
Sales, general and
administrative 5,404 (1,371) 2,660 6,693
Interest income and
other, net 13,000 - - 13,000
----------- -------------- ----------- -----------
Total in three
months ended June
30, 2008 $50,377 $(1,391) $2,660 $51,646
=========== ============== =========== ===========
Total in three
months ended March
31, 2008 $(2,174) $13,477 $5,169 $16,472
=========== ============== =========== ===========
Total in three
months ended June
30, 2007 $37,875 $10,808 $1,179 $49,862
=========== ============== =========== ===========
Three months ended
----------------------------
June 30, March 31, June 30,
2008 2008 2007
----------------------------
Stock-based compensation
------------------------------------------
Cost
s of revenues $ 5,418 $ 5,670 $ 5,965
Engineering, research and development 8,870 8,052 8,447
Sales, general and administrative 14,992 12,133 11,982
Provision for income taxes (9,077) (7,757) (8,182)
============================
Total $20,203 $18,098 $18,212
============================
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 budgeting and planning tools that management uses for future forecasting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.
(a) Acquisition related charges include impairment and amortization of intangible assets, inventory fair value adjustments, in-process research and development associated with acquisitions, asset impairment from discontinuing acquired products as well as making acquired products available for sale, and realized and unrealized gains and losses resulting from the Euro call option contracts related to the Company's acquisition of ICOS Vision Systems Corporation NV. Management believes that the expense associated with the impairment and 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 the Company's newly acquired and long-held business. Management believes that it is appropriate to exclude asset impairment from discontinuing acquired products as well as 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 facilities divestment program, worldwide reduction in force, gains from sale of facilities and one-time inventory write-off associated with the disposal of service inventory in excess of future needs. 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 of 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) Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.
(e) Non recurring tax items 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 it limits comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.
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