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KLA-Tencor Reports Fiscal 2009 Third Quarter ResultsMilpitas, CA | Posted on April 23rd, 2009
"We executed our cost containment programs well during the quarter and met our bookings and revenue guidance, in spite of the continued weakness in the global economy and the semiconductor equipment market," commented Rick Wallace, president and CEO of KLA-Tencor. "Although demand remains at low levels today, we are encouraged to see investments in technology development activity in the March quarter for customers at the leading edge. KLA-Tencor continues to advance its market leadership through maintaining our customer focus and driving our technology and innovation roadmaps."
GAAP Results Q3 FY 2009 Q2 FY 2009 Q3 FY 2008 Revenues $ 310 million $ 397 million $ 602 million Net (Loss) Income $(83) million $(434) million $111 million (Loss) Earnings per Share $ (0.49) $ (2.57) $ 0.61 Non-GAAP Results Q3 FY 2009 Q2 FY 2009 Q3 FY 2008 Net (Loss) Income $(58) million $(20) million $121 million (Loss) Earnings per Share $ (0.34) $ (0.12) $ 0.67
A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisition, goodwill and intangible asset impairment, restatement, and restructuring related items.
KLA-Tencor will discuss its fiscal 2009 third quarter results, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Daylight Time. A webcast of the call will be available at: www.kla-tencor.com
Statements in this press release other than historical facts, such as statements regarding KLA-Tencor's existing market position and its ability to maintain and advance such position relative to its competitors, the encouragement derived from the investment in technology development activity witnessed in the March quarter (including without limitation the potential success of such technology development activity and whether such activity will result in future sales for KLA-Tencor), future levels of investment in research and development, KLA-Tencor's ability to successfully innovate and develop new technologies and products, the benefit to customers of KLA-Tencor's products, KLA-Tencor's customer service and ability to deliver products and services consistent with our customers' demands and expectations, 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; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product offerings by competitors; cancellation of orders by customers; the ability of our research and development teams to successfully innovate and develop technology that is responsive to customer demands; the impact of local labor and employment laws on KLA-Tencor's ability to complete, and realize the anticipated cost savings from, its recent global workforce reductions; unanticipated delays in the completion of KLA-Tencor's facilities consolidation efforts or the implementation of other cost-reduction efforts; KLA-Tencor's ability to successfully integrate and manage businesses that it acquires; and changing customer demands. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this release, please refer to KLA-Tencor's Annual Report on Form 10-K for the year ended June 30, 2008, subsequently filed Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA-Tencor assumes no obligation to, and does not currently intend to, update these forward-looking statements.
About KLA-Tencor Corporation
KLA-Tencor Corporation Condensed Consolidated Unaudited Balance Sheets (In thousands) March 31, 2009 June 30, 2008 ASSETS Cash and short- and long-term investments $ 1,257,546 $ 1,579,383 Accounts receivable, net 241,425 492,488 Inventories, net 411,894 459,449 Other current assets 519,629 546,591 Land, property and equipment, net 303,303 355,474 Goodwill 321,298 601,882 Purchased intangibles, net 152,237 297,778 Other long-term assets 429,034 515,345 Total assets $ 3,636,366 $ 4,848,390 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 56,354 $ 104,315 Deferred system profit 74,188 150,797 Unearned revenue 60,903 56,692 Other current liabilities 411,382 638,528 Total current liabilities 602,827 950,332 Non-current liabilities: Income tax payable 49,398 63,634 Unearned revenue 7,516 31,745 Other non-current liabilities 61,725 76,288 Long-term debt 745,068 744,661 Total liabilities 1,466,534 1,866,660 Stockholders' equity: Common stock and capital in excess of par value 809,222 729,629 Retained earnings 1,421,999 2,204,417 Accumulated other comprehensive income (loss) (61,389 ) 47,684 Total stockholders' equity 2,169,832 2,981,730 Total liabilities and stockholders' equity $ 3,636,366 $ 4,848,390 KLA-Tencor Corporation Condensed Consolidated Unaudited Statements of Operations Three months ended Nine months ended (In thousands except per share data) March 31, 2009 March 31, 2008 March 31, 2009 March 31, 2008 Revenues: Product $ 207,332 $ 476,274 $ 885,900 $ 1,568,155 Service 102,280 125,945 352,814 362,867 Total revenues 309,612 602,219 1,238,714 1,931,022 Costs and operating expenses: Costs of revenues 209,223 285,650 700,203 870,710 Engineering, research and development 82,609 96,646 292,236 293,503 Selling, general and administrative 90,061 94,723 342,505 364,681 Goodwill and intangible asset impairment - - 446,744 6,163 Total costs and operating expenses 381,893 477,019 1,781,688 1,535,057 Income (loss) from operations (72,281 ) 125,200 (542,974 ) 395,965 Interest income (expense) and other, net (4,886 ) 36,009 (13,181 ) 66,752 Income (loss) before income taxes (77,167 ) 161,209 (556,155 ) 462,717 Provision for (benefit from) income taxes 5,660 50,229 (58,363 ) 179,644 Net income (loss) $ (82,827 ) $ 110,980 $ (497,792 ) $ 283,073 Net income (loss) per share: Basic $ (0.49 ) $ 0.62 $ (2.92 ) $ 1.55 Diluted $ (0.49 ) $ 0.61 $ (2.92 ) $ 1.52 Cash dividend paid per share $ 0.15 $ 0.15 $ 0.45 $ 0.45 Weighted average number of shares: Basic 169,934 178,112 170,349 182,397 Diluted 169,934 180,617 170,349 186,303 KLA-Tencor Corporation Condensed Consolidated Unaudited Statements of Cash Flows Three months ended March 31, (In thousands) 2009 2008 Cash flows from operating activities: Net income (loss) $ (82,827 ) $ 110,980 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 31,762 26,610 Impairment charges 2,791 - Non-cash, stock-based compensation 22,758 25,854 Tax benefit (charge) from equity awards (745 ) 5,397 Excess tax benefit from equity awards - (4,421 ) Net gain on sale of marketable securities and other investments (38 ) (20,335 ) Gain on sale of real estate (353 ) (8,641 ) Changes in assets and liabilities: Decrease in accounts receivable, net 77,797 26,078 Decrease in inventories 53,555 29,630 Decrease (increase) in other assets 24,363 (4,748 ) Decrease in accounts payable (44,371 ) (8,885 ) Decrease in deferred system profit (9,245 ) (6,380 ) Increase (decrease) in other liabilities 1,042 (26,336 ) Net cash provided by operating activities 76,489 144,803 Cash flows from investing activities: Acquisitions of businesses, net of cash received (424 ) (1,525 ) Restricted cash - (581,540 ) Capital expenditures, net (3,147 ) (10,202 ) Proceeds from sale of real estate - 28,668 Purchase of available-for-sale securities (140,394 ) (139,513 ) Proceeds from sale and maturity of available-for-sale securities 117,159 753,211 Purchase of trading securities (18,693 ) (19,721 ) Proceeds from sale of trading securities 21,829 23,130 Net cash provided by (used in) investing activities (23,670 ) 52,508 Cash flows from financing activities: Issuance of common stock 6 2,609 Tax withholding payments related to released restricted stock units (1,315 ) - Common stock repurchases - (179,889 ) Payment of dividends to stockholders (25,484 ) (26,557 ) Excess tax benefit from equity awards - 4,421 Net cash used in financing activities (26,793 ) (199,416 ) Effect of exchange rate changes on cash and cash equivalents (17,427 ) 17,944 Net increase in cash and cash equivalents 8,599 15,839 Cash and cash equivalents at beginning of period 656,330 547,643 Cash and cash equivalents at end of period $ 664,929 $ 563,482 Supplemental cash flow disclosures: Income taxes paid (refund received), net $ (21,736 ) $ 53,200 Interest paid $ 236 $ 1,435 KLA-Tencor Corporation Condensed Consolidated Unaudited Supplemental Information (In thousands except per share data) Reconciliation of GAAPNet Income (Loss) to Non-GAAPNet Income (Loss) Three months ended Nine months ended March 31, 2009 December 31, 2008 March 31, 2008 March 31, 2009 March 31, 2008 GAAP net income (loss) $ (82,827 ) $ (434,254 ) $ 110,980 $ (497,792 ) $ 283,073 Adjustments to reconcile GAAP net income (loss) to non-GAAP net income (loss) Acquisition related charges a 16,718 22,590 (2,174 ) 67,726 25,933 Restructuring, severance and other b 19,330 23,621 13,477 47,112 9,770 Restatement related charges c 2,018 9,190 5,169 14,992 74,280 Goodwill and intangible asset impairment d - 434,833 - 446,744 6,163 Income tax effect of non-GAAP adjustments e (13,524 ) (75,882 ) (6,210 ) (101,620 ) (41,277 ) Non recurring tax item f - - - - 46,613 Non-GAAP net income (loss) $ (58,285 ) $ (19,902 ) $ 121,242 $ (22,838 ) $ 404,555 GAAP net income (loss) per diluted share $ (0.49 ) $ (2.57 ) $ 0.61 $ (2.92 ) $ 1.52 Non-GAAP net income (loss) per diluted share $ (0.34 ) $ (0.12 ) $ 0.67 $ (0.13 ) $ 2.17 Shares used in diluted shares calculation 169,934 169,022 180,617 170,349 186,303 Impact of items included in Condensed Consolidated Unaudited Statements of Operations: Goodwill and intangible asset impairment Acquisition related charges Restructuring, severance and other Restatement related charges Total pre-tax GAAP to non-GAAP adjustment Costs of revenues $ - $ 10,626 $ 6,584 $ - $ 17,210 Engineering, research and development - 943 4,309 - 5,252 Sales, general and administrative - 5,149 8,437 2,018 15,604 Goodwill and intangible asset impairment - - - - - Total in three months ended March 31, 2009 $ - $ 16,718 $ 19,330 $ 2,018 $ 38,066 Total in three months ended December 31, 2008 $ 434,833 $ 22,590 $ 23,621 $ 9,190 $ 490,234 Total in three months ended March 31, 2008 $ - $ (2,174) $ 13,477 $ 5,169 $ 16,472 Three months ended March 31, 2009 December 31, 2008 March 31, 2008 Stock-based compensation Costs of revenues $ 4,706 $ 4,679 $ 5,670 Engineering, research and development 7,524 6,981 8,052 Sales, general and administrative 10,528 10,643 12,133 Total $ 22,758 $ 22,303 $ 25,855
To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of our operating performance and our prospects in the future. Specifically, we believe the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.
a Acquisition related charges include amortization of intangible assets, inventory fair value adjustments, in-process research and development associated with acquisitions, and unrealized gains resulting from Euro call option contracts entered into in connection with our acquisition of ICOS Vision Systems Corporation NV. Management believes that the expense associated with the amortization of acquisition related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both KLA-Tencor's newly acquired and long-held businesses. Management believes that it is appropriate to exclude inventory fair value adjustments, in-process research and development and gains and losses on foreign exchange contracts associated with business acquisitions as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.
b Restructuring, severance and other includes gains and costs associated with the company's facilities divestment program, reductions in force, entry into a severance and consulting agreement with the company's former president/chief operating officer, and gains from sale of facilities. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.
c Restatement related charges include compensation related to reimbursement payments by KLA-Tencor to non-executive employees for penalty taxes under section 409A of the Internal Revenue Code, as well as legal and other expenses related to the stock option investigation, shareholder litigation and related matters. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.
d Goodwill and intangible asset impairment includes non-cash expense recognized as a result of the company's annual testing for goodwill impairment performed in the second quarter of every fiscal year and testing for intangible asset impairment driven by certain macroeconomic and company-specific triggering events, as well as the impairment of goodwill and intangible assets as a result of discontinuing acquired products and making acquired products available for sale. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.
e Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.
f Non recurring tax item includes the U.S. tax impact associated with the implementation of our global manufacturing strategy and a benefit from revision of the amount of undistributed earnings of foreign subsidiaries considered to be permanently reinvested outside the United States. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items 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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