8-K
KLA CORP (KLAC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| FORM | 8-K |
|---|
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2020
| KLA CORPORATION | ||||
|---|---|---|---|---|
| (Exact name of registrant as specified in its charter) | ||||
| Delaware | 000-09992 | 04-2564110 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| One Technology Drive | Milpitas | California | 95035 | |
| (Address of principal executive offices) | (Zip Code) | |||
| Registrant’s telephone number, including area code: | (408) 875-3000 | |||
| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.001 par value per share | KLAC | The Nasdaq Stock Market, LLC |
| The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ | | --- | --- || If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | | --- | --- | | | ☐ | | Item 2.02 | Results of Operations and Financial Condition. | | --- | --- |
On October 28, 2020, KLA Corporation (the “Company”) issued a press release announcing selected financial and operating results for its first quarter of fiscal year 2021. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 of this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d)Exhibits
The following exhibit is furnished herewith:
| Exhibit No. | Description |
|---|---|
| 99.1 | Text of press release datedOctoberexhibit991earningsrele.htm28, 2020 issued by KLA Corporation |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KLA CORPORATION | ||
|---|---|---|
| Date: October 28, 2020 | By: | /s/ BREN D. HIGGINS |
| Name: | Bren D. Higgins | |
| Title: | Executive Vice President and Chief Financial Officer |
Document
FOR IMMEDIATE RELEASE
| Investor Relations: | Media Relations: |
|---|---|
| Kevin Kessel, CFA | Randi Polanich |
| Vice President, Investor Relations | Vice President and Chief Communications Officer |
| (408) 875-6627 | (408) 875-6633 |
| kevin.kessel@kla.com | randi.polanich@kla.com |
KLA CORPORATION REPORTS FISCAL 2021 FIRST QUARTER RESULTS
•Total revenue was $1.54 billion, finishing near the high-end of guidance;
•GAAP EPS was $2.69, and non-GAAP EPS was $3.03, each also finishing near the high-end of guidance;
•Cash flow from operations was $512 million and free cash flow was $456 million;
•Paid $141 million in dividends and repurchased $188 million in common stock;
MILPITAS, Calif., October 28, 2020 -KLA Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2021, which ended on September 30, 2020, and reported GAAP net income attributable to KLA of $421 million and GAAP earnings per diluted share attributable to KLA of $2.69 on revenue of $1.54 billion.
"Our results demonstrate the resourcefulness of our global workforce, resiliency of our business model, and our continuing commitment to returning value to our shareholders,” commented Rick Wallace, president and chief executive officer of KLA Corporation. “In the September quarter we saw broad, diversified strength across each of our segments. Semiconductor Process Control was solidly above plan, and our Service business is on track to deliver double-digit growth in 2020. We also ended the quarter with a strong backlog, reflecting the enabling role KLA plays in our customers' drive to innovate and invest in next-generation technology.”
| GAAP Results | |||
|---|---|---|---|
| Q1 FY 2021 | Q4 FY 2020 | Q1 FY 2020 | |
| Total revenue | $1,539 million | $1,460 million | $1,413 million |
| Net Income Attributable to KLA | $421 million | $411 million | $347 million |
| Earnings per Diluted Share Attributable to KLA | $2.69 | $2.63 | $2.16 |
| Non-GAAP Results | |||
| Q1 FY 2021 | Q4 FY 2020 | Q1 FY 2020 | |
| Adjusted Net Income Attributable to KLA | $475 million | $426 million | $398 million |
| Earnings per Diluted Share Attributable to KLA | $3.03 | $2.73 | $2.48 |
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 recurring stock-based compensation, but exclude the impact of acquisitions or pending acquisitions, goodwill impairment, restructuring, severance and other charges, loss on extinguishment of debt, and certain discrete tax items. KLA will discuss the results for its fiscal year 2021 first quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla.com.
Second Quarter Fiscal 2021 Guidance
The following details our guidance for the second quarter of fiscal 2021 ending in December:
•Total revenue between $1,510 million to $1,660 million
•GAAP diluted EPS attributable to KLA is expected to be in a range of $2.59 to $3.23
•Non-GAAP diluted EPS attributable to KLA in a range of $2.82 to $3.46
For additional guidance metrics please see the company’s published Letter to Shareholders and earnings slides on the KLA investor relations website.
About KLA:
KLA Corporation (“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: www.kla.com.
Note Regarding Forward-Looking Statements:
This release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, including statements regarding our total revenue, GAAP and non-GAAP EPS attributable to KLA for the quarter ending December 31, 2020, and growth of our Services business in 2020, are subject to risks and uncertainties. Factors that may cause actual results to differ materially from those projected and anticipated in the forward-looking statements in this release, include risks related to customer cancellations or push outs, our ability to deliver services during the COVID-19 pandemic, the introduction of new laws, regulations or orders that limit our ability to sell products to customers or to service products previously sold to customers and other risk factors included in KLA’s annual report on Form 10-K for the year ended June 30, 2020 and other filings with the Securities and Exchange Commission (including, without limitation, the risk factors described therein). Except as otherwise specifically indicated, the information included in this release is as of the date it is delivered. KLA assumes no obligation to, and does not currently intend to, update these forward-looking statements.
| KLA Corporation | ||||
|---|---|---|---|---|
| Condensed Consolidated Unaudited Balance Sheets | ||||
| (In thousands) | September 30, 2020 | June 30, 2020 | ||
| ASSETS | ||||
| Cash, cash equivalents and marketable securities | $ | 2,043,453 | $ | 1,980,472 |
| Accounts receivable, net | 1,028,883 | 1,107,413 | ||
| Inventories | 1,394,225 | 1,310,985 | ||
| Other current assets | 288,138 | 324,675 | ||
| Land, property and equipment, net | 561,852 | 519,824 | ||
| Goodwill | 2,045,432 | 2,045,402 | ||
| Deferred income taxes, non-current | 245,614 | 236,797 | ||
| Purchased intangible assets, net | 1,340,913 | 1,391,413 | ||
| Other non-current assets | 371,586 | 362,979 | ||
| Total assets | $ | 9,320,096 | $ | 9,279,960 |
| LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 254,458 | $ | 264,280 |
| Deferred system revenue | 253,604 | 336,237 | ||
| Deferred service revenue | 241,219 | 233,493 | ||
| Other current liabilities | 999,547 | 865,776 | ||
| Total current liabilities | 1,748,828 | 1,699,786 | ||
| Non-current liabilities: | ||||
| Long-term debt | 3,420,403 | 3,469,670 | ||
| Deferred tax liabilities | 656,876 | 660,885 | ||
| Deferred service revenue | 84,953 | 96,325 | ||
| Other non-current liabilities | 646,691 | 672,284 | ||
| Total liabilities | 6,557,751 | 6,598,950 | ||
| Stockholders’ equity: | ||||
| Common stock and capital in excess of par value | 2,072,715 | 2,090,268 | ||
| Retained earnings | 753,915 | 654,930 | ||
| Accumulated other comprehensive income (loss) | (79,446) | (79,774) | ||
| Total KLA stockholders' equity | 2,747,184 | 2,665,424 | ||
| Non-controlling interest in consolidated subsidiary | 15,161 | 15,586 | ||
| Total stockholders’ equity | 2,762,345 | 2,681,010 | ||
| Total liabilities and stockholders’ equity | $ | 9,320,096 | $ | 9,279,960 |
| KLA Corporation | ||||
| --- | --- | --- | --- | --- |
| Condensed Consolidated Unaudited Statements of Operations | ||||
| Three Months Ended September 30, | ||||
| (In thousands, except per share amounts) | 2020 | 2019 | ||
| Revenues: | ||||
| Product | $ | 1,145,495 | $ | 1,057,975 |
| Service | 393,125 | 355,439 | ||
| Total revenues | 1,538,620 | 1,413,414 | ||
| Costs and expenses: | ||||
| Costs of revenues | 620,562 | 604,241 | ||
| Research and development | 219,038 | 210,580 | ||
| Selling, general and administrative | 172,631 | 188,345 | ||
| Interest expense | 39,386 | 40,350 | ||
| Other expense (income), net | 3,197 | (1,618) | ||
| Income before income taxes | 483,806 | 371,516 | ||
| Provision for income taxes | 63,664 | 25,120 | ||
| Net income | 420,142 | 346,396 | ||
| Less: Net loss attributable to non-controlling interest | (425) | (129) | ||
| Net income attributable to KLA | $ | 420,567 | $ | 346,525 |
| Net income per share attributable to KLA: | ||||
| Basic | $ | 2.71 | $ | 2.18 |
| Diluted | $ | 2.69 | $ | 2.16 |
| Weighted-average number of shares: | ||||
| Basic | 155,281 | 158,697 | ||
| Diluted | 156,442 | 160,131 |
KLA Corporation
Condensed Consolidated Unaudited Statements of Cash Flows
| Three Months Ended | |||||
|---|---|---|---|---|---|
| September 30, | |||||
| (In thousands) | 2020 | 2019 | |||
| Cash flows from operating activities: | |||||
| Net income | $ | 420,142 | $ | 346,396 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||
| Depreciation and amortization | 80,066 | 98,588 | |||
| (Gain) loss on unrealized foreign exchange and other | (12,907) | 10,313 | |||
| Asset impairment charges | 865 | 2,481 | |||
| Stock-based compensation expense | 26,992 | 26,944 | |||
| Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions: | |||||
| Accounts receivable | 73,000 | (75,214) | |||
| Inventories | (85,991) | (5,091) | |||
| Other assets | 5,103 | (8,930) | |||
| Accounts payable | (9,822) | 18,885 | |||
| Deferred system revenue | (82,633) | (4,833) | |||
| Deferred service revenue | (3,646) | (4,337) | |||
| Other liabilities | 101,002 | 91,043 | |||
| Net cash provided by operating activities | 512,171 | 496,245 | |||
| Cash flows from investing activities: | |||||
| Proceeds from sale of assets | 1,114 | — | |||
| Business acquisitions, net of cash acquired | — | (78,530) | |||
| Capital expenditures | (55,925) | (32,566) | |||
| Purchases of available-for-sale securities | (231,821) | (263,767) | |||
| Proceeds from sale of available-for-sale securities | 53,249 | 25,449 | |||
| Proceeds from maturity of available-for-sale securities | 95,835 | 198,751 | |||
| Purchases of trading securities | (18,630) | (9,021) | |||
| Proceeds from sale of trading securities | 21,244 | 11,905 | |||
| Proceeds from other investments | 614 | 1,086 | |||
| Net cash used in investing activities | (134,320) | (146,693) | |||
| Cash flows from financing activities: | |||||
| Repayment of debt | (50,000) | — | |||
| Common stock repurchases | (187,897) | (228,496) | |||
| Payment of dividends to stockholders | (141,164) | (121,636) | |||
| Issuance of common stock | — | 114 | |||
| Tax withholding payments related to equity awards | (25,145) | (23,538) | |||
| Payment of contingent consideration payable | — | (57) | |||
| Net cash used in financing activities | (404,206) | (373,613) | |||
| Effect of exchange rate changes on cash and cash equivalents | 7,766 | (3,585) | |||
| Net decrease in cash and cash equivalents | (18,589) | (27,646) | |||
| Cash and cash equivalents at beginning of period | 1,234,409 | 1,015,994 | |||
| Cash and cash equivalents at end of period | $ | 1,215,820 | $ | 988,348 | |
| Supplemental cash flow disclosures: | |||||
| Income taxes paid | $ | 54,185 | $ | 19,862 | |
| Interest paid | $ | 40,071 | $ | 26,347 | |
| Non-cash activities: | |||||
| Accrued purchase of land, property and equipment - investing activities | $ | 23,388 | $ | 16,074 | |
| Contingent consideration payable - financing activities | $ | (2,987) | $ | 9,366 | |
| Dividends payable - financing activities | $ | 391 | $ | 1,552 | |
| Unsettled common stock repurchase - financing activities | $ | 6,000 | $ | 8,000 |
KLA 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 September 30, | ||||
|---|---|---|---|---|
| (In thousands) | 2020 | 2019 | ||
| Revenues: | ||||
| Semiconductor Process Control | $ | 1,267,954 | $ | 1,163,632 |
| Specialty Semiconductor Process | 88,954 | 69,139 | ||
| PCB, Display and Component Inspection | 181,177 | 178,552 | ||
| Other | 140 | 2,231 | ||
| Total revenues for reportable segments | 1,538,225 | 1,413,554 | ||
| Corporate allocation and effects of foreign exchange rates | 395 | (140) | ||
| Total revenues | $ | 1,538,620 | $ | 1,413,414 |
KLA Corporation
Condensed Consolidated Unaudited Supplemental Information
Reconciliation of GAAP Net Income and GAAP earnings per diluted share to Non-GAAP Net Income and Non-GAAP earnings per diluted share
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands, except per share amounts) | September 30,<br>2020 | June 30,<br>2020 | September 30,<br>2019 | |||||
| GAAP net income attributable to KLA | $ | 420,567 | $ | 411,253 | $ | 346,525 | ||
| Adjustments to reconcile GAAP net income to non-GAAP net income: | ||||||||
| Acquisition-related charges | a | 50,475 | 55,937 | 73,363 | ||||
| Restructuring, severance and other charges | b | 3,253 | 4,240 | — | ||||
| Income tax effect of non-GAAP adjustments | c | (17,013) | (16,027) | (22,266) | ||||
| Discrete tax items | d | 17,487 | (29,364) | — | ||||
| Non-GAAP net income attributable to KLA | $ | 474,769 | $ | 426,039 | $ | 397,622 | ||
| GAAP net income per diluted share attributable to KLA | $ | 2.69 | $ | 2.63 | $ | 2.16 | ||
| Non-GAAP net income per diluted share attributable to KLA | $ | 3.03 | $ | 2.73 | $ | 2.48 | ||
| Shares used in diluted shares calculation | 156,442 | 156,183 | 160,131 |
Pre-tax impact of GAAP to non-GAAP adjustments included in Condensed Consolidated Unaudited Statements of Operations
| In thousands | Acquisition - Related Charges | Restructuring, Severance and Other Charges | Total pre-tax GAAP to non-GAAP Adjustments | |||
|---|---|---|---|---|---|---|
| Three months ended September 30, 2020 | ||||||
| Costs of revenues | $ | 37,040 | $ | 636 | $ | 37,676 |
| Research and development | — | 923 | 923 | |||
| Selling, general and administrative | 13,435 | 1,933 | 15,368 | |||
| Other expense (income), net | — | (239) | (239) | |||
| Total in three months ended September 30, 2020 | $ | 50,475 | $ | 3,253 | $ | 53,728 |
| Three months ended June 30, 2020 | ||||||
| Costs of revenues | $ | 41,446 | $ | 534 | $ | 41,980 |
| Research and development | — | 585 | 585 | |||
| Selling, general and administrative | 14,491 | 1,179 | 15,670 | |||
| Other expense (income), net | — | 1,942 | 1,942 | |||
| Total in three months ended June 30, 2020 | $ | 55,937 | $ | 4,240 | $ | 60,177 |
| Three months ended September 30, 2019 | ||||||
| Costs of revenues | $ | 49,999 | $ | — | $ | 49,999 |
| Selling, general and administrative | 23,364 | — | 23,364 | |||
| Total in three months ended September 30, 2019 | $ | 73,363 | $ | — | $ | 73,363 |
Free Cash Flow Reconciliation
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| (In thousands) | 2020 | 2019 | ||
| Net cash provided by operating activities | $ | 512,171 | $ | 496,245 |
| Capital expenditures | (55,925) | (32,566) | ||
| Free Cash Flow | $ | 456,246 | $ | 463,679 |
Second Quarter Fiscal 2021 Guidance
Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS
| Three Months Ending December 31, 2020 | |||
|---|---|---|---|
| (In thousands, except per share amounts) | Low | High | |
| GAAP net income per diluted share attributable to KLA | $2.59 | $3.23 | |
| Acquisition-related charges | a | 0.32 | 0.32 |
| Restructuring, severance and other charges | b | 0.02 | 0.02 |
| Income tax effect of non-GAAP adjustments | c | (0.11) | (0.11) |
| Non-GAAP net income per diluted share attributable to KLA | $2.82 | $3.46 | |
| Shares used in net income per diluted share calculation | 155.4 | 155.4 |
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 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 and other acquisition-related adjustments including adjustments for the fair valuation of inventory and backlog, 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 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.Restructuring, severance and other charges primarily include costs associated with employee severance, acceleration of certain stock-based compensation arrangements, and other exit costs. Management believes excluding these items helps investors compare our operating performance with our results in prior periods.
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 in the three months ended September 30, 2020 include a tax expense of $14.0 million due to an increase in deferred tax liability on purchased intangibles relating to an increase in the United Kingdom statutory income tax rate as well as tax expense from a restructuring. Discrete tax items in the three months ended June 30, 2020 include a tax benefit of $29.4 million from an internal restructuring. 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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