10-QPeriod: Q2 FY2008

KLA CORP Quarterly Report for Q2 Ended Dec 31, 2007

Filed January 28, 2008For Securities:KLAC

Summary

KLA Corporation (KLAC) reported its financial results for the quarter ending December 30, 2007. The company's total revenues for the quarter were $635.8 million, a slight decrease compared to the same period last year. While product revenues saw a modest decline, service revenues continued to grow, indicating a strengthening services segment. Net income for the quarter was $83.9 million, resulting in diluted earnings per share of $0.45. The company experienced a decrease in cash and cash equivalents, largely due to significant share repurchases during the period, which totaled $809.8 million for the six-month period. KLA Corp also accrued a $65 million charge to settle a shareholder class action lawsuit related to historical stock option practices, impacting the current quarter's profitability and SG&A expenses. Despite these charges and ongoing legal matters, the company maintains a solid liquidity position with substantial cash, cash equivalents, and marketable securities.

Key Highlights

  • 1Total revenues for the quarter were $635.8 million, down slightly from $649.3 million in the prior year's comparable quarter.
  • 2Net income for the quarter was $83.9 million, or $0.45 per diluted share, compared to $90.0 million, or $0.44 per diluted share, in the prior year's quarter.
  • 3The company accrued $65 million to settle a shareholder class action lawsuit related to historical stock option practices, significantly impacting SG&A expenses for the quarter.
  • 4Cash and cash equivalents decreased to $547.6 million from $722.5 million, largely influenced by $809.8 million in common stock repurchases during the first six months of the fiscal year.
  • 5Service revenues showed a strong increase of 17% year-over-year, growing to $122.3 million, indicating continued growth in the services segment.
  • 6Research and Development (R&D) expenses decreased by 10% year-over-year to $97.5 million, partly due to fewer one-time charges compared to the prior year's period.
  • 7The company ended the quarter with $1.3 billion in cash, cash equivalents, and marketable securities, indicating a strong liquidity position despite the share repurchases and legal settlement accrual.

Frequently Asked Questions

The decrease in total revenues was primarily driven by a decline in product revenues. This was attributed to a lower backlog of shipped tools awaiting customer acceptance at the beginning of the quarter and a lower proportion of tools shipped that met customer acceptance criteria.

The $65 million charge represents an accrual for the anticipated settlement of a shareholder class action lawsuit concerning KLA-Tencor's historical stock option practices. This settlement is subject to final agreement and court approval and will provide a full release for the company and named defendants. The charge significantly impacted the Selling, General, and Administrative expenses for the quarter.

The company's cash and cash equivalents decreased from $722.5 million to $547.6 million. This reduction is primarily due to substantial common stock repurchases totaling $809.8 million during the six-month period. While operating activities generated significant cash, the aggressive share buyback program led to the overall decrease in cash reserves.

Service revenues have shown consistent year-over-year growth, increasing by 17% to $122.3 million in the current quarter. This growth is attributed to the expanding installed base of equipment at customer sites and increasing utilization of those systems, suggesting a positive trend for this segment.