KLA-Tencor Posts Third Quarter Fiscal Year 2005 Earnings of $123 Milli

    Business Editors/High-Tech Editors

    SAN JOSE, Calif.--(BUSINESS WIRE)--April 28, 2005--KLA-Tencor Corporation (Nasdaq:KLAC) today announced operating results for its third quarter of fiscal 2005, ended March 31, 2005. Revenues for the quarter were $542 million, up 2% from $533 million in the previous quarter and up 39% from $390 million in the third quarter of fiscal 2004. The net income for the quarter was $123 million or $0.61 per diluted share, compared with net income of $122 million or $0.61 per diluted share in the prior quarter and $66 million or $0.33 per diluted share in the third quarter of fiscal 2004.
    "Our strong financial performance reflects our ability to deliver solutions that our customers need to accelerate their development and production ramps," stated Ken Schroeder, President and Chief Executive Officer of KLA-Tencor. "Our focus on operational execution has resulted in significant increase in our cash levels which we intend to use for various internal and external growth initiatives, and dividend for our shareholders. With process control playing a vital role in bringing advance technologies to market profitably, we continue to invest in the solutions that will enable our customers to achieve manufacturing success in their current production lines as well as their next-generation pilot lines."
    KLA-Tencor reported ending the quarter with approximately 9 months of product related shipment and revenue backlog. On a geographic basis, Japan continued to post strong bookings. Japan was 31 percent of orders, higher than its historical average of 20 percent; Taiwan was 27 percent, above its historical average of 20 percent; Korea, China and Singapore combined were 18 percent of orders, below their combined historical average of 20 percent; U.S. was 17 percent of orders, below its historical average of 25 percent; and Europe was 7 percent, lower than its historical average of 15 percent.
    We continued to have strong gross margins as we benefit from cost reductions initiatives and high manufacturing utilization. Operating expenses increased from $160 million in the prior quarter to $165 million in the current quarter as a result of investment in research and development for new process control technology solutions and systems to drive business efficiencies.
    Cash, cash equivalents and marketable securities increased by $183 million to $2.11 billion compared to the end of the prior quarter, while the balance sheet remained free of long-term debt. Inventory increased by $3 million to $354 million, as we schedule our shipments to meet customer requirements. Accounts receivable decreased by $1 million to $445 million on lower product shipments.

    Forward Looking Statements: Statements in this press release regarding the Company's development efforts and investments and customer achievement of manufacturing success, total shipment and revenue backlog at current operating levels, 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: delays or cancellations of orders by customers; shipments or acceptances; inability by the company to meet its production and/or product development schedules; the demand for semiconductors; and new and enhanced product offerings by competitors. For a description of other factors that may cause actual results to differ from those projected, please refer to the Company's Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the company's SEC filings. All forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof. The Company undertakes no obligation to update these forward-looking statements.

    About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., the company has sales and service offices around the world. An S&P 500 company, KLA-Tencor was named one of the Best Managed Companies in America for 2005 by Forbes Magazine. KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC. Additional information about the company is available on the Internet at http://www.kla-tencor.com.

KLA-Tencor Corporation CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

March 31, June 30, 2005 2004 --------------------------------------------------------------------- (In thousands)

ASSETS

Cash, short-term investments and marketable securities $2,108,344 $1,876,356 Accounts receivable, net 445,227 372,773 Inventories 353,546 337,414 Land, property and equipment, net 392,773 376,052 Other assets 659,747 576,584 ---------- ----------

Total assets $3,959,637 $3,539,179 ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: Accounts payable $ 65,389 $ 63,991 Deferred system profit 272,207 284,813 Unearned revenue 65,563 57,318 Other current liabilities 573,924 505,507 ---------- ---------- Total current liabilities 977,083 911,629 ---------- ----------

Minority interest in subsidiary 7,676 --

Stockholders' equity: Common stock and capital in excess of par value 954,394 984,804 Retained earnings 2,002,232 1,640,587 Accumulated other comprehensive income 18,252 2,159 ---------- ---------- Total stockholders' equity 2,974,878 2,627,550 ---------- ---------- Total liabilities and stockholders' equity $3,959,637 $3,539,179 ========== ==========

KLA-Tencor Corporation CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

Three months ended Nine months ended March 31, March 31, 2005 2004 2005 2004 ---------------------------------------------------------------------- (In thousands, except per share data)

Revenues: Product $ 463,171 $312,645 $1,360,412 $ 827,614 Service 78,440 77,127 232,825 218,666 --------- -------- ---------- ---------- Total revenues 541,611 389,772 1,593,237 1,046,280

Costs and operating expenses: Costs of revenues 221,838 170,605 655,042 482,515 Engineering, research and development 88,812 69,149 253,120 203,531 Selling, general and administrative 76,114 62,265 217,753 184,451 --------- -------- ---------- ---------- Total costs and operating expenses 386,764 302,019 1,125,915 870,497 --------- -------- ---------- ----------

Income from operations 154,847 87,753 467,322 175,783

Interest income and other, net 7,292 4,909 22,054 20,642 --------- -------- ---------- ----------

Income before income taxes and minority interest 162,139 92,662 489,376 196,425

Provision for income taxes 40,065 26,480 130,055 48,891 --------- -------- ---------- ----------

Income before minority interest 122,074 66,182 359,321 147,534

Minority interest 1,089 -- 2,324 -- --------- -------- ---------- ----------

Net income $ 123,163 $ 66,182 $ 361,645 $ 147,534 ========= ======== ========== ==========

Net income per share: Basic $ 0.63 $ 0.34 $ 1.84 $ 0.76 ========= ======== ========== ========== Diluted $ 0.61 $ 0.33 $ 1.80 $ 0.73 ========= ======== ========== ==========

Weighted average number of shares: Basic 196,883 196,159 196,244 194,519 ========= ======== ========== ========== Diluted 202,239 203,150 200,977 201,952 ========= ======== ========== ==========

--30--HR/sf*

CONTACT: KLA-Tencor Corporation John Kispert, CFO, 408-875-6224 john.kispert@kla-tencor.com Cary Halsted, 408-875-2406 (Investment Community) cary.halsted@kla-tencor.com Uma Subramaniam, 408-875-5473 (Media) uma.subramaniam@kla-tencor.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE MANUFACTURING EARNINGS SOURCE: KLA-Tencor Corporation

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