KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

March 31,

(In thousands)

2014

2013

Cash flows from operating activities:

Net income

$

203,581

$

166,382

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

20,614

21,168

Non-cash stock-based compensation expense

12,723

18,536

Excess tax benefit from equity awards

(657)

(872)

Net gain on sale of marketable securities and other investments

(281)

(712)

Changes in assets and liabilities:

Decrease in accounts receivable, net

16,598

142,764

Decrease (increase) in inventories

(14,738)

11,138

Decrease in other assets

48,463

2,753

Increase (decrease) in accounts payable

(20,818)

4,552

Decrease in deferred system profit

(70,008)

(19,959)

Increase in other liabilities

42,250

69,033

Net cash provided by operating activities

237,727

414,783

Cash flows from investing activities:

Acquisition of cost method investment

(1,345)

—

Acquisition of business

(18,000)

—

Capital expenditures, net

(18,220)

(18,300)

Purchase of available-for-sale securities

(359,299)

(460,124)

Proceeds from sale of available-for-sale securities

202,650

258,067

Proceeds from maturity of available-for-sale securities

60,035

63,671

Purchase of trading securities

(20,939)

(14,005)

Proceeds from sale of trading securities

22,521

15,054

Net cash used in investing activities

(132,597)

(155,637)

Cash flows from financing activities:

Issuance of common stock

13,334

48,685

Tax withholding payments related to vested and released restricted stock units

(2,347)

(728)

Common stock repurchases

(59,880)

(68,343)

Payment of dividends to stockholders

(74,805)

(66,561)

Excess tax benefit from equity awards

657

872

Net cash used in financing activities

(123,041)

(86,075)

Effect of exchange rate changes on cash and cash equivalents

752

(6,183)

Net increase (decrease) in cash and cash equivalents

(17,159)

166,888

Cash and cash equivalents at beginning of period

793,382

767,313

Cash and cash equivalents at end of period

$

776,223

$

934,201

Supplemental cash flow disclosures:

Income taxes paid, net

$

9,636

$

11,041

Interest paid

$

135

$

204

Non-cash investing activities:

Purchase of land, property and equipment

$

4,103

$

—