EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Q2 2015 Financial Results

Andover, Mass., July 22, 2015 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity; today reports second quarter 2015 financial results.

                 
    GAAP Results   Non-GAAP Results
Net revenues ($ millions)
  $ 218     $ 218  
Gross margin
    45.3 %     44.4 %
Operating margin
    21.1 %     21.0 %
Net income ($ millions)
  $ 33.2     $ 33.1  
Diluted EPS
  $ 0.62     $ 0.62  

Second Quarter Financial Results

Sales were $218 million, an increase of 2% from $214 million in the first quarter of 2015, and an increase of 18% from $185 million in the second quarter of 2014.

Second quarter net income was $33.2 million, or $0.62 per diluted share, compared to net income of $33.8 million, or $0.63 per diluted share in the first quarter of 2015, and $21.2 million, or $0.40 per diluted share in the second quarter of 2014.

Non-GAAP net earnings, which exclude special charges and credits, were $33.1 million, or $0.62 per diluted share, compared to $35.5 million, or $0.66 per diluted share in the first quarter of 2015, and $22.6 million, or $0.42 per diluted share in the second quarter of 2014.

In the second quarter, the board of directors authorized a 3% increase in the quarterly cash dividend, to $0.17 per share, and paid a dividend of $9.1 million on June 12th. The Company has increased its quarterly cash dividend by 13% since its inception in 2011. In addition, during the quarter, the Company repurchased 116,000 shares for $4.3 million for an average price of $37.55 per share.

Gerald Colella, Chief Executive Officer and President, said, “The second quarter was another strong quarter financially for MKS. The favorable results were driven by a continued strong environment for our semiconductor business, which achieved another record high of $154 million, while sales to all other markets again grew sequentially for the seventh straight quarter. We also announced another increase in our quarterly cash dividend and repurchased shares as part of our ongoing share buyback program.

“Reports from the recent SEMICON trade show indicate a continued healthy market for semiconductor production equipment to support the technology inflections underway. Our near-term visibility indicates a continued positive business environment in both our semiconductor and other advanced markets for the third quarter.

“Based on these factors, and looking at current business levels, we anticipate that sales in the third quarter may range from $195 million to $215 million, and at these volumes, our non-GAAP net earnings could range from $0.50 to $0.64 per share and our GAAP net income could range from $0.48 to $0.61 per share.”

Conference Call Details

A conference call with management will be held on Thursday, July 23, 2015 at 8:30 a.m. (EDT). To participate in the conference call, please dial (877) 212-6076 for domestic callers and (707) 287-9331 for international callers, and an operator will connect you. Participants will need to provide the operator with the Conference ID of 68290658, which has been reserved for this call. A live and archived webcast of the call will be available on the company’s website at www.mksinst.com.

Use of Non-GAAP Financial Results

Non-GAAP amounts exclude amortization of acquired intangible assets, costs associated with completed acquisitions, income related to the sale of excess and obsolete inventory previously written down to net realizable value, restructuring charges, discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures are not in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). MKS’ management believes the presentation of these non-GAAP financial measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

About MKS Instruments

MKS Instruments, Inc. is a global provider of instruments, subsystems and process control solutions that measure, control, power, monitor and analyze critical parameters of advanced manufacturing processes to improve process performance and productivity. Our products are derived from our core competencies in pressure measurement and control, materials delivery, gas composition analysis, control and information technology, power and reactive gas generation, and vacuum technology. Our primary served markets are manufacturers of capital equipment for semiconductor devices, and for other thin film applications including flat panel displays, solar cells, light emitting diodes, data storage media, and other advanced coatings. We also leverage our technology in other markets with advanced manufacturing applications including medical equipment, pharmaceutical manufacturing, energy generation and environmental monitoring.

Forward-Looking Statements

This release contains projections or other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27 of the Securities Act, and Section 21E of the Securities Exchange Act regarding MKS’ future growth and the future financial performance of MKS. These projections or statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the projections or other forward-looking statements are the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to MKS’ major customers, potential fluctuations in quarterly results, the challenges, risks and costs involved with integrating the operations of MKS and any acquired companies, dependence on new product development, rapid technological and market change, acquisition strategy, manufacturing and sourcing risks, volatility of stock price, international operations, financial risk management, and future growth subject to risks. Readers are referred to MKS’ filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for a discussion of these and other important risk factors concerning MKS and its operations. MKS is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

###

Company Contact: Seth H. Bagshaw
Vice President, Chief Financial Officer and Treasurer
Telephone: 978.645.5578

Investor Relations Contact: Claire McAdams
Headgate Partners LLC
Telephone: 530.265.9899
Email: claire@headgatepartners.com

1

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)

                         
    Three Months Ended
    June 30, 2015   June 30, 2014   March 31, 2015
Net revenues:
                       
Products
  $ 188,281     $ 157,466     $ 186,096  
Services
    29,685       27,231       27,743  
 
                       
Total net revenues
    217,966       184,697       213,839  
Cost of revenues:
                       
Products
    99,849       87,513       98,652  
Services
    19,319       17,549       18,141  
 
                       
Total cost of revenues
    119,168       105,062       116,793  
Gross profit
    98,798       79,635       97,046  
Research and development
    17,567       15,421       16,680  
Selling, general and administrative
    33,269       32,239       30,867  
Acquisition costs
          271       30  
Restructuring
    219             788  
Amortization of intangible assets
    1,709       1,044       1,671  
 
                       
Income from operations
    46,034       30,660       47,010  
Interest income, net
    790       231       504  
 
                       
Income from operations before income taxes
    46,824       30,891       47,514  
Provision for income taxes
    13,604       9,667       13,728  
 
                       
Net income
  $ 33,220     $ 21,224     $ 33,786  
 
                       
Net income per share:
                       
Basic
  $ 0.62     $ 0.40     $ 0.63  
Diluted
  $ 0.62     $ 0.40     $ 0.63  
Cash dividends per common share
  $ 0.170     $ 0.165     $ 0.165  
Weighted average shares outstanding:
                       
Basic
    53,384       53,361       53,214  
Diluted
    53,589       53,537       53,529  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 33,220     $ 21,224     $ 33,786  
Adjustments (net of tax, if applicable):
                       
Acquisition costs (Note 1)
          271       30  
Acquisition inventory step-up (Note 2)
          545        
Restructuring (Note 3)
    219             788  
Sale of previously written down inventory (Note 4)
    (2,098 )            
Amortization of intangible assets
    1,709       1,044       1,671  
Pro forma tax adjustments
    74       (486 )     (773 )
 
                       
Non-GAAP net earnings (Note 5)
  $ 33,124     $ 22,598     $ 35,502  
 
                       
Non-GAAP net earnings per share (Note 5)
  $ 0.62     $ 0.42     $ 0.66  
 
                       
Weighted average shares outstanding
    53,589       53,537       53,529  
Income from operations
  $ 46,034     $ 30,660     $ 47,010  
Adjustments:
                       
Acquisition costs (Note 1)
  $     $ 271     $ 30  
Acquisition inventory step-up (Note 2)
          545        
Restructuring (Note 3)
    219             788  
Sale of previously written down inventory (Note 4)
    (2,098 )            
Amortization of intangible assets
    1,709       1,044       1,671  
 
                       
Non-GAAP income from operations (Note 6)
  $ 45,864     $ 32,520     $ 49,499  
 
                       
Non-GAAP operating margin percentage (Note 6)
    21.0 %     17.6 %     23.1 %
 
                       
Gross profit
  $ 98,798     $ 79,635     $ 97,046  
Acquisition inventory step-up (Note 2)
          545        
Sale of previously written down inventory (Note 4)
    (2,098 )            
 
                       
Non-GAAP gross profit (Note 7)
  $ 96,700     $ 80,180     $ 97,046  
 
                       
Non-GAAP gross profit percentage (Note 7)
    44.4 %     43.4 %     45.4 %
 
                       

Note 1: We recorded $0.03 million of acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. We recorded $0.3 million of acquisition costs comprising of legal fees related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 2: Inventory step-up adjustment related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 3: We recorded restructuring costs related to the outsourcing of an international manufacturing operation.

Note 4: Cost of sales for the three months ended June 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 5: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs, income related to the sale of excess and obsolete inventory previously written down to net realizable value, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related quarter.

Note 6: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs, income related to the sale of excess and obsolete inventory previously written down to net realizable value and amortization of intangible assets.

Note 7: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to an acquisition and income related to the sale of excess and obsolete inventory previously written down to net realizable value.

2

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)

                 
    Six Months Ended June 30,
    2015   2014
Net revenues:
               
Products
  $ 374,377     $ 338,652  
Services
    57,428       52,398  
 
               
Total net revenues
    431,805       391,050  
Cost of revenues:
               
Products
    198,501       187,724  
Services
    37,460       34,319  
 
               
Total cost of revenues
    235,961       222,043  
Gross profit
    195,844       169,007  
Research and development
    34,247       31,039  
Selling, general and administrative
    64,136       66,830  
Acquisition costs
    30       499  
Restructuring
    1,007       747  
Amortization of intangible assets
    3,380       1,454  
 
               
Income from operations
    93,044       68,438  
Interest income, net
    1,294       466  
 
               
Income from operations before income taxes
    94,338       68,904  
Provision for income taxes
    27,332       16,435  
 
               
Net income
  $ 67,006     $ 52,469  
 
               
Net income per share:
               
Basic
  $ 1.26     $ 0.98  
Diluted
  $ 1.25     $ 0.98  
Cash dividends per common share
  $ 0.335     $ 0.325  
Weighted average shares outstanding:
               
Basic
    53,299       53,386  
Diluted
    53,559       53,657  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
               
Net income
  $ 67,006     $ 52,469  
Adjustments (net of tax, if applicable):
               
Tax benefit (Note 1)
          (5,079 )
Acquisition costs (Note 2)
    30       499  
Acquisition inventory step-up (Note 3)
          545  
Restructuring (Note 4)
    1,007       747  
Sale of previously written down inventory (Note 5)
    (2,098 )      
Amortization of intangible assets
    3,380       1,454  
Pro forma tax adjustments
    (698 )     (852 )
 
               
Non-GAAP net earnings (Note 6)
  $ 68,627     $ 49,783  
 
               
Non-GAAP net earnings per share (Note 6)
  $ 1.28     $ 0.93  
 
               
Weighted average shares outstanding
    53,559       53,657  
Income from operations
  $ 93,044     $ 68,438  
Adjustments:
               
Acquisition costs (Note 2)
    30       499  
Acquisition inventory step-up (Note 3)
          545  
Restructuring (Note 4)
    1,007       747  
Sale of previously written down inventory (Note 5)
    (2,098 )      
Amortization of intangible assets
    3,380       1,454  
 
               
Non-GAAP income from operations (Note 7)
  $ 95,363     $ 71,683  
 
               
Non-GAAP operating margin percentage (Note 7)
    22.1 %     18.3 %
 
               
Gross profit
  $ 195,844     $ 169,007  
Acquisition inventory step-up (Note 3)
          545  
Sale of previously written down inventory (Note 5)
    (2,098 )      
 
               
Non-GAAP gross profit (Note 8)
  $ 193,746     $ 169,552  
 
               
Non-GAAP gross profit percentage (Note 8)
    44.9 %     43.4 %
 
               

Note 1: The six months ended June 30, 2014 includes a tax benefit related to the settlement of an audit and other discrete tax items during the first quarter of 2014.

Note 2: The six months ended June 30, 2015 includes acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. The six months ended June 30, 2014 includes acquisition costs comprised of legal fees related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 3: Inventory step-up adjustment related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 4: The six months ended June 30, 2015 includes restructuring charges related mainly to the outsourcing of an international manufacturing operation. The six month period ended June 30, 2014 includes restructuring charges primarily for severance related costs related to a reduction in work force throughout the Company.

Note 5: Cost of sales for the six months ended June 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs, amortization of intangible assets, income related to the sale of excess and obsolete inventory previously written down to net realizable value, discrete tax benefits and charges, and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related quarter.

Note 7: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs, income related to the sale of excess and obsolete inventory previously written down to net realizable value and amortization of intangible assets.

Note 8: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to an acquisition and income related to the sale of excess and obsolete inventory previously written down to net realizable value.

3

MKS Instruments, Inc.
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate
(In thousands)

                                                 
    Three Months Ended June 30, 2015   Three Months Ended March 31, 2015
     Income Before    Provision    Effective        Provision    
     Income Taxes    (benefit) for   Tax Rate    Income Before   (benefit) for   Effective
             Income Taxes             Income Taxes     Income Taxes     Tax Rate 
GAAP
  $ 46,824     $ 13,604       29.1 %   $ 47,514     $ 13,728       28.9 %
Adjustments:
                                               
Acquisition costs (Note 1)
  -                   30                
Restructuring (Note 3)
  219                   788                
Amortization of intangible assets
  1,709                   1,671                
Sale of previously written down
  (2,098 )                                  
inventory (Note 5)
                                               
Tax effect of pro forma adjustments
  -     311                     817          
Adjustment to pro forma tax rate
  -     (385 )                   (44 )        
 
                                               
Non-GAAP
  $ 46,654     $ 13,530       29.0 %   $ 50,003     $ 14,501       29.0 %
 
                                               
                         
    Three Months Ended June 30, 2014
    Income Before   Provision (benefit)   Effective
    Income Taxes   for   Tax Rate
             Income Taxes         
GAAP
  $ 30,891     $ 9,667       31.3 %
Adjustments:
                       
Acquisition costs (Note 1)
  271              
Acquisition inventory step-up (Note 2)
  545              
Amortization of intangible assets
  1,044              
Tax effect of pro forma adjustments
  -     642          
Adjustment to pro forma tax rate
  -     (156 )        
 
                       
Non-GAAP
  $ 32,751     $ 10,153       31.0 %
 
                       
                                                 
    Six Months Ended June 30, 2015   Six Months Ended June 30, 2014
         Provision            Provision    Effective
    Income Before   (benefit) for   Effective   Income Before   (benefit) for    Tax Rate 
     Income Taxes     Income Taxes    Tax Rate    Income Taxes     Income Taxes         
GAAP
  $ 94,338     $ 27,332       29.0 %   $ 68,904     $ 16,435       23.9 %
Adjustments:
                                               
Tax benefit (Note 4)
  -                         5,079          
Acquisition costs (Note 1)
  30                   499                
Acquisition inventory step-up
  -                   545                
(Note 2)
                                               
Restructuring (Note 3)
  1,007                   747                
Amortization of intangible assets
  3,380                   1,454                
Sale of previously written down
  (2,098 )                                  
inventory (Note 5)
                                               
Tax effect of pro forma adjustments
  -     1,128                     1,110          
Adjustment to pro forma tax rate
  -     (430 )                   (258 )        
 
                                               
Non-GAAP
  $ 96,657     $ 28,030       29.0 %   $ 72,149     $ 22,366       31.0 %
 
                                               

Note 1: The three months ended March 31, 2015 includes acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. The three and six months ended June 30, 2014 include acquisition costs comprising of legal and filing fees related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 2: The three and six months ended June 30, 2014 includes an inventory step-up adjustment related to the acquisition of the Granville-Phillips division of Brooks Automation, which closed during the second quarter of 2014.

Note 3: The three and six months ended March 31, 2015 and the three and six month periods ended June 30, 2015 include restructuring charges related to the outsourcing of an international manufacturing operation. The six month period ended June 30, 2014 includes restructuring charges primarily for severance related costs related to a reduction in work force throughout the Company.

Note 4: The six months ended June 30, 2014 includes a tax benefit related to the settlement of an audit and other discrete items.

Note 5: Cost of sales for the three months ended June 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

MKS Instruments, Inc.
Reconciliation of Q3-15 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

                                 
    The Months Ended September 30, 2015
    Low Guidance   High Guidance
    $ Amount   $ Per Share   $ Amount   $ Per Share
GAAP net income
  $ 25,700     $ 0.48     $ 32,900     $ 0.61  
Amortization
    1,700       0.03       1,700       0.03  
Tax effect of adjustments (Note 1)
    (500 )     (0.01 )     (400 )     (0.01 )
 
                               
Non-GAAP net earnings
  $ 26,900     $ 0.50     $ 34,200     $ 0.64  
 
                               
Q3-15 forecasted shares
            53,600               53,600  

Note 1: The Non-GAAP adjustments are tax effected at the estimated Q3-15 tax rate of 29%.

4

MKS Instruments, Inc.
Unaudited Consolidated Balance Sheet
(In thousands)

                 
    June 30, 2015   December 31, 2014
ASSETS
               
Cash and cash equivalents
  $ 178,319     $ 305,437  
Short-term investments
    177,433       129,594  
Trade accounts receivable, net
    124,553       106,362  
Inventories
    165,590       155,169  
Deferred income taxes
    13,570       14,017  
Other current assets
    28,203       27,512  
 
               
Total current assets
    687,668       738,091  
Property, plant and equipment, net
    69,898       72,776  
Long-term investments
    256,855       157,201  
Goodwill
    200,212       192,381  
Intangible assets, net
    47,822       46,389  
Other assets
    17,878       17,206  
 
               
Total assets
  $ 1,280,333     $ 1,224,044  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Accounts payable
  $ 34,054     $ 34,166  
Accrued compensation
    23,641       26,970  
Income taxes payable
    8,615       6,702  
Other current liabilities
    45,668       35,789  
 
               
Total current liabilities
    111,978       103,627  
Other liabilities
    38,919       38,595  
Stockholders’ equity:
               
Common stock
    113        113  
Additional paid-in capital
    739,567       734,732  
Retained earnings
    395,455       349,061  
Other stockholders’ equity
    (5,699 )     (2,084 )
 
               
Total stockholders’ equity
    1,129,436       1,081,822  
 
               
Total liabilities and stockholders’ equity
  $ 1,280,333     $ 1,224,044  
 
               

5