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

(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Q1 2015 Financial Results

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

                 
    GAAP Results   Non-GAAP Results
Net revenues ($ millions)
  $ 214     $ 214  
Gross margin
    45.4 %     45.4 %
Operating margin
    22.0 %     23.1 %
Net income ($ millions)
  $ 33.8     $ 35.5  
Diluted EPS
  $ 0.63     $ 0.66  

First Quarter Financial Results

Sales were $214 million, an increase of 5% from $203 million in the fourth quarter of 2014, and an increase of 4% from $206 million in the first quarter of 2014.

First quarter net income was $33.8 million, or $0.63 per diluted share, compared to net income of $34.2 million, or $0.64 per diluted share in the fourth quarter of 2014, and $31.2 million, or $0.58 per diluted share in the first quarter of 2014.

Non-GAAP net earnings, which exclude special charges and credits, were $35.5 million, or $0.66 per diluted share, compared to $29.1 million, or $0.54 per diluted share in the fourth quarter of 2014, and $27.2 million, or $0.51 per diluted share in the first quarter of 2014.

In the first quarter, the board of directors authorized a quarterly cash dividend of $0.165 per share, and the Company paid a dividend of $8.8 million on March 13th.

Gerald Colella, Chief Executive Officer and President, said, “The first quarter was another strong quarter financially for MKS. Sales were up 5% from the fourth quarter and at the high end of our guidance range, and profitability exceeded our expectations with non-GAAP earnings per share up over 20% sequentially. The favorable results were primarily driven by improvements to our operating model, as well as a continued strong environment for our semiconductor business, which increased 7% from the fourth quarter, while sales to all other markets grew for the sixth straight quarter.

“Recent reports for semiconductor capital spending are mixed, but continue to indicate a healthy market for wafer fab equipment in 2015. Our near-term visibility indicates a continued positive business environment in both our semiconductor and other advanced markets for the second quarter, which we expect will be stronger than the same period last year. As we operate within this healthy business environment, we continue to make refinements to our operating structure and improvements to our profitability, as well as redeploying resources to strategic and high-growth areas.

“Based on these factors, and looking at current business levels, we anticipate that sales in the second quarter may range from $200 million to $220 million, and at these volumes, our non-GAAP net earnings could range from $0.53 to $0.66 per share and our GAAP net income could range from $0.54 to $0.67 per share.”

Conference Call Details

A conference call with management will be held on Thursday, April 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 14695327, 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, 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

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

                         
    Three Months Ended
    March 31, 2015   March 31, 2014   December 31, 2014
Net revenues:
                       
Products
  $ 186,096     $ 181,186     $ 176,647  
Services
    27,743       25,167       26,374  
 
                       
Total net revenues
    213,839       206,353       203,021  
Cost of revenues:
                       
Products
    98,652       100,211       97,295  
Services
    18,141       16,770       16,292  
 
                       
Total cost of revenues
    116,793       116,981       113,587  
Gross profit
    97,046       89,372       89,434  
Research and development
    16,680       15,618       16,022  
Selling, general and administrative
    30,867       34,591       32,633  
Acquisition costs
    30       228        
Restructuring
    788       747       494  
Amortization of intangible assets
    1,671       410       1,731  
 
                       
Income from operations
    47,010       37,778       38,554  
Interest income, net
    504       235       391  
 
                       
Income from operations before income taxes
    47,514       38,013       38,945  
Provision for income taxes
    13,728       6,768       4,753  
 
                       
Net income
  $ 33,786     $ 31,245     $ 34,192  
 
                       
Net income per share:
                       
Basic
  $ 0.63     $ 0.58     $ 0.64  
Diluted
  $ 0.63     $ 0.58     $ 0.64  
Cash dividends per common share
  $ 0.165     $ 0.160     $ 0.165  
Weighted average shares outstanding:
                       
Basic
    53,214       53,411       53,102  
Diluted
    53,529       53,776       53,436  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 33,786     $ 31,245     $ 34,192  
Adjustments (net of tax, if applicable):
                       
Income tax charges (Note 1)
                1,422  
Release of tax reserves (Note 2)
                (3,394 )
Tax benefit and tax credits (Note 3)
          (5,079 )     (4,614 )
Acquisition costs (Note 4)
    30       228        
Restructuring (Note 5)
    788       747       494  
Amortization of intangible assets
    1,671       410       1,731  
Pro forma tax adjustments
    (773 )     (366 )     (779 )
 
                       
Non-GAAP net earnings (Note 6)
  $ 35,502     $ 27,185     $ 29,052  
 
                       
Non-GAAP net earnings per share (Note 6)
  $ 0.66     $ 0.51     $ 0.54  
 
                       
Weighted average shares outstanding
    53,529       53,776       53,436  
Income from operations
  $ 47,010     $ 37,778     $ 38,554  
Adjustments:
                       
Acquisition costs (Note 4)
  $ 30     $ 228     $  
Restructuring (Note 5)
    788       747       494  
Amortization of intangible assets
    1,671       410       1,731  
 
                       
Non-GAAP income from operations (Note 7)
  $ 49,499     $ 39,163     $ 40,779  
 
                       
Non-GAAP operating margin percentage (Note 7)
    23.1 %     19.0 %     20.1 %
 
                       

Note 1: In the fourth quarter of 2014, we recorded $1.4 million of withholding tax related to a foreign intercompany dividend.

Note 2: Reserve releases related to the settlement of audits and expiration of the statute of limitations.

Note 3: In the fourth quarter of 2014, we recorded a tax benefit of $3.2 million related to a German NOL resulting from a change in tax status and we recorded a $1.4 million tax credit for the reinstatement of the U.S. research credit for the full year 2014. In the first quarter of 2014, we recorded a tax benefit of $5.1 million related to the settlement of an audit and other discrete items.

Note 4: We recorded $0.03 million of acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. We recorded $0.2 million of acquisition costs comprising of legal and filing fees related to the Granville-Phillips acquisition, which closed during the second quarter of 2014.

Note 5: In the first quarter of 2015, we recorded restructuring charges related to the outsourcing of an international manufacturing operation. In the first and fourth quarters of 2014, we recorded restructuring charges primarily for severance costs related to a reduction in workforce and the consolidation of certain facilities.

Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructuring costs, acquisition costs, 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 amortization of intangible assets, restructuring costs, and acquisition costs.

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

                                                 
    Three Months Ended March 31, 2015   Three Months Ended December 31, 2014
         Provision    Effective        Provision    
    Income Before   (benefit) for    Tax Rate    Income Before   (benefit) for   Effective
     Income Taxes     Income Taxes             Income Taxes     Income Taxes     Tax Rate 
GAAP                
  $          47,514   $        13,728      28.9%      $        38,945   $         4,753       12.2%   
Adjustments:
                                               
Income tax charges (Note 1)
                (1,422 )        
Release of tax reserves (Note 2)
                3,394        
Tax benefit and tax credits (Note 3)
                4,614        
Acquisition costs (Note 4)
  30                      
Restructuring (Note 5)
  788             494          
Amortization of intangible assets
  1,671             1,731          
Tax effect of pro forma adjustments
    817             779        
Adjustment to pro forma tax rate
    (44 )                    
 
                               
Non-GAAP
  $       50,003   $       14,501      29.0%      $       41,170   $       12,118      29.4%   
 
                               
                         
    Three Months Ended March 31, 2014
         Provision    
    Income Before    (benefit) for   Effective
     Income Taxes     Income Taxes     Tax Rate 
GAAP
  $       38,013     $       6,768         17.8%    
Adjustments:
                       
Tax benefit and tax credits (Note 3)
          5,079          
Acquisition costs (Note 4)
    228                
Restructuring (Note 5)
    747                
Amortization of intangible assets
    410                
Tax effect of pro forma adjustments
          468          
Adjustment to pro forma tax rate
          (102 )        
 
                       
Non-GAAP
  $       39,398     $       12,213       31.0%    
 
                       

Note 1: In the fourth quarter of 2014, we recorded $1.4 million of withholding tax related to a foreign intercompany dividend.

Note 2: Reserve releases related to the settlement of audits and expiration of the statute of limitations.

Note 3: In the fourth quarter of 2014, we recorded a tax benefit of $3.2 million related to a German NOL resulting from a change in tax status and we recorded a $1.4 million tax credit for the reinstatement of the U.S. research credit for the full year 2014. In the first quarter of 2014, we recorded a tax benefit of $5.1 million related to the settlement of an audit and other discrete items.

Note 4: We recorded $0.03 million of acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. We recoded $0.2 million of acquisition costs comprising of legal and filing fees related to the Granville-Phillips acquisition, which closed during the second quarter of 2014.

Note 5: In the first quarter of 2015, we recorded restructuring charges related to the outsourcing of an international manufacturing operation. In the first and fourth quarters of 2014, we recorded restructuring charges primarily for severance costs related to a reduction in workforce and the consolidation of certain facilities.

3

MKS Instruments, Inc.
Reconciliation of Q2-15 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

                                 
    Three Months Ended June 30, 2015
    Low Guidance   High Guidance
    $ Amount   $ Per Share   $ Amount   $ Per Share
GAAP net income
  $ 28,800     $ 0.54     $ 36,000     $ 0.67  
Amortization
    1,700       0.03       1,700       0.03  
Reversal of special one-time E&O charge (Note 1)
    (2,300 )     (0.04 )     (2,300 )     (0.04 )
Tax effect of adjustments (Note 2)
    200       0.00       200       0.00  
 
                               
Non-GAAP net earnings
  $ 28,400     $ 0.53     $ 35,600     $ 0.66  
 
                               
Q2 - 15 forecasted shares
            53,700               53,700  

Note 1: Represents the estimated effect of the sale of inventory reduced to fair-market value in a prior period.

Note 2: The Non-GAAP adjustments are tax effected at the estimated Q2-15 tax rate of 29%.

4

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

                 
    March 31, 2015   December 31, 2014
ASSETS
               
Cash and cash equivalents
  $ 192,713     $ 305,437  
Short-term investments
    158,631       129,594  
Trade accounts receivable, net
    124,445       106,362  
Inventories
    164,412       155,169  
Deferred income taxes
    13,560       14,017  
Other current assets
    21,580       27,512  
 
               
Total current assets
    675,341       738,091  
Property, plant and equipment, net
    70,908       72,776  
Long-term investments
    237,313       157,201  
Goodwill
    199,330       192,381  
Intangible assets, net
    49,553       46,389  
Other assets
    17,165       17,206  
 
               
Total assets
  $ 1,249,610     $ 1,224,044  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Accounts payable
  $ 37,549     $ 34,166  
Accrued compensation
    21,349       26,970  
Income taxes payable
    6,455       6,702  
Other current liabilities
    38,513       35,789  
 
               
Total current liabilities
    103,866       103,627  
Other liabilities
    41,055       38,595  
Stockholders’ equity:
               
Common stock
    113       113  
Additional paid-in capital
    736,290       734,732  
Retained earnings
    374,063       349,061  
Other stockholders’ equity
    (5,777 )     (2,084 )
 
               
Total stockholders’ equity
    1,104,689       1,081,822  
 
               
Total liabilities and stockholders’ equity
  $ 1,249,610     $ 1,224,044  
 
               

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