ANDOVER, Mass., July 22, 2015 (GLOBE NEWSWIRE) -- 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 12 th. 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.
MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
       
       
       
  Three Months Ended 
  June 30, June 30, March 31,
    2015     2014     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.

 
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.  

 
             
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 (benefit) Effective  Income Before Provision (benefit) Effective 
  Income Taxes for Income Taxes Tax Rate Income Taxes for 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 inventory (Note 5)     (2,098 )     -          -        -     
  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 Income Taxes Tax Rate      
             
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
  Income Before Provision (benefit) Effective  Income Before Provision (benefit) Effective 
  Income Taxes for Income Taxes Tax Rate Income Taxes for Income Taxes Tax Rate
         
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 (Note 2)     -        -          545       -     
  Restructuring (Note 3)     1,007       -          747       -     
  Amortization of intangible assets     3,380       -          1,454       -     
  Sale of previously written down inventory (Note 5)     (2,098 )     -          -        -     
  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)    
             
  Three 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%.    

 
MKS Instruments, Inc.
Unaudited Consolidated Balance Sheet
(In thousands)
     
  June 30, December 31,
    2015     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  
     

 
Company Contact:Seth H. BagshawVice President, Chief Financial Officer and TreasurerTelephone:  978.645.5578Investor Relations Contact:Claire McAdamsHeadgate Partners LLCTelephone:  530.265.9899Email: claire@headgatepartners.com

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