ANDOVER, Mass., April 25, 2016 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reports first quarter 2016 financial results.
    GAAP Results   Non-GAAP Results
Net revenues ($ millions) $ 184   $ 184  
Gross margin   42.4 %   42.4 %
Operating margin   12.3 %   14.6 %
Net income ($ millions) $ 17.6   $ 20.1  
Diluted EPS $ 0.33   $ 0.38  
             

First Quarter Financial Results   

Sales were $184 million, an increase of 7% from $172 million in the fourth quarter of 2015, and a decrease of 14% from $214 million in the first quarter of 2015.

First quarter net income was $17.6 million, or $0.33 per diluted share, compared to net income of $25.5 million, or $0.48 per diluted share in the fourth quarter of 2015, and $33.8 million, or $0.63 per diluted share in the first quarter of 2015.

Non-GAAP net earnings, which exclude special charges and credits, were $20.1 million, or $0.38 per diluted share, compared to $18.4 million, or $0.34 per diluted share in the fourth quarter of 2015, and $35.5 million, or $0.66 per diluted share in the first quarter of 2015.

During the quarter we also paid a dividend of $9.1 million or $0.17 per share and repurchased 45 thousand shares for $1.5 million. 

Commenting on the company's financial results, Gerald Colella, Chief Executive Officer and President, said, "We are pleased with our first quarter performance, which was marked by stronger than anticipated revenue from our semiconductor customers. These results were driven by improving industry fundamentals and MKS' strong position in 3D NAND.  Moreover, we continue to make progress in broadening our technology and product portfolio and expanding our served available markets.  Our pending acquisition of Newport Corporation has passed all necessary regulatory reviews, we successfully secured financing for the acquisition, and subject to approval by the Newport stockholders, we anticipate closing the transaction this Friday.

"Based on current business levels, we expect that sales in the second quarter of 2016 may range from $185 to $205 million, and at these volumes, our non-GAAP net earnings could range from $0.41 to $0.54 per share and GAAP net income could range from $0.27 to $0.41 per share."  

Guidance for the second quarter excludes the effect of the closing of the acquisition of Newport Corporation. 

Conference Call Details 

A conference call with management will be held on Tuesday, April 26, 2016 at 8:30 a.m. (Eastern Time).  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 79005155, 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 and announced acquisitions, income related to the sale of excess and obsolete inventory previously written down to net realizable value, certain excess and obsolete inventory charges, 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, failure to obtain the required approval from the stockholders of Newport Corporation, or other unforeseen impediments to closing that acquisition, 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  
                March 31,   March 31,   December 31,  
                  2016       2015       2015    
                           
Net revenues:                          
Products               $ 153,621     $ 186,096     $ 143,286    
Services                 30,060       27,743       29,101    
Total net revenues               183,681       213,839       172,387    
Cost of revenues:                        
Products                 85,352       98,652       79,553    
Services                 20,416       18,141       20,035    
Total cost of revenues               105,768       116,793       99,588    
                           
Gross profit                 77,913       97,046       72,799    
                           
Research and development               17,227       16,680       16,841    
Selling, general and administrative             33,950       30,867       31,555    
Acquisition costs               2,494       30       -    
Restructuring                 -       788       505    
Amortization of intangible assets             1,683       1,671       1,693    
Income from operations               22,559       47,010       22,205    
                           
Interest and other income, net             1,246       504       841    
                           
Income before income taxes             23,805       47,514       23,046    
Provision (benefit) for income taxes             6,242       13,728       (2,476 )  
Net income               $ 17,563     $ 33,786     $ 25,522    
                           
Net income per share:                        
Basic               $ 0.33     $ 0.63     $ 0.48    
Diluted               $ 0.33     $ 0.63     $ 0.48    
                           
Cash dividends per common share           $ 0.17     $ 0.165     $ 0.17    
                           
Weighted average shares outstanding:                      
Basic                 53,235       53,214       53,217    
Diluted                 53,563       53,529       53,554    
                           
The following supplemental Non-GAAP earnings information is presented              
to aid in understanding MKS' operating results:                  
                           
Net income       $ 17,563     $ 33,786     $ 25,522    
               
Adjustments (net of tax, if applicable):              
Release of tax reserves (Note 1)     -       -       (7,692 )  
Tax benefit and tax credits (Note 2)     -       -       (1,378 )  
Excess and obsolete charge (Note 3)     -       -       488    
Acquisition costs (Note 4)     2,494       30       -    
Restructuring (Note 5)     -       788       505    
Amortization of intangible assets     1,683       1,671       1,693    
Pro forma tax adjustments     (1,593 )     (773 )     (761 )  
               
Non-GAAP net earnings (Note 6)   $ 20,147     $ 35,502     $ 18,377    
               
Non-GAAP net earnings per share (Note 6)   $ 0.38     $ 0.66     $ 0.34    
               
Weighted average shares outstanding     53,563       53,529       53,554    
               
Income from operations   $ 22,559     $ 47,010     $ 22,205    
               
Adjustments:              
Excess and obsolete charge (Note 3)     -       -       488    
Acquisition costs (Note 4)     2,494       30       -    
Restructuring (Note 5)     -       788       505    
Amortization of intangible assets     1,683       1,671       1,693    
               
Non-GAAP income from operations (Note 7)   $ 26,736     $ 49,499     $ 24,891    
               
Non-GAAP operating margin percentage (Note 7)     14.6 %     23.1 %     14.4 %  
             
Gross profit   $ 77,913     $ 97,046     $ 72,799    
Excess and obsolete charge (Note 3)     -       -       488    
             
Non-GAAP gross profit (Note 8)   $ 77,913     $ 97,046     $ 73,287    
             
Non-GAAP gross profit percentage (Note 8)     42.4 %     45.4 %     42.5 %  
             
             
Note 1: We recorded credits for reserve releases related to the settlement of audits and expiration of the statute of limitations.  
             
Note 2: In the fourth quarter of 2015, we recorded a tax benefit of $1.8 million from the reinstatement of the U.S. research tax credit, representing the full year benefit.  We excluded the benefit applicable to the first three quarters of 2015, which was $1.4 million, from Non-GAAP net earnings.  
 
   
Note 3: In the fourth quarter of 2015, we incurred $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line.  
                           
Note 4:  In 2016, we incurred acquisition costs related to the announced acquisition of Newport Corporation, which is expected to close during the second quarter of 2016. In 2015, we incurred acquisition costs related to the Precisive LLC acquisition which closed during the first quarter of 2015.  
 
                           
Note 5: The three months ended December 31, 2015 and March 31, 2015 include restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations.  
 
                           
Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude discrete tax benefits and charges, excess and obsolete inventory charges, acquisition costs, restructuring costs, 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 7: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude certain excess and obsolete inventory charges, acquisition costs, restructuring costs and amortization of intangible assets.  
 
                           
Note 8: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude certain excess and obsolete inventory charges.  
                           

                         
MKS Instruments, Inc.  
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate  
(In thousands)  
                       
    Three Months Ended March 31, 2016   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   $ 23,805     $ 6,242       26.2 %   $ 47,514     $ 13,728       28.9 %
         
Adjustments:          
Acquisition costs (Note 1)     2,494       -       30       -    
Restructuring (Note 2)     -       -       788       -    
Amortization of intangible assets     1,683       -       1,671       -    
Tax effect of pro forma adjustments     -       1,503       -       817    
Adjustment to pro forma tax rate     -       90       -       (44 )  
                     
Non-GAAP   $ 27,982     $ 7,835       28.0 %   $ 50,003     $ 14,501       29.0 %
         
         
    Three Months Ended December 31, 2015  
  Income Before   Provision (benefit)   Effective  
  Income Taxes   for Income Taxes   Tax Rate  
     
GAAP   $ 23,046     $ (2,476 )     -10.7 %  
     
Adjustments:      
Release of tax reserves (Note 3)     -       7,692      
Tax benefit and tax credits (Note 4)     -       1,378      
Excess and obsolete charge (Note 5)     488       -      
Restructuring (Note 2)     505       -      
Amortization of intangible assets     1,693       -      
Tax effect of pro forma adjustments     -       761      
         
Non-GAAP   $ 25,732     $ 7,355       28.6 %            
                         
Note 1: In 2016, we incurred acquisition costs related to the announced acquisition of Newport Corporation, which is expected to close during the second quarter of 2016. In 2015, we incurred acquisition costs related to the Precisive LLC acquisition which closed during the first quarter of 2015.
                         
Note 2: The three months ended December 31, 2015 and March 31, 2015 include restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations.
                                         
Note 3: We recorded credits for reserve releases related to the settlement of audits and expiration of the statute of limitations.
                         
Note 4: In the fourth quarter of 2015, we recorded a tax benefit of $1.8 million from the reinstatement of the U.S. research tax credit, representing the full year benefit.  We excluded the benefit applicable to the first three quarters of 2015, which was $1.4 million, from Non-GAAP net earnings.
                         
Note 5: In the fourth quarter of 2015, we incurred $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line.
                         

                   
MKS Instruments, Inc.
Reconciliation of Q2-16 Guidance - GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)
                   
    Three Months Ended June 30, 2016  
    Low Guidance   High Guidance  
    $ Amount   $ Per Share   $ Amount   $ Per Share  
                   
GAAP net income   $ 14,500     $ 0.27     $ 21,700     $ 0.40    
                   
Acquisition costs (Note 2)     6,600       0.12       6,600       0.12    
                   
Integration costs (Note 2)     1,900       0.04       1,900       0.04    
                   
Amortization     1,700       0.03       1,700       0.03    
                   
Tax effect of adjustments (Note 1)     (2,900 )     (0.05 )     (2,900 )     (0.05 )  
                   
Non-GAAP net earnings   $ 21,800     $ 0.41     $ 29,000     $ 0.54    
                   
Q2 -16 forecasted shares         53,700           53,700    
                   
Note 1: The Non-GAAP adjustments are tax effected at the estimated Q2-16 tax rate of 28%.          
 
Note 2: These costs relate to the announced acquisition of Newport Corporation, which is expected to close in the second quarter of 2016.  
 

                 
MKS Instruments, Inc.  
Unaudited Consolidated Balance Sheet  
(In thousands)  
                 
                 
          March 31,   December 31,  
            2016       2015    
                 
ASSETS                
                 
Cash and cash equivalents     $ 357,855     $ 227,574    
Short-term investments       308,768       430,663    
Trade accounts receivable, net       113,472       101,883    
Inventories         151,650       152,631    
Other current assets           27,388         26,760    
                 
  Total current assets       959,133       939,511    
                 
Property, plant and equipment, net     67,561       68,856    
Goodwill           199,999       199,703    
Intangible assets, net       42,575       44,027    
Other assets           21,392         21,250    
                 
Total assets       $ 1,290,660     $ 1,273,347    
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY        
                 
Accounts payable       $ 28,076     $ 23,177    
Accrued compensation       20,983       28,424    
Income taxes payable       3,510       4,024    
Other current liabilities         45,372         35,359    
  Total current liabilities     97,941       90,984    
                 
Other liabilities         21,650       21,482    
                 
Stockholders' equity:              
Common stock         113       113    
Additional paid-in capital       745,840       744,725    
Retained earnings         434,803       427,214    
Other stockholders' equity         (9,687 )       (11,171 )  
  Total stockholders' equity       1,171,069         1,160,881    
                 
Total liabilities and stockholders' equity   $ 1,290,660     $ 1,273,347    
                 
Company Contact: Seth H. BagshawVice President, Chief Financial Officer and TreasurerTelephone:  978.645.5578Investor Relations Contact: Monica GouldThe Blueshirt GroupTelephone:  212.871.3927Email:  monica@blueshirtgroup.com

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