• Achieved new quarterly records for total semiconductor revenue and Non-GAAP net earnings
  • Total quarterly revenue up 34% compared to Q2 2016 on a pro-forma basis
  • Achieved new quarterly revenue record for Light and Motion Division

ANDOVER, Mass., July 25, 2017 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported second quarter 2017 financial results.
Quarterly Financial Results
(in millions, except per share data)
  Q2 2017 Q1 2017
GAAP Results    
Net revenues $481   $437  
Gross margin   45.7%     47.0%  
Operating margin    19.3%     19.1%  
Net income $120.4   $65.1  
Diluted EPS $2.19   $1.18  
Non-GAAP Results    
Gross margin   45.9%     47.0%  
Operating margin    24.0%     22.5%  
Net earnings $ 77.7   $70.0  
Diluted EPS $1.41   $1.27  

Second Quarter 2017 Financial Results  Revenue was $481 million, an increase of 10% from $437 million in the first quarter of 2017 and an increase of 34% from $359 million in the second quarter of 2016 on a pro-forma basis.

Net income was $120.4 million, or $2.19 per diluted share, compared to net income of $65.1 million, or $1.18 per diluted share in the first quarter of 2017, and $9.2 million, or $0.17 per diluted share in the second quarter of 2016.

Non-GAAP net earnings, which exclude special charges and credits, were $77.7 million, or $1.41 per diluted share, compared to $70.0 million, or $1.27 per diluted share in the first quarter of 2017, and $38.7 million, or $0.72 per diluted share in the second quarter of 2016.

"We are very pleased with our continued progress in 2017 in achieving our objective of sustainable and profitable growth," said Gerald Colella, Chief Executive Officer and President. Mr. Colella added, "This quarter, we set new records for quarterly revenue and Non-GAAP net earnings and our focus on integrating the Newport Corporation acquisition into our organization has produced both excellent results and new growth opportunities. We achieved our initial cost synergies ahead of plan, while also substantially improving the revenue growth profile and profitability of the Light and Motion Division."

"We also continue to execute on our strategy to delever our balance sheet and significantly reduce our interest cost. I am pleased to report that as of June 30, the Company was in a net cash position. In addition, in early July, we completed our third successful re-pricing of our Term Loan and completed another $50 million voluntary pre-payment on our Term Loan facility, which brought our cumulative pre-payments to date to $250 million. Since origination on April 29, 2016, we have reduced our non-GAAP interest expense by $20 million or approximately 50% on an annualized basis," said Seth Bagshaw, Senior Vice President and Chief Financial Officer.

Additional Financial InformationThe Company had $577 million in cash and short-term investments as of June 30, 2017 and $573 million outstanding under its Term Loan (reduced to $523 million on July 11, 2017). During the second quarter of 2017, MKS paid a dividend of $9.5 million or $0.175 per diluted share.

In April, the Company completed the sale of its Data Analytics Solutions Business Unit and recognized a net after tax gain of $72 million in the second quarter.

Third Quarter 2017 Outlook  Based on current business levels, the Company expects that revenue in the third quarter of 2017 may range from $450 to $490 million.

At these volumes, GAAP net income could range from $1.12 to $1.37 per diluted share and non-GAAP net earnings could range from $1.32 to $1.56 per diluted share.

Conference Call DetailsA conference call with management will be held on Wednesday, July 26, 2017 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 40213368, 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.

About MKS InstrumentsMKS 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, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control technology, ozone generation and delivery, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration isolation, and optics. Our primary served markets include semiconductor capital equipment, general industrial, life sciences, and research. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial ResultsNon-GAAP amounts exclude amortization of acquired intangible assets, an asset impairment, costs associated with completed and announced acquisitions, acquisition integration costs, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to re-pricing of our Term Loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effect of a legal entity restructuring, other discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures are not in accordance with generally accepted accounting principles 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. Annualized GAAP interest expense based upon $780 million principal outstanding and using the LIBOR based interest rate spread in effect on April 29, 2016, was $44.0 million. Annualized GAAP interest expense based upon $523 million in principal currently outstanding and LIBOR plus 225 basis points would be $24.1 million. Pro-forma revenue amounts assume the acquisition of Newport Corporation had occurred as of the beginning of 2016.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTSThis release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future financial performance of MKS, our future business prospects, our future growth, and our expected synergies and cost savings from our recent acquisition of Newport Corporation. These statements are only predictions based on current assumptions and expectations. Actual events or results may differ materially from those in the forward-looking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are the conditions affecting the markets in which we operate, including the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to our major customers, our ability to successfully integrate Newport's operations and employees, unexpected risks, costs, charges or expenses resulting from the Newport acquisition or other acquisitions, the terms of the Term Loan financing, fluctuations in interest rates, MKS' ability to realize anticipated synergies and cost savings from the Newport acquisition, our ability to successfully grow our business, potential fluctuations in quarterly results, 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 the other factors described in MKS' most recent Annual Report on Form 10-K for the year ended December 31, 2016 filed with SEC. MKS is under no obligation to, and expressly disclaims any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release. 
                           
MKS Instruments, Inc.      
Unaudited Consolidated Statements of Operations      
(In thousands, except per share data)      
                           
                           
                           
                Three Months Ended  
                June 30,   June 30,   March 31,  
                  2017       2016       2017    
                           
Net revenues:                          
  Products               $   431,950     $   285,471     $   392,922    
  Services                   48,807         40,390         44,231    
  Total net revenues                 480,757         325,861         437,153    
Cost of revenues:                        
  Products                   229,304         163,993         205,060    
  Services                   31,870         25,955         26,546    
  Total cost of revenues                 261,174         189,948         231,606    
                           
Gross profit                   219,583         135,913         205,547    
                           
Research and development                 33,680         28,214         33,282    
Selling, general and administrative               71,979         59,579         74,220    
Acquisition and integration costs               790         20,055         1,442    
Restructuring                   2,064         24         522    
Asset impairment                 6,719         -          -     
Amortization of intangible assets               11,468         8,855         12,501    
Income from operations                 92,883         19,186         83,580    
                           
Interest income                   507         530         516    
Interest expense                 6,997         8,474         8,832    
Gain on sale of business                 74,856         -          -     
Other (expense) income, net               (3,277 )       1,126         2,021    
Income from operations before income taxes             157,972         12,368         77,285    
Provision for income taxes                 37,532         3,158         12,225    
Net income               $   120,440     $   9,210     $   65,060    
                           
Net income per share:                        
  Basic               $   2.22     $   0.17     $   1.21    
  Diluted               $   2.19     $   0.17     $   1.18    
                           
Cash dividends per common share           $   0.175     $   0.17     $   0.175    
                           
Weighted average shares outstanding:                    
  Basic                   54,178         53,461         53,769    
  Diluted                   55,001         53,806         54,958    
                           
The following supplemental Non-GAAP earnings information is presented              
to aid in understanding MKS' operating results:                  
                           
Net income               $   120,440     $   9,210     $   65,060    
                           
Adjustments:                          
  Acquisition and integration costs (Note 1)             790         20,055         1,442    
  Acquisition inventory step-up (Note 2)             -          10,119         -     
  Expenses related to sale of a business (Note 3)             436         -          423    
  Excess and obsolete inventory charge (Note 4)             1,160         -          -     
  Fees and expenses relating to re-pricing of term loan (Note 5)         -          713         -     
  Amortization of debt issuance costs (Note 6)             694         1,629         2,414    
  Restructuring (Note 7)                 2,064         24         522    
  Asset impairment (Note 8)               6,719         -          -     
  Gain on sale of business (Note 9)               (74,856 )       -          -     
  Amortization of intangible assets               11,468         8,855         12,501    
  Windfall tax benefit on stock-based compensation (Note 10)         (3,169 )       -          (6,650 )  
  Taxes related to sale of business (Note 11)             15,007         -          -     
  Pro-forma tax adjustments               (3,047 )       (11,896 )       (5,718 )  
                           
Non-GAAP net earnings (Note 12)           $   77,706     $   38,709     $   69,994    
                           
Non-GAAP net earnings per share (Note 12)         $   1.41     $   0.72     $   1.27    
                           
Weighted average shares outstanding               55,001         53,806         54,958    
                           
Income from operations             $   92,883     $   19,186     $   83,580    
                           
Adjustments:                          
  Acquisition and integration costs (Note 1)             790         20,055         1,442    
  Acquisition inventory step-up (Note 2)             -          10,119         -     
  Expenses related to sale of a business (Note 3)             436         -          423    
  Excess and obsolete inventory charge (Note 4)             1,160         -          -     
  Fees and expenses relating to re-pricing of term loan (Note 5)         -          713         -     
  Restructuring (Note 7)                 2,064         24         522    
  Asset impairment (Note 8)               6,719         -          -     
  Amortization of intangible assets               11,468         8,855         12,501    
                           
Non-GAAP income from operations (Note 13)         $   115,520     $   58,952     $   98,468    
                           
Non-GAAP operating margin percentage (Note 13)         24.0 %     18.1 %     22.5 %  
                           
Gross profit               $   219,583     $   135,913     $   205,547    
  Acquisition inventory step-up (Note 2)             -          10,119         -     
  Excess and obsolete inventory charge (Note 4)             1,160         -          -     
                           
Non-GAAP gross profit (Note 14)           $   220,743     $   146,032     $   205,547    
                           
Non-GAAP gross profit percentage (Note 14)           45.9 %     44.8 %     47.0 %  
                           
Interest expense             $   6,997     $   8,474     $   8,832    
  Amortization of debt issuance costs (Note 6)           694         1,629       2,414    
                           
Non-GAAP interest expense           $   6,303     $   6,845     $   6,418    
                           
Net Income               $   120,440     $   9,210     $   65,060    
  Interest expense (income), net               6,490         7,944         8,316    
  Provision for income taxes               37,532         3,158         12,225    
  Depreciation                   9,120         7,575         9,332    
  Amortization                   11,468         8,855         12,501    
EBITDA (Note 15)             $   185,050     $   36,742     $   107,434    
  Stock-based compensation               6,207         10,517         8,782    
  Acquisition and integration costs (Note 1)             790         20,055         1,442    
  Acquisition inventory step-up (Note 2)             -          10,119         -     
  Expenses related to sale of a business (Note 3)             436         -          423    
  Excess and obsolete inventory charge (Note 4)             1,160         -          -     
  Fees and expenses relating to re-pricing of term loan (Note 5)         -          713         -     
  Restructuring (Note 7)                 2,064         24         522    
  Asset impairment (Note 8)               6,719         -          -     
  Gain on sale of business (Note 9)               (74,856 )       -          -     
  Other adjustments                 822         661         747    
Adjusted EBITDA (Note 16)             $   128,392     $   78,831     $   119,350    
                           
Note 1: We recorded $0.8 million, $1.4 million and $20.1 million of acquisition and integration costs during the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively, related to the Newport Corporation acquisition, which closed during the second quarter of 2016.  
                           
Note 2: We recorded $10.1 million in cost of sales during the three months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.  
                           
Note 3: We recorded $0.4 million during the three months ended June 30, 2017 and March 31, 2017, respectively, related to the sale of a business, which was completed in April of 2017.  
                           
Note 4: We recorded $1.2 million of excess and obsolete inventory charges in cost of sales during the three months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.  
                                       
Note 5: We recorded $0.7 million of fees and expenses during the three months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.  
                           
Note 6: We recorded $0.7 million, $2.4 million and $1.6 million of additional interest expense during the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.  
                                       
Note 7: We recorded $2.1 million of restructuring costs during the three months ended June 30, 2017, related to the consolidation of two manufacturing plants and $0.5 million of restructuring costs during the three months ended March 31, 2017, related to the restructuring of one of our international facilities and the consolidation of sales offices.  
                                       
Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three months ended June 30, 2017, in conjunction with the consolidation of two manufacturing plants.  
                           
Note 9: We recorded a $74.9 million gain on the sale of our Data Analytics Solutions business during the three months ended June 30, 2017.    
                           
Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $3.2 million and $6.6 million during the three months ended June 30, 2017 and March 31, 2017, respectively, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).  
                                       
Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the three months ended June 30, 2017.  
                           
Note 12: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, amortization of debt issuance costs, restructuring costs, an asset impairment charge, a gain on the sale of a business, amortization of intangible assets, a windfall tax benefit related to stock-based compensation expense, taxes related to the sale of a business and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.  
                           
Note 13: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge and amortization of intangible assets.  
                                       
Note 14: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment and an excess and obsolete inventory charge.  
                                       
Note 15: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.          
                           
Note 16: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge, a gain on the sale of a business and other adjustments as defined in our Term Loan Credit Agreement.  
                                       

 

 

                       
MKS Instruments, Inc.  
Unaudited Consolidated Statements of Operations  
(In thousands, except per share data)  
                       
                       
                   
                Six Months Ended   
                June 30,  
                  2017       2016    
                       
Net revenues:                      
  Products               $   824,872     $   439,092    
  Services                   93,038         70,450    
  Total net revenues                 917,910         509,542    
Cost of revenues:                    
  Products                   434,364         249,345    
  Services                   58,416         46,371    
  Total cost of revenues                 492,780         295,716    
                       
Gross profit                   425,130         213,826    
                       
Research and development                 66,962         45,441    
Selling, general and administrative               146,199         93,529    
Acquisition and integration costs               2,232         22,549    
Restructuring                   2,586         24    
Asset impairment                  6,719         -     
Amortization of intangible assets               23,969         10,538    
Income from operations                 176,463         41,745    
                       
Interest income                   1,023         1,454    
Interest expense                 15,829         8,519    
Gain on sale of business                 74,856         -     
Other (expense) income, net               (1,256 )       1,493    
Income from continuing operations before income taxes           235,257         36,173    
Provision for income taxes                  49,757         9,400    
Net income               $   185,500     $   26,773    
                       
Net income per share:                    
  Basic               $   3.44     $   0.50    
  Diluted               $   3.37     $   0.50    
                       
Cash dividends per common share           $   0.35     $   0.34    
                       
Weighted average shares outstanding:                 
  Basic                   53,973         53,348    
  Diluted                   54,979         53,685    
                       
The following supplemental Non-GAAP earnings information is presented  to aid in understanding MKS' operating results:          
                       
Net income               $   185,500     $   26,773    
                       
Adjustments:                      
  Acquisition and integration costs (Note 1)             2,232         22,549    
  Acquisition inventory step-up (Note 2)             -          10,119    
  Expenses related to sale of a business (Note 3)             859         -     
  Excess and obsolete inventory charge (Note 4)             1,160         -     
  Fees and expenses relating to re-pricing of term loan (Note 5)         -          713    
  Amortization of debt issuance costs (Note 6)             3,108         1,629    
  Restructuring (Note 7)                 2,586         24    
  Asset impairment (Note 8)               6,719         -     
  Gain on sale of business (Note 9)               (74,856 )       -     
  Amortization of intangible assets               23,969         10,538    
  Windfall tax benefit on stock-based compensation (Note 10)         (9,819 )       -     
  Taxes related to sale of business (Note 11)             15,007         -     
  Pro-forma tax adjustments               (9,710 )       (13,489 )  
                       
Non-GAAP net earnings (Note 12)            $   146,755     $   58,856    
                       
Non-GAAP net earnings per share (Note 12)         $   2.67     $   1.10    
                       
Weighted average shares outstanding               54,979         53,685    
                       
Income from operations             $   176,463     $   41,745    
                       
Adjustments:                      
  Acquisition and integration costs (Note 1)             2,232         22,549    
  Acquisition inventory step-up (Note 2)             -          10,119    
  Expenses related to sale of a business (Note 3)             859         -     
  Excess and obsolete inventory charge (Note 4)             1,160         -     
  Fees and expenses relating to re-pricing of term loan (Note 5)         -          713    
  Restructuring (Note 7)                 2,586         24    
  Asset impairment (Note 8)               6,719         -     
  Amortization of intangible assets               23,969         10,538    
                       
Non-GAAP income from operations (Note 13)         $   213,988     $   85,688    
                       
Non-GAAP operating margin percentage (Note 13)         23.3 %     16.8 %  
                       
Gross profit   $   425,130     $   213,826    
  Acquisition inventory step-up (Note 2)       -          10,119    
  Excess and obsolete inventory charge (Note 4)       1,160         -     
         
Non-GAAP gross profit (Note 14)   $   426,290     $   223,945    
         
Non-GAAP gross profit percentage (Note 14)     46.4 %     44.0 %  
                       
Interest expense             $   15,829     $   8,519    
  Amortization of debt issuance costs (Note 6)             3,108         1,629    
                       
Non-GAAP interest  expense           $   12,721     $   6,890    
                       
Net Income   $   185,500     $   26,773    
  Interest expense (income), net       14,806         7,065    
  Provision for income taxes       49,757         9,400    
  Depreciation       18,452         11,170    
  Amortization       23,969         10,538    
EBITDA (Note 15)   $   292,484     $   64,946    
  Stock-based compensation        14,989         14,668    
  Acquisition and integration costs (Note 1)       2,232         22,549    
  Acquisition inventory step-up (Note 2)       -          10,119    
  Expenses related to sale of a business (Note 3)       859         -     
  Excess and obsolete inventory charge (Note 4)       1,160         -     
  Fees and expenses relating to re-pricing of term loan (Note 5)       -          713    
  Restructuring (Note 7)       2,586         24    
  Asset impairment (Note 8)               6,719         -     
  Gain on sale of business (Note 9)               (74,856 )       -     
  Other adjustments       1,569         661    
Adjusted EBITDA (Note 16)   $   247,742     $   113,680    
                       
                       
Note 1: We recorded $2.2 million and $22.5 million of acquisition and integration costs during the six months ended June 30, 2017 and 2016, respectively, related to the Newport Corporation acquisition, which closed during the second quarter of 2016.   
                               
Note 2: We recorded $10.1 million in cost of sales during the six months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.  
   
Note 3: We recorded $0.9 million during the six months ended June 30, 2017, which is comprised of legal and consulting and compensation related expenses related to the sale of a business, which was completed in April of 2017.  
   
Note 4: We recorded $1.2 million of excess and obsolete inventory charges in cost of sales during the six months ended June 30, 2017 related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants.  
   
Note 5: We recorded $0.7 million of fees and expenses during the six months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.  
   
Note 6: We recorded $3.1 million and $1.6 million of additional interest expense during the six months ended June 30, 2017 and 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.  
   
Note 7: We recorded $2.6 million of restructuring costs during the six months ended June 30, 2017, related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of sales offices.  
   
Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the six months ended June 30, 2017, in connection with the consolidation of two manufacturing plants.  
   
Note 9: We recorded a $74.9 gain on the sale of our Data Analytics Solutions business during the six months ended June 30, 2017.  
   
Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $9.8 million, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).  
   
Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the six months ended June 30, 2017.  
   
Note 12: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, amortization of debt issuance costs, restructuring costs, an asset impairment charge, a gain on the sale of a business, amortization of intangible assets, a windfall tax benefit related to stock-based compensation expense, taxes related to the sale of a business and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.  
   
Note 13: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge and amortization of intangible assets.  
   
Note 14: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment and an excess and obsolete inventory charge.  
                       
Note 15: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.   
   
Note 16: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge, a gain on the sale of a business and other adjustments as defined in our Term Loan Credit Agreement.  
     

 
                         
MKS Instruments, Inc.  
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate  
(In thousands)  
                       
    Three Months Ended June 30, 2017   Three Months Ended March 31, 2017
  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   $   157,972     $   37,532       23.8 %   $ 77,285     $ 12,225   15.8 %
                         
Adjustments:                        
  Acquisition and integration costs (Note 1)       790         -              1,442         -     
  Expenses related to sale of a business (Note 3)       436         -              423         -     
  Excess and obsolete inventory charge (Note 4)       1,160         -              -          -     
  Amortization of debt issuance costs (Note 6)       694         -              2,414         -     
  Restructuring (Note 7)       2,064         -              522         -     
  Asset impairment (Note 8)       6,719         -              -          -     
  Gain on sale of business (Note 9)       (74,856 )       -              -          -     
  Amortization of intangible assets       11,468         -            12,501         -     
  Windfall tax benefit on stock-based compensation (Note 10)       -          3,169             -          6,650    
  Taxes related to sale of business (Note 11)       -          (15,007 )       -          -   
  Tax effect of pro-forma adjustments       -          3,047             -          5,718    
                         
Non-GAAP   $ 106,447     $ 28,741       27.0 %   $ 94,587     $ 24,593   26.0 %
                         
                         
    Three Months Ended June 30, 2016            
    Income Before   Provision (benefit)   Effective             
    Income Taxes   for Income Taxes   Tax Rate            
                         
GAAP   $   12,368     $   3,158       25.5 %            
                         
Adjustments:                        
  Acquisition and integration costs (Note 1)       20,055         -                   
  Acquisition inventory step-up (Note 2)       10,119         -                   
  Fees and expenses relating to re-pricing of term loan (Note 5)       713         -                   
  Amortization of debt issuance costs (Note 6)       1,629         -                   
  Restructuring       24         -                   
  Amortization of intangible assets       8,855         -                   
  Tax effect of pro-forma adjustments       -          11,896                  
                         
Non-GAAP   $   53,763     $   15,054       28.0 %            
                         
                         
    Six Months Ended June 30, 2017   Six Months Ended June 30, 2016
  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   $   235,257     $   49,757       21.2 %   $   36,173     $   9,400   26.0 %
                         
Adjustments:                        
  Acquisition and integration costs (Note 1)     2,232         -            22,549         -     
  Acquisition inventory step-up (Note 2)      -          -            10,119         -     
  Expenses related to sale of a business (Note 3)       859         -              -          -     
  Excess and obsolete inventory charge (Note 4)       1,160         -              -          -     
  Fees and expenses relating to re-pricing of term loan (Note 5)       -          -              713         -     
  Amortization of debt issuance costs (Note 6)       3,108         -              1,629         -     
  Restructuring (Note 7)       2,586         -              24         -     
  Asset impairment (Note 8)       6,719         -              -          -     
  Gain on sale of business (Note 9)       (74,856 )       -              -          -     
  Amortization of intangible assets       23,969         -            10,538         -     
  Windfall tax benefit on stock-based compensation (Note 10)       -          9,819             -          -     
  Taxes related to sale of business (Note 11)       -          (15,007 )           -          -     
  Tax effect of pro-forma adjustments       -          9,710             -        13,489    
                         
Non-GAAP   $   201,034     $   54,279       27.0 %   $ 81,745     $ 22,889   28.0 %
     
                         
Note 1: Acquisition and integration costs during the three and six months ended June 30, 2017 relate to the Newport Corporation acquisition, which closed during the second quarter of 2016.            
                         
Note 2: We recorded $10.1 million in cost of sales during the three and six months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.             
                         
Note 3: We recorded $0.4 million and $0.9 million during the three and six months ended June 30, 2017, respectively, and $0.4 million for the three months ended March 31, 2017, related to the sale of a business, which was completed in April of 2017.            
                         
Note 4: We recorded $1.2 million of excess and obsolete inventory charges in cost of sales during the three months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants.            
                         
Note 5: We recorded $0.7 million of fees and expenses during the three and six months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.            
                         
Note 6: Amortization of debt issuance costs for the three and six months ended June 30, 2017 and 2016, respectively, and the three months ended March 31, 2017, are affiliated with our Term Loan Credit Agreement and ABL Facility.            
                                     
Note 7: We recorded $2.1 million and $2.6 million of restructuring costs during the three and six months ended June 30, 2017, respectively,  and $0.5 million for the three months ended March 31, 2017, related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of sales offices.            
                         
Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three and six months ended June 30, 2017, in conjunction with the consolidation of two manufacturing plants.            
                         
Note 9: We recorded a $74.9 million gain on the sale of our Data Analytics Solutions business during the three and six months ended June 30, 2017.            
                                     
Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $3.2 million and $9.8 million during the three and six months ended June 30, 2017, respectively, and $6.6 million for the three months ended March 31, 2017, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).            
                         
Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the three and six months ended June 30, 2017.            
                         
MKS Instruments, Inc.  
Reconciliation of Q3-17 Guidance - GAAP Net Income to Non-GAAP Net Earnings    
(In thousands, except per share data)    
                         
    Three Months Ended September 30, 2017        
    Low Guidance   High Guidance        
    $ Amount   $ Per Share   $ Amount   $ Per Share        
                         
GAAP net income   $   62,200     $   1.12     $   75,600     $   1.37          
                         
Amortization     10,800         0.20       10,800         0.20          
                         
Integration costs     1,700         0.03       1,700         0.03          
                         
Deferred financing costs     2,300         0.04       2,300         0.04          
                         
Tax effect of adjustments (Note 1)     (4,000 )       (0.07 )     (4,000 )       (0.07 )        
                         
Non-GAAP net earnings   $   73,000     $   1.32     $   86,400     $   1.56          
                         
Q3 -17 forecasted shares         55,300           55,300          
                         
Note 1: The Non-GAAP adjustments are tax effected at the applicable statutory rates and the difference between the GAAP and Non-GAAP tax rates.        
                         

 
                 
MKS Instruments, Inc.  
Unaudited Consolidated Balance Sheet  
(In thousands)  
                 
                 
                 
                 
          June 30,   December 31,  
            2017       2016    
                 
ASSETS                
                 
Cash and cash equivalents     $   422,830     $   228,623    
Restricted cash           5,282         5,287    
Short-term investments         149,016         189,463    
Trade accounts receivable, net         268,544         248,757    
Inventories           304,707         275,869    
Other current assets           51,721         50,770    
                 
  Total current assets         1,202,100         998,769    
                 
Property, plant and equipment, net       167,212         174,559    
Goodwill             586,865         588,585    
Intangible assets, net         386,075         408,004    
Long-term investments         10,329         9,858    
Other assets           32,102         32,467    
                 
Total assets       $   2,384,683     $   2,212,242    
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY        
                 
Short-term debt       $   9,810     $   10,993    
Accounts payable           73,291         69,337    
Accrued compensation         65,243         67,728    
Income taxes payable         42,142         22,794    
Deferred revenue           9,975         14,463    
Other current liabilities         57,795         51,985    
  Total current liabilities       258,256         237,300    
                 
Long-term debt, net           551,846         601,229    
Non-current deferred taxes         71,895         66,446    
Non-current accrued compensation       48,560         44,714    
Other liabilities           24,370         20,761    
  Total liabilities         954,927         970,450    
                 
Stockholders' equity:              
Common stock           113         113    
Additional paid-in capital         779,058         777,482    
Retained earnings           661,341         494,744    
Accumulated other comprehensive loss       (10,756 )       (30,547 )  
  Total stockholders' equity       1,429,756         1,241,792    
                 
Total liabilities and stockholders' equity   $   2,384,683     $   2,212,242    
                 

Company Contact:  Seth H. BagshawSenior Vice President, Chief Financial Officer and TreasurerTelephone:  978.645.5578Investor Relations Contacts:  Monica GouldThe Blueshirt GroupTelephone:  212.871.3927Email:  monica@blueshirtgroup.comLindsay Grant SavareseThe Blueshirt GroupTelephone:  212.331.8417Email:  lindsay@blueshirtgroup.com

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