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8-K - LIVE FILING - MKS INSTRUMENTS INChtm_48148.htm

(MKS LOGO)

EXHIBIT 99.1

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

MKS Instruments Reports Q2 2013 Financial Results

Andover, Mass., July 24, 2013 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity; today reports second quarter 2013 financial results.

                 
    GAAP Results   Non-GAAP Results
Net revenues ($ millions)
  $ 157     $ 157  
Operating margin
    6.6 %     6.6 %
Net income ($ millions)
  $ 7.3     $ 7.3  
Diluted EPS
  $ 0.14     $ 0.14  

Second Quarter Financial Results

Sales were $157 million, an increase of 11% from $142 million in the first quarter, and a decrease of 12% from $177 million in the second quarter of 2012.

Second quarter net income was $7.3 million, or $0.14 per diluted share, compared to net income of $5.8 million, or $0.11 per diluted share in the first quarter of 2013, and $18.6 million, or $0.35 per diluted share in the second quarter of 2012.

Non-GAAP net earnings, which exclude special items, were $7.3 million, or $0.14 per diluted share, compared to $3.9 million, or $0.07 per diluted share in the first quarter of 2013, and $18.9 million, or $0.36 per diluted share in the second quarter of 2012. Non-GAAP net earnings in the second quarter exclude amortization of acquired intangible assets as well as $0.2 million in restructuring charges and an insurance reimbursement of $1.1 million related to a litigation settlement in the third quarter of 2012, and the related tax impact of these adjustments.

In the second quarter, the Company paid a quarterly cash dividend of $0.16 per share which was paid on June 14th and the Company also repurchased 46 thousand shares for $1.2 million at an average price of $26.24 pursuant to the share repurchase program announced in July of 2011.

Leo Berlinghieri, Chief Executive Officer, said, “The tone at the recent Semicon West tradeshow was positive regarding long-term demand in the semiconductor market, and reports are projecting that we could continue to see modest growth as the year progresses. As the global economy continues to stabilize and grow, we are optimistic about the opportunities for MKS in both semiconductor and the other advanced markets we serve.

“Given current business levels, we anticipate that sales in the third quarter may range from $155 million to $170 million, and, at these volumes, our non-GAAP net earnings could range from $0.14 to $0.26 per share.”

Conference Call Details

A conference call with management will be held on Thursday, July 25, 2013 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 98319907, 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 net earnings and Non-GAAP net earnings per share amounts exclude amortization of acquired intangible assets, costs associated with acquisitions, restructuring charges, an insurance reimbursement related to a prior year litigation settlement, a benefit related to the enactment of the American Taxpayer Relief Act of 2012 and the related tax effect of any 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.

###

1

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

                         
    Three Months Ended (Note 5)
    June 30, 2013   June 30, 2012   March 31, 2013
Net revenues:
                       
Products
  $ 132,541     $ 148,851     $ 116,611  
Services
    24,387       28,546       25,034  
 
                       
Total net revenues
    156,928       177,397       141,645  
Cost of revenues:
                       
Products
    79,206       84,622       70,575  
Services
    15,764       16,259       16,368  
 
                       
Total cost of revenues
    94,970       100,881       86,943  
Gross profit
    61,958       76,516       54,702  
Research and development
    16,813       15,591       15,248  
Selling, general and administrative
    34,849       32,582       34,133  
Insurance reimbursement
    (1,071 )            
Completed acquisition costs
          377       171  
Restructuring
    198             40  
Amortization of intangible assets
    742       119       434  
 
                       
Income from operations
    10,427       27,847       4,676  
Interest income, net
    211       149       291  
 
                       
Income before income taxes
    10,638       27,996       4,967  
Provision (benefit) for income taxes
    3,318       9,424       (794 )
 
                       
Net income
  $ 7,320     $ 18,572     $ 5,761  
 
                       
Net income per share:
                       
Basic
  $ 0.14     $ 0.35     $ 0.11  
Diluted
  $ 0.14     $ 0.35     $ 0.11  
Cash dividends per common share
  $ 0.16     $ 0.15     $ 0.16  
Weighted average shares outstanding:
                       
Basic
    53,054       52,679       52,773  
Diluted
    53,358       53,206       53,359  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 7,320     $ 18,572     $ 5,761  
Adjustments (net of tax, if applicable):
                       
Tax benefit (Note 1)
                (2,353 )
Insurance reimbursement (Note 2)
    (1,071 )            
Completed acquisition costs (Note 3)
          377       171  
Restructuring (Note 4)
    198             40  
Amortization of intangible assets
    742       119       434  
Pro forma tax adjustments
    61       (176 )     (181 )
 
                       
Non-GAAP net earnings (Note 5)
  $ 7,250     $ 18,892     $ 3,872  
 
                       
Non-GAAP net earnings per share (Note 5)
  $ 0.14     $ 0.36     $ 0.07  
 
                       
Weighted average shares outstanding
    53,358       53,206       53,359  
Income from operations
  $ 10,427     $ 27,847     $ 4,676  
Adjustments:
                       
Insurance reimbursement (Note 2)
    (1,071 )            
Completed acquisition costs (Note 3)
          377       171  
Restructuring (Note 4)
    198             40  
Amortization of intangible assets
    742       119       434  
 
                       
Non-GAAP income from operations
  $ 10,296     $ 28,343     $ 5,321  
 
                       
Non-GAAP operating margin percentage
    6.6 %     16.0 %     3.8 %
 
                       

Note 1: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.

Note 2: In the third quarter of 2012, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. In the second quarter of 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement.

Note 3: Costs related to the Company’s acquisition of Alter Power Systems S.r.l., in March 2013, are comprised of legal fees. Costs related to the Company’s acquisition of Plasmart, Inc. in 2012, are comprised of investment banking fees, legal fees and due diligence fees.

Note 4: The three month period ended June 30, 2013, includes restructuring charges primarily for severance related costs related to the consolidation of two sites.

Note 5: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with acquisitions, a benefit related to an insurance reimbursement, the related tax effect of these adjustments and pro-forma income tax adjustments to reflect the expected full year effective tax rate in the quarter.

2

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

                                                 
    Three Months Ended June 30, 2013 (Note 5)   Three Months Ended March 31, 2013 (Note 5)
     Income Before    Provision for    Effective    Income Before    Provision for    Effective
     Income Taxes     Income taxes     Tax Rate     Income Taxes     Income taxes     Tax Rate 
GAAP                
  $          10,638     $         3,318          31.2%        $         4,967     $          (794)        -16.0%     
Adjustments:
                                               
Tax benefit (Note 1)
                              2,353          
Insurance reimbursement (Note 2)
    (1,071 )                                  
Completed acquisition costs (Note 3)
                        171                
Restructuring (Note 4)
    198                     40                
Amortization of intangible assets
    742                     434                
Tax effect of pro forma adjustments
          (147 )                   182          
Adjustment to pro forma tax rate
          86                     (1 )        
 
                                               
Non-GAAP
  $          10,507     $        3,257          31.0%        $        5,612     $         1,740          31.0%     
 
                                               
                         
    Three Months Ended June 30, 2012 (Note 5)
     Income Before     Provision for    Effective
     Income Taxes     Income taxes     Tax Rate 
GAAP
  $       27,996     $       9,424         33.7%    
Adjustments:
                       
Completed acquisition costs (Note 3)
    377                
Amortization of intangible assets
    119                
Tax effect of pro forma adjustments
          176          
 
                       
Non-GAAP
  $       28,492     $       9,600       33.7%    
 
                       
                                                 
    Six Months Ended June 30, 2013 (Note 5)   Six Months Ended June 30, 2012 (Note 5)
     Income Before    Provision for    Effective    Income Before    Provision for    Effective
     Income Taxes     Income taxes     Tax Rate     Income Taxes     Income taxes     Tax Rate 
GAAP                
  $          15,605     $         2,524          16.2%        $         61,617     $         20,277          32.9%     
Adjustments:
                                               
Tax benefit (Note 1)
          2,353                              
Insurance reimbursement (Note 2)
    (1,071 )                                  
Completed acquisition costs (Note 3)
    171                     377                
Restructuring (Note 4)
    238                                    
Amortization of intangible assets
    1,176                     238                
Tax effect of pro forma adjustments
          35                     210          
Adjustment to pro forma tax rate
          85                              
 
                                               
Non-GAAP
  $          16,119     $        4,997          31.0%        $        62,232     $         20,487          32.9%     
 
                                               

Note 1: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.

Note 2: In the third quarter of 2012, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. In the second quarter of 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement.

Note 3: Costs related to the Company’s acquisition of Alter Power Systems S.r.l., in March 2013, are comprised of legal fees. Costs related to the Company’s acquisition of Plasmart, Inc. in 2012, are comprised of investment banking fees, legal fees and due diligence fees.

Note 4: The three month period ended June 30, 2013, includes restructuring charges primarily for severance related costs related to the consolidation of two sites.

Note 5: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with acquisitions, a benefit related to an insurance reimbursement, the related tax effect of these adjustments and pro-forma income tax adjustments to reflect the expected full year effective tax rate in the quarter.

3

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

                 
    Six Months Ended
    June 30, (Note 5)
    2013   2012
Net revenues:
               
Products
  $ 249,152     $ 313,339  
Services
    49,421       54,926  
 
               
Total net revenues
    298,573       368,265  
Cost of revenues:
               
Products
    149,781       175,646  
Services
    32,132       32,312  
 
               
Total cost of revenues
    181,913       207,958  
Gross profit
    116,660       160,307  
Research and development
    32,061       31,775  
Selling, general and administrative
    68,982       66,701  
Insurance reimbursement
    (1,071 )      
Completed acquisition costs
    171       377  
Restructuring
    238        
Amortization of intangible assets
    1,176       238  
 
               
Income from operations
    15,103       61,216  
Interest income, net
    502       401  
 
               
Income from continuing operations before income taxes
    15,605       61,617  
Provision for income taxes
    2,524       20,277  
 
               
Net income
  $ 13,081     $ 41,340  
 
               
Net income per share:
               
Basic
  $ 0.25     $ 0.79  
Diluted
  $ 0.25     $ 0.78  
Cash dividends per common share
  $ 0.32     $ 0.30  
Weighted average shares outstanding:
               
Basic
    52,914       52,591  
Diluted
    53,359       53,214  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
               
Net income
  $ 13,081     $ 41,340  
Adjustments (net of tax, if applicable):
               
Tax benefit (Note 1)
    (2,353 )      
Insurance reimbursement (Note 2)
    (1,071 )      
Completed acquisition costs (Note 3)
    171       377  
Restructuring (Note 4)
    238        
Amortization of intangible assets
    1,176       238  
Pro forma tax adjustments
    (120 )     (210 )
 
               
Non-GAAP net earnings (Note 5)
  $ 11,122     $ 41,745  
 
               
Non-GAAP net earnings per share (Note 5)
  $ 0.21     $ 0.78  
 
               
Weighted average shares outstanding
    53,359       53,214  
Income from operations
  $ 15,103     $ 61,216  
Adjustments:
               
Insurance reimbursement (Note 2)
    (1,071 )      
Completed acquisition costs (Note 3)
    171       377  
Restructuring (Note 4)
    238        
Amortization of intangible assets
    1,176       238  
 
               
Non-GAAP income from operations
  $ 15,617     $ 61,831  
 
               
Non-GAAP operating margin percentage
    5.2 %     16.8 %
 
               

Note 1: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.

Note 2: In the third quarter of 2012, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. In the second quarter of 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement.

Note 3: Costs related to the Company’s acquisition of Alter Power Systems S.r.l., in March 2013, are comprised of legal fees. Costs related to the Company’s acquisition of Plasmart, Inc. in 2012, are comprised of investment banking fees, legal fees and due diligence fees.

Note 4: The three month period ended June 30, 2013, includes restructuring charges primarily for severance related costs related to the consolidation of two sites.

Note 5: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with acquisitions, a benefit related to an insurance reimbursement, the related tax effect of these adjustments and pro-forma income tax adjustments to reflect the expected full year effective tax rate in the period.

4

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

                 
    June 30, 2013   December 31, 2012
ASSETS
               
Cash and cash equivalents
  $ 235,724     $ 287,588  
Short-term investments
    346,715       327,653  
Trade accounts receivable, net
    95,771       82,060  
Inventories
    137,006       134,639  
Deferred income taxes
    9,297       8,194  
Other current assets
    38,426       28,048  
 
               
Total current assets
    862,939       868,182  
Property, plant and equipment, net
    78,875       80,516  
Long-term investments
    15,788       12,158  
Goodwill
    150,012       150,733  
Intangible assets, net
    12,523       11,561  
Other assets
    10,210       11,692  
 
               
Total assets
  $ 1,130,347     $ 1,134,842  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Accounts payable
  $ 24,302     $ 16,803  
Accrued compensation
    19,318       20,955  
Income taxes payable
    3,269       4,148  
Other current liabilities
    32,697       37,405  
 
               
Total current liabilities
    79,586       79,311  
Other liabilities
    46,693       43,375  
Stockholders’ equity:
               
Common stock
    113       113  
Additional paid-in capital
    723,360       718,005  
Retained earnings
    273,296       278,583  
Other stockholders’ equity
    7,299       15,455  
 
               
Total stockholders’ equity
    1,004,068       1,012,156  
 
               
Total liabilities and stockholders’ equity
  $ 1,130,347     $ 1,134,842  
 
               

5