MKS Instruments Reports Q3 2013 Financial Results
| GAAP Results | Non-GAAP Results | |
| Net revenues ($ millions) |
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| Gross margin | 37.4% | 41.2% |
| Operating margin | 7.4% | 12.2% |
| Net income/Net earnings ($ millions) |
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| Diluted EPS |
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Third Quarter Financial Results
Sales were
Third quarter net income was
Non-GAAP net earnings, which exclude special items, were
In the third quarter, the Company paid a quarterly cash dividend of
"Given current business levels, we anticipate that sales in the fourth quarter may range from
Conference Call Details
A conference call with management will be held on
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, certain excess and obsolete inventory charges, litigation settlements and related insurance reimbursements, certain supplemental executive retirement costs, discrete tax benefits and charges and the related tax effect of any adjustments. These non-GAAP measures are not in accordance with Accounting Principles Generally Accepted in
About
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
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| Unaudited Consolidated Statements of Operations | |||
| (In thousands, except per share data) | |||
| Three Months Ended (Note 7) | |||
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2013 |
2012 |
2013 |
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| Net revenues: | |||
| Products | $ 139,846 | $ 114,647 | $ 132,541 |
| Services | 26,607 | 26,800 | 24,387 |
| Total net revenues | 166,453 | 141,447 | 156,928 |
| Cost of revenues: | |||
| Products | 87,809 | 68,304 | 79,206 |
| Services | 16,410 | 16,572 | 15,764 |
| Total cost of revenues | 104,219 | 84,876 | 94,970 |
| Gross profit | 62,234 | 56,571 | 61,958 |
| Research and development | 15,257 | 14,136 | 16,813 |
| Selling, general and administrative | 33,158 | 29,661 | 34,849 |
| Insurance reimbursement | -- | -- | (1,071) |
| Litigation | -- | 5,316 | -- |
| Completed acquisition costs | -- | 851 | -- |
| Restructuring | 1,126 | -- | 198 |
| Amortization of intangible assets | 361 | 215 | 742 |
| Income from operations | 12,332 | 6,392 | 10,427 |
| Interest income, net | 208 | 267 | 211 |
| Income before income taxes | 12,540 | 6,659 | 10,638 |
| Provision for income taxes | 10,082 | 4,079 | 3,318 |
| Net income | $ 2,458 | $ 2,580 | $ 7,320 |
| Net income per share: | |||
| Basic | $ 0.05 | $ 0.05 | $ 0.14 |
| Diluted | $ 0.05 | $ 0.05 | $ 0.14 |
| Cash dividends per common share | $ 0.16 | $ 0.16 | $ 0.16 |
| Weighted average shares outstanding: | |||
| Basic | 53,165 | 52,854 | 53,054 |
| Diluted | 53,513 | 53,290 | 53,358 |
| The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results: | |||
| Net income | $ 2,458 | $ 2,580 | $ 7,320 |
| Adjustments (net of tax, if applicable): | |||
| Income tax charge (Note 1) | 6,481 | -- | -- |
| Credits on U.S. tax expense (Note 2) | (1,200) | -- | -- |
| Insurance reimbursement (Note 3) | -- | -- | (1,071) |
| Litigation (Note 3) | -- | 5,316 | -- |
| Excess and obsolete charge (Note 4) | 6,423 | -- | -- |
| Acquisition inventory step-up | -- | 101 | -- |
| Completed acquisition costs (Note 5) | -- | 851 | -- |
| Restructuring (Note 6) | 1,126 | -- | 198 |
| Amortization of intangible assets | 361 | 215 | 742 |
| Pro forma tax adjustments | (2,355) | (626) | 61 |
| Non-GAAP net earnings (Note 7) | $ 13,294 | $ 8,437 | $ 7,250 |
| Non-GAAP net earnings per share (Note 7) | $ 0.25 | $ 0.16 | $ 0.14 |
| Weighted average shares outstanding | 53,513 | 53,290 | 53,358 |
| Income from operations | $ 12,332 | $ 6,392 | $ 10,427 |
| Adjustments: | |||
| Insurance reimbursement (Note 3) | -- | -- | (1,071) |
| Litigation (Note 3) | -- | 5,316 | -- |
| Excess and obsolete charge (Note 4) | 6,423 | -- | -- |
| Acquisition inventory step-up | -- | 101 | -- |
| Completed acquisition costs (Note 5) | -- | 851 | -- |
| Restructuring (Note 6) | 1,126 | -- | 198 |
| Amortization of intangible assets | 361 | 215 | 742 |
| Non-GAAP income from operations | $ 20,242 | $ 12,875 | $ 10,296 |
| Non-GAAP operating margin percentage | 12.2% | 9.1% | 6.6% |
| Gross profit | $ 62,234 | $ 56,571 | $ 61,958 |
| Excess and obsolete charge (Note 4) | 6,423 | -- | -- |
| Non-GAAP gross profit | $ 68,657 | $ 56,571 | $ 61,958 |
| Non-GAAP gross profit percentage | 41.2% | 40.0% | 39.5% |
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Note 1: In the third quarter of 2013, we incurred income tax charges of |
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Note 2: In the third quarter of 2013, we received |
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Note 3: In the third quarter of 2012, we incurred |
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Note 4: Cost of sales for the three month period ended |
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Note 5: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in |
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Note 6: The three month periods ended |
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| Note 7: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with acquisitions, a litigation settlement, a benefit related to an insurance reimbursement, excess and obsolete charge related to unique product in a solar application and 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. | |||
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| Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate | ||||||
| (In thousands) | ||||||
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Three Months Ended |
Three Months Ended |
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Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
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| GAAP | $ 12,540 | $ 10,082 | 80.4% | $ 10,638 | $ 3,318 | 31.2% |
| Adjustments: | ||||||
| Income tax charge (Note 1) | -- | (6,481) | -- | -- | ||
| Credits on U.S. tax expense (Note 2) | -- | 1,200 | -- | -- | ||
| Insurance reimbursement (Note 4) | -- | -- | (1,071) | -- | ||
| Excess and obsolete charge (Note 5) | 6,423 | -- | -- | -- | ||
| Restructuring (Note 7) | 1,126 | -- | 198 | -- | ||
| Amortization of intangible assets | 361 | -- | 742 | -- | ||
| Tax effect of pro forma adjustments | -- | 767 | -- | (147) | ||
| Adjustment to pro forma tax rate | -- | 1,588 | -- | 86 | ||
| Non-GAAP | $ 20,450 | $ 7,156 | 35.0% | $ 10,507 | $ 3,257 | 31.0% |
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Three Months Ended |
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Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
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| GAAP | $ 6,659 | $ 4,079 | 61.3% | |||
| Adjustments: | ||||||
| Litigation (Note 4) | 5,316 | -- | ||||
| Completed acquisition costs (Note 6) | 851 | -- | ||||
| Acquisition inventory step-up | 101 | -- | ||||
| Amortization of intangible assets | 215 | 2,390 | ||||
| Tax effect of pro forma adjustments | -- | (1,764) | ||||
| Non-GAAP | $ 13,142 | $ 4,705 | 35.8% | |||
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Nine Months Ended |
Nine Months Ended |
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Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
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| GAAP | $ 28,145 | $ 12,606 | 44.8% | $ 68,276 | $ 24,356 | 35.7% |
| Adjustments: | ||||||
| Income tax charge (Note 1) | -- | (6,481) | -- | -- | ||
| Credits on U.S. tax expense (Note 2) | -- | 1,200 | -- | -- | ||
| Tax benefit (Note 3) | -- | 2,353 | -- | -- | ||
| Insurance reimbursement (Note 4) | (1,071) | -- | -- | -- | ||
| Litigation (Note 4) | -- | -- | 5,316 | -- | ||
| Excess and obsolete charge (Note 5) | 6,423 | -- | -- | -- | ||
| Completed acquisition costs (Note 6) | 171 | -- | 1,258 | -- | ||
| Acquisition inventory step-up | -- | -- | 101 | -- | ||
| Restructuring (Note 7) | 1,364 | -- | -- | -- | ||
| Amortization of intangible assets | 1,537 | -- | 453 | -- | ||
| Tax effect of pro forma adjustments | -- | 802 | -- | 2,611 | ||
| Adjustment to pro forma tax rate | -- | 2,319 | -- | 28 | ||
| Non-GAAP | $ 36,569 | $ 12,799 | 35.0% | $ 75,404 | $ 26,995 | 35.8% |
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Note 1: In the third quarter of 2013, we incurred income tax charges of |
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Note 2: In the third quarter of 2013, we received |
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Note 3: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on |
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Note 4: In the third quarter of 2012, we incurred |
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Note 5: Cost of sales for the three month period ended |
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Note 6: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in |
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Note 7: The three and nine month periods ended |
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| Reconciliation of Q4-13 Guidance - GAAP Net Income to Non-GAAP Net Earnings | ||||||
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Three Months Ended |
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| Low Guidance | High Guidance | |||||
| $ Amount | $ Per Share | $ Amount | $ Per Share | |||
| GAAP net income | $ 14,800 |
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$ 20,100 |
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| Executive retirement costs (Note 1) | 2,300 | 0.04 | 2,300 | 0.04 | ||
| Amortization | 400 | 0.01 | 400 | 0.01 | ||
| Restructuring (Note 2) | 100 | 0.00 | 100 | 0.00 | ||
| Tax effect of adjustments (Note 3) | (1,000) | (0.02) | (1,000) | (0.02) | ||
| Non-GAAP net earnings | $ 16,600 | $ 0.31 | $ 21,900 | $ 0.41 | ||
| Q4 -13 Forecasted shares | 53,600 | 53,600 | ||||
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Note1: As of |
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Note 2: The three month period ended |
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| Note 3: The Non-GAAP adjustments are tax effected at estimated Q4-13 tax rate of 35%. | ||||||
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| Unaudited Consolidated Statements of Operations | ||
| (In thousands, except per share data) | ||
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Nine Months Ended |
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| 2013 | 2012 | |
| Net revenues: | ||
| Products | $ 388,998 | $ 427,986 |
| Services | 76,028 | 81,726 |
| Total net revenues | 465,026 | 509,712 |
| Cost of revenues: | ||
| Products | 237,590 | 243,950 |
| Services | 48,542 | 48,884 |
| Total cost of revenues | 286,132 | 292,834 |
| Gross profit | 178,894 | 216,878 |
| Research and development | 47,318 | 45,911 |
| Selling, general and administrative | 102,140 | 96,332 |
| Insurance reimbursement | (1,071) | -- |
| Litigation | -- | 5,316 |
| Completed acquisition costs | 171 | 1,258 |
| Restructuring | 1,364 | -- |
| Amortization of intangible assets | 1,537 | 453 |
| Income from operations | 27,435 | 67,608 |
| Interest income, net | 710 | 668 |
| Income before income taxes | 28,145 | 68,276 |
| Provision for income taxes | 12,606 | 24,356 |
| Net income | $ 15,539 | $ 43,920 |
| Net income per share: | ||
| Basic | $ 0.29 | $ 0.83 |
| Diluted | $ 0.29 | $ 0.82 |
| Cash dividends per common share | $ 0.48 | $ 0.46 |
| Weighted average shares outstanding: | ||
| Basic | 52,998 | 52,679 |
| Diluted | 53,410 | 53,240 |
| The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results: | ||
| Net income | $ 15,539 | $ 43,920 |
| Adjustments (net of tax, if applicable): | ||
| Income tax charge (Note 1) | 6,481 | -- |
| Credits on U.S. tax expense (Note 2) | (1,200) | -- |
| Tax benefit (Note 3) | (2,353) | -- |
| Insurance reimbursement (Note 4) | (1,071) | -- |
| Litigation (Note 4) | -- | 5,316 |
| Excess and obsolete charge (Note 5) | 6,423 | -- |
| Acquisition inventory step-up | -- | 101 |
| Completed acquisition costs (Note 6) | 171 | 1,258 |
| Restructuring (Note 7) | 1,364 | -- |
| Amortization of intangible assets | 1,537 | 453 |
| Pro forma tax adjustments | (3,121) | (2,639) |
| Non-GAAP net earnings (Note 6) | $ 23,770 | $ 48,409 |
| Non-GAAP net earnings per share (Note 6) | $ 0.45 | $ 0.91 |
| Weighted average shares outstanding | 53,410 | 53,240 |
| Income from operations | $ 27,435 | $ 67,608 |
| Adjustments: | ||
| Insurance reimbursement (Note 4) | (1,071) | -- |
| Litigation (Note 4) | -- | 5,316 |
| Excess and obsolete charge (Note 5) | 6,423 | -- |
| Acquisition inventory step-up | -- | 101 |
| Completed acquisition costs (Note 6) | 171 | 1,258 |
| Restructuring (Note 7) | 1,364 | -- |
| Amortization of intangible assets | 1,537 | 453 |
| Non-GAAP income from operations | $ 35,859 | $ 74,736 |
| Non-GAAP operating margin percentage | 7.7% | 14.7% |
| Gross profit | $ 178,894 | $ 216,878 |
| Excess and obsolete charge (Note 5) | 6,423 | -- |
| Non-GAAP gross profit | $ 185,317 | $ 216,878 |
| Non-GAAP gross profit percentage | 39.9% | 42.5% |
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Note 1: In the third quarter of 2013, we incurred income tax charges of |
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Note 2: In the third quarter of 2013, we received |
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Note 3: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on |
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Note 4: In the third quarter of 2012, we incurred |
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Note 5: Cost of sales for the three month period ended |
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Note 6: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in |
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Note 7: The nine month period ended |
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| Note 8: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with acquisitions, a litigation settlement, a benefit related to an insurance reimbursement, excess and obsolete charge related to unique product in a solar application and 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. | ||
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| Unaudited Consolidated Balance Sheet | ||
| (In thousands) | ||
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2013 |
2012 |
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| ASSETS | ||
| Cash and cash equivalents | $ 254,778 | $ 287,588 |
| Short-term investments | 365,876 | 327,653 |
| Trade accounts receivable, net | 98,133 | 82,060 |
| Inventories | 136,060 | 134,639 |
| Deferred income taxes | 10,059 | 8,194 |
| Other current assets | 28,651 | 28,048 |
| Total current assets | 893,557 | 868,182 |
| Property, plant and equipment, net | 78,020 | 80,516 |
| Long-term investments | 5,183 | 12,158 |
| Goodwill | 150,700 | 150,733 |
| Intangible assets, net | 13,316 | 11,561 |
| Other assets | 31,198 | 29,412 |
| Total assets | $ 1,171,974 | $ 1,152,562 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Accounts payable | $ 27,304 | $ 16,803 |
| Accrued compensation | 25,190 | 20,955 |
| Income taxes payable | 7,768 | 4,148 |
| Other current liabilities | 35,899 | 37,405 |
| Total current liabilities | 96,161 | 79,311 |
| Other liabilities | 70,391 | 61,095 |
| Stockholders' equity: | ||
| Common stock | 113 | 113 |
| Additional paid-in capital | 726,018 | 718,005 |
| Retained earnings | 267,246 | 278,583 |
| Other stockholders' equity | 12,045 | 15,455 |
| Total stockholders' equity | 1,005,422 | 1,012,156 |
| Total liabilities and stockholders' equity | $ 1,171,974 | $ 1,152,562 |
CONTACT:Seth H. Bagshaw Vice President, Chief Financial Officer & Treasurer Telephone: 978.645.5578
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