UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 24, 2012
MKS Instruments, Inc.
(Exact name of registrant as specified in its charter)
| Massachusetts |
000-23621 |
04-2277512 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
| 2 Tech Drive, Suite 201, Andover, Massachusetts |
01810 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: 978-645-5500
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On October 24, 2012, MKS Instruments, Inc. announced its financial results for the quarter ended September 30, 2012. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release dated October 24, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MKS Instruments, Inc. | ||||||||
| October 24, 2012 | By: | /s/ Seth H. Bagshaw | ||||||
| Name: Seth H. Bagshaw Title: Vice President, CFO & Treasurer | ||||||||
Exhibit Index
| Exhibit No. |
Description | |
| 99.1 | Press Release dated October 24, 2012 | |
Exhibit 99.1
For Immediate Release
Contact: Seth H. Bagshaw
Vice President, Chief Financial Officer & Treasurer
Telephone: 978.645.5578
MKS Instruments Reports Q3 2012 Financial Results
Andover, Mass., October 24, 2012 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity; today reports third quarter 2012 financial results.
| GAAP Results | Non-GAAP Results | |||
| Net revenues ($ millions) |
$141.4 | $141.4 | ||
| Operating margin |
4.5% | 9.1% | ||
| Net income ($ millions) |
$2.6 | $8.4 | ||
| Diluted EPS |
$0.05 | $0.16 | ||
Third Quarter Financial Results
Sales were $141.4 million, a decrease of 20% from $177.4 million in the second quarter of 2012, and a decrease of 27% from $194.5 million in the third quarter of 2011.
Third quarter net income was $2.6 million, or $0.05 per diluted share, compared to net income of $18.6 million, or $0.35 per diluted share in the second quarter of 2012, and $30.4 million, or $0.57 per diluted share in the third quarter of 2011.
Non-GAAP net earnings, which exclude special charges, were $8.4 million, or $0.16 per diluted share, compared to $18.9 million, or $0.36 per diluted share in the second quarter of 2012, and $30.6 million, or $0.58 per diluted share in the third quarter of 2011.
In the third quarter, the board of directors authorized an increase in the Company’s quarterly cash dividend from $0.15 per share to $0.16 per share which was paid on September 14th and the Company also repurchased 76,600 shares for $2.1 million at an average price of $26.97 pursuant to the share repurchase program announced in July of 2011.
Leo Berlinghieri, Chief Executive Officer and President, said, “Forecasts by industry analysts and recent earnings reports by our customers indicate that the semiconductor
industry will decrease further in the fourth quarter, and the solar and LED equipment markets are also expected to remain depressed until excess capacity is absorbed. In this environment we are cautious and have implemented additional measures to curtail non-critical spending.
“Given current business levels, we anticipate that sales in the fourth quarter may range from $115 million to $135 million. At these volumes, our GAAP net income could range from a net loss of $(0.08) per basic share to net income of $0.05 per diluted share. Non-GAAP net earnings could range from a net loss of $(0.07) per basic share to net earnings of $0.06 per diluted share. While near term business conditions are challenging, we are continuing to work closely with customers on design wins and are continuing to make investments to position ourselves for long term growth.”
Conference Call Details
A conference call with management will be held on Thursday, October 25, 2012 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 38424683, 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 legal settlement charges, amortization of intangible assets, costs associated with acquisitions and disposition related charges, and certain adjustments to income taxes. 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, which exclude legal settlement charges, amortization of intangible assets, costs associated with acquisitions, the related tax effect of any adjustments and pro-forma tax adjustments to reflect the expected full year effective tax rate in the quarter, is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results. Non-GAAP net earnings (loss) per share guidance, excludes amortization of intangible assets and special charges net of tax.
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, including a pending investigation on export compliance in China, 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, as well as recent press releases, 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 (Notes 3 and 4) | ||||||||||||
| September 30, 2012 |
September 30, 2011 |
June 30, 2012 |
||||||||||
| Net revenues |
$ | 141,447 | $ | 194,508 | $ | 177,397 | ||||||
| Cost of revenues |
84,876 | 106,830 | 100,881 | |||||||||
|
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|
|
|
|
|
|||||||
| Gross profit |
56,571 | 87,678 | 76,516 | |||||||||
| Research and development |
14,136 | 14,331 | 15,591 | |||||||||
| Selling, general and administrative |
29,661 | 31,984 | 32,582 | |||||||||
| Litigation settlements |
5,316 | — | — | |||||||||
| Completed acquisition costs |
851 | — | 377 | |||||||||
| Amortization of intangible assets |
215 | 251 | 119 | |||||||||
|
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|||||||
| Income from operations |
6,392 | 41,112 | 27,847 | |||||||||
| Interest income, net |
267 | 272 | 149 | |||||||||
|
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|
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|
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|
|||||||
| Income before income taxes |
6,659 | 41,384 | 27,996 | |||||||||
| Provision for income taxes |
4,079 | 11,011 | 9,424 | |||||||||
|
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|||||||
| Net income |
$ | 2,580 | $ | 30,373 | $ | 18,572 | ||||||
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|||||||
| Basic income per share: |
||||||||||||
| Net income |
$ | 0.05 | $ | 0.58 | $ | 0.35 | ||||||
| Diluted income per share: |
||||||||||||
| Net income |
$ | 0.05 | $ | 0.57 | $ | 0.35 | ||||||
| Cash dividends per common share |
$ | 0.16 | $ | 0.15 | $ | 0.15 | ||||||
| Weighted average shares outstanding: |
||||||||||||
| Basic |
52,854 | 52,456 | 52,679 | |||||||||
| Diluted |
53,290 | 52,992 | 53,206 | |||||||||
| The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results: |
||||||||||||
| Net income |
$ | 2,580 | $ | 30,373 | $ | 18,572 | ||||||
| Adjustments (net of tax, if applicable): |
||||||||||||
| Completed acquisition costs (Note 1) |
851 | — | 377 | |||||||||
| Acquisition inventory step-up |
101 | — | — | |||||||||
| Litigation settlements (Note 2) |
5,316 | — | — | |||||||||
| Amortization of intangible assets |
215 | 251 | 119 | |||||||||
| Pro forma tax adjustments |
(626 | ) | (67 | ) | (176 | ) | ||||||
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| Non-GAAP net earnings (Note 3) |
$ | 8,437 | $ | 30,557 | $ | 18,892 | ||||||
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| Non-GAAP net earnings per share (Note 3) |
$ | 0.16 | $ | 0.58 | $ | 0.36 | ||||||
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| Weighted average shares outstanding |
53,290 | 52,992 | 53,206 | |||||||||
| Income from operations |
$ | 6,392 | $ | 41,112 | $ | 27,847 | ||||||
| Adjustments: |
||||||||||||
| Completed acquisition costs (Note 1) |
851 | — | 377 | |||||||||
| Acquisition inventory step-up |
101 | — | — | |||||||||
| Litigation settlements (Note 2) |
5,316 | — | — | |||||||||
| Amortization of intangible assets |
215 | 251 | 119 | |||||||||
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| Non-GAAP income from operations |
$ | 12,875 | $ | 41,363 | $ | 28,343 | ||||||
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| Non-GAAP operating margin |
9.1 | % | 21.3 | % | 16.0 | % | ||||||
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Note 1: Costs related to the Company's acquisition of Plasmart, Inc. in August 2012, are comprised of investment banking fees, legal fees and due diligence fees.
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.
Note 3: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, costs associated with acquisitions, litigation settlements, 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.
Note 4: In the third quarter of 2012, the Company has reported completed acquisition costs as a line item separate from selling, general and administrative expenses. The Company has reclassified these costs from selling, general and administrative expenses to this separate line beginning with the first quarter of 2012. These costs have been excluded from Non-GAAP earnings and the second quarter and year to date 2012 Non-GAAP net earnings and Non-GAAP net earnings per share have been adjusted to reflect this change.
MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
| Nine Months Ended September 30, (Notes 3 and 4) |
||||||||
| 2012 | 2011 | |||||||
| Net revenues |
$ | 509,712 | $ | 650,846 | ||||
| Cost of revenues |
292,834 | 351,819 | ||||||
|
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|
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|
|||||
| Gross profit |
216,878 | 299,027 | ||||||
| Research and development |
45,911 | 46,809 | ||||||
| Selling, general and administrative |
96,332 | 96,542 | ||||||
| Litigation settlements |
5,316 | — | ||||||
| Completed acquisition costs |
1,258 | — | ||||||
| Amortization of intangible assets |
453 | 751 | ||||||
|
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|
|
|
|||||
| Income from operations |
67,608 | 154,925 | ||||||
| Interest income, net |
668 | 852 | ||||||
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|
|||||
| Income from continuing operations before income taxes |
68,276 | 155,777 | ||||||
| Provision for income taxes |
24,356 | 48,760 | ||||||
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|
|||||
| Net income |
$ | 43,920 | $ | 107,017 | ||||
|
|
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|
|||||
| Basic income per share: |
||||||||
| Net income |
$ | 0.83 | $ | 2.06 | ||||
| Diluted income per share: |
||||||||
| Net income |
$ | 0.82 | $ | 2.03 | ||||
| Cash dividends per common share |
$ | 0.46 | $ | 0.45 | ||||
| Weighted average shares outstanding: |
||||||||
| Basic |
52,679 | 52,070 | ||||||
| Diluted |
53,240 | 52,761 | ||||||
| The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results: |
||||||||
| Net income |
$ | 43,920 | $ | 107,017 | ||||
| Adjustments (net of tax, if applicable): |
||||||||
| Completed acquisition costs (Note 1) |
1,258 | — | ||||||
| Acquisition inventory step-up |
101 | — | ||||||
| Litigation settlements (Note 2) |
5,316 | — | ||||||
| Amortization of intangible assets |
453 | 751 | ||||||
| Pro forma tax adjustments |
(2,639 | ) | (197 | ) | ||||
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|||||
| Non-GAAP net earnings (Note 3) |
$ | 48,409 | $ | 107,571 | ||||
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| Non-GAAP net earnings per share (Note 3) |
$ | 0.91 | $ | 2.04 | ||||
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| Weighted average shares outstanding |
53,240 | 52,761 | ||||||
| Income from operations |
$ | 67,608 | $ | 154,925 | ||||
| Adjustments: |
||||||||
| Completed acquisition costs (Note 1) |
1,258 | — | ||||||
| Acquisition inventory step-up |
101 | — | ||||||
| Litigation settlements (Note 2) |
5,316 | — | ||||||
| Amortization of intangible assets |
453 | 751 | ||||||
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| Non-GAAP income from operations |
$ | 74,736 | $ | 155,676 | ||||
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| Non-GAAP operating margin |
14.7 | % | 23.9 | % | ||||
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Note 1: Costs related to the Company's acquisition of Plasmart, Inc. in August 2012, are comprised of investment banking fees, legal fees and due diligence fees.
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.
Note 3: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, costs associated with acquisitions, litigation settlements, 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.
Note 4: In the third quarter of 2012, the Company has reported completed acquisition costs as a line item separate from selling, general and administrative expenses. The Company has reclassified these costs from selling, general and administrative expenses to this separate line beginning with the first quarter of 2012. These costs have been excluded from Non-GAAP earnings and the year to date 2012 Non-GAAP net earnings and Non-GAAP net earnings per share have been adjusted to reflect this change.
MKS Instruments, Inc.
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate
(In thousands)
| Three Months Ended September 30,
2012 (Note 3) |
Three Months Ended June 30, 2012 (Note 3) |
|||||||||||||||||||||||
| Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
|||||||||||||||||||
| GAAP |
$ | 6,659 | $ | 4,079 | 61.3 | % | $ | 27,996 | $ | 9,424 | 33.7 | % | ||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Completed acquisition costs (Note 1) |
851 | — | 377 | — | ||||||||||||||||||||
| Acquisition inventory step-up |
101 | — | — | — | ||||||||||||||||||||
| Litigation settlements (Note 2) |
5,316 | — | — | — | ||||||||||||||||||||
| Amortization of intangible assets |
215 | — | 119 | — | ||||||||||||||||||||
| Tax effect of pro forma adjustments |
— | 2,390 | — | 176 | ||||||||||||||||||||
| Adjustment to pro forma tax rate |
— | (1,764 | ) | — | — | |||||||||||||||||||
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| Non-GAAP |
$ | 13,142 | $ | 4,705 | 35.8 | % | $ | 28,492 | $ | 9,600 | 33.7 | % | ||||||||||||
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| Three Months Ended September 30,
2011 (Note 3) |
||||||||||||||||||||||||
| Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
||||||||||||||||||||||
| GAAP |
$ | 41,384 | $ | 11,011 | 26.6 | % | ||||||||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Amortization of intangible assets |
251 | — | ||||||||||||||||||||||
| Tax effect of pro forma adjustments |
— | 67 | ||||||||||||||||||||||
| Adjustment to pro forma tax rate |
— | — | ||||||||||||||||||||||
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| Non-GAAP |
$ | 41,635 | $ | 11,078 | 26.6 | % | ||||||||||||||||||
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| Nine Months Ended September 30, 2012 (Note 3) |
Nine Months Ended September 30, 2011 (Note 3) |
|||||||||||||||||||||||
| Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
Income Before Income Taxes |
Provision for Income Taxes |
Effective Tax Rate |
|||||||||||||||||||
| GAAP |
$ | 68,276 | $ | 24,356 | 35.7 | % | $ | 155,777 | $ | 48,760 | 31.3 | % | ||||||||||||
| Adjustments: |
||||||||||||||||||||||||
| Completed acquisition costs (Note 1) |
1,258 | — | — | — | ||||||||||||||||||||
| Acquisition inventory step-up |
101 | — | — | — | ||||||||||||||||||||
| Litigation settlements (Note 2) |
5,316 | — | — | — | ||||||||||||||||||||
| Amortization of intangible assets |
453 | — | 751 | — | ||||||||||||||||||||
| Tax effect of pro forma adjustments |
— | 2,611 | — | 197 | ||||||||||||||||||||
| Adjustment to pro forma tax rate |
— | 28 | — | — | ||||||||||||||||||||
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| Non-GAAP |
$ | 75,404 | $ | 26,995 | 35.8 | % | $ | 156,528 | $ | 48,957 | 31.3 | % | ||||||||||||
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Note 1: Costs related to the Company's acquisition of Plasmart, Inc. in August 2012, are comprised of investment banking fees, legal fees and due diligence fees.
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.
Note 3: The Non-GAAP net earnings before taxes exclude amortization of intangible assets, costs associated with acquisitions, litigation settlements, 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.
MKS Instruments, Inc.
Unaudited Consolidated Balance Sheet
(In thousands)
| September 30, 2012 |
December 31, 2011 |
|||||||
| ASSETS |
||||||||
| Cash and short-term investments |
$ | 583,634 | $ | 565,519 | ||||
| Trade accounts receivable, net |
87,536 | 120,894 | ||||||
| Inventories |
145,518 | 153,632 | ||||||
| Other current assets |
36,249 | 44,856 | ||||||
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|
|||||
| Total current assets |
852,937 | 884,901 | ||||||
| Property, plant and equipment, net |
77,493 | 72,487 | ||||||
| Long-term investments |
40,062 | 7,873 | ||||||
| Goodwill |
149,887 | 140,084 | ||||||
| Intangible assets, net |
11,843 | 1,043 | ||||||
| Other assets |
10,080 | 12,266 | ||||||
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|
|||||
| Total assets |
$ | 1,142,302 | $ | 1,118,654 | ||||
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| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Short-term borrowings |
$ | 4,164 | $ | 1,932 | ||||
| Accounts payable |
16,395 | 24,853 | ||||||
| Accrued expenses and other liabilities |
68,631 | 69,646 | ||||||
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|
|||||
| Total current liabilities |
89,190 | 96,431 | ||||||
| Other liabilities |
37,925 | 32,211 | ||||||
| Stockholders' equity: |
||||||||
| Common stock |
113 | 113 | ||||||
| Additional paid-in capital |
715,001 | 707,419 | ||||||
| Retained earnings |
284,802 | 268,870 | ||||||
| Other stockholders' equity |
15,271 | 13,610 | ||||||
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|
|||||
| Total stockholders' equity |
1,015,187 | 990,012 | ||||||
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| Total liabilities and stockholders' equity |
$ | 1,142,302 | $ | 1,118,654 | ||||
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