MKS Instruments, Inc. (Form: 8-K)  

 


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 21, 2015

MKS Instruments, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

     
Massachusetts 000-23621 04-2277512
_____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation) File Number) 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))


Top of the Form

Item 2.02 Results of Operations and Financial Condition.

On October 21, 2015, MKS Instruments, Inc. announced its financial results for the quarter ended September 30, 2015. 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 21, 2015






Top of the Form

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 21, 2015   By:   /s/ Seth H. Bagshaw
       
        Name: Seth H. Bagshaw
        Title: VP, CFO & Treasurer


Top of the Form

Exhibit Index


     
Exhibit No.   Description

 
99.1
  Press Release dated October 21, 2015
EX-99.1

(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Q3 2015 Financial Results

Andover, Mass., October 21, 2015 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity; today reports third quarter 2015 financial results.

                 
    GAAP Results   Non-GAAP Results
Net revenues ($ millions)
  $ 209     $ 209  
Gross margin
    45.0 %     45.0 %
Operating margin
    19.8 %     20.8 %
Net income ($ millions)
  $ 29.8     $ 31.5  
Diluted EPS
  $ 0.56     $ 0.59  

Third Quarter Financial Results

Sales were $209 million, a decrease of 4% from $218 million in the second quarter of 2015, and an increase of 12% from $187 million in the third quarter of 2014.

Third quarter net income was $29.8 million, or $0.56 per diluted share, compared to net income of $33.2 million, or $0.62 per diluted share in the second quarter of 2015, and $29.1 million, or $0.55 per diluted share in the third quarter of 2014.

Non-GAAP net earnings, which exclude special charges and credits, were $31.5 million, or $0.59 per diluted share, compared to $33.1 million, or $0.62 per diluted share in the second quarter of 2015, and $22.8 million, or $0.43 per diluted share in the third quarter of 2014.

In the third quarter, the board of directors authorized a quarterly cash dividend of $0.17 per share, and paid a dividend of $9.1 million on September 11th. In addition, during the quarter, the Company repurchased 129 thousand shares for $4.5 million for an average price of $35.21 per share.

Gerald Colella, Chief Executive Officer and President, said, “The third quarter came in largely as expected, with a modest decline in our semiconductor business off of a record second quarter, continued revenue growth in our other advanced markets, and operating performance aligned with the improved financial model targets announced in June. I am pleased to report that semiconductor revenue was up 11% for the first three quarters of 2015, however, recent capex reductions by some of the largest spenders in the semiconductor industry are affecting the near-term environment for our semiconductor business, as semiconductor OEMs adjust their inventory levels ahead of a downtick in industry spending. These swings in our semiconductor business are not new to us, and we anticipate that we will continue to deliver financial performance in line with our improved operating model targets.

“Based on these factors, and looking at current business levels, we anticipate that sales in the fourth quarter may range from $150 million to $170 million, and at these volumes, our non-GAAP net earnings could range from $0.21 to $0.33 per share and our GAAP net income could range from $0.18 to $0.30 per share.”

Conference Call Details

A conference call with management will be held on Thursday, October 22, 2015 at 8:30 a.m. (EDT). 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 39578407, which has been reserved for this call. A live and archived webcast of the call will be available on the company’s website at www.mksinst.com.

Use of Non-GAAP Financial Results

Non-GAAP amounts exclude amortization of acquired intangible assets, costs associated with completed acquisitions, income related to the sale of excess and obsolete inventory previously written down to net realizable value, an inventory step-up adjustment related to an acquisition, restructuring charges, discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures are not in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). MKS’ management believes the presentation of these non-GAAP financial measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

About MKS Instruments

MKS Instruments, Inc. is a global provider of instruments, subsystems and process control solutions that measure, control, power, monitor and analyze critical parameters of advanced manufacturing processes to improve process performance and productivity. Our products are derived from our core competencies in pressure measurement and control, materials delivery, gas composition analysis, control and information technology, power and reactive gas generation, and vacuum technology. Our primary served markets are manufacturers of capital equipment for semiconductor devices, and for other thin film applications including flat panel displays, solar cells, light emitting diodes, data storage media, and other advanced coatings. We also leverage our technology in other markets with advanced manufacturing applications including medical equipment, pharmaceutical manufacturing, energy generation and environmental monitoring.

Forward-Looking Statements

This release contains projections or other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27 of the Securities Act, and Section 21E of the Securities Exchange Act regarding MKS’ future growth and the future financial performance of MKS. These projections or statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the projections or other forward-looking statements are the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to MKS’ major customers, potential fluctuations in quarterly results, 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.

###

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

Investor Relations Contact: Claire McAdams
Headgate Partners LLC
Telephone: 530.265.9899
Email: claire@headgatepartners.com

1

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

                         
    Three Months Ended
    September 30, 2015   September 30, 2014   June 30, 2015
Net revenues:
                       
Products
  $ 179,441     $ 158,520     $ 188,281  
Services
    29,891       28,278       29,685  
 
                       
Total net revenues
    209,332       186,798       217,966  
Cost of revenues:
                       
Products
    95,710       89,181       99,849  
Services
    19,393       18,292       19,319  
 
                       
Total cost of revenues
    115,103       107,473       119,168  
Gross profit
    94,229       79,325       98,798  
Research and development
    17,217       15,827       17,567  
Selling, general and administrative
    33,396       32,365       33,269  
Restructuring
    562       1,223       219  
Amortization of intangible assets
    1,691       1,760       1,709  
 
                       
Income from operations
    41,363       28,150       46,034  
Interest income, net
    721       394       790  
 
                       
Income from operations before income taxes
    42,084       28,544       46,824  
Provision (benefit) for income taxes
    12,315       (573 )     13,604  
 
                       
Net income
  $ 29,769     $ 29,117     $ 33,220  
 
                       
Net income per share:
                       
Basic
  $ 0.56     $ 0.55     $ 0.62  
Diluted
  $ 0.56     $ 0.55     $ 0.62  
Cash dividends per common share
  $ 0.170     $ 0.165     $ 0.170  
Weighted average shares outstanding:
                       
Basic
    53,314       53,054       53,384  
Diluted
    53,568       53,310       53,589  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 29,769     $ 29,117     $ 33,220  
Adjustments (net of tax, if applicable):
                       
Release of tax reserves (Note 1)
          (6,109 )      
Tax benefit (Note 2)
          (3,343 )      
Sale of previously written down inventory (Note 3)
                (2,098 )
Acquisition inventory step-up (Note 4)
          1,634        
Restructuring (Note 5)
    562       1,223       219  
Amortization of intangible assets
    1,691       1,760       1,709  
Pro forma tax adjustments
    (543 )     (1,500 )     74  
 
                       
Non-GAAP net earnings (Note 6)
  $ 31,479     $ 22,782     $ 33,124  
 
                       
Non-GAAP net earnings per share (Note 6)
  $ 0.59     $ 0.43     $ 0.62  
 
                       
Weighted average shares outstanding
    53,568       53,310       53,589  
Income from operations
  $ 41,363     $ 28,150     $ 46,034  
Adjustments:
                       
Sale of previously written down inventory (Note 3)
                (2,098 )
Acquisition inventory step-up (Note 4)
          1,634        
Restructuring (Note 5)
    562       1,223       219  
Amortization of intangible assets
    1,691       1,760       1,709  
 
                       
Non-GAAP income from operations (Note 7)
  $ 43,616     $ 32,767     $ 45,864  
 
                       
Non-GAAP operating margin percentage (Note 7)
    20.8 %     17.5 %     21.0 %
 
                       
Gross profit
  $ 94,229     $ 79,325     $ 98,798  
Sale of previously written down inventory (Note 3)
                (2,098 )
Acquisition inventory step-up (Note 4)
          1,634        
 
                       
Non-GAAP gross profit (Note 8)
  $ 94,229     $ 80,959     $ 96,700  
 
                       
Non-GAAP gross profit percentage (Note 8)
    45.0 %     43.3 %     44.4 %
 
                       

Note 1: For the three months ended September 30, 2014, we recorded $6.1 million in credits for reserve releases related to the settlement of audits and expiration of the statute of limitations.

Note 2: For the three months ended September 30, 2014, we recorded a tax benefit of $3.3 million related to a one time foreign dividend to the U.S.

Note 3: Cost of sales for the three months ended June 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 4: Inventory step-up adjustment related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 5: The three months ended September 30, 2015 and June 30, 2015, includes restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. The three months ended September 30, 2014 includes restructuring charges primarily for severance costs related to a reduction in work force at one of our foreign subsidiaries.

Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude discrete tax benefits, income related to the sale of excess and obsolete inventory previously written down to net realizable value, an inventory step-up adjustment related to an acquisition, restructuring costs, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related quarter.

Note 7: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude income related to the sale of excess and obsolete inventory previously written down to net realizable value, an inventory step-up adjustment related to an acquisition, restructuring costs and amortization of intangible assets.

Note 8: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude income related to the sale of excess and obsolete inventory previously written down to net realizable value and an inventory step-up adjustment related to an acquisition.

2

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

                 
    Nine Months Ended
    September 30,
    2015   2014
Net revenues:
               
Products
  $ 553,818     $ 497,172  
Services
    87,319       80,676  
 
               
Total net revenues
    641,137       577,848  
Cost of revenues:
               
Products
    294,211       276,905  
Services
    56,853       52,611  
 
               
Total cost of revenues
    351,064       329,516  
Gross profit
    290,073       248,332  
Research and development
    51,464       46,866  
Selling, general and administrative
    97,532       99,195  
Acquisition costs
    30       499  
Restructuring
    1,569       1,970  
Amortization of intangible assets
    5,071       3,214  
 
               
Income from operations
    134,407       96,588  
Interest income, net
    2,015       860  
 
               
Income from operations before income taxes
    136,422       97,448  
Provision for income taxes
    39,647       15,862  
 
               
Net income
  $ 96,775     $ 81,586  
 
               
Net income per share:
               
Basic
  $ 1.82     $ 1.53  
Diluted
  $ 1.81     $ 1.52  
Cash dividends per common share
  $ 0.505     $ 0.49  
Weighted average shares outstanding:
               
Basic
    53,304       53,276  
Diluted
    53,562       53,541  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
               
Net income
  $ 96,775     $ 81,586  
Adjustments (net of tax, if applicable):
               
Release of tax reserves (Note 1)
          (11,188 )
Tax benefit (Note 2)
          (3,343 )
Sale of previously written down inventory (Note 3)
    (2,098 )      
Acquisition costs (Note 4)
    30       499  
Acquisition inventory step-up (Note 5)
          2,179  
Restructuring (Note 6)
    1,569       1,970  
Amortization of intangible assets
    5,071       3,214  
Pro forma tax adjustments
    (1,241 )     (2,569 )
 
               
Non-GAAP net earnings (Note 7)
  $ 100,106     $ 72,348  
 
               
Non-GAAP net earnings per share (Note 7)
  $ 1.87     $ 1.35  
 
               
Weighted average shares outstanding
    53,562       53,541  
Income from operations
  $ 134,407     $ 96,588  
Adjustments:
               
Sale of previously written down inventory (Note 3)
    (2,098 )      
Acquisition costs (Note 4)
    30       499  
Acquisition inventory step-up (Note 5)
          2,179  
Restructuring (Note 6)
    1,569       1,970  
Amortization of intangible assets
    5,071       3,214  
 
               
Non-GAAP income from operations (Note 8)
  $ 138,979     $ 104,450  
 
               
Non-GAAP operating margin percentage (Note 8)
    21.7 %     18.1 %
 
               
Gross profit
  $ 290,073     $ 248,332  
Sale of previously written down inventory (Note 3)
    (2,098 )      
Acquisition inventory step-up (Note 5)
          2,179  
 
               
Non-GAAP gross profit (Note 9)
  $ 287,975     $ 250,511  
 
               
Non-GAAP gross profit percentage (Note 9)
    44.9 %     43.4 %
 
               

Note 1: For the nine months ended September 30, 2014, we recorded $11.2 million in credits for reserve releases related to the settlement of audits and expiration of the statute of limitations.

Note 2: For the nine months ended September 30, 2014, we recorded a tax benefit of $3.3 million related to a one time foreign dividend to the U.S.

Note 3: Cost of sales for the nine months ended September 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 4: The nine months ended September 30, 2015 includes acquisition costs related to the Precisive LLC acquisition which closed during the first quarter of 2015. The nine months ended September 30, 2014 includes acquisition costs comprised of legal fees and filing fees related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 5: Inventory step-up adjustment related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 6: The nine months ended September 30, 2015 includes restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. The nine months ended September 30, 2014 includes restructuring charges primarily for severance related costs related to a reduction in work force at one of our foreign subsidiaries.

Note 7: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude discrete tax benefits, income related to the sale of excess and obsolete inventory previously written down to net realizable value, an inventory step-up adjustment related to an acquisition, restructuring costs, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related quarter.

Note 8: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude income related to the sale of excess and obsolete inventory previously written down to net realizable value, an inventory step-up adjustment related to an acquisition, restructuring costs and amortization of intangible assets.

Note 9: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude income related to the sale of excess and obsolete inventory previously written down to net realizable value and an inventory step-up adjustment related to an acquisition.

3

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

                                                 
    Three Months Ended September 30, 2015   Three Months Ended September 30, 2014
     Income Before    Provision    Effective        Provision    
     Income Taxes    (benefit) for    Tax Rate    Income Before   (benefit) for   Effective
             Income Taxes             Income Taxes     Income Taxes     Tax Rate 
GAAP                
  $          42,084     $        12,315          29.3%        $         28,544     $          (573)        -2.0%     
Adjustments:
                                               
Release of tax reserves (Note 1)
                              6,109          
Tax benefit (Note 2)
                              3,343          
Restructuring (Note 3)
    562                     1,223                
Acquisition inventory step-up (Note 4)
                        1,634                
Amortization of intangible assets
    1,691                     1,760                
Tax effect of pro forma adjustments
          755                     1,680          
Adjustment to pro forma tax rate
          (212 )                   (180 )        
 
                                               
Non-GAAP
  $          44,337     $        12,858          29.0%        $        33,161     $       10,379          31.3%     
 
                                               
                         
    Three Months Ended June 30, 2015
         Provision    Effective
    Income Before    (benefit) for    Tax Rate 
     Income Taxes     Income Taxes         
GAAP
  $       46,824     $       13,604         29.1%    
Adjustments:
                       
Restructuring (Note 3)
    219                
Amortization of intangible assets
    1,709                
Sales of previously written down inventory (Note 5)
    (2,098 )              
Tax effect of pro forma adjustments
          311          
Adjustment to pro forma tax rate
          (385 )        
 
                       
Non-GAAP
  $       46,654     $       13,530       29.0%    
 
                       
                                                 
    Nine Months Ended September 30, 2015   Nine Months Ended September 30, 2014
         Provision            Provision    Effective
    Income Before   (benefit) for   Effective   Income Before   (benefit) for    Tax Rate 
     Income Taxes     Income Taxes     Tax Rate     Income Taxes     Income Taxes         
GAAP                
  $         136,422     $        39,647          29.1%        $         97,448     $        15,862          16.3%     
Adjustments:
                                               
Release of tax reserves (Note 1)
                              11,188          
Tax benefit (Note 2)
                              3,343          
Restructuring (Note 3)
    1,569                     1,970                
Acquisition inventory step-up
                        2,179                
(Note 4)
                                               
Sales of previously written down
    (2,098 )                                  
inventory (Note 5)
                                               
Acquisition costs (Note 6)
    30                     499                
Amortization of intangible assets
    5,071                     3,214                
Tax effect of pro forma adjustments
          1,883                     2,790          
Adjustment to pro forma tax rate
          (642 )                   (221 )        
 
                                               
Non-GAAP
  $         140,994     $        40,888          29.0%        $       105,310     $         32,962          31.3%     
 
                                               

Note 1: For the three and nine months ended September 30, 2014, we recorded $6.1 million and $11.2 million in credits, respectively, for reserve releases related to the settlement of audits and expiration of the statute of limitations.

Note 2: For the three and nine months ended September 30, 2014, we recorded a tax benefit of $3.3 million related to a one time foreign dividend to the U.S.

Note 3: The three and nine months ended September 30, 2015 includes restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. The nine months ended September 30, 2014 includes restructuring charges primarily for severance related costs related to a reduction in work force at one of our foreign subsidiaries.

Note 4: Inventory step-up adjustment related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 5: Cost of sales for the three months ended June 30, 2015 and nine months ended September 30, 2015 includes income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 6: The nine months ended September 30, 2015 includes acquisition costs related to the Precisive LLC acquisition, which closed during the first quarter of 2015. The nine months ended September 30, 2014 includes acquisition costs comprised of legal fees and filing fees related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

MKS Instruments, Inc.
Reconciliation of Q4-15 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

                                 
    The Months Ended December 31, 2015
    Low Guidance   High Guidance
    $ Amount   $ Per Share   $ Amount   $ Per Share
GAAP net income
  $ 9,800     $ 0.18     $ 16,300     $ 0.30  
Amortization
    1,700       0.03       1,700       0.03  
Restructuring
    500       0.01       500       0.01  
Tax effect of adjustments (Note 1)
    (600 )     (0.01 )     (600 )     (0.01 )
 
                               
Non-GAAP net earnings
  $ 11,400     $ 0.21     $ 17,900     $ 0.33  
 
                               
Q4-15 forecasted shares
            53,500               53,500  

Note 1: The Non-GAAP adjustments are tax effected at the estimated Q4-15 tax rate of 29%.

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

                 
    September 30, 2015   December 31, 2014
ASSETS
               
Cash and cash equivalents
  $ 195,147     $ 305,437  
Short-term investments
    196,842       129,594  
Trade accounts receivable, net
    115,988       106,362  
Inventories
    168,079       155,169  
Deferred income taxes
    14,412       14,017  
Other current assets
    28,894       27,512  
 
               
Total current assets
    719,362       738,091  
Property, plant and equipment, net
    69,193       72,776  
Long-term investments
    240,908       157,201  
Goodwill
    199,562       192,381  
Intangible assets, net
    45,647       46,389  
Other assets
    18,673       17,206  
 
               
Total assets
  $ 1,293,345     $ 1,224,044  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Accounts payable
  $ 26,326     $ 34,166  
Accrued compensation
    29,172       26,970  
Income taxes payable
    9,279       6,702  
Other current liabilities
    42,835       35,789  
 
               
Total current liabilities
    107,612       103,627  
Other liabilities
    39,061       38,595  
Stockholders’ equity:
               
Common stock
    113       113  
Additional paid-in capital
    741,423       734,732  
Retained earnings
    413,419       349,061  
Other stockholders’ equity
    (8,283 )     (2,084 )
 
               
Total stockholders’ equity
    1,146,672       1,081,822  
 
               
Total liabilities and stockholders’ equity
  $ 1,293,345     $ 1,224,044  
 
               

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