mksi-8k_20181023.htm

 

 

 

 

 

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 23, 2018

 

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)

(IRS Employer

Identification No.)

 

 

 

2 Tech Drive, Suite 201,

Andover, MA

 

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 (see General Instructions A.2. below):

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

Item 2.02 Results of Operations and Financial Condition.

 

On October 23, 2018, MKS Instruments, Inc. announced its financial results for the quarter ended September 30, 2018. 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 or 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 23, 2018

 

 


 

Exhibit Index

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated October 23, 2018

 

 

 

 

 

 

 


 

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 thereunto duly authorized.

 

 

 

MKS Instruments, Inc.

 

 

 

 

Date: October 23, 2018

 

By:

/s/Seth H. Bagshaw

 

 

 

Name: Seth H. Bagshaw

 

 

 

Title: Sr. Vice President, Chief Financial Officer and Treasurer

 

 

mksi-ex991_6.htm

EXHIBIT 99.1

 

MKS Instruments Reports Third Quarter 2018 Financial Results

 

Andover, MA, October 23, 2018 -- MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported third quarter 2018 financial results.

 

Quarterly Financial Results

 

 

 

 

 

 

 

 

(in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

Q3 2018

 

 

Q2 2018

 

GAAP Results

 

 

 

 

 

 

 

 

Net revenues

 

$

487

 

 

$

573

 

Gross margin

 

 

47.6

%

 

 

48.0

%

Operating margin

 

 

24.0

%

 

 

26.4

%

Net income

 

$

93

 

 

$

123

 

Diluted EPS

 

$

1.70

 

 

$

2.22

 

Non-GAAP Results

 

 

 

 

 

 

 

 

Gross margin

 

 

47.6

%

 

 

48.0

%

Operating margin

 

 

26.5

%

 

 

28.3

%

Net earnings

 

$

103

 

 

$

129

 

Diluted EPS

 

$

1.88

 

 

$

2.33

 

 

Third Quarter 2018 Financial Results

Revenue was $487 million, a decrease of 15% from a record of $573 million in the second quarter of 2018 and an increase of $1 million from $486 million in the third quarter of 2017.

Net income was $93 million, or $1.70 per diluted share, compared to net income of $123 million, or $2.22 per diluted share, in the second quarter of 2018, and $76 million, or $1.38 per diluted share, in the third quarter of 2017.

Non-GAAP net earnings, which exclude special charges and credits, were $103 million, or $1.88 per diluted share, compared to $129 million, or $2.33 per diluted share, in the second quarter of 2018, and $86 million, or $1.56 per diluted share, in the third quarter of 2017.

Sales in the Vacuum and Analysis Division were $286 million, a decrease of 7% from the third quarter a year ago, primarily due to moderation in semiconductor capital equipment spending. Sales in the Light and Motion Division were $201 million, an increase of 13% from the prior year period.

Sales to semiconductor customers were $259 million, a decrease of 8% compared to the third quarter of 2017, and sales to Advanced Markets were $228 million, an increase of 11% compared to the third quarter of 2017.

“Despite the recent moderation in the semiconductor market, we are pleased with our strong financial results for the third quarter, reflecting our ability to manage through these cycles,” said Gerald Colella, Chief Executive Officer.  “Although we foresee the semiconductor market will continue to face headwinds in the near term, exiting the third quarter we have seen that our semiconductor business has been more steady and consistent.  We


are very optimistic on the long-term growth drivers within the semiconductor market.  Moreover, we have continued to diversify our markets, customers and product portfolio and are on target to grow our Advanced Markets more than two times faster than the overall market.

“The acquisition of Newport Corporation, which was completed two years ago, coupled with strong organic growth has continued to expand our portion of revenue from Advanced Markets,” said Seth Bagshaw, Chief Financial Officer. “In the past five years, we have grown our Advanced Market revenue from approximately $211 million in 2013 to approaching over $900 million in 2018.  Advanced Markets represented approximately 47% of consolidated revenue in the third quarter and year to date revenue increased almost 20% from the same period a year ago.”

Additional Financial Information

The Company had $620 million in cash and short-term investments and $348 million of Term Loan Debt as of September 30, 2018. During the third quarter of 2018, the Company repurchased 818 thousand shares for $75 million at an average price of $91.67 per share and paid a dividend of $10.9 million or $0.20 cents per diluted share.

Fourth Quarter 2018 Outlook

Based on current business levels, the Company expects that revenue in the fourth quarter of 2018 could range from $420 to $460 million.

At these volumes, GAAP net income could range from $1.19 to $1.45 per diluted share and Non-GAAP net earnings could range from $1.38 to $1.64 per diluted share. This financial guidance incorporates assumptions made based upon the Company’s current interpretation of the 2017 Tax Cut and Jobs Act and may change as additional clarification and implementation guidance is issued.

Conference Call Details

A conference call with management will be held on Wednesday, October 24, 2018 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 4268689, 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, along with the Company's earnings press release and supplemental financial information.

About MKS Instruments

MKS Instruments, Inc. is a global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for our customers. Our products are derived from our core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas


composition analysis, residual gas analysis, leak detection, control technology, ozone generation and delivery, power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control and optics. We also provide services relating to the maintenance and repair of our products, installation services and training. Our primary served markets include semiconductor, industrial technologies, life and health sciences, research and defense. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results

This release includes measures that are not in accordance with U.S. generally accepted accounting principles (“Non-GAAP measures”). Non-GAAP measures exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitions, acquisition integration costs, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to the re-pricings of our term loan, amortization of debt issuance costs, environmental costs related to an acquisition, costs associated with the sale of a business, the one-time tax effects of the 2017 Tax Cut and Jobs Act, windfall tax benefits from stock-based compensation, accrued taxes on subsidiary distributions, a tax adjustment related to the sale of a business and the related tax effects of adjustments impacting pre-tax income. These Non-GAAP measures should be viewed in addition to, and not as a substitute for, MKS’ reported results, and may be different from Non-GAAP measures used by other companies. In addition, these Non-GAAP measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these Non-GAAP measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future financial performance, business prospects and growth of MKS. These statements are only predictions based on current assumptions and expectations. Actual events or results may differ materially from those in the forward-looking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are the conditions affecting the markets in which MKS operates, including the fluctuations in capital spending in the semiconductor industry and other advanced manufacturing markets, fluctuations in net sales to our major customers, the challenges, risks and costs involved with integrating the operations of the companies we have acquired, including our most recent acquisition of Newport Corporation, the Company’s ability to successfully grow our business, potential fluctuations in quarterly results, the terms of our term loan, dependence on new product development, rapid technological and market change, acquisition strategy, manufacturing and sourcing risks, volatility of stock price, international operations, financial risk management, and the other factors described in MKS’ most recent Annual Report on Form 10-K for the year ended December 31, 2017 filed with SEC. MKS is under no


obligation to, and expressly disclaims any obligation to, update or alter these forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release.  

###

 

Company Contact:  Seth H. Bagshaw

Senior Vice President, Chief Financial Officer and Treasurer

Telephone:  978.645.5578

 

Investor Relations Contacts:  

Monica Gould

The Blueshirt Group

Telephone:  212.871.3927

Email:  monica@blueshirtgroup.com

 

Lindsay Grant Savarese

The Blueshirt Group

Telephone:  212.331.8417

Email:  lindsay@blueshirtgroup.com


MKS Instruments, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

June 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

 

 

 

 

 

(Note 12)

 

 

 

 

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

426,255

 

 

$

428,891

 

 

$

509,999

 

Services

 

 

60,897

 

 

 

57,376

 

 

 

63,141

 

Total net revenues

 

 

487,152

 

 

 

486,267

 

 

 

573,140

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

219,311

 

 

 

226,445

 

 

 

266,890

 

Services

 

 

35,981

 

 

 

31,827

 

 

 

31,373

 

Total cost of revenues

 

 

255,292

 

 

 

258,272

 

 

 

298,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

231,860

 

 

 

227,995

 

 

 

274,877

 

Research and development

 

 

31,898

 

 

 

32,548

 

 

 

36,504

 

Selling, general and administrative

 

 

70,822

 

 

 

71,347

 

 

 

76,181

 

Acquisition and integration costs

 

 

36

 

 

 

2,466

 

 

 

(1,168

)

Restructuring

 

 

1,364

 

 

 

10

 

 

 

790

 

Fees and expenses related to repricing of term loan

 

 

 

 

 

492

 

 

 

378

 

Amortization of intangible assets

 

 

10,695

 

 

 

10,977

 

 

 

10,901

 

Income from operations

 

 

117,045

 

 

 

110,155

 

 

 

151,291

 

Interest income

 

 

1,516

 

 

 

873

 

 

 

1,456

 

Interest expense

 

 

3,719

 

 

 

7,172

 

 

 

3,922

 

Other expense, net

 

 

326

 

 

 

2,485

 

 

 

281

 

Income from operations before income taxes

 

 

114,516

 

 

 

101,371

 

 

 

148,544

 

Provision for income taxes

 

 

21,239

 

 

 

25,377

 

 

 

25,682

 

Net income

 

$

93,277

 

 

$

75,994

 

 

$

122,862

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.71

 

 

$

1.40

 

 

$

2.25

 

Diluted

 

$

1.70

 

 

$

1.38

 

 

$

2.22

 

Cash dividends per common share

 

$

0.20

 

 

$

0.18

 

 

$

0.20

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

54,476

 

 

 

54,282

 

 

 

54,719

 

Diluted

 

 

54,954

 

 

 

55,101

 

 

 

55,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results:

 

Net income

 

$

93,277

 

 

$

75,994

 

 

$

122,862

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs (Note 1)

 

 

36

 

 

 

2,466

 

 

 

(1,168

)

Fees and expenses related to repricing of term loan (Note 2)

 

 

 

 

 

492

 

 

 

378

 

Amortization of debt issuance costs (Note 3)

 

 

682

 

 

 

2,314

 

 

 

660

 

Restructuring (Note 4)

 

 

1,364

 

 

 

10

 

 

 

790

 

Amortization of intangible assets

 

 

10,695

 

 

 

10,977

 

 

 

10,901

 

Windfall tax benefit on stock-based compensation (Note 5)

 

 

(287

)

 

 

(594

)

 

 

(4,752

)

Accrued tax on subsidiary distribution (Note 6)

 

 

(2,756

)

 

 

 

 

 

 

Transition tax on accumulated foreign earnings (Note 7)

 

 

863

 

 

 

 

 

 

(659

)

Pro-forma tax adjustments

 

 

(659

)

 

 

(5,789

)

 

 

(200

)

Non-GAAP net earnings (Note 8)

 

$

103,215

 

 

$

85,870

 

 

$

128,812

 

Non-GAAP net earnings per share (Note 8)

 

$

1.88

 

 

$

1.56

 

 

$

2.33

 

Weighted average shares outstanding

 

 

54,954

 

 

 

55,101

 

 

 

55,274

 

Income from operations

 

$

117,045

 

 

$

110,155

 

 

$

151,291

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs (Note 1)

 

 

36

 

 

 

2,466

 

 

 

(1,168

)

Fees and expenses related to repricing of term loan (Note 2)

 

 

 

 

 

492

 

 

 

378

 

Restructuring (Note 4)

 

 

1,364

 

 

 

10

 

 

 

790

 

Amortization of intangible assets

 

 

10,695

 

 

 

10,977

 

 

 

10,901

 

Non-GAAP income from operations (Note 9)

 

$

129,140

 

 

$

124,100

 

 

$

162,192

 

Non-GAAP operating margin percentage (Note 9)

 

 

26.5

%

 

 

25.5

%

 

 

28.3

%

Interest expense

 

$

3,719

 

 

$

7,172

 

 

$

3,922

 


Amortization of debt issuance costs (Note 3)

 

 

682

 

 

 

2,314

 

 

 

660

 

Non-GAAP interest expense

 

$

3,037

 

 

$

4,858

 

 

$

3,262

 

Net income

 

$

93,277

 

 

$

75,994

 

 

$

122,862

 

Interest expense, net

 

 

2,203

 

 

 

6,299

 

 

 

2,466

 

Provision for income taxes

 

 

21,239

 

 

 

25,377

 

 

 

25,682

 

Depreciation

 

 

8,834

 

 

 

9,153

 

 

 

8,984

 

Amortization

 

 

10,695

 

 

 

10,977

 

 

 

10,901

 

EBITDA (Note 10)

 

$

136,248

 

 

$

127,800

 

 

$

170,895

 

Stock-based compensation

 

 

5,213

 

 

 

4,846

 

 

 

6,366

 

Acquisition and integration costs (Note 1)

 

 

36

 

 

 

2,466

 

 

 

(1,168

)

Fees and expenses related to repricing of term loan (Note 2)

 

 

 

 

 

492

 

 

 

378

 

Restructuring (Note 4)

 

 

1,364

 

 

 

10

 

 

 

790

 

Other adjustments

 

 

 

 

 

836

 

 

 

 

Adjusted EBITDA (Note 11)

 

$

142,861

 

 

$

136,450

 

 

$

177,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016, during the three months ended September 30, 2018 and 2017. During the second quarter of 2018, we reversed a portion of these costs related to severance agreement provisions that were not met.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 2: We recorded fees and expenses during the three months ended June 30, 2018 and September 30, 2017 related to repricings of our Term Loan Credit Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 3: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 4: We recorded restructuring charges during the three months ended September 30, 2018, which consisted primarily of severance costs related to an organization-wide reduction in workforce. We recorded restructuring costs during the three months ended June 30, 2018 which were primarily comprised of severance costs related to transferring a portion of our shared accounting functions to a third party as well as the consolidation of certain shared accounting functions in Asia. We recorded restructuring costs during the three months ended September 30, 2017, primarily related to the consolidation of two manufacturing plants.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 5: We recorded windfall tax benefits on the vesting of stock-based compensation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 6: We recorded an adjustment to a tax accrual related to a planned distribution of an MKS subsidiary.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 7*: We adjusted the provisional transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended September 30, 2018 and June 30, 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 8: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, fees and expenses related to the repricing of our Term Loan Credit Agreement, amortization of debt issuance costs, restructuring costs, amortization of intangible assets, a windfall tax benefit related to stock compensation expense, a deferred tax adjustment, transition tax on accumulated foreign earnings and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 9: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs and amortization of intangible assets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 10: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 11: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs and other adjustments as defined in our Term Loan Credit Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 12: We historically recorded the revenue and related cost of revenue for our spare parts within Products in our Statement of Operations for the Vacuum and Analysis Division. We have now determined that these items are better reflected within Services in our Statement of Operations and have revised the presentation of our previously issued financial statements as shown below:

 


 

 

 

Three Months Ended September 30, 2017

 

 

 

As previously

reported

 

 

Adjustment

 

 

As revised

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

434,710

 

 

$

(5,819

)

 

$

428,891

 

Services

 

 

51,557

 

 

 

5,819

 

 

 

57,376

 

Total net revenues

 

 

486,267

 

 

 

 

 

 

486,267

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products

 

 

225,174

 

 

 

1,271

 

 

 

226,445

 

Cost of services

 

 

33,098

 

 

 

(1,271

)

 

 

31,827

 

Total cost of revenues

 

$

258,272

 

 

$

 

 

$

258,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*The computation of the one-time tax on our offshore earnings pursuant to the 2017 Tax Cut and Jobs Act (the "Tax Act") as well as our net deferred tax liability is based on our current understanding and assumptions regarding the impact of the Tax Act, and may change as additional clarification and implementation guidance is issued and as the interpretation of the Tax Act evolves over time.

 

 


MKS Instruments, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

September 30,

 

 

 

 

 

2018

 

 

2017 (Note 20)

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

Products

 

 

 

$

1,432,931

 

 

$

1,243,146

 

Services

 

 

 

 

181,636

 

 

 

161,031

 

Total net revenues

 

 

 

 

1,614,567

 

 

 

1,404,177

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

Products

 

 

 

 

747,522

 

 

 

662,985

 

Services

 

 

 

 

97,453

 

 

 

88,067

 

Total cost of revenues

 

 

 

 

844,975

 

 

 

751,052

 

Gross profit

 

 

 

 

769,592

 

 

 

653,125

 

Research and development

 

 

 

 

103,259

 

 

 

99,510

 

Selling, general and administrative

 

 

 

 

229,952

 

 

 

217,546

 

Acquisition and integration costs

 

 

 

 

(1,132

)

 

 

4,698

 

Restructuring

 

 

 

 

3,374

 

 

 

2,596

 

Environmental costs

 

 

 

 

1,000

 

 

 

 

Asset impairment

 

 

 

 

 

 

 

6,719

 

Fees and expenses related to repricing of term loan

 

 

 

 

378

 

 

 

492

 

Amortization of intangible assets

 

 

 

 

32,786

 

 

 

34,946

 

Income from operations

 

 

 

 

399,975

 

 

 

286,618

 

Interest income

 

 

 

 

4,077

 

 

 

1,896

 

Interest expense

 

 

 

 

13,071

 

 

 

23,001

 

Gain on sale of business

 

 

 

 

 

 

 

74,856

 

Other expense, net

 

 

 

 

1,179

 

 

 

3,741

 

Income from operations before income taxes

 

 

 

 

389,802

 

 

 

336,628

 

Provision for income taxes

 

 

 

 

68,542

 

 

 

75,134

 

Net income

 

 

 

$

321,260

 

 

$

261,494

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

$

5.89

 

 

$

4.84

 

Diluted

 

 

 

$

5.82

 

 

$

4.75

 

Cash dividends per common share

 

 

 

$

0.58

 

 

$

0.53

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

54,539

 

 

 

54,076

 

Diluted

 

 

 

 

55,171

 

 

 

55,020

 

 

 

 

 

 

 

 

 

 

 

 

The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results:

 

Net income

 

 

 

$

321,260

 

 

$

261,494

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs (Note 1)

 

 

 

 

(1,132

)

 

 

4,698

 

Expenses related to sale of a business (Note 2)

 

 

 

 

 

 

 

859

 

Excess and obsolete inventory charge (Note 3)

 

 

 

 

 

 

 

1,160

 

Fees and expenses related to repricing of term loan (Note 4)

 

 

 

 

378

 

 

 

492

 

Amortization of debt issuance costs (Note 5)

 

 

 

 

3,173

 

 

 

5,422

 

Restructuring (Note 6)

 

 

 

 

3,374

 

 

 

2,596

 

Environmental costs (Note 7)

 

 

 

 

1,000

 

 

 

 

Asset impairment (Note 8)

 

 

 

 

 

 

 

6,719

 

Gain on sale of business (Note 9)

 

 

 

 

 

 

 

(74,856

)

Amortization of intangible assets

 

 

 

 

32,786

 

 

 

34,946

 

Windfall tax benefit on stock-based compensation (Note 10)

 

 

 

 

(8,075

)

 

 

(10,413

)

Accrued tax on subsidiary distribution (Note 11)

 

 

 

 

(2,756

)

 

 

 

Tax adjustment related to the sale of a business (Note 12)

 

 

 

 

 

 

 

15,007

 

Deferred tax adjustment (Note 13)

 

 

 

 

878

 

 

 

 

Transition tax on accumulated foreign earnings (Note 14)

 

 

 

 

(1,464

)

 

 

 


Pro-forma tax adjustments

 

 

 

 

(3,106

)

 

 

(15,499

)

Non-GAAP net earnings (Note 15)

 

 

 

$

346,316

 

 

$

232,625

 

Non-GAAP net earnings per share (Note 15)

 

 

 

$

6.28

 

 

$

4.23

 

Weighted average shares outstanding

 

 

 

 

55,171

 

 

 

55,020

 

Income from operations

 

 

 

$

399,975

 

 

$

286,618

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs (Note 1)

 

 

 

 

(1,132

)

 

 

4,698

 

Expenses related to sale of a business (Note 2)

 

 

 

 

 

 

 

859

 

Excess and obsolete inventory charge (Note 3)

 

 

 

 

 

 

 

1,160

 

Fees and expenses related to repricing of term loan (Note 4)

 

 

 

 

378

 

 

 

492

 

Restructuring (Note 6)

 

 

 

 

3,374

 

 

 

2,596

 

Environmental costs (Note 7)

 

 

 

 

1,000

 

 

 

 

Asset impairment (Note 8)

 

 

 

 

 

 

 

6,719

 

Amortization of intangible assets

 

 

 

 

32,786

 

 

 

34,946

 

Non-GAAP income from operations (Note 16)

 

 

 

$

436,381

 

 

$

338,088

 

Non-GAAP operating margin percentage (Note 16)

 

 

 

 

27.0

%

 

 

24.1

%

Gross profit

 

 

 

$

769,592

 

 

$

653,125

 

Excess and obsolete inventory charge (Note 3)

 

 

 

 

 

 

 

1,160

 

Non-GAAP gross profit (Note 17)

 

 

 

$

769,592

 

 

$

654,285

 

Non-GAAP gross profit percentage (Note 17)

 

 

 

 

47.7

%

 

 

46.6

%

Interest expense

 

 

 

$

13,071

 

 

$

23,001

 

Amortization of debt issuance costs (Note 5)

 

 

 

 

3,173

 

 

 

5,422

 

Non-GAAP interest expense

 

 

 

$

9,898

 

 

$

17,579

 

Net Income

 

 

 

$

321,260

 

 

$

261,494

 

Interest expense, net

 

 

 

 

8,994

 

 

 

21,105

 

Provision for income taxes

 

 

 

 

68,542

 

 

 

75,134

 

Depreciation

 

 

 

 

27,120

 

 

 

27,605

 

Amortization

 

 

 

 

32,786

 

 

 

34,946

 

EBITDA (Note 18)

 

 

 

$

458,702

 

 

$

420,284

 

Stock-based compensation

 

 

 

 

22,005

 

 

 

19,835

 

Acquisition and integration costs (Note 1)

 

 

 

 

(1,132

)

 

 

4,698

 

Expenses related to sale of a business (Note 2)

 

 

 

 

 

 

 

859

 

Excess and obsolete inventory charge (Note 3)

 

 

 

 

 

 

 

1,160

 

Fees and expenses related to repricing of term loan (Note 4)

 

 

 

 

378

 

 

 

492

 

Restructuring (Note 6)

 

 

 

 

3,374

 

 

 

2,596

 

Environmental costs (Note 7)

 

 

 

 

1,000

 

 

 

 

Asset impairment (Note 8)

 

 

 

 

 

 

 

6,719

 

Gain on sale of business (Note 9)

 

 

 

 

 

 

 

(74,856

)

Other adjustments

 

 

 

 

772

 

 

 

2,405

 

Adjusted EBITDA (Note 19)

 

 

 

$

485,099

 

 

$

384,192

 

 

 

 

 

 

 

 

 

 

 

 

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016, during the nine months ended September 30, 2018 and 2017. During the second quarter of 2018, we reversed a portion of these costs related to severance agreement provisions that were not met.

 

 

 

 

 

 

 

 

 

 

 

 

Note 2: We recorded legal and consulting expenses during the nine months ended September 30, 2017 related to the sale of a business, which was completed in April 2017.

 

 

 

 

 

 

 

 

 

 

 

 

Note 3: We recorded excess and obsolete inventory charges in cost of sales during the nine months ended September 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.

 

 

 

 

 

 

 

 

 

 

 

 

Note 4: We recorded fees and expenses during the nine months ended September 30, 2018 and 2017 related to repricings of our Term Loan Credit Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

Note 5: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

 

 

 

 

 

 

 

 

 

 

 

 


Note 6: We recorded restructuring costs during the nine months ended September 30, 2018, which were primarily comprised of severance costs related to a worldwide reduction in workforce in the third quarter, transferring a portion of our shared accounting functions to a third party as well as the consolidation of certain shared accounting functions in Asia. We recorded restructuring costs during the nine months ended September 30, 2017, primarily related to the restructuring of one of our international facilities and the consolidation of sales offices.

 

 

 

 

 

 

 

 

 

 

 

 

Note 7: We recorded additional environmental costs during the nine months ended September 30, 2018, related to an EPA-designated Superfund site, which was acquired as part of our Newport acquisition.