MKS Instruments, Inc.
Feb 2, 2017

MKS Instruments Reports Fourth Quarter and Full Year 2016 Financial Results

 

 

ANDOVER, Mass., Feb. 02, 2017 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported fourth quarter and full year 2016 financial results.

 

GAAP Financial Results1
 
 Q4 Full Year
   2015  2016   2015  2016 
Net revenues ($ millions)$172 $405  $814 $1,295 
Operating margin 12.9% 15.4%  19.3% 12.1%
Net income ($ millions)$25.5 $45.5  $122.3 $104.8 
Diluted EPS$0.48 $0.83  $2.28 $1.94 

 


 

Non GAAP Financial Results1
 
 Q4 Full Year
  2015  2016    2015  2016 
Net revenues ($ millions)$172 $405  $814 $1,295 
Operating margin 14.4% 20.6%  20.1% 18.7%
Net income ($ millions)$18.4 $57.2  $119.1 $ 164.0 
Diluted EPS$0.34 $1.05   $2.22 $3.03 

 

1   The full year 2016 results include the results of Newport Corporation (now our Light & Motion segment) since the acquisition on April 29, 2016.

 

Fourth Quarter Financial Results  

 

Sales were $405 million, an increase of 6% from $381 million in the third quarter of 2016, and an increase of 26% from $323 million in the fourth quarter of 2015 on a pro-forma basis.

 

Fourth quarter net income was $45.5 million, or $0.83 per diluted share, compared to net income of $32.5 million, or $0.60 per diluted share in the third quarter of 2016, and $25.5 million, or $0.48 per diluted share in the fourth quarter of 2015.

 

Non-GAAP net earnings, which exclude special charges and credits, were $57.2 million, or $1.05 per diluted share, compared to $47.9 million, or $0.88 per diluted share in the third quarter of 2016, and $18.4 million, or $0.34 per diluted share in the fourth quarter of 2015.

 

Additional Financial Information

 

The Company had $423 million in cash and short-term investments as of December 31, 2016 and $627 million outstanding under its term loan.  During the fourth quarter, MKS paid a dividend of $9.1 million or $0.17 per diluted share.

 

Full Year Results

 

On a pro-forma basis, sales were $1.47 billion, an increase of 4% from $1.42 billion in 2015 driven by strong sales to our semiconductor customers. Sales to our semiconductor customers were $790 million, an increase of 14% compared to 2015, also on a pro-forma basis.

 

Sales in our Vacuum and Analysis segment, the historic MKS business, were $872 million, an increase of 7% from $814 million in 2015 driven by very strong sales to our semiconductor customers, which increased 15% from 2015.

 

"The fourth quarter was a strong finish to a transformational year for MKS. We are pleased with our sales of $405 million in the quarter, which rose 6% sequentially after a strong Q3," said Gerald Colella, Chief Executive Officer and President.  Mr. Colella added, "The integration with Newport is proceeding very well, and exiting 2016 we have realized almost $20 million of synergies on an annualized basis. We are tracking ahead of plan and are pleased to announce that we now expect to achieve total synergies of $40 million by the end of 2018, up from our previously announced goal of $35 million. The combination with Newport is allowing us to create new, high-value solutions to address a wide array of applications for a broad set of customers. As we look to 2017 and beyond, we are excited about our prospects to deliver growth, generate strong cash flow, and deliver attractive financial returns."

 

"We also continue to execute on our strategy to delever our balance sheet and reduce our interest cost. During the quarter we completed another successful re-pricing of our term loan resulting in an additional 75 basis point reduction in our interest rate. We also made a $40 million voluntary pre-payment on our term loan facility, bringing our total pre-payments to date to $150 million. These actions are expected to result in significant savings over the life of the loan and align with our strategy to delever our balance sheet and reduce our cost of capital.  Since origination on April 29th, we have reduced our non-GAAP interest expense by approximately $14 million or 36% on an annualized basis," said Seth Bagshaw, Vice President and Chief Financial Officer.

 

First Quarter 2017 Outlook  

 

Based on current business levels, the Company expects that sales in the first quarter of 2017 may range from $385 to $425 million, and at these volumes, GAAP net income could range from $0.72 to $0.96 per diluted share and non-GAAP net earnings could range from $0.93 to $1.17 per diluted share.

 

Conference Call Details

 

A conference call with management will be held today 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 47777201, 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.

 

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, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control and information technology, ozone generation and delivery, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration isolation, and optics.  Our primary served markets include semiconductor capital equipment, general industrial, life sciences, and research.  Additional information can be found at www.mksinst.com.

 

Use of Non-GAAP Financial Results

 

Non-GAAP amounts exclude amortization of acquired intangible assets, an asset impairment, costs associated with completed and announced acquisitions, acquisition integration costs, sale of previously written down inventory, an inventory step-up adjustment related to an acquisition, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to re-pricing of term loan, amortization of debt issuance costs, net proceeds from an insurance policy, the tax effect of a legal entity restructuring, other 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.  Pro forma revenue amounts assume the acquisition of Newport had occurred as of the beginning of 2015.

 

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 of MKS, our future business prospects, our future growth, and our expected synergies and cost savings from our recent acquisition of Newport Corporation.  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 we operate, including the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to our major customers, our ability to successfully integrate Newport's operations and employees, unexpected costs, charges or expenses resulting from the Newport acquisition, the terms of the term loan financing, MKS' ability to realize anticipated synergies and cost savings from the Newport acquisition, our ability to successfully grow our business, potential adverse reactions or changes to business relationships resulting from the Newport acquisition, potential fluctuations in quarterly results, the challenges, risks and costs involved with integrating the operations of any other 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 the other factors described in MKS' Quarterly Report for the quarter ended June 30, 2016 on Form 10-Q filed with the SEC.  MKS is under no obligation to, and expressly disclaims any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release.

 

              
MKS Instruments, Inc.
 
Unaudited Consolidated Statements of Operations
 
(In thousands, except per share data)
 
              
        Three Months Ended 
        December 31, December 31, September 30, 
         2016   2015   2016  
              
Net revenues:              
Products       $359,765  $143,286  $335,156  
Services        45,375   29,101   45,504  
Total net revenues        405,140   172,387   380,660   
Cost of revenues:            
Products        194,716   79,553   183,789  
Services        27,016   20,035   28,486  
Total cost of revenues       221,732   99,588   212,275  
              
Gross profit        183,408   72,799   168,385  
              
Research and development       32,870   16,841   32,268  
Selling, general and administrative      67,626   31,555   68,016  
Acquisition and integration costs      2,089   -   2,641  
Restructuring        618   505   -  
Asset impairment       5,000   -   -  
Amortization of intangible assets      12,691   1,693   12,452  
Income from operations       62,514   22,205   53,008  
              
Interest income         702   852   404  
Interest expense       10,085   11   12,008  
Other (expense) income, net      (3,575)  -   844  
              
Income from operations before income taxes     49,556   23,046   42,248  
Provision (benefit) for income taxes      4,069   (2,476)  9,699  
Net income       $45,487  $25,522  $32,549  
              
Net income per share:            
Basic       $ 0.85  $0.48  $0.61  
Diluted       $0.83   $0.48  $0.60  
               
Cash dividends per common share     $0.17  $0.17  $0.17  
              
Weighted average shares outstanding:          
Basic        53,617   53,217   53,574  
Diluted        54,518   53,554   54,315  
              
The following supplemental Non-GAAP earnings information is presented        
to aid in understanding MKS' operating results:         
              
Net income   $45,487  $25,522  $32,549  
        
Adjustments:        
Acquisition and integration costs (Note 1)        2,089   -   2,641  
Acquisition inventory step-up (Note 2)        -   -   4,971  
Fees and expenses relating to re-pricing of term loan (Note 3)       526   -   -  
Amortization of debt issuance costs (Note 4)        2,430   -   2,838  
Restructuring (Note 5)        618   505   -  
Net proceeds from an insurance policy (Note 6)        -   -   (1,323) 
Tax (benefit) expense from legal entity restructuring (Note 7)        (6,570)  -   1,532  
Release of tax reserves (Note 8)        -   (7,692)  -  
Tax benefit and tax credits (Note 9)        -   (1,378)  -  
Excess and obsolete charge (Note 10)        -   488   -  
Asset impairment (Note 11)        5,000   -   -  
Withholding tax on dividends (Note 12)        1,362   -   -  
Amortization of intangible assets        12,691   1,693   12,452  
Pro forma tax adjustments  (6,437)  (761)  (7,790) 
        
Non-GAAP net earnings (Note 13) $57,196  $18,377  $47,870  
        
Non-GAAP net earnings per share (Note 13) $1.05  $ 0.34  $0.88  
        
Weighted average shares outstanding  54,518   53,554   54,315  
        
Income from operations $62,514  $22,205  $53,008  
        
Adjustments:       
Acquisition and integration costs (Note 1)        2,089   -   2,641  
Acquisition inventory step-up (Note 2)        -   -   4,971  
Fees and expenses relating to re-pricing of term loan (Note 3)       526   -    -  
Restructuring (Note 5)        618   505   -  
Excess and obsolete charge (Note 10)        -   488   -  
Asset impairment (Note 11)        5,000   -   -  
Amortization of intangible assets         12,691   1,693   12,452  
        
Non-GAAP income from operations (Note 14) $83,438  $24,891  $73,072  
        
Non-GAAP operating margin percentage (Note 14)  20.6%  14.4%  19.2% 
       
Gross profit $183,408  $72,799  $168,385  
Acquisition inventory step-up (Note 2)  -   -   4,971  
Excess and obsolete charge (Note 10)  -   488   -  
       
Non-GAAP gross profit (Note 15) $183,408  $73,287  $173,356  
       
Non-GAAP gross profit percentage (Note 15)  45.3%  42.5%  45.5% 
       
Interest expense $10,085  $11  $12,008  
Amortization of debt issuance costs (Note 4)  2,430   -   2,838  
        
Non-GAAP interest expense $7,655  $11  $9,170  
       
Note 1: We recorded $2.1 million and $2.6 million of acquisition and integration costs during the three months ended December 31, 2016 and September 30, 2016, respectively, related to the Newport Corporation acquisition. 
              
Note 2: We recorded $5.0 million of amortization expense during the three months ended September 30, 2016, related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition. 
              
Note 3: We recorded $0.5 million of fees and expenses during the three months ended December 31, 2016 related to the second re-pricing of our Term Loan Credit Agreement. 
              
Note 4: We recorded $2.4 million and $2.8 million of additional interest expense during the three months ended December 31, 2016 and September 30, 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility. 
              
Note 5: We recorded $0.6 million of restructuring costs during the three months ended December 31, 2016, related to the restructuring of one of our international facilities. We recorded $0.5 million of restructuring costs during the three months ended December 31, 2015 related to the consolidation of an international manufacturing operation.  
              
Note 6: We recorded net proceeds of $1.3 million from a Company owned life insurance policy during the three months ended September 30, 2016. 
              
Note 7: We recorded a tax benefit of $6.6 million during the three months ended December 31, 2016 and a tax expense of $1.5 million during the three months ended September 30, 2016, related to a legal entity restructuring. 
              
Note 8:  We recorded credits of $7.7 million for reserve releases related to the settlement of audits and expiration of the statute of limitations during the three months ended December 31, 2015. 
              
Note 9: We recorded a tax benefit of $1.8 million during the three months ended December 31, 2015 from the reinstatement of the U.S. research tax credit, representing a full year benefit. We excluded the benefit applicable to the first three quarters of 2015, which is $1.4 million, from Non-GAAP net earnings. 
              
Note 10: We recorded $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line during the three months ended December 31, 2015. 
              
Note 11: We recorded a $5.0 million impairment charge related to a minority interest investment in a privately held company during the three months ended December 31, 2016. 
              
Note 12: We recorded $1.4 million for withholding tax on intercompany dividends during the three months ended December, 31, 2016.      
              
Note 13: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, an inventory step-up adjustment related to an acquisition, fees and expenses related to the re-pricing of a term loan credit agreement, amortization of debt issuance costs, restructuring costs, net proceeds from an insurance policy, the tax effect of a legal entity restructuring, reserve releases related to the settlement of audits and expiration of the statute of limitations, tax benefit and tax credits, an excess and obsolete inventory charge, an asset impairment charge,  a withholding tax on dividends, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period. 
              
Note 14: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, an inventory step-up adjustment related to an acquisition, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an excess and obsolete inventory charge, an asset impairment charge and amortization of intangible assets. 
              
Note 15:  The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to an acquisition and excess and obsolete inventory charges. 
               

 

 

 

            
MKS Instruments, Inc. 
Unaudited Consolidated Statements of Operations 
(In thousands, except per share data) 
          
        Twelve Months Ended 
        December 31, 
         2016   2015  
            
Net revenues:           
Products       $1,134,013  $697,104  
Services        161,329   116,420  
Total net revenues        1,295,342   813,524  
Cost of revenues:          
Products        627,850   373,764  
Services        101,873   76,888  
Total cost of revenues       729,723   450,652  
            
Gross profit        565,619   362,872  
            
Research and development       110,579   68,305  
Selling, general and administrative      229,171   129,087  
Acquisition and integration costs      27,279   30  
Restructuring        642   2,074  
Asset impairment       5,000   -  
Amortization of intangible assets      35,681   6,764  
Income from operations       157,267   156,612  
            
Interest income        2,560   2,999  
Interest expense       30,611   143  
Other (expense), net       (1,239)  -  
            
Income from operations before income taxes     127,977   159,468  
Provision for income taxes       23,168   37,171  
Net income       $104,809  $122,297  
            
Net income per share:          
Basic       $1.96   $2.30  
Diluted        $1.94  $2.28  
            
Cash dividends per common share     $0.68  $0.675  
            
Weighted average shares outstanding:        
Basic        53,472   53,282  
Diluted        54,051    53,560  
            
The following supplemental Non-GAAP earnings information is presented      
to aid in understanding MKS' operating results:       
            
Net income       $104,809  $122,297  
            
Adjustments:           
Acquisition and integration costs (Note 1)        27,279   30  
Acquisition inventory step-up (Note 2)        15,090   -  
Fees and expenses relating to re-pricing of term loan (Note 3)        1,239   -  
Amortization of debt issuance costs (Note 4)         6,897   -  
Restructuring (Note 5)        642   2,074  
Sale of previously written down inventory (Note 6)        -   (2,098) 
Net proceeds from an insurance policy (Note 7)        (1,323)  -  
Tax benefit from legal entity restructuring (Note 8)        (5,038)  -  
Release of tax reserves (Note 9)        -   (7,692) 
Excess and obsolete charge (Note 10)        -   488  
Asset impairment (Note 11)        5,000   -  
Withholding tax on dividends (Note 12)        1,362   -  
Amortization of intangible assets        35,681   6,764  
Pro forma tax adjustments        (27,617)  (2,790) 
            
Non-GAAP net earnings (Note 13)     $164,021  $119,073  
            
Non-GAAP net earnings per share (Note 13)    $3.03  $2.22  
            
Weighted average shares outstanding      54,051   53,560  
            
            
Income from operations      $157,267  $156,612  
            
Adjustments:           
Acquisition and integration costs (Note 1)         27,279   30  
Acquisition inventory step-up (Note 2)        15,090   -  
Fees and expenses relating to re-pricing of term loan (Note 3)        1,239   -  
Restructuring (Note 5)         642   2,074  
Sale of previously written down inventory (Note 6)        -   (2,098 ) 
Excess and obsolete charge (Note 10)        -   488  
Asset impairment (Note 11)        5,000   -  
Amortization of intangible assets        35,681   6,764  
            
Non-GAAP income from operations (Note 14)    $242,198  $163,870  
            
Non-GAAP operating margin percentage (Note 14)    18.7%  20.1% 
            
Gross profit $565,619  $362,872  
Acquisition inventory step-up (Note 2)        15,090   -  
Sale of previously written down inventory (Note 6)        -   (2,098) 
Excess and obsolete charge (Note 10)        -   488  
     
Non-GAAP gross profit (Note 15) $580,709  $361,262  
     
Non-GAAP gross profit percentage (Note 15)  44.8%  44.4% 
            
Interest expense      $ 30,611  $143  
Amortization of debt issuance costs (Note 4)     6,897   -  
             
Non-GAAP interest expense     $23,714  $143  
            
Note 1: We recorded $27.3 million of acquisition and integration costs during the twelve months ended December 31, 2016 related to the Newport Corporation acquisition, which closed during the second quarter of 2016. We recorded $0.03 million of acquisition costs during the twelve months ended December 31, 2015 related to the Precisive LLC acquisition, which closed during the first quarter of 2015. 
            
Note 2: We recorded $15.1 million of amortization expense during the twelve months ended December 31, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition. 
                
Note 3: We recorded $1.2 million of fees and expenses during the twelve months ended December 31, 2016, related to the two re-pricings of our Term Loan Credit Agreement. 
                
Note 4: We recorded $6.9 million of amortization expense during the twelve months ended December 31, 2016 related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility. 
                
Note 5: We recorded $0.6 million of restructuring costs during the twelve months ended December 31, 2016, related to the restructuring of one of our international facilities. We recorded $2.1 million of restructuring costs during the twelve months ended December 31, 2015 related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. 
            
Note 6: Cost of sales for 2015 includes a $2.1 million reversal of an excess and obsolete inventory charge for inventory that was subsequently sold. 
            
Note 7: We recorded net proceeds of $1.3 million from a Company owned life insurance policy during the twelve months ended December 31, 2016. 
            
Note 8: We recorded a tax benefit of $5.0 million related to a legal entity restructuring during the twelve months ended December 31, 2016. 
            
Note 9: We recorded credits of $7.7 million for reserve releases related to the settlement of audits and expiration of the statute of limitations during the twelve months ended December 31, 2015. 
            
Note 10: We recorded $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line during the twelve months ended December 31, 2015. 
            
Note 11: We recorded a $5.0 million impairment charge related to a minority interest investment in a privately held company during the twelve months ended December 31, 2016. 
            
Note 12: We recorded $1.4 million for withholding tax on intercompany dividends during the twelve months ended December 31, 2016. 
            
Note 13: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, an inventory step-up adjustment related to an acquisition, fees and expenses related to re-pricings of a term loan credit agreement, amortization of debt issuance costs, restructuring costs, the reversal of an excess and obsolete inventory charge for inventory that was subsequently sold, net proceeds from an insurance policy, the tax effect of a legal entity restructuring, excess and obsolete inventory charges, an asset impairment charge, a withholding tax on dividends, reserve releases related to the settlement of audits and expiration of the statute of limitations, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period. 
            
Note 14: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, an inventory step-up adjustment related to an acquisition, fees and expenses related to re-pricings of a term loan credit agreement, restructuring costs, the reversal of an excess and obsolete inventory charge for inventory that was subsequently sold, excess and obsolete inventory charges, an asset impairment charge and amortization of intangible assets. 
            
Note 15:  The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to an acquisition, the reversal of an excess and obsolete inventory charge for inventory that was subsequently sold and excess and obsolete inventory charges. 
            

 

 

 

MKS Instruments, Inc. 
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate 
(In thousands) 
            
  Three Months Ended December 31, 2016 Three Months Ended September 30, 2016
 Income Before Provision (benefit) Effective Income Before Provision (benefit) Effective
 Income Taxes for Income Taxes Tax Rate Income Taxes for Income Taxes Tax Rate
     
GAAP  $49,556  $4,069   8.2% $42,248  $9,699   23.0%
             
Adjustments:            
Acquisition and integration costs (Note 1)  2,089   -     2,641   -   
Acquisition inventory step-up (Note 2)  -   -     4,971   -   
Fees and expenses relating to re-pricing of term loan (Note 3)  526   -     -   -   
Amortization of debt issuance costs (Note 4)  2,430    -     2,838   -   
Restructuring (Note 5)  618   -     -   -   
Net proceeds from an insurance policy (Note 6)  -   -     (1,323)  -   
Tax (benefit) expense from legal entity restructuring (Note 7)  -   6,570     -   (1,532)  
Asset impairment (Note 8)  5,000   -     -   -   
Withholding tax on dividends (Note 12)  -   (1,362)    -   -   
Amortization of intangible assets  12,691   -     12,452   -   
Tax effect of pro forma adjustments  -   6,437     -   7,790   
              
Non-GAAP $72,910  $15,714   21.6% $63,827  $15,957  25.0%
              
             
  Three Months Ended December 31, 2015      
  Income Before Provision (benefit) Effective      
  Income Taxes for Income Taxes Tax Rate      
             
GAAP $23,046  $(2,476)  -10.7%      
             
Adjustments:             
Restructuring (Note 5)  505   -         
Excess and obsolete inventory charge (Note 9)  488   -         
Amortization of intangible assets  1,693   -         
Release of tax reserves (Note 11)  -   7,692         
Tax benefit and tax credits (Note 13)  -   1,378         
Tax effect of pro forma adjustments  -   761         
             
Non-GAAP $25,732  $7,355   28.6%      
             
             
  Twelve Months Ended December 31, 2016 Twelve Months Ended December 31, 2015
 Income Before Provision (benefit) Effective Income Before Provision (benefit) Effective
 Income Taxes for Income Taxes Tax Rate Income Taxes for Income Taxes Tax Rate
         
GAAP $127,977  $23,168   18.1% $159,468  $37,171  23.3%
             
Adjustments:             
Acquisition and integration costs (Note 1)  27,279    -     30   -   
Acquisition inventory step-up (Note 2)  15,090   -     -   -   
Fees and expenses relating to re-pricing of term loan (Note 3)  1,239   -     -   -   
Amortization of debt issuance costs (Note 4)  6,897   -     -   -   
Restructuring (Note 5)  642   -     2,074   -   
Sale of previously written down inventory (Note 10)  -   -     (2,098)  -   
Net proceeds from an insurance policy (Note 6)  (1,323)  -     -   -   
Tax expense from legal entity restructuring (Note 7)  -   5,038     -   -   
Release of tax reserves (Note 11)  -   -     -   7,692   
Excess and obsolete inventory charge (Note 9)  -   -     488   -   
Asset impairment (Note 8)  5,000   -     -   -   
Withholding tax on dividends (Note 12)  -   (1,362)    -   -    
Amortization of intangible assets  35,681   -     6,764   -   
Tax effect of pro forma adjustments  -   27,617     -   2,790   
             
Non-GAAP $218,482  $54,461   24.9% $166,726  $47,653  28.6%
             
             
Note 1: We recorded $2.1 million and $27.3 million of acquisition and integration costs during the three and twelve months ended December 31, 2016, respectively, related to the Newport Corporation acquisition, which closed during the second quarter of 2016. We recorded $0.03 million of acquisition costs during the twelve months ended December 31, 2015 related to the Precisive LLC acquisition, which closed during the first quarter of 2015.
             
Note 2: We recorded $5.0 million and $15.1 million of amortization expense during the three  months ended September 30, 2016 and twelve months ended December 31, 2016, respectively, related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.
             
Note 3: We recorded $0.5 million and $1.2 million of fees and expenses during the three and twelve months ended December 31, 2016, respectively, related to the re-pricing of our Term Loan Credit Agreement.
             
Note 4: We recorded $2.4 million and $6.9 million of additional interest expense during the three and twelve months ended December 31, 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.
             
Note 5: We recorded $0.6 million of restructuring costs during the three and twelve months ended December 31, 2016, related to the restructuring of one of our international facilities. We recorded $0.5 million and $2.1 million of restructuring costs during the three and twelve months ended December 31, 2015, respectively, related to the outsourcing of an international manufacturing operation.
             
Note 6: We recorded net proceeds of $1.3 million during 2016 from a company owned life insurance policy.
             
Note 7: We recorded a tax benefit of $6.6 million and $5.0 million for the three and twelve months ended December 31, 2016, respectively, and a tax expense of $1.5 million for the three months ended September 30, 2016, related to a legal entity restructuring.
             
Note 8: We recorded a $5.0 million impairment charge during the three and twelve months ended December 31, 2016, related to a minority interest investment in a privately held company.
              
Note 9: We recorded $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line during the three and twelve months ended December 31, 2015.
             
Note 10: Cost of sales for 2015 includes a $2.1 million reversal of an excess and obsolete inventory charge for inventory that was subsequently sold.
              
Note 11: We recorded credits for reserve releases related to the settlement of audits and expiration of the statute of limitations in 2015.
             
Note 12: We recorded $1.4 million during the three and twelve months ended December 31, 2016 for withholding tax on intercompany dividends.
             
Note 13: We recorded a tax benefit of $1.8 million from the reinstatement of the U.S. research tax credit, representing a full year benefit during the three months ended December 31, 2015. We excluded the benefit applicable to the first three quarters of 2015, which is $1.4 million, from Non-GAAP net earnings.
                     
             
 
MKS Instruments, Inc. 
Reconciliation of Q1-17 Guidance - GAAP Net Income to Non-GAAP Net Earnings   
(In thousands, except per share data)  
             
  Three Months Ended March 31, 2017    
  Low Guidance High Guidance    
  $ Amount  $ Per Share $ Amount $ Per Share    
             
GAAP net income $39,200  $0.72  $52,500  $0.96     
              
Amortization  12,300   0.22   12,300   0.22     
             
Debt issuance costs  1,000   0.02   1,000   0.02     
             
Acquisition costs  300   0.01   300    0.01     
             
Integration costs  2,600   0.05   2,600   0.05     
             
Tax effect of adjustments (Note 1)  (4,700)  (0.09)  (4,900)  (0.09)    
             
Non-GAAP net earnings $50,700  $0.93  $63,800  $1.17     
              
Q1 -17 forecasted shares    54,700     54,700     
              
Note 1: The Non-GAAP adjustments are tax effected at the applicable statutory rates and the difference between the GAAP and Non-GAAP tax rates. 
             

 

 

 

MKS Instruments, Inc.  
Unaudited Consolidated Balance Sheet  
(In thousands)  
          
     December 31, December 31,  
      2016   2015    
          
ASSETS          
          
Cash and cash equivalents  $228,623  $ 227,574   
Restricted cash    5,287   -   
Short-term investments   189,463   430,663   
Trade accounts receivable, net   248,757   101,883   
Inventories    275,869   152,631   
Other current assets    50,770   26,760   
          
 Total current assets   998,769    939,511   
          
Property, plant and equipment, net  174,559   68,856   
Goodwill     588,585   199,703   
Intangible assets, net   408,004   44,027   
Long-term investments   9,858   -   
Other assets    32,467   21,250   
          
Total assets   $2,212,242  $1,273,347   
          
          
LIABILITIES AND STOCKHOLDERS' EQUITY     
          
Short-term debt   $10,993  $-   
Accounts payable    69,337   23,177   
Accrued compensation   67,728   28,424   
Income taxes payable   22,794   4,024   
Other current liabilities   66,448   35,359   
 Total current liabilities  237,300   90,984   
          
Long-term debt, net    601,229   -   
Non-current deferred taxes   69,068   2,655   
Non-current accrued compensation  44,714   13,395   
Other liabilities    18,139   5,432   
 Total liabilities   970,450    112,466   
          
Stockholders' equity:        
Common stock    113   113   
Additional paid-in capital   777,482   744,725   
Retained earnings    494,744   427,214   
Accumulated other comprehensive loss  (30,547)  (11,171)  
 Total stockholders' equity  1,241,792   1,160,881    
          
Total liabilities and stockholders' equity $2,212,242  $1,273,347   
          

 


 

Company Contact:  Seth H. Bagshaw

Vice President, Chief Financial Officer and Treasurer

Telephone:  978.645.5578



Investor Relations Contact:  Monica Gould

The Blueshirt Group

Telephone:  212.871.3927

Email:  monica@blueshirtgroup.com

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Source: MKS Instruments, Inc.

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