SEC Filing | MKS Instruments, Inc.

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mksi-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23621

MKS INSTRUMENTS, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2277512
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		MKSI		Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2021, the registrant had 55,458,911 shares of common stock outstanding.

MKS INSTRUMENTS, INC.

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION

	ITEM 1.	FINANCIAL STATEMENTS (Unaudited).	3

		Condensed Consolidated Balance Sheets – September 30, 2021 and December 31, 2020	3

		Condensed Consolidated Statements of Operations and Comprehensive Income – Three and nine months ended September 30, 2021 and 2020	4

		Condensed Consolidated Statements of Stockholders’ Equity – Three and nine months ended September 30, 2021 and 2020	5

		Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2021 and 2020	7

		Notes to Unaudited Condensed Consolidated Financial Statements	8

	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	33

	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	46

	ITEM 4.	CONTROLS AND PROCEDURES.	46

PART II. OTHER INFORMATION

	ITEM 1.	LEGAL PROCEEDINGS.	47

	ITEM 1A.	RISK FACTORS.	47

	ITEM 6.	EXHIBITS.	48

SIGNATURES			50

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

(Unaudited)

ASSETS	September 30, 2021			December 31, 2020
Current assets:
Cash and cash equivalents	$	633.3		$	608.3
Short-term investments		246.3			227.7
Trade accounts receivable, net of allowance for doubtful accounts of $2.4 and $2.0 at September 30, 2021 and December 31, 2020, respectively		443.4			392.7
Inventories		550.4			501.4
Other current assets		121.5			74.3
Total current assets		1,994.9			1,804.4

Property, plant and equipment, net		316.8			284.3
Right-of-use assets		184.5			184.4
Goodwill		1,226.2			1,066.4
Intangible assets, net		589.5			512.2
Long-term investments		6.4			6.5
Other assets		47.6			45.6
Total assets	$	4,365.9		$	3,903.8

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	9.0		$	14.5
Accounts payable		150.8			110.6
Accrued compensation		118.9			117.9
Income taxes payable		16.5			18.3
Lease liabilities		17.3			15.8
Deferred revenue and customer advances		37.6			31.2
Other current liabilities		87.0			65.6
Total current liabilities		437.1			373.9

Long-term debt, net		809.7			815.0
Non-current deferred taxes		98.5			59.2
Non-current accrued compensation		48.7			49.5
Non-current lease liabilities		193.0			187.4
Other non-current liabilities		50.3			57.9
Total liabilities		1,637.3			1,542.9
Commitments and contingencies (Note 19)
Stockholders’ equity:
Preferred Stock, $0.01 par value per share, 2 shares authorized; none issued and outstanding		—			—
Common Stock, no par value, 200 shares authorized; 55.5 and 55.2 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		0.1			0.1
Additional paid-in capital		892.8			873.2
Retained earnings		1,853.0			1,487.3
Accumulated other comprehensive (loss) income		(17.3	)		0.3
Total stockholders’ equity		2,728.6			2,360.9
Total liabilities and stockholders’ equity	$	4,365.9		$	3,903.8

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in millions, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net revenues:
Products	$	649.1		$	506.8		$	1,910.8		$	1,441.0
Services		92.8			83.0			274.9			228.8
Total net revenues		741.9			589.8			2,185.7			1,669.8
Cost of revenues:
Products		344.5			280.7			1,011.8			794.8
Services		49.0			47.1			148.2			127.1
Total cost of revenues (exclusive of amortization shown separately below)		393.5			327.8			1,160.0			921.9
Gross profit		348.4			262.0			1,025.7			747.9
Research and development		51.7			42.5			148.9			127.7
Selling, general and administrative		95.8			87.0			288.9			260.3
Acquisition and integration costs		8.6			0.5			20.8			3.4
Restructuring and other		2.0			3.1			9.9			6.8
Amortization of intangible assets		15.0			12.5			40.1			42.6
Asset impairment		—			—			—			1.2
COVID-19 related net credits		—			—			—			(1.2	)
Income from operations		175.3			116.4			517.1			307.1
Interest income		0.1			0.1			0.4			1.1
Interest expense		6.3			6.6			19.1			22.7
Other expense, net		2.9			1.1			11.5			3.0
Income before income taxes		166.2			108.8			486.9			282.5
Provision for income taxes		33.8			17.1			85.7			48.0
Net income	$	132.4		$	91.7		$	401.2		$	234.5
Other comprehensive income, net of tax:
Changes in value of financial instruments designated as cash flow hedges	$	3.0		$	(0.6	)	$	13.9		$	(7.7	)
Foreign currency translation adjustments		(18.2	)		17.1			(31.6	)		12.1
Net unrecognized pension gain		0.3			0.1			0.2			0.1
Unrealized (loss) gain on investments		—			—			(0.1	)		0.2
Total comprehensive income	$	117.5		$	108.3		$	383.6		$	239.2
Net income per share:
Basic	$	2.39		$	1.66		$	7.24		$	4.26
Diluted	$	2.38		$	1.66		$	7.21		$	4.24
Weighted average common shares outstanding:
Basic		55.5			55.2			55.4			55.1
Diluted		55.7			55.4			55.7			55.3

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except per share data)

(Unaudited)

	Common Stock				Additional Paid-In			Retained			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital			Earnings			Income/(Loss)			Equity
Balance at December 31, 2020		55.2	$	0.1	$	873.2		$	1,487.3		$	0.3		$	2,360.9
Net issuance under stock-based plans		0.1				(5.3	)								(5.3	)
Stock-based compensation						10.0									10.0
Cash dividend ($0.20 per common share)									(11.1	)					(11.1	)
Comprehensive income (net of tax):
Net income									122.3						122.3
Other comprehensive loss												(7.8	)		(7.8	)
Balance at March 31, 2021		55.3		0.1		877.9			1,598.5			(7.5	)		2,469.0
Net issuance under stock-based plans		0.1				(2.4	)								(2.4	)
Stock-based compensation						8.8									8.8
Cash dividend ($0.22 per common share)									(12.2	)					(12.2	)
Comprehensive income (net of tax):
Net income									146.5						146.5
Other comprehensive income												5.1			5.1
Balance at June 30, 2021		55.4		0.1		884.3			1,732.8			(2.4	)		2,614.8
Net issuance under stock-based plans		0.1				(0.4	)								(0.4	)
Stock-based compensation						8.9									8.9
Cash dividend ($0.22 per common share)									(12.2	)					(12.2	)
Comprehensive income (net of tax):
Net income									132.4						132.4
Other comprehensive loss												(14.9	)		(14.9	)
Balance at September 30, 2021		55.5	$	0.1	$	892.8		$	1,853.0</