Contact: Ronald C. Weigner Vice President and Chief Financial Officer Telephone: 978.284.4446
MKS Instruments Reports Fourth Quarter and Year 2005 Results
Wilmington, Mass., February 16, 2006 — MKS Instruments, Inc. (NASDAQ: MKSI), a leading worldwide provider of process control technologies for improving productivity in semiconductor and other advanced manufacturing processes, today reported fourth quarter and full year 2005 financial results. Fourth quarter net sales were $129.2 million, up 5 percent from $122.5 million in the third quarter of 2005 and down 1 percent from $130.9 million in the fourth quarter of 2004.
Fourth quarter GAAP net earnings increased to $12.1 million, or $0.22 per diluted share, compared to third quarter 2005 GAAP net earnings of $7.2 million, or $0.13 per diluted share. Fourth quarter 2004 GAAP net earnings of $24.1 million, or $0.44 per diluted share included a non-cash adjustment of $16.7 million, or $0.31 per share, to reverse a previously established valuation allowance against net deferred tax assets. Excluding this adjustment, fourth quarter 2004 GAAP net earnings were $7.4 million, or $0.14 per diluted share.
Fourth quarter non-GAAP net earnings, which exclude amortization of acquired intangible assets and special items, increased to $12.1 million, or $0.22 per share, compared to $9.2 million, or $0.17 per share, for the third quarter of 2005 and $11.1 million, or $0.20 per share, for the fourth quarter of 2004.
For calendar year 2005, net sales totaled $509.3 million compared to $555.1 million for 2004. GAAP net earnings totaled $34.6 million, or $0.63 per diluted share, compared to $69.8 million, or $1.28 per diluted share in 2004. Non-GAAP net earnings for 2005 totaled $39.5 million, or $0.72 per share, compared to $62.9 million, or $1.15 per diluted share, in 2004.
Leo Berlinghieri, Chief Executive Officer and President, said, “I am pleased to report that fourth quarter sales and earnings exceeded our guidance. We saw order momentum from semiconductor OEMs and device manufacturers as the quarter progressed.”
First quarter 2006 results will include the effect of two recent acquisitions, and stock compensation expense of approximately $0.03 per share related to the adoption of SFAS 123 ®.
Mr. Berlinghieri continued, “Our guidance reflects strong demand for our technology and solutions that improve semiconductor process performance and productivity. Based on current customer order patterns, we estimate that first quarter 2006 sales could range from $160 to $165 million. GAAP net earnings could range from $0.17 to $0.20 per diluted share on 55 million shares outstanding. Non-GAAP net earnings, which exclude amortization of acquired intangible assets, stock compensation expense, and special items, could range from $0.27 to $0.30 per share.
“While it is not clear how the year 2006 will unfold, MKS is well positioned for a cyclical upturn, with our technology leadership, strong product portfolio and short lead times. We have the resources across our global infrastructure to work closely with our customers as we respond to increased demand.”
The financial results that exclude certain charges and special items are not in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). MKS has historically been acquisitive, and MKS’ management believes the presentation of non-GAAP financial measures, which exclude the costs associated with acquisitions and other special items, is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.
Management will discuss fourth quarter financial results on a conference call today at 8:30 a.m. (Eastern Time). Dial-in numbers are 1-800-257-7087 for domestic callers and 303-262-2131 for international callers. The call will be broadcast live and available for replay atwww.mksinstruments.com. To hear a telephone replay through February 23, 2006, dial 303-590-3000, passcode 11052264#.
MKS Instruments, Inc. is a leading worldwide provider of process control solutions for advanced manufacturing processes such as semiconductor device manufacturing; thin-film manufacturing for flat panel displays, data storage media, architectural glass and electro-optical products; and technology for medical imaging equipment. Our instruments, components and subsystems incorporate sophisticated technologies to power, measure, control, and monitor increasingly complex gas-related semiconductor manufacturing processes, thereby enhancing our customers’ uptime, yield and throughput, and improving their productivity and return on invested capital.
This release contains projections or other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 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, 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 Quarterly Report 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.
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1
MKS Instruments, Inc. Unaudited Consolidated Statements of Operations (In thousands, except per share data)
Three Months Ended
December 31, 2005
December 31, 2004
September 30, 2005
Net sales
$
129,174
$
130,859
$
122,520
Cost of sales
77,545
82,716
74,863
Gross profit
51,629
48,143
47,657
Research and development
12,994
13,816
13,684
Selling, general and administrative
23,791
21,500
22,341
Amortization of acquired intangible assets
3,099
3,691
3,382
Income from litigation settlement
(3,000
)
—
—
Restructuring (NOTE 1)
(91
)
—
(278
)
Income from operations
14,836
9,136
8,528
Interest income, net
2,202
873
1,811
Income before income taxes
17,038
10,009
10,339
Provision (benefit) for income taxes (NOTE 2)
4,933
(14,106
)
3,115
Net income
$
12,105
$
24,115
$
7,224
Net income per share:
Basic
$
0.22
$
0.45
$
0.13
Diluted
$
0.22
$
0.44
$
0.13
Weighted average shares outstanding:
Basic
54,269
53,680
54,146
Diluted
54,945
54,272
54,743
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
GAAP net income
$
12,105
$
24,115
$
7,224
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
1,937
3,691
2,114
Restructuring (NOTE 1)
(57
)
—
(174
)
Income from litigation settlement
(1,875
)
—
—
Benefit for income taxes (NOTE 2)
—
(16,729
)
—
Non-GAAP net income (NOTE 3)
$
12,110
$
11,077
$
9,164
Non-GAAP net income per share (NOTE 3)
$
0.22
$
0.20
$
0.17
Weighted average shares outstanding — diluted
54,945
54,272
54,743
NOTE 1: Restructuring for the three months ended December 31, 2005 and September 30, 2005 includes favorable lease adjustments related to previously vacated facilities.
NOTE 2: The three month period ended December 31, 2004 includes a benefit of $16,729 for the reversal of the previously established valuation allowance against net deferred tax assets.
NOTE 3: The Non-GAAP net income and Non-GAAP net income per share amounts exclude amortization of acquired intangible assets, acquisition and disposition related charges and special items, net of applicable income taxes.
2
MKS Instruments, Inc. Unaudited Consolidated Statements of Operations (In thousands, except per share data)
Twelve Months Ended
December 31,
2005
2004
Net sales
$
509,294
$
555,080
Cost of sales
308,860
335,709
Gross profit
200,434
219,371
Research and development
55,916
56,973
Selling, general and administrative
93,021
87,284
Amortization of acquired intangible assets
13,864
14,764
Income from litigation settlement
(3,000
)
—
Restructuring
85
437
Income from operations
40,548
59,913
Interest income, net
6,459
1,913
Other income (NOTE 1)
—
5,402
Income before income taxes
47,007
67,228
Provision (benefit) for income taxes
12,442
(2,611
)
Net income
$
34,565
$
69,839
Net income per share:
Basic
$
0.64
$
1.30
Diluted
$
0.63
$
1.28
Weighted average shares outstanding:
Basic
54,067
53,519
Diluted
54,633
54,656
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
GAAP net income
$
34,565
$
69,839
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
8,665
14,764
Restructuring
41
437
Income from litigation settlement
(1,875
)
—
Other income (NOTE 1)
—
(5,402
)
Benefit for income taxes (NOTE 2)
(1,901
)
(16,729
)
Non-GAAP net income (NOTE 3)
$
39,495
$
62,909
Non-GAAP net income per share (NOTE 3)
$
0.72
$
1.15
Weighted average shares outstanding — diluted
54,633
54,656
NOTE 1: The GAAP amount for December 31, 2004 represents primarily the collection of a note receivable of $5.0 million during the three months ended June 30, 2004 which had been written off in 2002.
NOTE 2: The twelve months ended December 31, 2005 includes a benefit of $1,901 in connection with closing an IRS audit during the three months ended June 30, 2005. The twelve months ended December 31, 2004 includes a benefit of $16,729 for the reversal of the previously established valuation allowance against net deferred tax assets.
NOTE 3: The Non-GAAP net income and Non-GAAP net income per share amounts exclude amortization of acquired intangible assets, acquisition and disposition related charges and special items, net of applicable income taxes.
MKS Instruments, Inc. Unaudited Consolidated Balance Sheet (In thousands)
December 31, 2005
December 31, 2004
ASSETS
Cash and short-term investments
$
292,619
$
235,900
Trade accounts receivable
82,610
82,315
Inventories
98,242
99,633
Other current assets
25,676
22,037
Total current assets
499,147
439,885
Property, plant and equipment, net
78,726
80,917
Long-term investments
857
4,775
Goodwill
255,243
255,740
Other acquired intangible assets
27,422
41,604
Other assets
2,345
5,756
Total assets
$
863,740
$
828,677
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt
$
18,886
$
24,509
Accounts payable
27,955
23,338
Accrued expenses and other liabilities
42,246
44,338
Total current liabilities
89,087
92,185
Long-term debt
5,238
6,667
Other long-term liabilities
6,572
3,191
Stockholders’ equity:
Common stock
113
113
Additional paid-in capital
639,152
631,760
Retained earnings
116,642
82,077
Other stockholders’ equity
6,936
12,684
Total stockholders’ equity
762,843
726,634
Total liabilities and stockholders’ equity
$
863,740
$
828,677
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