Contact: Ronald C. Weigner Vice President and Chief Financial Officer Telephone: 978.645.5500
MKS Instruments Reports Third Quarter 2008 Financial Results
Andover, Mass., October 22, 2008 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported third quarter 2008 financial results.
Sales were $157.4 million, down 8 percent from $171.0 million in the second quarter of 2008 and down 13 percent from $181.0 million in the third quarter of 2007.
Net income was $6.8 million, or $0.14 per diluted share, compared to $9.2 million, or $0.18 per diluted share, in the second quarter of 2008 and $21.4 million, or $0.37 per diluted share, in the third quarter of 2007.
Non-GAAP net earnings, which exclude amortization of acquired intangible assets and special items, totaled $8.9 million, or $0.18 per diluted share, compared to $10.5 million, or $0.21 per diluted share, in the second quarter of 2008 and $22.0 million, or $0.38 per diluted share, in the third quarter of 2007.
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’ management believes the presentation of non-GAAP financial measures, which exclude costs associated with acquisitions and special items, is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.
Leo Berlinghieri, Chief Executive Officer and President, said, “Despite an increasingly difficult environment in the third quarter, we continued to penetrate the high-growth solar market with 27 percent sales growth quarter over quarter. This progress reduced the impact of lower spending for semiconductor capital equipment in a cyclical industry downturn. Our cash position remained strong.
“Given the current challenging macroeconomic environment, we expect fourth quarter sales could decline and range from $130 to $140 million, with income above breakeven. Net income could range from $0.01 to $0.09 per diluted share on approximately 50 million shares outstanding, and non-GAAP net earnings could range from $0.00 to $0.07 per diluted share.”
Management will discuss third quarter financial results on a conference call today at 8:30 a.m. (Eastern Time). Dial-in numbers are 1-800-257-2182 for domestic callers and 303-262-2140 for international callers. The call will be broadcast live and available for replay atwww.mksinstruments.com. To hear a telephone replay through October 29, 2008, dial 303-590-3000, pass code 11120704#.
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, electrostatic charge management, 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, data storage media, and other advanced coatings. We also leverage our technology in other markets with advanced manufacturing applications including medical equipment, pharmaceutical manufacturing, and energy generation and environmental monitoring.
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, 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, 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
September 30, 2008
September 30, 2007
June 30, 2008
Net sales
$
157,364
$
181,014
$
171,002
Cost of sales
94,425
104,416
100,514
Gross profit
62,939
76,598
70,488
Research and development
19,528
17,159
20,486
Selling, general and administrative
33,460
32,494
35,113
Amortization of acquired intangible assets
1,963
3,877
1,984
Income from operations
7,988
23,068
12,905
Gain (Impairment) of investments
506
—
(251
)
Interest income, net
1,326
4,010
1,636
Income before income taxes
9,820
27,078
14,290
Provision for income taxes
3,029
5,696
5,056
Net income
$
6,791
$
21,382
$
9,234
Net income per share:
Basic
$
0.14
$
0.38
$
0.19
Diluted
$
0.14
$
0.37
$
0.18
Weighted average shares outstanding:
Basic
48,730
56,809
49,691
Diluted
49,898
57,482
50,866
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
GAAP net income
$
6,791
$
21,382
$
9,234
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
1,963
3,877
1,984
Expense (Benefit) for income taxes (Note 1)
819
(1,847
)
—
Tax effect of adjustments
(709
)
(1,427
)
(717
)
Non-GAAP net earnings (Note 2)
$
8,864
$
21,985
$
10,501
Non-GAAP net earnings per share (Note 2)
$
0.18
$
0.38
$
0.21
Weighted average shares outstanding — diluted
49,898
57,482
50,866
Note 1: The three month period ended September 30, 2008 includes a net tax expense for discrete items of $819 attributable to the booking of a valuation allowance on state tax credits of $2,651 partially offset by a benefit of $1,832 for discrete items related to the reversal of FIN 48 reserve items as a result of a statute of limitations expiration. The three month period ended September 30, 2007 includes a benefit of $1,847 attributable to a discrete tax matter related to our research and development tax credits.
Note 2: The Non-GAAP net earnings and Non-GAAP net earnings 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)
Nine Months Ended September 30,
2008
2007
Net sales
$
521,814
$
596,424
Cost of sales
306,480
340,934
Gross profit
215,334
255,490
Research and development
59,263
53,809
Selling, general and administrative
100,282
102,998
Amortization of acquired intangible assets
7,052
12,092
Income from operations
48,737
86,591
Impairment of investments
(906
)
—
Interest income, net
5,138
10,896
Income before income taxes
52,969
97,487
Provision for income taxes
16,562
26,288
Net income
$
36,407
$
71,199
Net income per share:
Basic
$
0.73
$
1.26
Diluted
$
0.71
$
1.24
Weighted average shares outstanding:
Basic
50,051
56,661
Diluted
51,112
57,582
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
GAAP net income
$
36,407
$
71,199
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
7,052
12,092
Expense (Benefit) for income taxes (Note 1)
819
(1,847
)
Foreign exchange gain from legal entity restructuring (Note 2)
(2,669
)
—
Tax effect of adjustments
(1,630
)
(4,454
)
Non-GAAP net earnings (Note 3)
$
39,979
$
76,990
Non-GAAP net earnings per share (Note 3)
$
0.78
$
1.34
Weighted average shares outstanding — diluted
51,112
57,582
Note 1: The nine month period ended September 30, 2008 includes a net tax expense for discrete items of $819 attributable to the booking of a valuation allowance on state tax credits of $2,651 partially offset by a benefit of $1,832 for discrete items related to the reversal of FIN 48 reserve items as a result of a statute of limitations expiration. The nine month period ended September 30, 2007 includes a benefit of $1,847 attributable to a discrete tax matter related to our research and development tax credits.
Note 2: Selling, general and administrative expenses for the nine month period ended September 20, 2008 includes a foreign exchange gain of $2,669 related to the Company’s legal entity restructuring of certain foreign operations.
Note 3: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of acquired intangible assets, acquisition and disposition related charges and special items, net of applicable income taxes.
3
MKS Instruments, Inc. Unaudited Consolidated Balance Sheet (In thousands)
September 30, 2008
December 31, 2007
ASSETS
Cash and short-term investments
$
257,212
$
323,765
Trade accounts receivable
104,558
107,504
Inventories
142,680
150,731
Other current assets
38,178
27,980
Total current assets
542,628
609,980
Property, plant and equipment, net
79,760
81,365
Goodwill
337,765
337,473
Other acquired intangible assets
29,089
36,141
Other assets
9,768
11,301
Total assets
$
999,010
$
1,076,260
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt
$
18,310
$
20,203
Accounts payable
25,405
28,683
Accrued expenses and other liabilities
42,733
46,859
Total current liabilities
86,448
95,745
Long-term debt
540
5,871
Other long-term liabilities
21,459
20,635
Stockholders’ equity:
Common stock
113
113
Additional paid-in capital
632,428
685,465
Retained earnings
247,718
255,244
Other stockholders’ equity
10,304
13,187
Total stockholders’ equity
890,563
954,009
Total liabilities and stockholders’ equity
$
999,010
$
1,076,260
4
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