Contact: Seth H. Bagshaw Vice President & Chief Financial Officer Telephone: 978.645.5500
MKS Instruments Reports Q3 2010 Financial Results
Andover, Mass., October 20, 2010 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reports third quarter 2010 financial results.
Sales remained strong and were $221.3 million, up from $220.6 million in the second quarter of 2010, and an increase of 117% from $102.0 million in the third quarter of 2009.
Non-GAAP net earnings per share increased 9% as a result of favorable gross margin, lower operating expenses and favorable foreign exchange. Non-GAAP net earnings, which exclude discontinued operations and special items, were $36.8 million, or $0.72 per diluted share, compared to net earnings of $33.4 million, or $0.66 per diluted share in the second quarter of 2010, and a net loss of $2.0 million, or ($0.04) per basic share in the third quarter of 2009.
GAAP net income was $38.6 million, or $0.76 per diluted share, compared to net income of $38.8 million, or $0.76 per diluted shared in the second quarter of 2010, and a net loss of $4.0 million, or ($0.08) per basic share in the third quarter of 2009.
Leo Berlinghieri, Chief Executive Officer and President, said, “Sales to both the semiconductor and other advanced markets are tracking at record levels. The semiconductor market has had an exceptional year so far in 2010, and at this point, we are seeing no significant variation in the semiconductor market. In the other leading edge markets we serve, we anticipate that as the global economy continues its recovery, we will see continued growth. Based on this, we estimate that our fourth quarter sales may range from $215 to $230 million, and at these volumes, our non-GAAP net earnings could range from $0.62 to $0.73 per share.”
Management will discuss third quarter financial results on a conference call tomorrow at 8:30 a.m. (Eastern Time). Dial-in numbers are (800) 762-8779 for domestic callers and (480) 629-9771 for international callers. The call will be broadcast live and available for replay at www.mksinstruments.com. To hear a telephone replay through October 28, 2010, dial (303) 590-3030, pass code 4365453#.
The financial results that exclude discontinued operations 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 discontinued operations, costs associated with acquisitions and special items, is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.
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, light emitting diodes, data storage media, and other advanced coatings. We also leverage our technology in other markets with advanced manufacturing applications including medical equipment, pharmaceutical manufacturing, 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, 2010
September 30, 2009
June 30, 2010
Net sales
$
221,323
$
102,028
$
220,647
Cost of sales
122,820
64,154
123,328
Gross profit
98,503
37,874
97,319
Research and development
15,070
11,448
16,154
Selling, general and administrative
28,247
22,984
30,902
Amortization of acquired intangible assets
250
690
314
Restructuring
—
143
—
Income from operations
54,936
2,609
49,949
Interest income, net
35
263
254
Income from continuing operations before income taxes
54,971
2,872
50,203
Provision for income taxes
18,370
5,318
17,059
Income (loss) from continuing operations
36,601
(2,446
)
33,144
Income (loss) from discontinued operations, net of taxes
2,035
(1,527
)
5,633
Net income (loss)
$
38,636
$
(3,973
)
$
38,777
Basic income (loss) per share:
Continuing operations
$
0.73
$
(0.05
)
$
0.66
Discontinued operations
0.04
(0.03
)
0.11
Net income (loss)
$
0.77
$
(0.08
)
$
0.77
Diluted income (loss) per share:
Continuing operations
$
0.72
$
(0.05
)
$
0.65
Discontinued operations
0.04
(0.03
)
0.11
Net income (loss)
$
0.76
$
(0.08
)
$
0.76
Weighted average shares outstanding:
Basic
50,226
49,461
50,067
Diluted
50,994
49,461
50,870
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Income (loss) from continuing operations
$
36,601
$
(2,446
)
$
33,144
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
250
690
314
Restructuring and related items (Note 1)
—
143
—
Proforma tax adjustments
(66
)
(382
)
(90
)
Non-GAAP net earnings (loss) (Note 2)
$
36,785
$
(1,995
)
$
33,368
Non-GAAP net earnings (loss) per share (Note 2)
$
0.72
$
(0.04
)
$
0.66
Weighted average shares outstanding
50,994
49,461
50,870
NOTE 1: The three month period ended September 30, 2009 includes $143 of restructuring charges primarily for severance related costs.
NOTE 2: The Non-GAAP net earnings (loss) and Non-GAAP net earnings (loss) 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,
2010
2009
Net sales
$
634,136
$
249,916
Cost of sales
352,819
179,274
Gross profit
281,317
70,642
Research and development
46,899
37,411
Selling, general and administrative
86,961
74,257
Amortization of acquired intangible assets
1,033
2,071
Gain on sale of asset
(682
)
—
Goodwill and asset impairment charges
—
142,958
Restructuring
—
5,536
Income (loss) from operations
147,106
(191,591
)
Interest income, net
614
1,485
Income (loss) from continuing operations before income taxes
147,720
(190,106
)
Provision (benefit) for income taxes
48,977
(26,339
)
Income (loss) from continuing operations
98,743
(163,767
)
Income (loss) from discontinued operations, net of taxes
7,895
(63,839
)
Net income (loss)
$
106,638
$
(227,606
)
Basic income (loss) per share:
Continuing operations
$
1.98
$
(3.32
)
Discontinued operations
0.16
(1.30
)
Net income (loss)
$
2.13
$
(4.62
)
Diluted income (loss) per share:
Continuing operations
$
1.94
$
(3.32
)
Discontinued operations
0.16
(1.30
)
Net income (loss)
$
2.10
$
(4.62
)
Weighted average shares outstanding:
Basic
49,965
49,254
Diluted
50,821
49,254
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Income (loss) from continuing operations
$
98,743
$
(163,767
)
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
1,033
2,071
Excess & obsolete inventory adjustment (Note 1)
—
12,900
Gain on sale of asset (Note 2)
(682
)
—
Goodwill and asset impairment charges (Note 3)
—
142,958
Restructuring and related items (Note 4)
—
4,287
(Benefit) for income taxes (Note 5)
—
(6,370
)
Proforma tax adjustments
(48
)
(8,557
)
Non-GAAP net earnings (loss) (Note 6)
$
99,046
$
(16,478
)
Non-GAAP net earnings (loss) per share (Note 6)
$
1.95
$
(0.33
)
Weighted average shares outstanding
50,821
49,254
NOTE 1: Cost of sales for the nine month period ended September 30, 2009 includes $12,900 of special charges for excess, obsolete and committed inventory purchases.
NOTE 2: The nine month period ended September 30, 2010 includes a $682 gain on the sale of a vacated facility.
NOTE 3: The nine month period ended September 30, 2009 includes a $142,958 charge related to the impairment of goodwill and other long-lived assets.
NOTE 4: The nine month period ended September 30, 2009 includes $5,536 of restructuring charges primarily for severance related costs offset by a credit of $1,249 for the reversal of previously expensed equity compensation charges of terminated employees.
NOTE 5: The nine month period ended September 30, 2009 includes a benefit of $6,370 attributable to the reversal of FIN 48 reserve items as a result of a Federal audit close.
NOTE 6: The Non-GAAP net earnings (loss) and Non-GAAP net earnings (loss) 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, 2010
December 31, 2009
ASSETS
Cash and short-term investments
$
343,725
$
271,795
Trade accounts receivable
155,619
94,215
Inventories
152,096
118,004
Other current assets
56,472
48,867
Total current assets
707,912
532,881
Property, plant and equipment, net
67,659
67,196
Goodwill
137,728
144,511
Other acquired intangible assets
1,993
4,963
Other assets
20,327
24,518
Total assets
$
935,619
$
774,069
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt
$
9,553
$
12,885
Accounts payable
37,453
26,292
Accrued expenses and other liabilities
63,151
32,123
Total current liabilities
110,157
71,300
Other long-term liabilities
23,809
17,836
Stockholders’ equity:
Common stock
113
113
Additional paid-in capital
654,610
645,411
Retained earnings
135,407
28,769
Other stockholders’ equity
11,523
10,640
Total stockholders’ equity
801,653
684,933
Total liabilities and stockholders’ equity
$
935,619
$
774,069
4
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