Contact: Seth H. Bagshaw Vice President & Chief Financial Officer Telephone: 978.645.5578
MKS Instruments Reports Fourth Quarter and Full Year 2010 Financial Results
Record Year in Revenue and Earnings; 117% Revenue Growth and Non-GAAP Net Earnings of $133.4 Million
Andover, Mass., February 2, 2011 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reports fourth quarter and full year 2010 financial results.
Fourth Quarter Financial Results
Sales were $219.0 million, up 53 percent from $142.8 million in the fourth quarter of 2009 and down slightly from $221.3 million in the third quarter of 2010.
Fourth quarter net income was $35.9 million, or $0.70 per diluted share, compared to net income of $14.9 million, or $0.30 per diluted share, in the fourth quarter of 2009 and $38.6 million, or $0.76 per diluted share, in the third quarter of 2010.
Non-GAAP net earnings, which exclude discontinued operations and special charges, were $34.4 million, or $0.67 per diluted share, compared to $14.9 million, or $0.29 per diluted share, in the fourth quarter of 2009 and $36.8 million, or $0.72 per diluted share, in the third quarter of 2010.
Full Year Results
Net sales were $853.1 million, up 117 percent compared to $392.7 million in 2009. Net income was $142.6 million, or $2.80 per diluted share, compared to a net loss of $212.7 million, or $4.31 per diluted share, in 2009. Non-GAAP net earnings were $133.4 million, or $2.62 per diluted share, compared to a net loss of $1.6 million, or $0.03 per diluted share in 2009.
Leo Berlinghieri, Chief Executive Officer and President, said, “2010 was a tremendous year for MKS, with record-level revenues, profitability and cash flow. Sales increased 117% over 2009 levels, driven by the sharp recovery in semiconductor industry spending and continued growth in the other advanced markets we serve. Our operations team and our suppliers did a terrific job responding to this steep ramp.
“In 2010, we demonstrated the success of our growth strategy and the strength of our operating model. As we look to 2011, we see a number of positive indicators for our business. In the semiconductor market, demand for chips continues to increase, with growing demand for semiconductor rich products like smart phones and tablet computers. Recently, several major IC manufacturers have increased their capital spending plans for 2011, which would indicate another strong year for our semiconductor business. In the other advanced markets we serve, we are encouraged by the continued momentum from a growing global economy, as well as from the recently announced large solar orders.
“Based on these factors and current customer activity, we estimate that revenues in the first quarter of 2011 will increase to a range of $220 to $240 million and, at these volumes, our non-GAAP net earnings could range from $0.62 to $0.77 per share, and our GAAP net income could range from $0.62 to $0.77 per share.”
Conference Call Details
Management will discuss fourth quarter and full year financial results on a conference call tomorrow at 8:30 a.m. (Eastern Time). Dial-in numbers are 1 (800) 762-8795 for domestic callers and 1 (480) 629-9773 for international callers. The call will be broadcast live and available for replay at www.mksinst.com. To hear a telephone replay through February 10, 2011, dial 1 (303) 590-3030, access code 4402397#.
Use of Non-GAAP Financial Results
The financial results that exclude discontinued operations, costs associated with acquisitions 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.
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, materials delivery, gas composition analysis, 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.
Forward-Looking Statements
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 and Quarterly Reports 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.
###
1
MKS Instruments, Inc. Unaudited Consolidated Statements of Operations (In thousands, except per share data)
Three Months Ended
December 31, 2010
December 31, 2009
September 30, 2010
Net sales
$
218,978
$
142,777
$
221,323
Cost of sales
121,657
83,203
122,820
Gross profit
97,321
59,574
98,503
Research and development
15,790
12,801
15,070
Selling, general and administrative
32,880
26,172
28,247
Amortization of acquired intangible assets
250
691
250
Restructuring
—
(20
)
—
Income from operations
48,401
19,930
54,936
Interest income, net
303
156
35
Income from continuing operations before income taxes
48,704
20,086
54,971
Provision for income taxes
14,528
5,680
18,370
Income from continuing operations
34,176
14,406
36,601
Income from discontinued operations, net of taxes
1,773
541
2,035
Net income
$
35,949
$
14,947
$
38,636
Basic income per share:
Continuing operations
$
0.68
$
0.29
$
0.73
Discontinued operations
0.03
0.01
0.04
Net income
$
0.71
$
0.30
$
0.77
Diluted income per share:
Continuing operations
$
0.67
$
0.29
$
0.72
Discontinued operations
0.03
0.01
0.04
Net income
$
0.70
$
0.30
$
0.76
Weighted average shares outstanding:
Basic
50,415
49,509
50,226
Diluted
51,245
50,459
50,994
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Income from continuing operations
$
34,176
$
14,406
$
36,601
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
250
691
250
Restructuring and related items
—
(20
)
—
Proforma tax adjustments
(66
)
(220
)
(66
)
Non-GAAP net earnings (Note 2)
$
34,360
$
14,857
$
36,785
Non-GAAP net earnings per share (Note 2)
$
0.67
$
0.29
$
0.72
Weighted average shares outstanding
51,245
50,459
50,994
Note 1: During 2010, the Company sold two product lines that no longer met the Company’s long-term strategic objectives. The results of operations of the two product lines have been classified as discontinued operations in the consolidated statements of operations for all periods provided.
Note 2: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude results of discontinued operations, 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,
2010
2009
Net sales
$
853,114
$
392,693
Cost of sales
474,476
262,477
Gross profit
378,638
130,216
Research and development
62,689
50,212
Selling, general and administrative
119,841
100,429
Amortization of acquired intangible assets
1,283
2,762
Gain on sale of asset
(682
)
—
Goodwill and asset impairment charges
—
142,958
Restructuring
—
5,516
Income (loss) from operations
195,507
(171,661
)
Interest income, net
917
1,641
Income (loss) from continuing operations before income taxes
196,424
(170,020
)
Provision (benefit) for income taxes
63,505
(20,659
)
Income (loss) from continuing operations
132,919
(149,361
)
Income (loss) from discontinued operations, net of taxes
9,668
(63,298
)
Net income (loss)
$
142,587
$
(212,659
)
Basic income (loss) per share:
Continuing operations
$
2.66
$
(3.03
)
Discontinued operations
0.19
(1.28
)
Net income (loss)
$
2.85
$
(4.31
)
Diluted income (loss) per share:
Continuing operations
$
2.61
$
(3.03
)
Discontinued operations
0.19
(1.28
)
Net income (loss)
$
2.80
$
(4.31
)
Weighted average shares outstanding:
Basic
50,077
49,318
Diluted
50,927
49,318
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Income (loss) from continuing operations
$
132,919
$
(149,361
)
Adjustments (net of tax, if applicable):
Amortization of acquired intangible assets
1,283
2,762
Gain on sale of asset (Note 2)
(682
)
—
Excess & obsolete inventory adjustment (Note 3)
—
12,900
Goodwill and asset impairment charges (Note 4)
—
142,958
Restructuring and related items (Note 5)
—
4,267
(Benefit) for income taxes (Note 6)
—
(6,370
)
Proforma tax adjustments
(113
)
(8,777
)
Non-GAAP net earnings (loss) (Note 7)
$
133,407
$
(1,621
)
Non-GAAP net earnings (loss) per share (Note 7)
$
2.62
$
(0.03
)
Weighted average shares outstanding
50,927
49,318
Note 1: During 2010, the Company sold two product lines that no longer met the Company’s long-term strategic objectives. The results of operations of the two product lines have been classified as discontinued operations in the consolidated statements of operations for all periods provided.
Note 2: The twelve month period ended December 31, 2010 includes a $682 gain on the sale of a vacated facility.
Note 3: Cost of sales for the twelve month period ended December 31, 2009 includes $12,900 of special charges for excess, obsolete and committed inventory purchases.
Note 4: The twelve month period ended December 31, 2009 includes a $142,958 charge related to the impairment of goodwill and other long-lived assets.
Note 5: The twelve month period ended December 31, 2009 includes $5,516 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 6: The twelve month period ended December 31, 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 7: The Non-GAAP net earnings (loss) and Non-GAAP net earnings (loss) per share amounts exclude results of discontinued operations, 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)
December 31, 2010
December 31, 2009
ASSETS
Cash and short-term investments
$
431,933
$
271,795
Trade accounts receivable
138,181
94,215
Inventories
156,429
118,004
Other current assets
26,352
48,867
Total current assets
752,895
532,881
Property, plant and equipment, net
68,976
67,196
Goodwill
140,020
144,511
Other acquired intangible assets
1,743
4,963
Long-term marketable securities
—
4,853
Other assets
18,779
19,665
Total assets
$
982,413
$
774,069
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt
$
—
$
12,885
Accounts payable
36,427
26,292
Accrued expenses and other liabilities
73,259
32,123
Total current liabilities
109,686
71,300
Other long-term liabilities
25,688
17,836
Stockholders’ equity:
Common stock
113
113
Additional paid-in capital
663,792
645,411
Retained earnings
171,356
28,769
Other stockholders’ equity
11,778
10,640
Total stockholders’ equity
847,039
684,933
Total liabilities and stockholders’ equity
$
982,413
$
774,069
4
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