MKS Instruments 8K Reports Second Quarter 2017 Financial Results | MKSI 25 Jul 17

(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Second Quarter 2017 Financial Results

Achieved new quarterly records for total semiconductor revenue and Non-GAAP net earnings

Total quarterly revenue up 34% compared to Q2 2016 on a pro-forma basis

Achieved new quarterly revenue record for Light and Motion Division

Andover, Mass., July 25, 2017 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported second quarter 2017 financial results.


Quarterly Financial Results
(in millions, except per share data)
	Q2 2017			Q1 2017
GAAP Results
Net revenues	$	481		$	437
Gross margin		45.7	%		47.0	%
Operating margin		19.3	%		19.1	%
Net income	$	120.4		$	65.1
Diluted EPS	$	2.19		$	1.18
Non-GAAP Results
Gross margin		45.9	%		47.0	%
Operating margin		24.0	%		22.5	%
Net earnings	$	77.7		$	70.0
Diluted EPS	$	1.41		$	1.27

Second Quarter 2017 Financial Results

Revenue was $481 million, an increase of 10% from $437 million in the first quarter of 2017 and an increase of 34% from $359 million in the second quarter of 2016 on a pro-forma basis.

Net income was $120.4 million, or $2.19 per diluted share, compared to net income of $65.1 million, or $1.18 per diluted share in the first quarter of 2017, and $9.2 million, or $0.17 per diluted share in the second quarter of 2016.

Non-GAAP net earnings, which exclude special charges and credits, were $77.7 million, or $1.41 per diluted share, compared to $70.0 million, or $1.27 per diluted share in the first quarter of 2017, and $38.7 million, or $0.72 per diluted share in the second quarter of 2016.

“We are very pleased with our continued progress in 2017 in achieving our objective of sustainable and profitable growth,” said Gerald Colella, Chief Executive Officer and President. Mr. Colella added, “This quarter, we set new records for quarterly revenue and Non-GAAP net earnings and our focus on integrating the Newport Corporation acquisition into our organization has produced both excellent results and new growth opportunities. We achieved our initial cost synergies ahead of plan, while also substantially improving the revenue growth profile and profitability of the Light and Motion Division.”

“We also continue to execute on our strategy to delever our balance sheet and significantly reduce our interest cost. I am pleased to report that as of June 30, the Company was in a net cash position. In addition, in early July, we completed our third successful re-pricing of our Term Loan and completed another $50 million voluntary pre-payment on our Term Loan facility, which brought our cumulative pre-payments to date to $250 million. Since origination on April 29, 2016, we have reduced our non-GAAP interest expense by $20 million or approximately 50% on an annualized basis,” said Seth Bagshaw, Senior Vice President and Chief Financial Officer.

Additional Financial Information

The Company had $577 million in cash and short-term investments as of June 30, 2017 and $573 million outstanding under its Term Loan (reduced to $523 million on July 11, 2017). During the second quarter of 2017, MKS paid a dividend of $9.5 million or $0.175 per diluted share.

In April, the Company completed the sale of its Data Analytics Solutions Business Unit and recognized a net after tax gain of $72 million in the second quarter.

Third Quarter 2017 Outlook

Based on current business levels, the Company expects that revenue in the third quarter of 2017 may range from $450 to $490 million.

At these volumes, GAAP net income could range from $1.12 to $1.37 per diluted share and non-GAAP net earnings could range from $1.32 to $1.56 per diluted share.

Conference Call Details

A conference call with management will be held on Wednesday, July 26, 2017 at 8:30 a.m. (Eastern Time). To participate in the conference call, please dial (877) 212-6076 for domestic callers and (707) 287-9331 for international callers, and an operator will connect you. Participants will need to provide the operator with the Conference ID of 40213368, which has been reserved for this call. A live and archived webcast of the call will be available on the company’s website atwww.mksinst.com.

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, flow measurement and control, gas and vapor delivery, gas composition analysis, residual gas analysis, leak detection, control technology, ozone generation and delivery, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration isolation, and optics. Our primary served markets include semiconductor capital equipment, general industrial, life sciences, and research. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results

Non-GAAP amounts exclude amortization of acquired intangible assets, an asset impairment, costs associated with completed and announced acquisitions, acquisition integration costs, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to re-pricing of our Term Loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effect of a legal entity restructuring, other discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures are not in accordance with generally accepted accounting principles in the United States of America (GAAP). MKS’ management believes the presentation of these non-GAAP financial measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results. Annualized GAAP interest expense based upon $780 million principal outstanding and using the LIBOR based interest rate spread in effect on April 29, 2016, was $44.0 million. Annualized GAAP interest expense based upon $523 million in principal currently outstanding and LIBOR plus 225 basis points would be $24.1 million. Pro-forma revenue amounts assume the acquisition of Newport Corporation had occurred as of the beginning of 2016.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future financial performance of MKS, our future business prospects, our future growth, and our expected synergies and cost savings from our recent acquisition of Newport Corporation. These statements are only predictions based on current assumptions and expectations. Actual events or results may differ materially from those in the forward-looking statements set forth herein. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are the conditions affecting the markets in which we operate, including the fluctuations in capital spending in the semiconductor industry, and other advanced manufacturing markets, fluctuations in net sales to our major customers, our ability to successfully integrate Newport’s operations and employees, unexpected risks, costs, charges or expenses resulting from the Newport acquisition or other acquisitions, the terms of the Term Loan financing, fluctuations in interest rates, MKS’ ability to realize anticipated synergies and cost savings from the Newport acquisition, our ability to successfully grow our business, potential fluctuations in quarterly results, 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 the other factors described in MKS’ most recent Annual Report on Form 10-K for the year ended December 31, 2016 filed with SEC. MKS is under no obligation to, and expressly disclaims any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release.

###

Company Contact: Seth H. Bagshaw
Senior Vice President, Chief Financial Officer and Treasurer
Telephone: 978.645.5578

Investor Relations Contacts:
Monica Gould
The Blueshirt Group
Telephone: 212.871.3927
Email:monica@blueshirtgroup.com

Lindsay Grant Savarese
The Blueshirt Group
Telephone: 212.331.8417
Email:lindsay@blueshirtgroup.com

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)


	Three Months Ended
	June 30, 2017			June 30, 2016			March 31, 2017
Net revenues:
Products	$	431,950		$	285,471		$	392,922
Services		48,807			40,390			44,231

Total net revenues		480,757			325,861			437,153
Cost of revenues:
Products		229,304			163,993			205,060
Services		31,870			25,955			26,546

Total cost of revenues		261,174			189,948			231,606
Gross profit		219,583			135,913			205,547
Research and development		33,680			28,214			33,282
Selling, general and administrative		71,979			59,579			74,220
Acquisition and integration costs		790			20,055			1,442
Restructuring		2,064			24			522
Asset impairment		6,719			—			—
Amortization of intangible assets		11,468			8,855			12,501

Income from operations		92,883			19,186			83,580
Interest income		507			530			516
Interest expense		6,997			8,474			8,832
Gain on sale of business		74,856			—			—
Other (expense) income, net		(3,277	)		1,126			2,021

Income from operations before income taxes		157,972			12,368			77,285
Provision for income taxes		37,532			3,158			12,225

Net income	$	120,440		$	9,210		$	65,060

Net income per share:
Basic	$	2.22		$	0.17		$	1.21
Diluted	$	2.19		$	0.17		$	1.18
Cash dividends per common share	$	0.175		$	0.17		$	0.175
Weighted average shares outstanding:
Basic		54,178			53,461			53,769
Diluted		55,001			53,806			54,958
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Net income	$	120,440		$	9,210		$	65,060
Adjustments:
Acquisition and integration costs (Note 1)		790			20,055			1,442
Acquisition inventory step-up (Note 2)		—			10,119			—
Expenses related to sale of a business (Note 3)		436			—			423
Exess and obsolete inventory charge (Note 4)		1,160			—			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713			—
Amortization of debt issuance costs (Note 6)		694			1,629			2,414
Restructuring (Note 7)		2,064			24			522
Asset impairment (Note 8)		6,719			—			—
Gain on sale of business (Note 9)		(74,856	)		—			—
Amortization of intangible assets		11,468			8,855			12,501
Windfall tax benefit on stock-based compensation (Note 10)		(3,169	)		—			(6,650	)
Taxes related to sale of business (Note 11)		15,007			—			—
Pro-forma tax adjustments		(3,047	)		(11,896	)		(5,718	)

Non-GAAP net earnings (Note 12)	$	77,706		$	38,709		$	69,994

Non-GAAP net earnings per share (Note 12)	$	1.41		$	0.72		$	1.27

Weighted average shares outstanding		55,001			53,806			54,958
Income from operations	$	92,883		$	19,186		$	83,580
Adjustments:
Acquisition and integration costs (Note 1)		790			20,055			1,442
Acquisition inventory step-up (Note 2)		—			10,119			—
Expenses related to sale of a business (Note 3)		436			—			423
Excess and obsolete inventory charge (Note 4)		1,160			—			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713			—
Restructuring (Note 7)		2,064			24			522
Asset impairment (Note 8)		6,719			—			—
Amortization of intangible assets		11,468			8,855			12,501

Non-GAAP income from operations (Note 13)	$	115,520		$	58,952		$	98,468

Non-GAAP operating margin percentage (Note 13)		24.0	%		18.1	%		22.5	%

Gross profit	$	219,583		$	135,913		$	205,547
Acquisition inventory step-up (Note 2)		—			10,119			—
Excess and obsolete inventory charge (Note 4)		1,160			—			—

Non-GAAP gross profit (Note 14)	$	220,743		$	146,032		$	205,547

Non-GAAP gross profit percentage (Note 14)		45.9	%		44.8	%		47.0	%

Interest expense	$	6,997		$	8,474		$	8,832
Amortization of debt issuance costs (Note 6)		694			1,629			2,414

Non-GAAP interest expense	$	6,303		$	6,845		$	6,418

Net income	$	120,440		$	9,210		$	65,060
Interest expense (income), net		6,490			7,944			8,316
Provision for income taxes		37,532			3,158			12,225
Depreciation		9,120			7,575			9,332
Amortization		11,468			8,855			12,501

EBITDA (Note 15)	$	185,050		$	36,742		$	107,434

Stock-based compensation		6,207			10,517			8,782
Acquisition and integration costs (Note 1)		790			20,055			1,442
Acquisition inventory step-up (Note 2)		—			10,119			—
Expenses related to sale of a business (Note 3)		436			—			423
Excess and obsolete inventory charge (Note 4)		1,160			—			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713			—
Restructuring (Note 7)		2,064			24			522
Asset impairment (Note 8)		6,719			—			—
Gain on sale of business (Note 9)		(74,856	)		—			—
Other adjustments		822			661			747

Adjusted EBITDA (Note 16)	$	128,392		$	78,831		$	119,350

Note 1: We recorded $0.8 million, $1.4 million and $20.1 million of acquisition and integration costs during the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively, related to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded $10.1 million in cost of sales during the three months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.

Note 3: We recorded $0.4 million during the three months ended June 30, 2017 and March 31, 2017, respectively, related to the sale of a business, which was completed in April of 2017.

Note 4: We recorded $1.2 million of excess and obsolete inventory charges in cost of sales during the three months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.

Note 5: We recorded $0.7 million of fees and expenses during the three months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.

Note 6: We recorded $0.7 million, $2.4 million and $1.6 million of additional interest expense during the three months ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 7: We recorded $2.1 million of restructuring costs during the three months ended June 30, 2017, related to the consolidation of two manufacturing plants and $0.5 million of restructuring costs during the three months ended March 31, 2017, related to the restructuring of one of our international facilities and the consolidation of sales offices.

Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three months ended June 30, 2017, in conjunction with the consolidation of two manufacturing plants.

Note 9: We recorded a $74.9 million gain on the sale of our Data Analytics Solutions business during the three months ended June 30, 2017.

Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $3.2 million and $6.6 million during the three months ended June 30, 2017 and March 31, 2017, respectively, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).

Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the three months ended June 30, 2017.

Note 12: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, amortization of debt issuance costs, restructuring costs, an asset impairment charge, a gain on the sale of a business, amortization of intangible assets, a windfall tax benefit related to stock-based compensation expense, taxes related to the sale of a business and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.

Note 13: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, an inventory step-up adjustment to fair value, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge and amortization of intangible assets.

Note 14: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment and an excess and obsolete inventory charge.

Note 15: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.

Note 16: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the re-pricing of a term loan credit agreement, restructuring costs, an asset impairment charge, a gain on the sale of a business and other adjustments as defined in our Term Loan Credit Agreement.

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)


	Six Months Ended June 30,
	2017			2016
Net revenues:
Products	$	824,872		$	439,092
Services		93,038			70,450

Total net revenues		917,910			509,542
Cost of revenues:
Products		434,364			249,345
Services		58,416			46,371

Total cost of revenues		492,780			295,716
Gross profit		425,130			213,826
Research and development		66,962			45,441
Selling, general and administrative		146,199			93,529
Acquisition and integration costs		2,232			22,549
Restructuring		2,586			24
Asset impairment		6,719			—
Amortization of intangible assets		23,969			10,538

Income from operations		176,463			41,745
Interest income		1,023			1,454
Interest expense		15,829			8,519
Gain on sale of business		74,856			—
Other (expense) income, net		(1,256	)		1,493

Income from continuing operations before income taxes		235,257			36,173
Provision for income taxes		49,757			9,400

Net income	$	185,500		$	26,773

Net income per share:
Basic	$	3.44		$	0.50
Diluted	$	3.37		$	0.50
Cash dividends per common share	$	0.35		$	0.34
Weighted average shares outstanding:
Basic		53,973			53,348
Diluted		54,979			53,685
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
Net income	$	185,500		$	26,773
Adjustments:
Acquisition and integration costs (Note 1)		2,232			22,549
Acquisition inventory step-up (Note 2)		—			10,119
Expenses related to sales of a business (Note 3)		859			—
Excess and obsolete inventory charge (Note 4)		1,160			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713
Amortization of debt issuance costs (Note 6)		3,108			1,629
Restructuring (Note 7)		2,586			24
Asset impairment (Note 8)		6,719			—
Gain on sale of business (Note 9)		(74,856	)		—
Amortization of intangible assets		23,969			10,538
Windfall tax benefit on stock-based compensation (Note 10)		(9,819	)		—
Taxes related to sale of business (Note 11)		15,007			—
Pro-forma tax adjustments		(9,710	)		(13,489	)

Non-GAAP net earnings (Note 12)	$	146,755		$	58,856

Non-GAAP net earnings per share (Note 12)	$	2.67		$	1.10

Weighted average shares outstanding		54,979			53,685
Income from operations	$	176,463		$	41,745
Adjustments:
Acquisition and integration costs (Note 1)		2,232			22,549
Acquisition inventory step-up (Note 2)		—			10,119
Expenses related to sale of a business (Note 3)		859			—
Excess and obsolete inventory charge (Note 4)		1,160			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713
Restructuring (Note 7)		2,586			24
Asset impairment (Note 8)		6,719			—
Amortization of intangible assets		23,969			10,538

Non-GAAP income from operations (Note 13)	$	213,988		$	85,688

Non-GAAP operating margin percentage (Note 13)		23.3	%		16.8	%

Gross profit	$	425,130		$	213,826
Acquisition inventory step-up (Note 2)		—			10,119
Excess and obsolete inventory charge (Note 4)		1,160			—

Non-GAAP gross profit (Note 14)	$	426,290		$	223,945

Non-GAAP gross profit percentage (Note 14)		46.4	%		44.0	%

Interest expense	$	15,829		$	8,519
Amortization of debt issuance costs (Note 6)		3,108			1,629

Non-GAAP interest expense	$	12,721		$	6,890

Net income	$	185,500		$	26,773
Interest expense (income), net		14,806			7,065
Provision for income taxes		49,757			9,400
Depreciation		18,452			11,170
Amortization		23,969			10,538

EBITDA (Note 15)	$	292,484		$	64,946

Stock-based compensation		14,989			14,668
Acquisition and integration costs (Note 1)		2,232			22,549
Acquisition inventory step-up (Note 2)		—			10,119
Expenses related to sale of a business (Note 3)		859			—
Excess and obsolete inventory charge (Note 4)		1,160			—
Fees and expenses relating to re-pricing of term loan (Note 5)		—			713
Restructuring (Note 7)		2,586			24
Asset impairment (Note 8)		6,719			—
Gain on sale of business (Note 9)		(74,856	)		—
Other adjustments		1,569			661

Adjusted EBITDA (Note 16)	$	247,742		$	113,680

Note 1: We recorded $2.2 million and $22.5 million of acquisition and integration costs during the six months ended June 30, 2017 and 2016, respectively, related to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded $10.1 million in cost of sales during the six months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.

Note 3: We recorded $0.9 million during the six months ended June 30, 2017, which is comprised of legal and consulting and compensation related expenses related to the sale of a business, which was completed in April of 2017.

Note 4: We recorded $1.2 million of excess and obsolete inventory charges in cost of sales during the six months ended June 30, 2017 related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants.

Note 5: We recorded $0.7 million of fees and expenses during the six months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.

Note 6: We recorded $3.1 million and $1.6 million of additional interest expense during the six months ended June 30, 2017 and 2016, respectively, related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 7: We recorded $2.6 million of restructuring costs during the six months ended June 30, 2017, related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of sales offices.

Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the six months ended June 30, 2017, in connection with the consolidation of two manufacturing plants.

Note 9: We recorded a $74.9 gain on the sale of our Data Analytics Solutions business during the six months ended June 30, 2017.

Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $9.8 million, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).

Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the six months ended June 30, 2017.

Note 14: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment and an excess and obsolete inventory charge.

Note 15: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.

MKS Instruments, Inc.
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate
(In thousands)


	Three Months Ended June 30, 2017								Three Months Ended March 31, 2017
	Income Before			Provision (benefit)			Effective				Provision
	Income Taxes			for			Tax Rate		Income Before		(benefit) for		Effective
				Income Taxes					Income Taxes		Income Taxes		Tax Rate
GAAP	$	157,972		$	37,532			23.8%	$	77,285	$	12,225		15.8%
Adjustments:
Acquisition and integration costs (Note		790			—					1,442		—
1)
Expenses related to sale of a business		436			—					423		—
(Note 3)
Excess and obsolete inventory charge		1,160			—					—		—
(Note 4)
Amortization of debt issuance costs		694			—					2,414		—
(Note 6)
Restructuring (Note 7)		2,064			—					522		—
Asset impairment (Note 8)		6,719			—					—		—
Gain on sale of business (Note 9)		(74,856	)		—					—		—
Amortization of intangible assets		11,468			—					12,501		—
Windfall tax benefit on stock-based		—			3,169					—		6,650
compensation (Note 10)
Tax related to sale of business (Note 11)		—			(15,007	)				—		—
Tax effect of pro-forma adjustments		—			3,047					—		5,718

Non-GAAP	$	106,447		$	28,741			27.0%	$	94,587	$	24,593		26.0%


	Three Months Ended June 30, 2016
			Provision		Effective
	Income Before		(benefit) for		Tax Rate
	Income Taxes		Income Taxes
GAAP	$	12,368	$	3,158		25.5%
Adjustments:
Acquisition and integration costs (Note 1)		20,055		—
Acquisition inventory step-up (Note 2)		10,119		—
Fees and expenses relating to re-pricing of term loan (Note 5)		713		—
Amortization of debt issuance costs (Note 6)		1,629		—
Restructuring		24		—
Amortization of intangible assets		8,855		—
Tax effect of pro-forma adjustments		—		11,896

Non-GAAP	$	53,763	$	15,054		28.0%


	Six Months Ended June 30, 2017								Six Months Ended June 30, 2016
				Provision (benefit)							Provision		Effective
	Income Before			for			Effective		Income Before		(benefit) for		Tax Rate
	Income Taxes			Income Taxes			Tax Rate		Income Taxes		Income Taxes
GAAP	$	235,257		$	49,757			21.2%	$	36,173	$	9,400		26.0%
Adjustments:
Acquisition and integration costs		2,232			—					22,549		—
(Note 1)
Acquisition inventory step-up		—			—					10,119		—
(Note 2)
Expenses related to sale of a		859			—					—		—
business (Note 3)
Excess and obsolete inventory		1,160			—					—		—
charge (Note 4)
Fees and expenses relating to		—			—					713		—
re-pricing of term loan (Note 5)
Amortization of debt issuance		3,108			—					1,629		—
costs (Note 6)
Restructuring (Note 7)		2,586			—					24		—
Asset impairment (Note 8)		6,719			—					—		—
Gain on sale of business (Note 9)		(74,856	)		—					—		—
Amortization of intangible assets		23,969			—					10,538		—
Windfall tax benefit on		—			9,819					—		—
stock-based compensation (Note 10)
Taxes related to sale of business		—			(15,007	)				—		—
(Note 11)
Tax effect of pro-forma adjustments		—			9,710					—		13,489

Non-GAAP	$	201,034		$	54,279			27.0%	$	81,745	$	22,889		28.0%

Note 1: Acquisition and integration costs during the three and six months ended June 30, 2017 relate to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded $10.1 million in cost of sales during the three and six months ended June 30, 2016 related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition.

Note 3: We recorded $0.4 million and $0.9 million during the three and six months ended June 30, 2017, respectively, and $0.4 million for the three months ended March 31, 2017, related to the sale of a business, which was completed in April of 2017.

Note 5: We recorded $0.7 million of fees and expenses during the three and six months ended June 30, 2016, related to the re-pricing of our Term Loan Credit Agreement.

Note 6: Amortization of debt issuance costs for the three and six months ended June 30, 2017 and 2016, respectively, and the three months ended March 31, 2017, are affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 7: We recorded $2.1 million and $2.6 million of restructuring costs during the three and six months ended June 30, 2017, respectively, and $0.5 million for the three months ended March 31, 2017, related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of sales offices.

Note 8: We recorded a $6.7 million asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three and six months ended June 30, 2017, in conjunction with the consolidation of two manufacturing plants.

Note 9: We recorded a $74.9 million gain on the sale of our Data Analytics Solutions business during the three and six months ended June 30, 2017.

Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation of $3.2 million and $9.8 million during the three and six months ended June 30, 2017, respectively, and $6.6 million for the three months ended March 31, 2017, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).

Note 11: We recorded $15.0 million of taxes related to the sale of our Data Analytics Solutions business during the three and six months ended June 30, 2017.

MKS Instruments, Inc.
Reconciliation of Q3-17 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)


	Three Months Ended September 30, 2017
	Low Guidance						High Guidance
	$ Amount			$ Per Share			$ Amount			$ Per Share
GAAP net income	$	62,200		$	1.12		$	75,600		$	1.37
Amortization		10,800			0.20			10,800			0.20
Integration costs		1,700			0.03			1,700			0.03
Deferred financing costs		2,300			0.04			2,300			0.04
Tax effect of adjustments (Note 1)		(4,000	)		(0.07	)		(4,000	)		(0.07	)

Non-GAAP net earnings	$	73,000		$	1.32		$	86,400		$	1.56

Q3-17 forecasted shares					55,300						55,300

Note 1: The Non-GAAP adjustments are tax effected at the applicable statutory rates and the difference between the GAAP and Non-GAAP tax rates.

MKS Instruments, Inc.
Unaudited Consolidated Balance Sheet
(In thousands)


	June 30, 2017			December 31, 2016
ASSETS
Cash and cash equivalents	$	422,830		$	228,623
Restricted cash		5,282			5,287
Short-term investments		149,016			189,463
Trade accounts receivable, net		268,544			248,757
Inventories		304,707			275,869
Other current assets		51,721			50,770

Total current assets		1,202,100			998,769
Property, plant and equipment, net		167,212			174,559
Goodwill		586,865			588,585
Intangible assets, net		386,075			408,004
Long-term investments		10,329			9,858
Other assets		32,102			32,467

Total assets	$	2,384,683		$	2,212,242

LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt	$	9,810		$	10,993
Accounts payable		73,291			69,337
Accrued compensation		65,243			67,728
Income taxes payable		42,142			22,794
Deferred revenue		9,975			14,463
Other current liabilities		57,795			51,985

Total current liabilities		258,256			237,300
Long-term debt, net		551,846			601,229
Non-current deferred taxes		71,895			66,446
Non-current accrued compensation		48,560			44,714
Other liabilities		24,370			20,761

Total liabilities		954,927			970,450

Stockholders’ equity:
Common stock		113			113
Additional paid-in capital		779,058			777,482
Retained earnings		661,341			494,744
Accumulated other comprehensive loss		(10,756	)		(30,547	)

Total stockholders’ equity		1,429,756			1,241,792

Total liabilities and stockholders’ equity	$	2,384,683		$	2,212,242

MKS Instruments (MKSI) 8-KMKS Instruments Reports Second Quarter 2017 Financial Results