MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of
technologies that enable advanced processes and improve
productivity, today reported third quarter 2020 financial results.
“We delivered record quarterly revenue for MKS, led by record
Semiconductor Market revenue and a recovery in our Advanced Markets
revenue. Demand for our critical enabling technologies in the
Semiconductor Market was broad-based across our portfolio and, in
particular, for Power Solutions, which has grown more than 110%
year-on-year for the first nine months of 2020 and achieved another
quarter of record revenue,” said John T.C. Lee, President and Chief
Executive Officer.
Mr. Lee added, “We are encouraged with the sequential growth in
our Advanced Markets, particularly given the anticipated seasonal
decline in our Flex PCB drilling business. We are excited about the
long-term opportunities in precision laser processing and our
unique positioning to capitalize on them.”
“We achieved another increase in our non-GAAP operating margins,
marking the fourth consecutive quarterly increase. This
demonstrates our continued focus on driving strong operating
leverage in our financial model as well as executing on our
long-standing commitment to develop innovative solutions for our
customers,” said Seth H. Bagshaw, Senior Vice President and Chief
Financial Officer.
Mr. Bagshaw added, “The third quarter marked another record for
operating and free cash flow, which reflects our higher
profitability and emphasis on driving improvements in our cash
conversion cycle. This has enabled us to reduce our net leverage
ratio to 0.2x exiting the third quarter, and we anticipate a
continued reduction exiting the year.”
Fourth Quarter 2020
Outlook
Based on current business levels, the Company expects revenue in
the fourth quarter of 2020 could be $600 million, plus or minus $25
million. At these volumes, GAAP net income per diluted share could
be $1.75, plus or minus $0.20 and non-GAAP net earnings per diluted
share could be $2.00, plus or minus $0.20.
Conference Call Details
A conference call with management will be held on Wednesday,
October 28, 2020 at 8:30 a.m. (Eastern Time). To access a live
webcast of the conference call and related presentation materials
management will refer to during the call, visit MKS’ website at
mksinst.com and click on Company – Investor Relations – Investor
Overview. The webcast and related presentation materials will be
listed in the calendar of events. To participate by telephone,
please dial (877) 212-6076 for domestic callers or (707) 287-9331
for international callers, provide the operator with Conference ID
(3881427), and access the presentation materials on MKS’ website.
Participants are asked to access the live webcast or dial in at
least 15 minutes in advance to ensure a timely connection. An
archive of the webcast and related presentation materials will be
available on MKS’ website.
About MKS Instruments
MKS Instruments, Inc. is a global provider of instruments,
systems, subsystems and process control solutions that measure,
monitor, deliver, analyze, power and control critical parameters of
advanced manufacturing processes to improve process performance and
productivity for our customers. Our products are derived from our
core competencies in pressure measurement and control, flow
measurement and control, gas and vapor delivery, gas composition
analysis, electronic control technology, reactive gas generation
and delivery, power generation and delivery, vacuum technology,
lasers, photonics, optics, precision motion control, vibration
control and laser-based manufacturing systems solutions. We also
provide services relating to the maintenance and repair of our
products, installation services and training. Our primary served
markets include semiconductor, industrial technologies, life and
health sciences, research and defense. Additional information can
be found at mksinst.com.
Use of Non-GAAP Financial Results
This press release includes financial measures that are not in
accordance with U.S. generally accepted accounting principles
(“Non-GAAP financial measures”). These Non-GAAP financial measures
should be viewed in addition to, and not as a substitute for, MKS’
reported GAAP results, and may be different from Non-GAAP financial
measures used by other companies. In addition, these Non-GAAP
financial measures are not based on any comprehensive set of
accounting rules or principles. 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. For further information
regarding these Non-GAAP financial measures, please refer to the
tables presenting reconciliations of our Non-GAAP results to our
U.S. GAAP results and the “Notes on our Non-GAAP Financial
Information” at the end of this press release.
|
Selected GAAP and Non-GAAP Financial
Measures(In millions, except per share
data) |
|
|
|
Third
Quarter 2020 Financial
Results |
|
|
|
Q3
2020 |
|
Q2
2020 |
|
Net revenues |
$ |
|
590 |
|
$ |
544 |
|
|
|
|
GAAP
Financial Measures |
|
|
Operating margin |
|
|
19.7 |
% |
|
18.5 |
% |
Net income |
$ |
|
92 |
|
$ |
74 |
|
Diluted EPS |
$ |
|
1.66 |
|
$ |
1.33 |
|
|
|
|
Non-GAAP
Financial Measures |
|
|
Operating margin |
|
|
23.1 |
% |
|
21.6 |
% |
Net earnings |
$ |
|
107 |
|
$ |
89 |
|
Diluted EPS |
$ |
|
1.93 |
|
$ |
1.62 |
|
Net revenues in the third quarter of 2020 were $590 million, an
increase of 8% from $544 million in the second quarter of 2020, and
an increase of 28% from $462 million in the third quarter of 2019.
The increase in net revenues was driven largely by increased demand
from customers in the Semiconductor Market. Net revenues in the
Semiconductor Market were $359 million in the third quarter of
2020, a sequential increase of 12%. Net revenues in Advanced
Markets were $231 million in the third quarter of 2020, a
sequential increase of 4%.
Net income in the third quarter of 2020 was $92 million, or
$1.66 per diluted share, compared to net income of $74 million, or
$1.33 per diluted share, in the second quarter of 2020, and $47
million, or $0.86 per diluted share, in the third quarter of
2019.
Net income in the third quarter of 2020 included restructuring
and other costs of $3 million and acquisition and integration costs
of $0.5 million, which were related to the acquisition of Electro
Scientific Industries, Inc. (“ESI”).
Non-GAAP net earnings, which exclude special charges and
credits, were $107 million, or $1.93 per diluted share, in the
third quarter of 2020, compared to $89 million, or $1.62 per
diluted share, in the second quarter of 2020, and $62 million or
$1.12 per diluted share, in the third quarter of 2019.
Additional Financial Information
At September 30, 2020, the Company had $716 million in cash and
short-term investments, $836 million of secured term loan principal
outstanding and $100 million of incremental borrowing capacity
under an asset-based line of credit, subject to certain borrowing
base requirements. During the third quarter of 2020, the Company
paid a cash dividend of $11 million or $0.20 per diluted share.
SAFE HARBOR FOR FORWARD-LOOKING
STATEMENTS
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and
21E of the Securities Exchange Act of 1934 regarding the future
financial performance, business prospects and growth of MKS
Instruments, Inc. (“MKS” or the “Company”). These statements are
only predictions based on current assumptions and expectations. Any
statements that are not statements of historical fact (including
statements containing the words “will,” “projects,” “intends,”
“believes,” “plans,” “anticipates,” “expects,” “estimates,”
“forecasts,” “continues” and similar expressions) should be
considered to be forward-looking statements. 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 MKS operates, including the fluctuations in capital
spending in the semiconductor industry and other advanced
manufacturing markets, fluctuations in sales to our major
customers, the impact of the COVID-19 pandemic on the global
economy and financial markets, including any restrictions on MKS’
operations and the operations of MKS’ customers and suppliers
resulting from public health requirements and government mandates,
the terms of our term loan, competition from larger or more
established companies in MKS’ markets, MKS’ ability to successfully
grow our business and particularly that of ESI’s business, the
challenges, risks and costs involved with integrating the
operations of the companies we have acquired, 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, 2019 and any subsequent
Quarterly Reports on Form 10-Q, as filed with the SEC. MKS is under
no obligation to, and expressly disclaims any obligation to, update
or alter these forward-looking statements, whether as a result of
new information, future events or otherwise after the date of this
press release.
Company Contact: David RyzhikVice President,
Investor RelationsTelephone: (978) 557-5180Email:
david.ryzhik@mksinst.com
|
MKS
Instruments, Inc.Unaudited Consolidated Statements
of Operations(In millions, except per share
data) |
|
|
Quarter Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
$ |
506.8 |
|
$ |
386.2 |
|
$ |
473.0 |
|
$ |
1,441.0 |
|
$ |
1,184.9 |
|
Services |
|
83.0 |
|
|
76.3 |
|
|
71.3 |
|
|
228.8 |
|
|
215.2 |
|
Total net revenues |
|
589.8 |
|
|
462.5 |
|
|
544.3 |
|
|
1,669.8 |
|
|
1,400.1 |
|
Cost of
revenues: |
|
|
|
|
|
Products |
|
280.7 |
|
|
216.3 |
|
|
258.0 |
|
|
794.8 |
|
|
672.2 |
|
Services |
|
47.1 |
|
|
41.2 |
|
|
40.0 |
|
|
127.1 |
|
|
113.8 |
|
Total cost of revenues |
|
327.8 |
|
|
257.5 |
|
|
298.0 |
|
|
921.9 |
|
|
786.0 |
|
Gross
profit |
|
262.0 |
|
|
205.0 |
|
|
246.3 |
|
|
747.9 |
|
|
614.1 |
|
Research and
development |
|
42.5 |
|
|
41.7 |
|
|
42.8 |
|
|
127.7 |
|
|
122.3 |
|
Selling,
general and administrative |
|
87.0 |
|
|
82.1 |
|
|
86.1 |
|
|
260.3 |
|
|
247.8 |
|
Acquisition
and integration costs |
|
0.5 |
|
|
2.1 |
|
|
0.7 |
|
|
3.4 |
|
|
35.5 |
|
Restructuring and other |
|
3.1 |
|
|
1.5 |
|
|
3.3 |
|
|
6.8 |
|
|
4.7 |
|
Amortization
of intangible assets |
|
12.5 |
|
|
17.0 |
|
|
13.8 |
|
|
42.6 |
|
|
50.3 |
|
Asset
impairment |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
COVID-19
related net credits |
|
— |
|
|
— |
|
|
(1.2 |
) |
|
(1.2 |
) |
|
— |
|
Fees and
expenses related to repricing of Term Loan |
|
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
6.5 |
|
Gain on sale
of long-lived assets |
|
— |
|
|
(6.8 |
) |
|
— |
|
|
— |
|
|
(6.8 |
) |
Income from
operations |
|
116.4 |
|
|
66.8 |
|
|
100.8 |
|
|
307.1 |
|
|
153.8 |
|
Interest
income |
|
0.1 |
|
|
1.2 |
|
|
0.3 |
|
|
1.1 |
|
|
4.3 |
|
Interest
expense |
|
6.6 |
|
|
13.5 |
|
|
7.2 |
|
|
22.7 |
|
|
35.3 |
|
Other
expense (income), net |
|
1.1 |
|
|
(0.9 |
) |
|
1.5 |
|
|
3.0 |
|
|
0.2 |
|
Income
before income taxes |
|
108.8 |
|
|
55.4 |
|
|
92.4 |
|
|
282.5 |
|
|
122.6 |
|
Provision
for income taxes |
|
17.1 |
|
|
8.0 |
|
|
18.7 |
|
|
48.0 |
|
|
25.0 |
|
Net
income |
$ |
91.7 |
|
$ |
47.4 |
|
$ |
73.7 |
|
$ |
234.5 |
|
$ |
97.6 |
|
Net income
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.66 |
|
$ |
0.86 |
|
$ |
1.34 |
|
$ |
4.26 |
|
$ |
1.79 |
|
Diluted |
$ |
1.66 |
|
$ |
0.86 |
|
$ |
1.33 |
|
$ |
4.24 |
|
$ |
1.77 |
|
Cash
dividend per common share |
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.20 |
|
$ |
0.60 |
|
$ |
0.60 |
|
Weighted
average shares outstanding: |
|
|
|
|
|
Basic |
|
55.2 |
|
|
54.9 |
|
|
55.1 |
|
|
55.1 |
|
|
54.6 |
|
Diluted |
|
55.4 |
|
|
55.2 |
|
|
55.3 |
|
|
55.3 |
|
|
55.0 |
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Unaudited Consolidated Balance
Sheet(In millions) |
|
|
|
September 30, |
|
December 31, |
|
|
|
2020 |
|
|
|
2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
493.3 |
|
|
$ |
414.6 |
|
Short-term
investments |
|
|
222.4 |
|
|
|
109.4 |
|
Trade
accounts receivable, net |
|
|
363.9 |
|
|
|
341.1 |
|
Inventories |
|
|
494.2 |
|
|
|
462.1 |
|
Other
current assets |
|
|
95.9 |
|
|
|
106.3 |
|
Total current assets |
|
|
1,669.7 |
|
|
|
1,433.5 |
|
Property,
plant and equipment, net |
|
|
267.9 |
|
|
|
241.9 |
|
Right-of-use
asset |
|
|
180.1 |
|
|
|
64.5 |
|
Goodwill |
|
|
1,062.1 |
|
|
|
1,058.5 |
|
Intangible
assets, net |
|
|
523.3 |
|
|
|
564.6 |
|
Long-term
investments |
|
|
6.3 |
|
|
|
5.8 |
|
Other
assets |
|
|
41.5 |
|
|
|
47.5 |
|
Total assets |
|
$ |
3,750.9 |
|
|
$ |
3,416.3 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Short-term
debt |
|
$ |
12.0 |
|
|
$ |
12.1 |
|
Accounts
payable |
|
|
113.4 |
|
|
|
88.4 |
|
Accrued
compensation |
|
|
95.4 |
|
|
|
100.9 |
|
Income taxes
payable |
|
|
18.8 |
|
|
|
15.4 |
|
Lease
liability |
|
|
16.8 |
|
|
|
20.6 |
|
Deferred
revenue and customer advances |
|
|
30.4 |
|
|
|
21.5 |
|
Other
current liabilities |
|
|
77.5 |
|
|
|
58.8 |
|
Total current liabilities |
|
|
364.3 |
|
|
|
317.7 |
|
Long-term
debt, net |
|
|
816.8 |
|
|
|
871.7 |
|
Non-current
deferred taxes |
|
|
67.2 |
|
|
|
72.4 |
|
Non-current
accrued compensation |
|
|
44.9 |
|
|
|
43.9 |
|
Non-current
lease liability |
|
|
172.2 |
|
|
|
44.8 |
|
Other
liabilities |
|
|
58.7 |
|
|
|
42.5 |
|
Total liabilities |
|
|
1,524.1 |
|
|
|
1,393.0 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common
stock |
|
|
0.1 |
|
|
|
0.1 |
|
Additional
paid-in capital |
|
|
861.6 |
|
|
|
864.3 |
|
Retained
earnings |
|
|
1,382.7 |
|
|
|
1,181.2 |
|
Accumulated
other comprehensive loss |
|
|
(17.6 |
) |
|
|
(22.3 |
) |
Total stockholders' equity |
|
|
2,226.8 |
|
|
|
2,023.3 |
|
Total
liabilities and stockholders' equity |
|
$ |
3,750.9 |
|
|
$ |
3,416.3 |
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Unaudited Consolidated Statements
of Cash Flows(In millions) |
|
|
Quarter Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
91.7 |
|
$ |
47.4 |
|
$ |
73.7 |
|
$ |
234.5 |
|
$ |
97.6 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
23.3 |
|
|
27.2 |
|
|
24.1 |
|
|
75.8 |
|
|
79.9 |
|
Amortization of inventory step-up adjustment to fair value |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.6 |
|
Amortization of debt issuance costs and original issue
discount |
|
0.5 |
|
|
3.6 |
|
|
0.5 |
|
|
2.1 |
|
|
6.5 |
|
Stock-based compensation |
|
7.4 |
|
|
7.4 |
|
|
6.8 |
|
|
22.7 |
|
|
42.1 |
|
Provision for excess and obsolete inventory |
|
6.9 |
|
|
6.5 |
|
|
6.7 |
|
|
19.8 |
|
|
18.6 |
|
Provision for doubtful accounts |
|
— |
|
|
0.9 |
|
|
— |
|
|
0.2 |
|
|
0.2 |
|
Deferred income taxes |
|
(4.1 |
) |
|
(6.4 |
) |
|
2.8 |
|
|
(0.7 |
) |
|
(9.1 |
) |
Asset impairment |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
Loss (gain) on sale of long-lived asset |
|
1.6 |
|
|
(6.8 |
) |
|
— |
|
|
1.6 |
|
|
(6.8 |
) |
Other |
|
(0.3 |
) |
|
(0.5 |
) |
|
0.4 |
|
|
— |
|
|
0.4 |
|
Changes in operating assets and liabilities |
|
25.1 |
|
|
(18.6 |
) |
|
24.0 |
|
|
8.8 |
|
|
(69.7 |
) |
Net cash
provided by operating activities |
|
152.1 |
|
|
60.7 |
|
|
139.0 |
|
|
366.0 |
|
|
167.3 |
|
Cash flows
(used in) provided by investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of business, net of cash acquired |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(988.6 |
) |
Purchases of investments |
|
(163.7 |
) |
|
(53.4 |
) |
|
(164.3 |
) |
|
(358.2 |
) |
|
(171.3 |
) |
Maturities of investments |
|
84.2 |
|
|
52.9 |
|
|
47.8 |
|
|
181.5 |
|
|
93.3 |
|
Sales of investments |
|
35.6 |
|
|
4.7 |
|
|
— |
|
|
64.3 |
|
|
162.4 |
|
Proceeds from sale of assets |
|
— |
|
|
41.2 |
|
|
— |
|
|
— |
|
|
41.2 |
|
Purchases of property, plant and equipment |
|
(29.0 |
) |
|
(16.5 |
) |
|
(20.9 |
) |
|
(59.9 |
) |
|
(44.7 |
) |
Net cash
(used in) provided by investing activities |
|
(72.9 |
) |
|
28.9 |
|
|
(137.4 |
) |
|
(172.3 |
) |
|
(907.7 |
) |
Cash flows
(used in) provided by financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short and long-term borrowings |
|
3.4 |
|
|
1.2 |
|
|
4.6 |
|
|
20.1 |
|
|
642.2 |
|
Payments of short-term borrowings |
|
(2.7 |
) |
|
(2.0 |
) |
|
(7.6 |
) |
|
(20.2 |
) |
|
(3.9 |
) |
Payments of long-term borrowings |
|
(2.3 |
) |
|
(52.2 |
) |
|
(2.2 |
) |
|
(56.8 |
) |
|
(103.9 |
) |
Dividend payments |
|
(11.0 |
) |
|
(10.9 |
) |
|
(11.0 |
) |
|
(33.0 |
) |
|
(32.6 |
) |
Net payments related to employee stock awards |
|
(4.5 |
) |
|
(0.7 |
) |
|
(0.5 |
) |
|
(25.4 |
) |
|
(11.8 |
) |
Net cash
(used in) provided by financing activities |
|
(17.1 |
) |
|
(64.6 |
) |
|
(16.7 |
) |
|
(115.3 |
) |
|
490.0 |
|
Effect of
exchange rate changes on cash and cash equivalents |
|
2.3 |
|
|
(5.6 |
) |
|
2.0 |
|
|
0.3 |
|
|
(7.6 |
) |
Increase
(decrease) in cash and cash equivalents |
|
64.4 |
|
|
19.4 |
|
|
(13.1 |
) |
|
78.7 |
|
|
(258.0 |
) |
Cash and
cash equivalents at beginning of period |
|
428.9 |
|
|
366.9 |
|
|
442.0 |
|
|
414.6 |
|
|
644.3 |
|
Cash and
cash equivalents at end of period |
$ |
493.3 |
|
$ |
386.3 |
|
$ |
428.9 |
|
$ |
493.3 |
|
$ |
386.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following supplemental Non-GAAP
earnings information is presented to aid in understanding MKS’
operating results:
|
MKS
Instruments, Inc.Schedule Reconciling Selected
Non-GAAP Financial Measures(In millions, except
per share data) |
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
91.7 |
|
$ |
47.4 |
|
$ |
73.7 |
|
$ |
234.5 |
|
$ |
97.6 |
|
COVID-19 related net credits (Note 1) |
|
— |
|
|
— |
|
|
(0.9 |
) |
|
(0.9 |
) |
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.6 |
|
Inventory charge related to exit of product groups (Note 3) |
|
3.9 |
|
|
— |
|
|
— |
|
|
3.9 |
|
|
— |
|
Acquisition and integration costs (Note 4) |
|
0.5 |
|
|
2.1 |
|
|
0.7 |
|
|
3.4 |
|
|
35.5 |
|
Amortization of debt issuance costs (Note 5) |
|
0.2 |
|
|
3.1 |
|
|
0.2 |
|
|
1.3 |
|
|
4.9 |
|
Restructuring and other (Note 6) |
|
3.1 |
|
|
1.5 |
|
|
3.3 |
|
|
6.8 |
|
|
4.7 |
|
Amortization of intangible assets |
|
12.5 |
|
|
17.0 |
|
|
13.8 |
|
|
42.6 |
|
|
50.3 |
|
Asset impairment (Note 7) |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
Fees and expenses related to repricing of Term Loan (Note 8) |
|
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
6.5 |
|
Gain on sale of long-lived assets (Note 9) |
|
— |
|
|
(6.8 |
) |
|
— |
|
|
— |
|
|
(6.8 |
) |
Windfall tax benefit on stock-based compensation (Note 10) |
|
(0.2 |
) |
|
0.3 |
|
|
(1.4 |
) |
|
(2.4 |
) |
|
(1.9 |
) |
Deferred tax asset write-off (Note 11) |
|
— |
|
|
— |
|
|
3.5 |
|
|
3.5 |
|
|
— |
|
Tax reform adjustments (Note 12) |
|
— |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
2.8 |
|
Tax effect of Non-GAAP adjustments (Note 19) |
|
(4.7 |
) |
|
(3.7 |
) |
|
(3.6 |
) |
|
(12.7 |
) |
|
(18.5 |
) |
Non-GAAP net
earnings (Note 13) |
$ |
107.0 |
|
$ |
61.6 |
|
$ |
89.3 |
|
$ |
281.2 |
|
$ |
182.7 |
|
Non-GAAP net
earnings per diluted share (Note 13) |
$ |
1.93 |
|
$ |
1.12 |
|
$ |
1.62 |
|
$ |
5.08 |
|
$ |
3.32 |
|
Weighted
average diluted shares outstanding |
|
55.4 |
|
|
55.2 |
|
|
55.3 |
|
|
55.3 |
|
|
55.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
152.1 |
|
$ |
60.7 |
|
$ |
139.0 |
|
$ |
366.0 |
|
$ |
167.3 |
|
Purchases of
property, plant and equipment |
|
(29.0 |
) |
|
(16.5 |
) |
|
(20.9 |
) |
|
(59.9 |
) |
|
(44.7 |
) |
Free cash
flow |
$ |
123.1 |
|
$ |
44.2 |
|
$ |
118.1 |
|
$ |
306.1 |
|
$ |
122.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Schedule Reconciling Selected
Non-GAAP Financial Measures(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
$ |
262.0 |
|
$ |
205.0 |
|
$ |
246.3 |
|
$ |
747.9 |
|
$ |
614.1 |
|
COVID-19 related net costs (Note 1) |
|
— |
|
|
— |
|
|
0.3 |
|
|
0.3 |
|
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.6 |
|
Inventory charge related to exit of product groups (Note 3) |
|
3.9 |
|
|
— |
|
|
— |
|
|
3.9 |
|
|
— |
|
Non-GAAP
gross profit (Note 14) |
$ |
265.9 |
|
$ |
205.0 |
|
$ |
246.6 |
|
$ |
752.1 |
|
$ |
621.7 |
|
Non-GAAP
gross margin (Note 14) |
|
45.1 |
% |
|
44.3 |
% |
|
45.3 |
% |
|
45.0 |
% |
|
44.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
$ |
145.6 |
|
$ |
138.2 |
|
$ |
145.5 |
|
$ |
440.8 |
|
$ |
460.3 |
|
Acquisition and integration costs (Note 4) |
|
0.5 |
|
|
2.1 |
|
|
0.7 |
|
|
3.4 |
|
|
35.5 |
|
Restructuring and other (Note 6) |
|
3.1 |
|
|
1.5 |
|
|
3.3 |
|
|
6.8 |
|
|
4.7 |
|
Amortization of intangible assets |
|
12.5 |
|
|
17.0 |
|
|
13.8 |
|
|
42.6 |
|
|
50.3 |
|
Asset impairment (Note 7) |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
COVID-19 related net credits (Note 1) |
|
— |
|
|
— |
|
|
(1.2 |
) |
|
(1.2 |
) |
|
— |
|
Fees and expenses related to repricing of Term Loan (Note 8) |
|
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
6.5 |
|
Gain on sale of long-lived assets (Note 9) |
|
— |
|
|
(6.8 |
) |
|
— |
|
|
— |
|
|
(6.8 |
) |
Non-GAAP
operating expenses (Note 15) |
$ |
129.5 |
|
$ |
123.8 |
|
$ |
128.9 |
|
$ |
388.0 |
|
$ |
370.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
$ |
116.4 |
|
$ |
66.8 |
|
$ |
100.8 |
|
$ |
307.1 |
|
$ |
153.8 |
|
COVID-19 related net credits (Note 1) |
|
— |
|
|
— |
|
|
(0.9 |
) |
|
(0.9 |
) |
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.6 |
|
Inventory charge related to exit of product groups (Note 3) |
|
3.9 |
|
|
— |
|
|
— |
|
|
3.9 |
|
|
— |
|
Acquisition and integration costs (Note 4) |
|
0.5 |
|
|
2.1 |
|
|
0.7 |
|
|
3.4 |
|
|
35.5 |
|
Restructuring and other (Note 6) |
|
3.1 |
|
|
1.5 |
|
|
3.3 |
|
|
6.8 |
|
|
4.7 |
|
Amortization of intangible assets |
|
12.5 |
|
|
17.0 |
|
|
13.8 |
|
|
42.6 |
|
|
50.3 |
|
Asset impairment (Note 7) |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
Fees and expenses related to repricing of Term Loan (Note 8) |
|
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
6.5 |
|
Gain on sale of long-lived assets (Note 9) |
|
— |
|
|
(6.8 |
) |
|
— |
|
|
— |
|
|
(6.8 |
) |
Non-GAAP
income from operations (Note 16) |
$ |
136.4 |
|
$ |
81.2 |
|
$ |
117.7 |
|
$ |
364.1 |
|
$ |
251.6 |
|
Non-GAAP
operating margin (Note 16) |
|
23.1 |
% |
|
17.6 |
% |
|
21.6 |
% |
|
21.8 |
% |
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
$ |
6.5 |
|
$ |
12.3 |
|
$ |
6.9 |
|
$ |
21.6 |
|
$ |
31.0 |
|
Amortization of debt issuance costs (Note 5) |
|
0.2 |
|
|
3.1 |
|
|
0.2 |
|
|
1.3 |
|
|
4.9 |
|
Non-GAAP
interest expense, net |
$ |
6.3 |
|
$ |
9.2 |
|
$ |
6.7 |
|
$ |
20.3 |
|
$ |
26.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
91.7 |
|
$ |
47.4 |
|
$ |
73.7 |
|
$ |
234.5 |
|
$ |
97.6 |
|
Interest expense, net |
|
6.5 |
|
|
12.3 |
|
|
6.9 |
|
|
21.6 |
|
|
31.0 |
|
Provision for income taxes |
|
17.1 |
|
|
8.0 |
|
|
18.7 |
|
|
48.0 |
|
|
25.0 |
|
Depreciation |
|
10.9 |
|
|
10.2 |
|
|
10.3 |
|
|
33.3 |
|
|
29.6 |
|
Amortization of intangible assets |
|
12.5 |
|
|
17.0 |
|
|
13.8 |
|
|
42.6 |
|
|
50.3 |
|
EBITDA (Note
17) |
$ |
138.7 |
|
$ |
94.9 |
|
$ |
123.4 |
|
$ |
380.0 |
|
$ |
233.5 |
|
Stock-based compensation |
|
7.3 |
|
|
5.8 |
|
|
6.7 |
|
|
22.0 |
|
|
20.9 |
|
COVID-19 related net credits (Note 1) |
|
— |
|
|
— |
|
|
(0.9 |
) |
|
(0.9 |
) |
|
— |
|
Acquisition inventory step-up (Note 2) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7.6 |
|
Inventory charge related to exit of product groups (Note 3) |
|
3.9 |
|
|
— |
|
|
— |
|
|
3.9 |
|
|
— |
|
Acquisition and integration costs (Note 4) |
|
0.5 |
|
|
2.1 |
|
|
0.7 |
|
|
3.4 |
|
|
35.5 |
|
Restructuring and other (Note 6) |
|
3.1 |
|
|
1.5 |
|
|
3.3 |
|
|
6.8 |
|
|
4.7 |
|
Asset impairment (Note 7) |
|
— |
|
|
— |
|
|
— |
|
|
1.2 |
|
|
— |
|
Fees and expenses related to repricing of Term Loan (Note 8) |
|
— |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
6.5 |
|
Gain on sale of long-lived assets (Note 9) |
|
— |
|
|
(6.8 |
) |
|
— |
|
|
— |
|
|
(6.8 |
) |
Other adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3.4 |
|
Adjusted
EBITDA (Note 18) |
$ |
153.5 |
|
$ |
98.1 |
|
$ |
133.2 |
|
$ |
416.4 |
|
$ |
305.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Reconciliation of GAAP Income Tax
Rate to Non-GAAP Income Tax Rate(In
millions) |
|
|
|
Three Months Ended September 30, 2020 |
|
Three Months Ended September 30, 2019 |
|
|
Income Before |
|
Provision (benefit) |
|
Effective |
|
Income Before |
|
Provision (benefit) |
|
Effective |
|
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
GAAP |
|
$ |
108.8 |
|
|
$ |
17.1 |
|
|
|
15.7 |
% |
|
$ |
55.4 |
|
|
$ |
8.0 |
|
|
14.4 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory charge related to exit of product groups (Note 3) |
|
|
3.9 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and integration costs (Note 4) |
|
|
0.5 |
|
|
|
— |
|
|
|
|
|
2.1 |
|
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 5) |
|
|
0.2 |
|
|
|
— |
|
|
|
|
|
3.1 |
|
|
|
— |
|
|
|
Restructuring and other (Note 6) |
|
|
3.1 |
|
|
|
— |
|
|
|
|
|
1.5 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
|
12.5 |
|
|
|
— |
|
|
|
|
|
17.0 |
|
|
|
— |
|
|
|
Fees and expenses related to Term Loan (Note 8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
0.6 |
|
|
|
— |
|
|
|
Gain on sale of long-lived assets (Note 9) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(6.8 |
) |
|
|
— |
|
|
|
Windfall tax benefit on stock-based compensation
(Note 10) |
|
— |
|
|
|
0.2 |
|
|
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
Tax effect of Non-GAAP adjustments (Note 19) |
|
|
— |
|
|
|
4.7 |
|
|
|
|
|
— |
|
|
|
3.7 |
|
|
|
Non-GAAP |
|
$ |
129.0 |
|
|
$ |
22.0 |
|
|
|
17.0 |
% |
|
$ |
72.9 |
|
|
$ |
11.4 |
|
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|
|
|
|
|
|
|
Income Before |
|
Provision (benefit) |
|
Effective |
|
|
|
|
|
|
|
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
|
|
|
|
|
GAAP |
|
$ |
92.4 |
|
|
$ |
18.7 |
|
|
|
20.2 |
% |
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
COVID-19 related net credits (Note 1) |
|
|
(0.9 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Acquisition and integration costs (Note 4) |
|
|
0.7 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs (Note 5) |
|
|
0.2 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Restructuring and other (Note 6) |
|
|
3.3 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
13.8 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Windfall tax benefit on stock-based compensation (Note 10) |
|
— |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
Deferred tax asset write-off (Note 10) |
|
|
— |
|
|
|
(3.5 |
) |
|
|
|
|
|
|
|
|
Tax effect of Non-GAAP adjustments (Note 19) |
|
|
— |
|
|
|
3.6 |
|
|
|
|
|
|
|
|
|
Non-GAAP |
|
$ |
109.5 |
|
|
$ |
20.2 |
|
|
|
18.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Reconciliation of GAAP Income Tax Rate to Non-GAAP
Income Tax Rate(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
Nine Months Ended September 30, 2019 |
|
|
Income Before |
|
Provision (benefit) |
|
Effective |
|
Income Before |
|
Provision (benefit) |
|
Effective |
|
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
|
Income Taxes |
|
for Income Taxes |
|
Tax Rate |
GAAP |
|
$ |
282.5 |
|
|
$ |
48.0 |
|
|
|
17.0 |
% |
|
$ |
122.6 |
|
|
$ |
25.0 |
|
|
20.4 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
COVID-19 related net credits (Note 1) |
|
|
(0.9 |
) |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition inventory step-up (Note 2) |
|
|
— |
|
|
|
— |
|
|
|
|
|
7.6 |
|
|
|
|
|
Inventory charge related to exit of product groups (Note 3) |
|
|
3.9 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Acquisition and integration costs (Note 4) |
|
|
3.4 |
|
|
|
— |
|
|
|
|
|
35.5 |
|
|
|
— |
|
|
|
Amortization of debt issuance costs (Note 5) |
|
|
1.3 |
|
|
|
— |
|
|
|
|
|
4.9 |
|
|
|
— |
|
|
|
Restructuring and other (Note 6) |
|
|
6.8 |
|
|
|
— |
|
|
|
|
|
4.7 |
|
|
|
— |
|
|
|
Amortization of intangible assets |
|
|
42.6 |
|
|
|
— |
|
|
|
|
|
50.3 |
|
|
|
— |
|
|
|
Asset impairment (Note 6) |
|
|
1.2 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
Fees and expenses related to Term Loan (Note 8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
6.5 |
|
|
|
— |
|
|
|
Gain on sale of long-lived assets (Note 9) |
|
|
|
|
|
|
|
|
(6.8 |
) |
|
|
|
|
Windfall tax benefit on stock-based compensation (Note 10) |
|
— |
|
|
|
2.4 |
|
|
|
|
|
— |
|
|
|
1.9 |
|
|
|
Deferred tax asset write-off (Note 11) |
|
|
— |
|
|
|
(3.5 |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
Tax reform adjustments (Note 12) |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
(2.8 |
) |
|
|
Tax effect of Non-GAAP adjustments (Note 19) |
|
|
— |
|
|
|
12.7 |
|
|
|
|
|
— |
|
|
|
18.5 |
|
|
|
Non-GAAP |
|
$ |
340.8 |
|
|
$ |
59.6 |
|
|
|
17.5 |
% |
|
$ |
225.3 |
|
|
$ |
42.6 |
|
|
18.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS
Instruments, Inc.Schedule Reconciling Selected
Non-GAAP Financial Measures – Q4’20 Guidance(In
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending December 31, 2020 |
|
|
|
|
|
|
$ Amount |
|
Plus orMinus |
|
Per Share |
|
Plus orMinus |
|
|
|
|
GAAP net
income |
|
$ |
97.1 |
|
|
$ |
11.1 |
|
|
$ |
1.75 |
|
|
$ |
0.20 |
|
|
|
|
|
Amortization
of intangible assets |
|
|
12.6 |
|
|
|
— |
|
|
|
0.23 |
|
|
|
— |
|
|
|
|
|
Deferred
financing costs |
|
|
0.2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Acquisition
and integration costs |
|
|
0.5 |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
|
|
Restructuring and other costs |
|
|
3.5 |
|
|
|
— |
|
|
|
0.06 |
|
|
|
— |
|
|
|
|
|
Tax effect
of Non-GAAP adjustments (Note 19) |
|
|
(2.9 |
) |
|
|
— |
|
|
|
(0.05 |
) |
|
|
— |
|
|
|
|
|
Non-GAAP net
earnings |
|
$ |
111.0 |
|
|
$ |
11.1 |
|
|
$ |
2.00 |
|
|
$ |
0.20 |
|
|
|
|
|
Estimated
weighted average diluted shares |
|
|
|
|
|
|
|
|
55.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
$ Amount |
|
Plus orMinus |
|
|
|
|
|
|
|
|
GAAP
operating expenses |
|
$ |
149.6 |
|
|
$ |
4.0 |
|
|
|
|
|
|
|
|
|
Acquisition
and integration costs |
|
|
(0.5 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Restructuring and other costs |
|
|
(3.5 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Amortization
of intangible assets |
|
|
(12.6 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Non-GAAP
operating expenses |
|
$ |
133.0 |
|
|
$ |
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending December 31, 2020 |
|
|
|
|
|
|
$ Amount |
|
Plus orMinus |
|
Percentage |
|
Plus orMinus |
|
|
|
|
GAAP
operating income and margin |
|
$ |
123.3 |
|
|
$ |
13.3 |
|
|
|
20.5 |
% |
|
|
1.3 |
% |
|
|
|
|
Acquisition
and integration costs |
|
|
0.5 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
|
|
Restructuring and other costs |
|
|
3.5 |
|
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
|
|
|
|
Amortization
of intangible assets |
|
|
12.6 |
|
|
|
— |
|
|
|
2.1 |
|
|
|
— |
|
|
|
|
|
Non-GAAP
operating income and margin |
|
$ |
139.9 |
|
|
$ |
13.3 |
|
|
|
23.3 |
% |
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Guidance |
|
|
|
|
|
|
|
|
|
|
|
|
$ Amount |
|
|
|
|
|
|
|
|
GAAP
interest expense, net |
|
|
|
$ |
6.2 |
|
|
|
|
|
|
|
|
|
Deferred
financing costs |
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
Non-GAAP
interest expense, net |
|
|
|
$ |
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MKS Instruments, Inc.Notes
on Our Non-GAAP Financial
Information
Non-GAAP financial measures adjust GAAP financial
measures for the items listed below. These Non-GAAP financial
measures should be viewed in addition to, and not as a substitute
for, MKS' reported GAAP results, and may be different from Non-GAAP
financial measures used by other companies. In addition, these
Non-GAAP financial measures are not based on any comprehensive set
of accounting rules or principles. 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.
Note 1: During the nine months ended September 30, 2020, we
recorded COVID-19 related costs and credits that were direct,
incremental and not expected to recur. The amounts consisted of
payroll-tax credits for maintaining our workforce during the
pandemic, offset by shift premiums and bonuses.
Note 2: Cost of revenues during the nine months ended September
30, 2019 includes the amortization of the step-up of inventory to
fair value as a result of the acquisition of Electro Scientific
Industries, Inc. (ESI Acquisition).
Note 3: During the three and nine months ended September 30,
2020, we recorded an inventory charge related to the exit of
certain product groups.
Note 4: Acquisition and integration costs were primarily related
to the ESI Acquisition which closed on February 1, 2019.
Note 5: We recorded additional interest expense related to the
amortization of debt issuance costs related to our Term Loan Credit
Agreement and our ABL Credit Agreement.
Note 6: Restructuring and other costs during the three and nine
months ended September 30, 2020 and the three months ended June 30,
2020 included duplicate facility costs attributed to entering into
new facility leases, costs related to the exit of certain product
groups and costs related to the pending closure of a facility in
Europe. Such costs for the nine months ended September 30, 2020
were offset by an insurance reimbursement related to a legal
settlement. Restructuring and other costs recorded during the three
and nine months ended September 30, 2019 consisted primarily of
severance costs related to an organization-wide reduction in
workforce, the consolidation of service functions in Asia and the
movement of certain products to low cost regions. During the nine
months ended September 30, 2019, we also recorded a legal
settlement.
Note 7: During the nine months ended September 30, 2020, we
recorded an asset impairment charge as a result of the write-down
of long-lived assets related to the pending closure of a facility
in Europe.
Note 8: We recorded fees and expenses during the three months
ended September 30, 2019 related to Amendment No. 6 to our Term
Loan Credit Agreement. We recorded fees and expenses during the
nine months ended September 30, 2019 related to Amendment No. 5 and
Amendment No. 6 to our Term Loan Credit Agreement.
Note 9: During the three and nine months ended September 30,
2019, we recorded a net gain on the sale of two of our buildings in
Boulder, CO and three of our buildings in Portland, OR.
Note 10: We recorded windfall tax benefits on the vesting of
stock-based compensation.
Note 11: We recorded a write-off of a deferred tax asset related
to foreign net operating losses.
Note 12: We recorded tax adjustments during the three and nine
months ended September 30, 2019 resulting from additional guidance
provided by tax authorities with respect to the 2017 U.S. tax
reforms.
Note 13: Non-GAAP net earnings and Non-GAAP net earnings per
diluted share amounts exclude net credits related to the COVID-19
pandemic, amortization of the step-up of inventory to fair value,
an inventory charge related to the exit of certain product groups,
acquisition and integration costs, amortization of debt issuance
costs, restructuring and other costs, amortization of intangible
assets, asset impairments, fees and expenses related to repricings
of, and amendments to, our Term Loan Credit Agreement, gain on the
sale of long-lived assets, windfall tax adjustments related to
stock compensation expense, a deferred tax write-off, tax reform
adjustments and the related tax effect of these adjustments to
reflect the expected full year effective tax rate in the related
period.
Note 14: The Non-GAAP gross profit amount and Non-GAAP gross
margin percentages exclude net costs related to the COVID-19
pandemic, an inventory charge related to the exit of certain
product groups and the amortization of the step-up of inventory to
fair value.
Note 15: Non-GAAP operating expenses exclude acquisition and
integration costs, restructuring and other costs, amortization of
intangible assets, an asset impairment, net credits related to the
COVID-19 pandemic, fees and expenses related to repricings of our
Term Loan Credit Agreement and a gain on the sale of long-lived
assets.
Note 16: Non-GAAP income from operations and Non-GAAP operating
margin percentages exclude net credits related to the COVID-19
pandemic, amortization of the step-up of inventory to fair value,
an inventory charge related to the exit of certain product groups,
acquisition and integration costs, restructuring and other costs,
amortization of intangible assets, an asset impairment, fees and
expenses related to repricings of our Term Loan Credit Agreement
and a gain on the sale of long-lived assets.
Note 17: EBITDA excludes net interest, income taxes,
depreciation and amortization of intangible assets.
Note 18: Adjusted EBITDA excludes from EBITDA, stock-based
compensation, net credits related to the COVID-19 pandemic,
amortization of the step-up of inventory to fair value, an
inventory charge related to the exit of certain product groups,
acquisition and integration costs, restructuring and other costs,
an asset impairment, fees and expenses related to repricings and
amendments of our Term Loan Credit Agreement and a gain on the sale
of long-lived assets.
Note 19: Non-GAAP adjustments are tax effected at applicable
statutory rates resulting in a difference between the GAAP and
Non-GAAP tax rates. For the three months ending December 31, 2020,
we forecast a GAAP tax rate of approximately 17% and a Non-GAAP tax
rate of approximately 17% based on forecasted Non-GAAP adjustments
for the three months ending December 31, 2020, which include the
related tax effects of acquisition and integration costs,
restructuring and other, amortization of intangible assets and
deferred financing costs.
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