ANDOVER, Mass., Jan. 29, 2014 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (Nasdaq:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reports fourth quarter and full year 2013 financial results.
Fourth Quarter Financial Results
Sales were $204 million, an increase of 23% from $166 million in the third quarter of 2013, and an increase of 53% from $134 million in the fourth quarter of 2012.
Fourth quarter net income was $20.2 million, or $0.38 per diluted share, compared to net income of $2.5 million, or $0.05 per diluted share in the third quarter of 2013, and $4.1 million, or $0.08 per diluted share in the fourth quarter of 2012.
Non-GAAP net earnings, which exclude special charges, were $22.3 million, or $0.42 per diluted share, compared to $13.3 million, or $0.25 per diluted share in the third quarter of 2013, and $5.1 million, or $0.10 per diluted share in the fourth quarter of 2012.
| Fourth Quarter Financial Results | ||
| GAAP Results | Non-GAAP Results | |
| Net revenues ($ millions) | $204 | $204 |
| Operating margin | 15.1% | 16.7% |
| Net income ($ millions) | $20.2 | $22.3 |
| Diluted EPS | $0.38 | $0.42 |
Full Year Results
Sales were $669 million, an increase of 4% from $644 million in 2012. Net income was $35.8 million, or $0.67 per diluted share, compared to $48.0 million, or $0.90 per diluted share in 2012. Non-GAAP net earnings were $48.4 million, or $0.90 per diluted share, compared to $53.3 million, or $1.00 per diluted share in 2012. We ended the year with a strong balance sheet with $650 million in cash and investments, or approximately $12 per share. Total book value, net of goodwill and intangibles, was $857 million or approximately $16 per share.
Gerald Colella, Chief Executive Officer and President, said, "I'm very pleased with our strong financial and operational performance in 2013 and, in particular, with our strong finish to the year. The year culminated with December being the strongest month of the year, due in part to a significant first-phase semiconductor fab build-out in China. Business levels continue to be very healthy entering 2014. For the new year, we will continue to focus on exceeding customer requirements, leveraging growth in our existing and new markets, and increasing long-term shareholder value.
"Based on current business levels, we expect that sales in the first quarter of 2014 may range from $190 to $205 million, and at these volumes, our non-GAAP and GAAP net earnings could range from $0.35 to $0.48 per share."
Conference Call Details
A conference call with management will be held on Thursday, January 30, 2014 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 30134845, which has been reserved for this call. A live and archived webcast of the call will be available on the company's website at www.mksinst.com.
Use of Non-GAAP Financial Results
Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of acquired intangible assets, costs associated with completed acquisitions, restructuring charges, certain excess and obsolete inventory charges, litigation settlements and related insurance reimbursements, certain supplemental executive retirement costs, discrete tax benefits and charges and the related tax effect of any adjustments. These non-GAAP measures are not in accordance with Accounting Principles Generally Accepted 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.
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, and other advanced manufacturing markets, 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.
| MKS Instruments, Inc. | |||
| Unaudited Consolidated Statements of Operations | |||
| (In thousands, except per share data) | |||
| Three Months Ended (Note 6) | |||
| December 31, | December 31, | September 30, | |
| 2013 | 2012 | 2013 | |
| Net revenues: | |||
| Products | $ 179,319 | $ 108,788 | $ 139,846 |
| Services | 25,075 | 25,008 | 26,607 |
| Total net revenues | 204,394 | 133,796 | 166,453 |
| Cost of revenues: | |||
| Products | 99,874 | 66,535 | 87,809 |
| Services | 16,840 | 14,660 | 16,410 |
| Total cost of revenues | 116,714 | 81,195 | 104,219 |
| Gross profit | 87,680 | 52,601 | 62,234 |
| Research and development | 16,252 | 14,207 | 15,257 |
| Selling, general and administrative | 39,874 | 30,853 | 33,158 |
| Restructuring | -- | 343 | 1,126 |
| Amortization of intangible assets | 602 | 583 | 361 |
| Income from operations | 30,952 | 6,615 | 12,332 |
| Interest income, net | 204 | 245 | 208 |
| Income before income taxes | 31,156 | 6,860 | 12,540 |
| Provision for income taxes | 10,919 | 2,751 | 10,082 |
| Net income | $ 20,237 | $ 4,109 | $ 2,458 |
| Net income per share: | |||
| Basic | $ 0.38 | $ 0.08 | $ 0.05 |
| Diluted | $ 0.38 | $ 0.08 | $ 0.05 |
| Cash dividends per common share | $ 0.16 | $ 0.16 | $ 0.16 |
| Weighted average shares outstanding: | |||
| Basic | 53,251 | 52,707 | 53,165 |
| Diluted | 53,695 | 53,217 | 53,513 |
| The following supplemental Non-GAAP earnings information is presented | |||
| to aid in understanding MKS' operating results: | |||
| Net income | $ 20,237 | $ 4,109 | $ 2,458 |
| Adjustments (net of tax, if applicable): | |||
| Income tax charge (Note 1) | -- | -- | 6,481 |
| Credits on U.S. tax expense (Note 2) | -- | -- | (1,200) |
| Executive retirement costs (Note 3) | 2,581 | -- | -- |
| Excess and obsolete charge (Note 4) | -- | -- | 6,423 |
| Acquisition inventory step-up | -- | 202 | -- |
| Restructuring (Note 5) | -- | 343 | 1,126 |
| Amortization of intangible assets | 602 | 583 | 361 |
| Pro forma tax adjustments | (1,100) | (132) | (2,355) |
| Non-GAAP net earnings (Note 6) | $ 22,320 | $ 5,105 | $ 13,294 |
| Non-GAAP net earnings per share (Note 6) | $ 0.42 | $ 0.10 | $ 0.25 |
| Weighted average shares outstanding | 53,695 | 53,217 | 53,513 |
| Income from operations | $ 30,952 | $ 6,615 | $ 12,332 |
| Adjustments: | |||
| Executive retirement costs (Note 3) | 2,581 | -- | -- |
| Excess and obsolete charge (Note 4) | -- | -- | 6,423 |
| Acquisition inventory step-up | -- | 202 | -- |
| Restructuring (Note 5) | -- | 343 | 1,126 |
| Amortization of intangible assets | 602 | 583 | 361 |
| Non-GAAP income from operations | $ 34,135 | $ 7,743 | $ 20,242 |
| Non-GAAP operating margin percentage | 16.7% | 5.8% | 12.2% |
| Gross profit | $ 87,680 | $ 52,601 | $ 62,234 |
| Excess and obsolete charge (Note 4) | -- | -- | 6,423 |
| Non-GAAP gross profit | $ 87,680 | $ 52,601 | $ 68,657 |
| Non-GAAP gross profit percentage | 42.9% | 39.3% | 41.2% |
| Note 1: In the third quarter of 2013, we incurred income tax charges of $6.5 million related to an election to pay currently, at a substantially reduced rate, taxes on certain accumulated earnings from the years 2001 to 2011 of one of our foreign subsidiaries. |
| Note 2: In the third quarter of 2013, we received $1.2 million in credits against U.S. tax expense on amended returns related to prior years. |
| Note 3: In the fourth quarter of 2013, the Company's Chief Executive Officer retired and $2.6 million of costs related to his supplemental executive retirement plan and other benefits were recognized and recorded in selling, general and administrative expenses for the three and twelve month periods ended December 31, 2013. |
| Note 4: Cost of sales for the three month period ended September 30, 2013, include $6.4 million of special charges for obsolete inventory related to unique product in a solar application in which slowing market conditions provide uncertainty as to the net realizable value of this inventory. |
| Note 5: The three month periods ended September 30, 2013 and December 31, 2012 include restructuring charges primarily for severance related costs related to the consolidation of certain facilities. |
| Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with completed acquisitions, certain supplemental executive retirement costs, a benefit related to an insurance reimbursement, excess and obsolete charge related to unique product in a solar application and the related tax effect of these adjustments and pro-forma income tax adjustments to reflect the expected full year effective tax rate in the quarter. |
| MKS Instruments, Inc. | ||||||
| Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate | ||||||
| (In thousands) | ||||||
| Three Months Ended December 31, 2013 | Three Months Ended September 30, 2013 | |||||
| Income Before | Provision for | Effective | Income Before | Provision for | Effective | |
| Income Taxes | Income Taxes | Tax Rate | Income Taxes | Income Taxes | Tax Rate | |
| GAAP | $ 31,156 | $ 10,919 | 35.0% | $ 12,540 | $ 10,082 | 80.4% |
| Adjustments: | ||||||
| Income tax charge (Note 1) | -- | -- | -- | (6,481) | ||
| Credits on U.S. tax expense (Note 2) | -- | -- | -- | 1,200 | ||
| Executive retirement costs (Note 4) | 2,581 | -- | -- | -- | ||
| Excess and obsolete charge (Note 6) | -- | -- | 6,423 | -- | ||
| Restructuring (Note 8) | -- | -- | 1,126 | -- | ||
| Amortization of intangible assets | 602 | -- | 361 | -- | ||
| Tax effect of pro forma adjustments | -- | 1,124 | -- | 767 | ||
| Adjustment to pro forma tax rate | -- | (24) | -- | 1,588 | ||
| Non-GAAP | $ 34,339 | $ 12,019 | 35.0% | $ 20,450 | $ 7,156 | 35.0% |
| Three Months Ended December 31, 2012 | ||||||
| Income Before | Provision for | Effective | ||||
| Income Taxes | Income Taxes | Tax Rate | ||||
| GAAP | $ 6,860 | $ 2,751 | 40.1% | |||
| Adjustments: | ||||||
| Acquisition inventory step-up | 202 | -- | ||||
| Restructuring (Note 8) | 343 | -- | ||||
| Amortization of intangible assets | 583 | -- | ||||
| Tax effect of pro forma adjustments | -- | 338 | ||||
| Adjustment to pro forma tax rate | -- | (206) | ||||
| Non-GAAP | $ 7,988 | $ 2,883 | 36.1% | |||
| Twelve Months Ended December 31, 2013 | Twelve Months Ended December 31, 2012 | |||||
| Income Before | Provision for | Effective | Income Before | Provision for | Effective | |
| Income Taxes | Income Taxes | Tax Rate | Income Taxes | Income Taxes | Tax Rate | |
| GAAP | $ 59,301 | $ 23,525 | 39.7% | $ 75,136 | $ 27,107 | 36.1% |
| Adjustments: | ||||||
| Income tax charge (Note 1) | -- | (6,481) | -- | -- | ||
| Credits on U.S. tax expense (Note 2) | -- | 1,200 | -- | -- | ||
| Tax benefit (Note 3) | -- | 2,353 | -- | -- | ||
| Executive retirement costs (Note 4) | 2,581 | -- | -- | -- | ||
| Insurance reimbursement (Note 5) | (1,071) | -- | -- | -- | ||
| Litigation (Note 5) | -- | -- | 5,316 | -- | ||
| Excess and obsolete charge (Note 6) | 6,423 | -- | -- | -- | ||
| Completed acquisition costs (Note 7) | 171 | -- | 1,258 | -- | ||
| Acquisition inventory step-up | -- | -- | 303 | -- | ||
| Restructuring (Note 8) | 1,364 | -- | 343 | -- | ||
| Amortization of intangible assets | 2,139 | -- | 1,036 | -- | ||
| Tax effect of pro forma adjustments | -- | 1,923 | -- | 2,948 | ||
| Non-GAAP | $ 70,908 | $ 22,520 | 31.8% | $ 83,392 | $ 30,055 | 36.0% |
| Note 1: In the third quarter of 2013, we incurred income tax charges of $6.5 million related to an election to pay currently, at a substantially reduced rate, taxes on certain accumulated earnings from the years 2001 to 2011 of one of our foreign subsidiaries. |
| Note 2: In the third quarter of 2013, we received $1.2 million in credits against U.S. tax expense on amended returns related to prior years. |
| Note 3: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013. |
| Note 4: In the fourth quarter of 2013, the Company's Chief Executive Officer retired and $2.6 million of costs related to his supplemental executive retirement plan and other benefits were recognized and recorded in selling, general and administrative expenses for the three and twelve month periods ended December 31, 2013. |
| Note 5: In the third quarter of 2012, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. In the second quarter of 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement. |
| Note 6: Cost of sales for the three month period ended September 30, 2013, include $6.4 million of special charges for obsolete inventory related to unique product in a solar application in which slowing market conditions provide uncertainty as to the net realizable value of this inventory. |
| Note 7: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in March 2013, are comprised of legal fees. Costs related to the Company's acquisition of Plasmart, Inc. in August 2012, are comprised of investment banking fees, legal fees and due diligence fees. |
| Note 8: The three months ended September 30, 2013 and December 31, 2012 and the twelve month periods ended December 31, 2013 and 2012 include restructuring charges primarily for severance related costs related to the consolidation of certain facilities. |
| MKS Instruments, Inc. | ||
| Unaudited Consolidated Statements of Operations | ||
| (In thousands, except per share data) | ||
| Twelve Months Ended | ||
| December 31, (Note 9) | ||
| 2013 | 2012 | |
| Net revenues: | ||
| Products | $ 568,317 | $ 536,774 |
| Services | 101,103 | 106,734 |
| Total net revenues | 669,420 | 643,508 |
| Cost of revenues: | ||
| Products | 337,464 | 310,485 |
| Services | 65,382 | 63,544 |
| Total cost of revenues | 402,846 | 374,029 |
| Gross profit | 266,574 | 269,479 |
| Research and development | 63,570 | 60,118 |
| Selling, general and administrative | 142,014 | 127,185 |
| Insurance reimbursement | (1,071) | -- |
| Litigation | -- | 5,316 |
| Completed acquisition costs | 171 | 1,258 |
| Restructuring | 1,364 | 343 |
| Amortization of intangible assets | 2,139 | 1,036 |
| Income from operations | 58,387 | 74,223 |
| Interest income, net | 914 | 913 |
| Income before income taxes | 59,301 | 75,136 |
| Provision for income taxes | 23,525 | 27,107 |
| Net income | $ 35,776 | $ 48,029 |
| Net income per share: | ||
| Basic | $ 0.67 | $ 0.91 |
| Diluted | $ 0.67 | $ 0.90 |
| Cash dividends per common share | $ 0.64 | $ 0.62 |
| Weighted average shares outstanding: | ||
| Basic | 53,061 | 52,686 |
| Diluted | 53,481 | 53,234 |
| The following supplemental Non-GAAP earnings information is presented | ||
| to aid in understanding MKS' operating results: | ||
| Net income | $ 35,776 | $ 48,029 |
| Adjustments (net of tax, if applicable): | ||
| Income tax charge (Note 1) | 6,481 | -- |
| Credits on U.S. tax expense (Note 2) | (1,200) | -- |
| Tax benefit (Note 3) | (2,353) | -- |
| Executive retirement costs (Note 4) | 2,581 | |
| Insurance reimbursement (Note 5) | (1,071) | -- |
| Litigation (Note 5) | -- | 5,316 |
| Excess and obsolete charge (Note 6) | 6,423 | -- |
| Acquisition inventory step-up | -- | 303 |
| Completed acquisition costs (Note 7) | 171 | 1,258 |
| Restructuring (Note 8) | 1,364 | 343 |
| Amortization of intangible assets | 2,139 | 1,036 |
| Pro forma tax adjustments | (1,923) | (2,948) |
| Non-GAAP net earnings (Note 9) | $ 48,388 | $ 53,337 |
| Non-GAAP net earnings per share (Note 9) | $ 0.90 | $ 1.00 |
| Weighted average shares outstanding | 53,481 | 53,234 |
| Income from operations | $ 58,387 | $ 74,223 |
| Adjustments: | ||
| Executive retirement costs (Note 4) | 2,581 | -- |
| Insurance reimbursement (Note 5) | (1,071) | -- |
| Litigation (Note 5) | -- | 5,316 |
| Excess and obsolete charge (Note 6) | 6,423 | -- |
| Acquisition inventory step-up | -- | 303 |
| Completed acquisition costs (Note 7) | 171 | 1,258 |
| Restructuring (Note 8) | 1,364 | 343 |
| Amortization of intangible assets | 2,139 | 1,036 |
| Non-GAAP income from operations | $ 69,994 | $ 82,479 |
| Non-GAAP operating margin percentage | 10.5% | 12.8% |
| Gross profit | $ 266,574 | $ 269,479 |
| Excess and obsolete charge (Note 6) | 6,423 | -- |
| Non-GAAP gross profit | $ 272,997 | $ 269,479 |
| Non-GAAP gross profit percentage | 40.8% | 41.9% |
| Note 1: In the third quarter of 2013, we incurred income tax charges of $6.5 million related to an election to pay currently, at a substantially reduced rate, taxes on certain accumulated earnings from the years 2001 to 2011 of one of our foreign subsidiaries. |
| Note 2: In the third quarter of 2013, we received $1.2 million in credits against U.S. tax expense on amended returns related to prior years. |
| Note 3: Tax benefit related to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013. |
| Note 4: In the fourth quarter of 2013, the Company's Chief Executive Officer retired and $2.6 million of costs related to his supplemental executive retirement plan and other benefits were recognized and recorded in selling, general and administrative expenses for the three and twelve month periods ended December 31, 2013. |
| Note 5: In the third quarter of 2012, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. In the second quarter of 2013, we recovered $1.1 million from our insurance company relating to the prior year settlement. |
| Note 6: Cost of sales for the three month period ended September 30, 2013, include $6.4 million of special charges for obsolete inventory related to unique product in a solar application in which slowing market conditions provide uncertainty as to the net realizable value of this inventory. |
| Note 7: Costs related to the Company's acquisition of Alter Power Systems S.r.l., in March 2013, are comprised of legal fees. Costs related to the Company's acquisition of Plasmart, Inc. in August 2012, are comprised of investment banking fees, legal fees and due diligence fees. |
| Note 8: The twelve month periods ended December 31, 2013 and December 31, 2012 include restructuring charges primarily for severance related costs related to the consolidation of certain facilities. |
| Note 9: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude amortization of intangible assets, restructurings, costs associated with completed acquisitions, a litigation settlement, a benefit related to an insurance reimbursement, excess and obsolete charge related to unique product in a solar application, certain supplemental executive retirement costs and the related tax effect of these adjustments and pro-forma income tax adjustments to reflect the expected full year effective tax rate in the quarter. |
| MKS Instruments, Inc. | ||
| Unaudited Consolidated Balance Sheet | ||
| (In thousands) | ||
| December 31, | December 31, | |
| 2013 | 2012 | |
| ASSETS | ||
| Cash and cash equivalents | $ 278,502 | $ 287,588 |
| Short-term investments | 311,115 | 327,653 |
| Trade accounts receivable, net | 116,744 | 82,060 |
| Inventories | 142,727 | 134,639 |
| Deferred income taxes | 10,629 | 8,194 |
| Other current assets | 16,715 | 28,048 |
| Total current assets | 876,432 | 868,182 |
| Property, plant and equipment, net | 77,536 | 80,516 |
| Long-term investments | 60,405 | 12,158 |
| Goodwill | 150,909 | 150,733 |
| Intangible assets, net | 13,090 | 11,561 |
| Other assets | 34,646 | 29,412 |
| Total assets | $ 1,213,018 | $ 1,152,562 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Accounts payable | $ 40,074 | $ 16,803 |
| Accrued compensation | 43,662 | 20,955 |
| Income taxes payable | 10,444 | 4,148 |
| Other current liabilities | 34,242 | 37,405 |
| Total current liabilities | 128,422 | 79,311 |
| Other liabilities | 63,073 | 61,095 |
| Stockholders' equity: | ||
| Common stock | 113 | 113 |
| Additional paid-in capital | 730,571 | 718,005 |
| Retained earnings | 278,966 | 278,583 |
| Other stockholders' equity | 11,873 | 15,455 |
| Total stockholders' equity | 1,021,523 | 1,012,156 |
| Total liabilities and stockholders' equity | $ 1,213,018 | $ 1,152,562 |