MKS Instruments Reports Fourth Quarter and Full Year 2015 Financial Results


             
MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
             
             
             
        Three Months Ended 
        December 31, December 31, September 30,
         2015   2014   2015 
             
Net revenues:            
  Products       $  143,286  $  176,647  $  179,441 
  Services          29,101     26,374     29,891 
    Total net revenues         172,387     203,021     209,332 
Cost of revenues:           
  Products          79,553     97,295     95,710 
  Services          20,035     16,292     19,393 
    Total cost of revenues         99,588        113,587         115,103  
                         
Gross profit                   72,799         89,434         94,229  
                         
Research and development                 16,841         16,022         17,217  
Selling, general and administrative               31,555         32,633         33,396  
Restructuring                   505         494         562  
Amortization of intangible assets               1,693         1,731         1,691  
Income from operations                 22,205         38,554         41,363  
                         
Interest income, net                 841         391         721  
                         
Income from operations before income taxes             23,046         38,945         42,084  
Provision (benefit) for income taxes                (2,476 )       4,753         12,315  
Net income               $   25,522     $   34,192     $   29,769  
                         
Net income per share:                      
  Basic               $   0.48     $   0.64     $   0.56  
  Diluted               $   0.48     $   0.64     $   0.56  
                         
Cash dividends per common share           $   0.17     $   0.165     $   0.17  
                         
Weighted average shares outstanding:                   
  Basic                   53,217         53,102         53,314  
  Diluted                   53,554         53,436         53,568  
                         
The following supplemental Non-GAAP earnings information is presented              
to aid in understanding MKS' operating results:                
                         
Net income       $   25,522     $   34,192     $   29,769  
             
Adjustments (net of tax, if applicable):            
  Income tax charges (Note 1)       -          1,422         -   
  Release of tax reserves (Note 2)       (7,692 )       (3,394 )       -   
  Tax benefit and tax credits (Note 3)       (1,378 )       (4,614 )       -   
  Excess and obsolete charge (Note 4)        488         -          -   
  Restructuring (Note 5)       505         494         562  
  Amortization of intangible assets       1,693         1,731         1,691  
  Pro forma tax adjustments       (761 )       (779 )       (543 )
             
Non-GAAP net earnings (Note 6)   $   18,377     $   29,052     $   31,479  
             
Non-GAAP net earnings per share (Note 6)   $   0.34     $   0.54     $   0.59  
             
Weighted average shares outstanding       53,554         53,436         53,568  
             
Income from operations   $   22,205     $   38,554     $   41,363  
             
Adjustments:            
  Excess and obsolete charge (Note 4)    $   488     $   -      $   -   
  Restructuring (Note 5)       505         494         562  
  Amortization of intangible assets       1,693         1,731         1,691  
             
Non-GAAP income from operations (Note 7)   $   24,891     $   40,779     $   43,616  
             
Non-GAAP operating margin percentage (Note 7)     14.4 %     20.1 %     20.8 %
           
Gross profit   $   72,799     $   89,434     $   94,229  
  Excess and obsolete charge (Note 4)        488         -          -   
           
Non-GAAP gross profit (Note 8)   $   73,287     $   89,434     $   94,229  
           
Non-GAAP gross profit percentage (Note 8)     42.5 %     44.1 %     45.0 %
           
Note 1: In the fourth quarter of 2014, we recorded $1.4 million of withholding tax related to a foreign intercompany dividend.    
                         
Note 2:  Reserve releases related to the settlement of audits and expiration of the statute of limitations.
                         
Note 3: In the fourth quarter of 2015, we recorded a tax benefit of $1.8 million from the reinstatement of the U.S. research tax credit, representing the full year benefit.  We are excluding the benefit applicable to the first three quarters of 2015, which is $1.4 million, from Non-GAAP net earnings. In the fourth quarter of 2014, we recorded a tax benefit of $3.2 million related to a German net operating loss resulting from a change in tax status and we recorded a $1.4 million tax credit for the reinstatement of the U.S. research credit for the full year 2014.
                         
Note 4: In the fourth quarter of 2015, we incurred $0.5 million of excess and obsolete inventory charges, related to the discontinuation of a product line.
                         
Note 5: The third and fourth quarters of 2015, include restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. The fourth quarter of 2014 includes restructuring charges for severance costs related to a reduction in workforce, primarily at one of our foreign subsidiaries.
                         
Note 6: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude discrete tax benefits and charges, excess and obsolete inventory charges, restructuring costs, amortization of intangible assets and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related quarter.
                         
Note 7: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude certain excess and obsolete inventory charges, restructuring costs and amortization of intangible assets.
                         
Note 8: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude certain excess and obsolete inventory charges.
                         

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