Market Overview

MKS Instruments Reports First Quarter 2019 Financial Results

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  • Quarterly revenue of $464 million
  • GAAP net income of $12.5 million, or $0.23 per diluted share
  • Non-GAAP net earnings of $61.3 million, or $1.12 per diluted share
  • Successfully completed acquisition of Electro Scientific Industries, Inc. ("ESI") in the quarter

ANDOVER, Mass., April 29, 2019 (GLOBE NEWSWIRE) -- MKS Instruments, Inc. (NASDAQ:MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported first quarter 2019 financial results.

"We're very pleased with our continued strong execution across the standalone MKS business.  Excluding the ESI acquisition, revenue and Non-GAAP net earnings were both above the mid-point of our guidance range for the first quarter," said Gerald Colella, Chief Executive Officer.

Mr. Colella added, "Our strong customer relationships and technical capabilities have also resulted in a number of important design wins, as we take full advantage of the current moderation in the semiconductor market.   The acquisition of ESI further advances our Surround the WorkpieceSM offerings and expands our solutions for Advanced Markets.  We plan to leverage this advanced systems expertise and deep technical understanding of laser materials processing interactions to provide rich and robust solutions to meet the challenges of our customers' evolving technology needs."

"ESI integration efforts are proceeding ahead of schedule and we are on target to realize $15 million of annualized cost synergies over the next 18 to 36 months," said Seth Bagshaw, Senior Vice President and Chief Financial Officer. "Furthermore, we exited the quarter with a strong balance sheet and liquidity with over $460 million of cash and short-term investments and trailing twelve-month net leverage ratio of under 1 times."

Quarterly Consolidated Financial Results
(in millions, except per share data)

    Q1 2019     Q4 2018  
GAAP Results                
Net revenues   $ 463.6     $ 460.5  
Gross margin     42.7 %     45.6 %
Operating margin     5.0 %     20.4 %
Net income   $ 12.5     $ 71.6  
Diluted EPS   $ 0.23     $ 1.32  
Non-GAAP Results                
Gross margin     43.8 %     45.6 %
Operating margin     17.7 %     23.7 %
Net earnings   $ 61.3     $ 84.0  
Diluted EPS   $ 1.12     $ 1.54  

First Quarter 2019 Financial Results  
Revenue was $463.6 million and included two months of results from the Company's acquisition of ESI, which closed on February 1, 2019. Net income was $12.5 million, or $0.23 per diluted share, compared to net income of $71.6 million, or $1.32 per diluted share, in the fourth quarter of 2018, and $105.1 million, or $1.90 per diluted share, in the first quarter of 2018. First quarter net income included additional amortization of intangible assets of $5.1 million and aggregate acquisition and integration costs of $30.2 million associated with the acquisition.

Non-GAAP net earnings, which exclude special charges and credits, were $61.3 million, or $1.12 per diluted share, compared to $84.0 million, or $1.54 per diluted share, in the fourth quarter of 2018, and $114.3 or $2.07 per diluted share, in the first quarter of 2018.

Sales to Advanced Markets were $243 million, an increase of 8% compared to the fourth quarter of 2018, which was primarily attributed to the acquisition of ESI. Sales to semiconductor customers were $221 million, a decrease of 6% compared to the fourth quarter of 2018.

Additional Financial Information
The Company had $462 million in cash and short-term investments and $1 billion of term loan debt outstanding as of March 31, 2019 and during the first quarter of 2019, MKS paid a dividend of $10.8 million or $0.20 per diluted share. The Company has available a $100 million asset-based line of credit.

Second Quarter 2019 Outlook  
Based on current business levels, the Company expects that revenue in the second quarter of 2019 could range from $460 to $510 million.

At these volumes, GAAP net income could range from $0.56 to $0.93 per diluted share and non-GAAP net earnings could range from $0.89 to $1.26 per diluted share.

Quarterly Consolidated Non-GAAP Financial Results - Excluding ESI
(in millions, except per share data)

    Q1 2019     Q4 2018  
Non-GAAP Results                
Net revenues   $ 428.8     $ 460.5  
Gross margin     44.6 %     45.6 %
Operating margin     18.9 %     23.7 %
Net earnings   $ 64.0     $ 84.0  
Diluted EPS   $ 1.17     $ 1.54  

Segment Results

In conjunction with the ESI acquisition, the Company has added a third business segment when reporting results.  We refer to this new business segment as Equipment & Solutions and it represents primarily the legacy ESI business.

Conference Call Details
A conference call with management will be held on Tuesday, April 30, 2019 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 7138019, 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, along with the Company's earnings press release and supplemental financial information.   

About MKS Instruments
MKS Instruments, Inc. is a global provider of instruments, 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, residual gas analysis, leak detection, control technology, ozone generation and delivery, power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control, optics and laser-based manufacturing 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, and research and defense. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results
This release includes measures that are not in accordance with U.S. generally accepted accounting principles ("Non-GAAP measures"). Non-GAAP measures exclude amortization of acquired intangible assets, costs associated with completed acquisitions, acquisition integration costs, fees and expenses related to our term loan, amortization of debt issuance costs, restructuring charges, a customer contract obligation related to an acquisition, environmental costs related to an acquisition, windfall tax benefits from stock-based compensation, accrued taxes on subsidiary distributions, the one-time tax effects of the 2017 Tax Cut and Jobs Act, tax cost on the intercompany sale of an asset and the related tax effects of adjustments impacting pre-tax income. These Non-GAAP measures should be viewed in addition to, and not as a substitute for, MKS' reported results, and may be different from Non-GAAP measures used by other companies. In addition, these Non-GAAP measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these Non-GAAP measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

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, business prospects and growth of MKS, and MKS' expected synergies and cost savings from its recent acquisition of ESI.  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 MKS operates, including the fluctuations in capital spending in the semiconductor industry and other advanced manufacturing markets, fluctuations in net sales to our major customers, the ability of MKS to successfully integrate ESI's operations and employees, unexpected costs, charges or expenses resulting from the ESI acquisition, MKS' ability to realize anticipated synergies and cost savings from the ESI acquisition, the terms of our term loan, competition from larger or more established companies in MKS' markets; MKS' ability to successfully grow ESI's business; potential adverse reactions or changes to business relationships resulting from the ESI acquisition, the challenges, risks and costs involved with integrating the operations of the other companies we have acquired, the Company's 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, 2018 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:  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
    March 31,   March 31,   December 31,
      2019       2018       2018  
             
Net revenues:            
Products   $ 397,363     $ 496,677     $ 402,271  
Services     66,198       57,598       58,270  
Total net revenues     463,561       554,275       460,541  
Cost of revenues:            
Products     229,710       261,321       221,766  
Services     35,733       30,099       28,891  
Total cost of revenues     265,443       291,420       250,657  
Gross profit     198,118       262,855       209,884  
Research and development     38,933       34,857       32,461  
Selling, general and administrative     82,455       82,949       68,166  
Fees and expenses related to incremental term loan     5,847              
Acquisition and integration costs     30,167             4,245  
Restructuring     223       1,220       193  
Customer contract obligation     1,700              
Environmental costs           1,000        
Amortization of intangible assets     15,727       11,190       10,735  
Income from operations     23,066       131,639       94,084  
Interest income     1,714       1,105       1,698  
Interest expense     9,119       5,430       3,871  
Other expense, net     325       572       763  
Income from operations before income taxes     15,336       126,742       91,148  
Provision for income taxes     2,881       21,621       19,512  
Net income   $ 12,455     $ 105,121     $ 71,636  
Net income per share:            
Basic   $ 0.23     $ 1.93     $ 1.33  
Diluted   $ 0.23     $ 1.90     $ 1.32  
Cash dividends per common share   $ 0.20     $ 0.18     $ 0.20  
Weighted average shares outstanding:            
Basic     54,147       54,423       54,005  
Diluted     54,848       55,286       54,454  
             
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS' operating results:
             
Net income   $ 12,455     $ 105,121     $ 71,636  
Adjustments:            
Acquisition and integration costs (Note 1)     30,167             4,245  
Acquisition inventory step-up (Note 2)     5,140              
Fees and expenses related to incremental term loan (Note 3)     5,847              
Amortization of debt issuance costs (Note 4)     599       1,831       711  
Restructuring (Note 5)     223       1,220       193  
Customer contract obligation (Note 6)     1,700              
Environmental costs (Note 7)           1,000        
Amortization of intangible assets     15,727       11,190       10,735  
Windfall tax benefit on stock-based compensation (Note 8)     (1,389 )     (3,036 )     (202 )
Deferred tax adjustment (Note 9)           878        
Accrued tax on MKS subsidiary distributions (Note 10)                 (2,277 )
Tax cost on the inter-company sale of an asset (Note 11)                 541  
Transition tax on accumulated foreign earnings (Note 12)           (1,668 )      
Pro-forma tax adjustments     (9,169 )     (2,247 )     (1,549 )
Non-GAAP net earnings (Note 13)   $ 61,300     $ 114,289     $ 84,033  
Non-GAAP net earnings per share (Note 13)   $ 1.12     $ 2.07     $ 1.54  
Weighted average shares outstanding     54,848       55,286       54,454  
             
Income from operations   $ 23,066     $ 131,639     $ 94,084  
Adjustments:            
Acquisition and integration costs (Note 1)     30,167             4,245  
Acquisition inventory step-up (Note 2)     5,140              
Fees and expenses related to incremental term loan (Note 3)     5,847              
Restructuring (Note 5)     223       1,220       193  
Customer contract obligation (Note 6)     1,700              
Environmental costs (Note 7)           1,000        
Amortization of intangible assets     15,727       11,190       10,735  
Non-GAAP income from operations (Note 14)   $ 81,870     $ 145,049     $ 109,257  
Non-GAAP operating margin percentage (Note 14)     17.7%       26.2%       23.7%  
             
Gross profit   $ 198,118     $ 262,855     $ 209,884  
Acquisition inventory step-up (Note 2)     5,140              
Non-GAAP gross profit (Note 15)   $ 203,258     $ 262,855     $ 209,884  
Non-GAAP gross profit percentage (Note 15)     43.8%       47.4%       45.6%  
             
Interest expense   $ 9,119     $ 5,430     $ 3,871  
Amortization of debt issuance costs (Note 4)     599       1,831       711  
Non-GAAP interest expense   $ 8,520     $ 3,599     $ 3,160  
             
Net income   $ 12,455     $ 105,121     $ 71,636  
Interest expense, net     7,405       4,325       2,173  
Provision for income taxes     2,881       21,621       19,512  
Depreciation     9,484       9,302       9,212  
Amortization     15,727       11,190       10,735  
EBITDA (Note 16)   $ 47,952     $ 151,559     $ 113,268  
Stock-based compensation     9,274       10,426       5,257  
Acquisition and integration costs (Note 1)     30,167             4,245  
Acquisition inventory step-up (Note 2)     5,140              
Fees and expenses related to incremental term loan (Note 3)     5,847              
Restructuring (Note 5)     223       1,220       193  
Customer contract obligation (Note 6)     1,700              
Environmental costs           1,000        
Other adjustments     3,337       772        
Adjusted EBITDA (Note 17)   $ 103,640     $ 164,977     $ 122,963  
             
             
Note 1: Acquisition and integration costs for the three months ended March 31, 2019 and December 31, 2018, respectively, related to the acquisition of Electro Scientific Industries, Inc. ("ESI") which closed on February 1, 2019.
             
Note 2: Costs of revenues during the three months ended March 31, 2019 includes the amortization of the step-up of inventory to fair value as a result of the ESI acquisition.
             
Note 3: We recorded fees and expenses during the three months ended March 31, 2019 related to Amendment No. 5 of our Term Loan Credit Agreement.
 
Note 4: We recorded additional interest expense related to the amortization of debt issuance costs associated with our Term Loan Credit Agreement.
             
Note 5: We recorded restructuring charges during the three months ended March 31, 2019 and December 31, 2018, respectively, which consisted primarily of severance costs related to an organization-wide reduction in workforce. We recorded restructuring costs during the three months ended March 31, 2018, primarily comprised of severance costs related to transferring a portion of our shared service functions to a third party as well as the consolidation of certain shared service functions in Asia.
             
Note 6: We recorded expense during the three months ended March 31, 2019 related to a contractual obligation we assumed as part of our acquisition of Newport Corporation.
             
Note 7: We recorded environmental costs during the three months ended March 31, 2018, related to an Environmental Protection Agency-designated Superfund site, which was acquired as part of our acquisition of Newport Corporation.
             
Note 8: We recorded windfall tax benefits on the vesting of stock-based compensation.
             
Note 9: The three months ended March 31, 2018 includes an update to the provisional tax adjustment recorded during the three months ended December 31, 2017 where we recorded a provisional deferred tax adjustment, which also included the reversal of a tax accrual on a French dividend, related to U.S. tax reform legislation.
             
Note 10: We recorded and adjusted tax accruals related to distributions from MKS subsidiaries.
 
Note 11: We recorded taxes on the inter-company sale of an asset during the three months ended December 31, 2018.
             
Note 12: We adjusted the provisional transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended March 31, 2018.
             
Note 13: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment to our Term Loan Credit agreement, amortization of debt issuance costs, restructuring costs, a customer contract obligation, environmental costs, amortization of intangible assets, a windfall tax benefit related to stock-based compensation expense, a deferred tax adjustment, accrued tax on MKS subsidiary distributions, tax costs on the inter-company sale of an asset, transition tax on accumulated foreign earnings 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 income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment to our Term Loan Credit Agreement, restructuring costs, a customer contract obligation, environmental costs and amortization of intangible assets.
             
Note 15: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to the acquisition of ESI.
             
Note 16: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.
             
Note 17: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs,  the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment of our Term Loan Credit agreement, restructuring costs, a customer contract obligation, environmental costs and other adjustments as defined in our Term Loan Credit Agreement.
             


MKS Instruments, Inc.  
Unaudited Consolidated Balance Sheet  
(In thousands)  
           
    March 31,   December 31,  
      2019       2018    
ASSETS          
Cash and cash equivalents   $ 418,016     $ 644,345    
Short-term investments     44,326       73,826    
Trade accounts receivable, net     335,990       295,454    
Inventories     475,633       384,689    
Other current assets     86,387       65,790    
Total current assets     1,360,352       1,464,104    
Property, plant and equipment, net     251,424       194,367    
Right-of-use asset     65,628          
Goodwill     1,057,331       586,996    
Intangible assets, net     619,091       319,807    
Long-term investments     10,350       10,290    
Other assets     48,562       38,682    
Total assets   $ 3,412,738     $ 2,614,246    
LIABILITIES AND STOCKHOLDERS' EQUITY          
Short-term debt   $ 10,281     $ 3,986    
Accounts payable     95,317       83,825    
Accrued compensation     61,523       82,350    
Income taxes payable     14,355       16,358    
Lease liability     19,459          
Deferred revenue and customer advances     21,056       14,246    
Other current liabilities     74,568       62,520    
Total current liabilities     296,559       263,285    
Long-term debt, net     976,823       343,842    
Non-current deferred taxes     78,904       48,223    
Non-current accrued compensation     60,337       55,598    
Non-current lease liability     49,392          
Other liabilities     29,862       30,111    
Total liabilities     1,491,877       741,059    
Stockholders' equity:          
Common stock     113       113    
Additional paid-in capital     844,261       793,932    
Retained earnings     1,086,409       1,084,797    
Accumulated other comprehensive income     (9,922 )     (5,655 )  
Total stockholders' equity     1,920,861       1,873,187    
Total liabilities and stockholders' equity   $ 3,412,738     $ 2,614,246    
           


             
MKS Instruments, Inc.
Unaudited Consolidated Statements of Cash Flows
(In thousands, except per share data)
             
    Three Months Ended
    March 31   March 31,   December 31,
      2019       2018       2018  
Cash flows from operating activities:            
Net income   $ 12,455     $ 105,121     $ 71,636  
Adjustments to reconcile net income to net cash provided by operating activities:                        
Depreciation and amortization     25,211       20,492       19,947  
Amortization of inventory step-up adjustment to fair value     5,140              
Amortization of debt issuance costs, original issue discount and soft call premium     1,202       2,019       934  
Stock-based compensation     27,838       10,426       5,257  
Provision for excess and obsolete inventory     5,063       5,333       6,749  
(Recovery) Provision for doubtful accounts     (440 )     335       576  
Deferred income taxes     (2,445 )     (705 )     (13,249 )
Other     66       34       2,118  
Changes in operating assets and liabilities     (45,040 )     (70,299 )     41,490  
Net cash provided by operating activities     29,050       72,756       135,458  
Cash flows (used in) provided by investing activities:            
Acquisition of business, net of cash acquired     (988,599 )            
Purchases of investments     (44,212 )     (49,753 )     (39,824 )
Sales of investments     154,489       8,930       139,674  
Maturities of investments     18,684       49,596       46,410  
Proceeds from sale of assets     35              
Purchases of property, plant and equipment     (14,529 )     (9,390 )     (26,056 )
Net cash (used in) provided by investing activities     (874,132 )     (617 )     120,204  
Cash flows provided by (used in) financing activities:            
Payments of short-term borrowings     (176 )     (10,274 )     (9,299 )
Net proceeds from short and long-term borrowings     638,638       11,907       7,045  
Payments of long-term borrowings           (50,000 )      
Dividend payments     (10,843 )     (9,808 )     (10,797 )
Net (payments) proceeds related to employee stock awards     (8,987 )     (8,921 )     2,537  
Net cash provided by (used in) financing activities     618,632       (67,096 )     (10,514 )
Effect of exchange rate changes on cash and cash equivalents     121       1,958       (653 )
(Decrease) Increase in cash and cash equivalents     (226,329 )     7,001       244,495  
Cash and cash equivalents at beginning of period     644,345       333,887       399,850  
Cash and cash equivalents at end of period   $ 418,016     $ 340,888     $ 644,345  
             


MKS Instruments, Inc.  
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate  
(In thousands)  
                         
    Three Months Ended March 31, 2019   Three Months Ended December 31, 2018
    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   $ 15,336   $ 2,881     18.8 %   $ 91,148   $ 19,512     21.4 %
Adjustments:                        
Acquisition and integration costs (Note 1)     30,167               4,245          
Acquisition inventory step up (Note 2)     5,140                        
Fees and expenses related to incremental term loan (Note 3)     5,847                        
Amortization of debt issuance costs (Note 4)     599               711          
Restructuring (Note 5)     223               193          
Customer contract obligation (Note 6)     1,700                        
Amortization of intangible assets     15,727               10,735          
Windfall tax benefit on stock-based compensation (Note 8)         1,389               202      
Accrued tax on MKS subsidiary distributions (Note 10)                       2,277      
Tax cost on the inter-company sale of an asset (Note 11)                       (541 )    
Tax effect of pro-forma adjustments         9,169               1,549      
Non-GAAP   $ 74,739   $ 13,439     18.0 %   $ 107,032   $ 22,999     21.5 %
                         
                         
    Three Months Ended March 31, 2018            
    Income Before   Provision (benefit)   Effective            
    Income Taxes   for Income Taxes   Tax Rate            
GAAP   $ 126,742   $ 21,621     17.1 %            
Adjustments:                        
Amortization of debt issuance costs (Note 4)     1,831                      
Restructuring (Note 5)     1,220                      
Environmental costs (Note 7)     1,000                      
Amortization of intangible assets     11,190                      
Windfall tax benefit on stock-based compensation (Note 8)         3,036                  
Deferred tax adjustment (Note 9)         (878 )                
Transition tax on accumulated foreign earnings (Note 12)         1,668                  
Tax effect of pro-forma adjustments         2,247                  
Non-GAAP   $ 141,983   $ 27,694     19.5 %            
                         
                         
Note 1: Acquisition and integration costs for the three months ended March 31, 2019 and December 31, 2018, respectively, related to the acquisition of Electro Scientific Industries, Inc. ("ESI") which closed on February 1, 2019.
                         
Note 2: Costs of revenues during the three months ended March 31, 2019 includes the amortization of the step-up of inventory to fair value as a result of the ESI acquisition.
                         
Note 3: We recorded fees and expenses during the three months ended March 31, 2019 related to Amendment No. 5 of our Term Loan Credit Agreement.
                         
Note 4: We recorded additional interest expense related to the amortization of debt issuance costs associated with our Term Loan Credit Agreement.
                         
Note 5: We recorded restructuring charges during the three months ended March 31, 2019 and December 31, 2018, respectively, which consisted primarily of severance costs related to an organization-wide reduction in workforce. We recorded restructuring costs during the three months ended March 31, 2018, primarily comprised of severance costs related to transferring a portion of our shared service functions to a third party as well as the consolidation of certain shared service functions in Asia.
                         
Note 6: We recorded expense during the three months ended March 31, 2019 related to a contractual obligation we assumed as part of our acquisition of Newport Corporation.
                         
Note 7: We recorded environmental costs during the three months ended March 31, 2018, related to an Environmental Protection Agency-designated Superfund site, which was acquired as part of our acquisition of Newport Corporation.
                         
Note 8: We recorded windfall tax benefits on the vesting of stock-based compensation.
 
Note 9: The three months ended March 31, 2018 includes an update to the provisional tax adjustment recorded during the three months ended December 31, 2017 where we recorded a provisional deferred tax adjustment, which also included the reversal of a tax accrual on a French dividend, related to U.S. tax reform legislation.
 
Note 10: We recorded and adjusted tax accruals related to distributions from MKS subsidiaries.
                         
Note 11: We recorded taxes on the inter-company sale of an asset during the three months ended December 31, 2018.
                         
Note 12: We adjusted the provisional transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended March 31, 2018.
                         


MKS Instruments, Inc.
Reconciliation of Q2-19 Guidance - GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)
                   
    Three Months Ended June 30, 2019  
    Low Guidance   High Guidance  
    $ Amount   $ Per Share   $ Amount   $ Per Share  
GAAP net income   $ 30,700     $ 0.56     $ 50,900     $ 0.93    
Amortization     17,600       0.32       17,600       0.32    
Deferred financing costs     834       0.01       834       0.01    
Integration costs     1,800       0.03       1,800       0.03    
Inventory step-up amortization     3,243       0.06       3,243       0.06    
Tax effect of adjustments (Note 1)     (5,077 )     (0.09 )     (5,277 )     (0.09 )  
Non-GAAP net earnings   $ 49,100     $ 0.89     $ 69,100     $ 1.26    
Q2 -19 forecasted shares         55,000           55,000    
                   
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.  

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