MKS Instruments Reports Q3 2010 Financial Results

ANDOVER, Mass., Oct. 20 — (PRNewswire) — MKS Instruments, Inc. (Nasdaq: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reports third quarter 2010 financial results.

Sales remained strong and were $221.3 million, up from $220.6 million in the second quarter of 2010, and an increase of 117% from $102.0 million in the third quarter of 2009.

Non-GAAP net earnings per share increased 9% as a result of favorable gross margin, lower operating expenses and favorable foreign exchange.  Non-GAAP net earnings, which exclude discontinued operations and special items, were $36.8 million, or $0.72 per diluted share, compared to net earnings of $33.4 million, or $0.66 per diluted share in the second quarter of 2010, and a net loss of $2.0 million, or ($0.04) per basic share in the third quarter of 2009.

GAAP net income was $38.6 million, or $0.76 per diluted share, compared to net income of $38.8 million, or $0.76 per diluted shared in the second quarter of 2010, and a net loss of $4.0 million, or ($0.08) per basic share in the third quarter of 2009.

Leo Berlinghieri, Chief Executive Officer and President, said, "Sales to both the semiconductor and other advanced markets are tracking at record levels.  The semiconductor market has had an exceptional year so far in 2010, and at this point, we are seeing no significant variation in the semiconductor market. In the other leading edge markets we serve, we anticipate that as the global economy continues its recovery, we will see continued growth.  Based on this, we estimate that our fourth quarter sales may range from $215 to $230 million, and at these volumes, our non-GAAP net earnings could range from $0.62 to $0.73 per share."

Management will discuss third quarter financial results on a conference call tomorrow at 8:30 a.m. (Eastern Time). Dial-in numbers are (800) 762-8779 for domestic callers and (480) 629-9771 for international callers. The call will be broadcast live and available for replay at www.mksinstruments.com. To hear a telephone replay through October 28, 2010, dial (303) 590-3030, pass code 4365453#.

The financial results that exclude discontinued operations and special items are not in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). MKS' management believes the presentation of non-GAAP financial measures, which exclude discontinued operations, costs associated with acquisitions and special items, is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

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, electrostatic charge management, 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.

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, 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, 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


September 30,


September 30,


June 30,


2010


2009


2010







Net sales

$           221,323


$             102,028


$          220,647

Cost of sales

122,820


64,154


123,328

Gross profit

98,503


37,874


97,319







Research and development

15,070


11,448


16,154

Selling, general and administrative

28,247


22,984


30,902

Amortization of acquired intangible assets

250


690


314

Restructuring

-


143


-

Income from operations

54,936


2,609


49,949







Interest income, net

35


263


254







Income from continuing operations before income taxes

54,971


2,872


50,203

Provision for income taxes

18,370


5,318


17,059

Income (loss) from continuing operations

36,601


(2,446)


33,144

Income (loss) from discontinued operations, net of taxes

2,035


(1,527)


5,633

Net income (loss)

$             38,636


$               (3,973)


$            38,777







Basic income (loss) per share:






 Continuing operations

$                 0.73


$                 (0.05)


$                0.66

 Discontinued operations

0.04


(0.03)


0.11

 Net income (loss)

$                 0.77


$                 (0.08)


$                0.77







Diluted income (loss) per share:






 Continuing operations

$                 0.72


$                 (0.05)


$                0.65

 Discontinued operations

0.04


(0.03)


0.11

 Net income (loss)

$                 0.76


$                 (0.08)


$                0.76







Weighted average shares outstanding:






 Basic

50,226


49,461


50,067

 Diluted

50,994


49,461


50,870







The following supplemental Non-GAAP earnings information is presented






to aid in understanding MKS' operating results:












Income (loss) from continuing operations

$             36,601


$               (2,446)


$            33,144







Adjustments (net of tax, if applicable):






 Amortization of acquired intangible assets

250


690


314

 Restructuring and related items (Note 1)

-


143


-

 Proforma tax adjustments

(66)


(382)


(90)







Non-GAAP net earnings (loss) (Note 2)

$             36,785


$               (1,995)


$            33,368







Non-GAAP net earnings (loss) per share (Note 2)

$                 0.72


$                 (0.04)


$                0.66

Weighted average shares outstanding

50,994


49,461


50,870













Note 1: The three month period ended September 30, 2009 includes $143 of restructuring charges primarily for severance related costs.


Note 2 : The Non-GAAP net earnings (loss) and Non-GAAP net earnings (loss) per share amounts exclude amortization of acquired intangible

assets, acquisition and disposition related charges and special items, net of applicable income taxes.



MKS Instruments, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)










Nine Months Ended


September 30,






2010


2009





Net sales

$         634,136


$        249,916

Cost of sales

352,819


179,274

Gross profit

281,317


70,642





Research and development

46,899


37,411

Selling, general and administrative

86,961


74,257

Amortization of acquired intangible assets

1,033


2,071

Gain on sale of asset

(682)


-

Goodwill and asset impairment charges

-


142,958

Restructuring

-


5,536

Income (loss) from operations

147,106


(191,591)





Interest income, net

614


1,485





Income (loss) from continuing operations before income taxes

147,720


(190,106)

Provision (benefit) for income taxes

48,977


(26,339)

Income (loss) from continuing operations

98,743


(163,767)

Income (loss) from discontinued operations, net of taxes

7,895


(63,839)

Net income (loss)

$         106,638


$      (227,606)





Basic income (loss) per share:




 Continuing operations

$               1.98


$            (3.32)

 Discontinued operations

0.16


(1.30)

 Net income (loss)

$               2.13


$            (4.62)





Diluted income (loss) per share:




 Continuing operations

$               1.94


$            (3.32)

 Discontinued operations

0.16


(1.30)

 Net income (loss)

$               2.10


$            (4.62)





Weighted average shares outstanding:




 Basic

49,965


49,254

 Diluted

50,821


49,254





The following supplemental Non-GAAP earnings information is presented




to aid in understanding MKS' operating results:








Income (loss) from continuing operations

$           98,743


$      (163,767)





Adjustments (net of tax, if applicable):




 Amortization of acquired intangible assets

1,033


2,071

 Excess & obsolete inventory adjustment (Note 1)

-


12,900

 Gain on sale of asset (Note 2)

(682)


-

 Goodwill and asset impairment charges (Note 3)

-


142,958

 Restructuring and related items (Note 4)

-


4,287

 (Benefit) for income taxes (Note 5)

-


(6,370)

 Proforma tax adjustments

(48)


(8,557)





Non-GAAP net earnings (loss) (Note 6)

$           99,046


$        (16,478)





Non-GAAP net earnings (loss) per share (Note 6)

$               1.95


$            (0.33)

Weighted average shares outstanding

50,821


49,254









Note 1: Cost of sales for the nine month period ended September 30, 2009 includes $12,900 of special charges for excess,

obsolete and committed inventory purchases.


Note 2 : The nine month period ended September 30, 2010 includes a $682 gain on the sale of a vacated facility.


Note 3 : The nine month period ended September 30, 2009 includes a $142,958 charge related to the impairment of goodwill

and other long-lived assets.


Note 4: The nine month period ended September 30, 2009 includes $5,536 of restructuring charges primarily for severance related

costs offset by a credit of $1,249 for the reversal of previously expensed equity compensation charges of terminated employees.


Note 5: The nine month period ended September 30, 2009 includes a benefit of $6,370 attributable to the reversal of FIN 48 reserve

items as a result of a Federal audit close.


Note 6 : The Non-GAAP net earnings (loss) and Non-GAAP net earnings (loss) per share amounts exclude amortization of acquired

intangible assets, acquisition and disposition related charges and special items, net of applicable income taxes.



MKS Instruments, Inc.

Unaudited Consolidated Balance Sheet

(In thousands)













September 30,


December 31,



2010


2009






ASSETS










Cash and short-term investments

$             343,725


$             271,795

Trade accounts receivable

155,619


94,215

Inventories


152,096


118,004

Other current assets

56,472


48,867


Total current assets

707,912


532,881






Property, plant and equipment, net

67,659


67,196

Goodwill


137,728


144,511

Other acquired intangible assets

1,993


4,963

Other assets

20,327


24,518






Total assets


$             935,619


$             774,069











LIABILITIES AND STOCKHOLDERS' EQUITY









Short-term debt

$                 9,553


$               12,885

Accounts payable

37,453


26,292

Accrued expenses and other liabilities

63,151


32,123


Total current liabilities

110,157


71,300






Other long-term liabilities

23,809


17,836






Stockholders' equity:




Common stock

113


113

Additional paid-in capital

654,610


645,411

Retained earnings

135,407


28,769

Other stockholders' equity

11,523


10,640


Total stockholders' equity

801,653


684,933






Total liabilities and stockholders' equity

$             935,619


$             774,069




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