MKS Instruments Reports Fourth Quarter and Full Year 2015

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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