MKS Instruments Reports Fourth Quarter and Full Year 2015

MKS Instruments Reports Fourth Quarter and Full Year 2015 Financial Results


MKS Instruments, Inc.
Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate
(In thousands)

	Three Months Ended December 31, 2015									Three Months Ended December 31, 2014
	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	$	23,046		$	(2,476	)		-10.7	%	$	38,945		$	4,753			12.2	%

Adjustments:
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 5)		488			-						-			-
Restructuring (Note 8)		505			-						494			-
Amortization of intangible assets		1,693			-						1,731			-
Tax effect of pro forma adjustments		-			761						-			779

Non-GAAP	$	25,732		$	7,355			28.6	%	$	41,170		$	12,118			29.4	%


	Three Months Ended September 30, 2015
	Income Before			Provision (benefit)			Effective
	Income Taxes			for Income Taxes			Tax Rate

GAAP	$	42,084		$	12,315			29.3	%

Adjustments:
Restructuring (Note 8)		562			-
Amortization of intangible assets		1,691			-
Tax effect of pro forma adjustments		-			543

Non-GAAP	$	44,337		$	12,858			29.0	%


	Twelve Months Ended December 31, 2015									Twelve Months Ended December 31, 2014
	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	$	159,468		$	37,171			23.3	%	$	136,393		$	20,615			15.1	%

Adjustments:
Income tax charges (Note 1)		-			-						-			(1,422	)
Release of tax reserves (Note 2)		-			7,692						-			14,582
Tax benefit and tax credits (Note 3)		-			-						-			7,957
Sale of previously written down inventory (Note 4)		(2,098	)		-						-			-
Excess and obsolete charge (Note 5)		488			-						-			-
Acquisition costs (Note 6)		30			-						499			-
Acquisition inventory step-up (Note 7)		-			-						2,179			-
Restructuring (Note 8)		2,074			-						2,464			-
Amortization of intangible assets		6,764			-						4,945			-
Tax effect of pro forma adjustments		-			2,790						-			3,569

Non-GAAP	$	166,726		$	47,653			28.6	%	$	146,480		$	45,301			30.9	%


Note 1: In 2014, we recorded $1.4 million of withholding tax related to a foreign intercompany dividend.

Note 2: We recorded credits for 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. For the three and twelve months ended December 31, 2014, we recorded a tax benefit off $3.2 million related to a German net operating loss resulting from a change in tax status. We also recorded a $1.4 million credit for the reinstatement of the U.S. research credit for the three and twelve months ended December 31, 2014. In the third quarter of 2014, we recorded a tax benefit of $3.3 million related to a foreign intercompany dividend to the U.S.

Note 4: In the second quarter of 2015, we recorded income related to the sale of excess and obsolete inventory previously written down to net realizable value.

Note 5: 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 6: In 2015, we incurred acquisition costs related to the Precisive LLC acquisition which closed during the first quarter of 2015. In 2014, we incurred acquisition costs comprising of legal fees and filing fees related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 7: Inventory step-up adjustment related to the Granville-Phillips acquisition which closed during the second quarter of 2014.

Note 8: The three and twelve months ended December 31, 2015 includes restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. The three and twelve months ended December 31, 2014 includes restructuring charges primarily for severance related costs related to a reduction in workforce at one of our foreign subsidiaries.


MKS Instruments, Inc.
Reconciliation of Q1-16 Guidance - GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

	Three Months Ended March 31, 2016
	Low Guidance						High Guidance
	$ Amount			$ Per Share			$ Amount			$ Per Share

GAAP net income	$	12,400		$	0.23		$	19,000		$	0.36

Amortization		1,700			0.03			1,700			0.03

Tax effect of adjustments		(500	)		(0.01	)		(500	)		(0.01	)

Non-GAAP net earnings	$	13,600		$	0.25		$	20,200		$	0.38

Q1 -16 forecasted shares					53,500						53,500

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