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)



	Twelve Months Ended
	December 31,
		2015			2014

Net revenues:
Products	$	697,104		$	673,819
Services		116,420			107,050
Total net revenues		813,524			780,869
Cost of revenues:
Products		373,764			374,200
Services		76,888			68,903
Total cost of revenues		450,652			443,103

Gross profit		362,872			337,766

Research and development		68,305			62,888
Selling, general and administrative		129,087			131,828
Acquisition costs		30			499
Restructuring		2,074			2,464
Amortization of intangible assets		6,764			4,945
Income from operations		156,612			135,142

Interest income, net		2,856			1,251

Income from operations before income taxes		159,468			136,393
Provision for income taxes		37,171			20,615
Net income	$	122,297		$	115,778

Net income per share:
Basic	$	2.30		$	2.17
Diluted	$	2.28		$	2.16

Cash dividends per common share	$	0.675		$	0.655

Weighted average shares outstanding:
Basic		53,282			53,232
Diluted		53,560			53,515

The following supplemental Non-GAAP earnings information is presented
to aid in understanding MKS' operating results:

Net income	$	122,297		$	115,778

Adjustments (net of tax, if applicable):
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	)
Excess and obsolete charge (Note 4)		488			-
Sale of previously written down inventory (Note 5)		(2,098	)		-
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
Pro forma tax adjustments		(2,790	)		(3,569	)

Non-GAAP net earnings (Note 9)	$	119,073		$	101,179

Non-GAAP net earnings per share (Note 9)	$	2.22		$	1.89

Weighted average shares outstanding		53,560			53,515


Income from operations	$	156,612		$	135,142

Adjustments:
Excess and obsolete charge (Note 4)		488			-
Sale of previously written down inventory (Note 5)		(2,098	)		-
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

Non-GAAP income from operations (Note 10)	$	163,870		$	145,229

Non-GAAP operating margin percentage (Note 10)		20.1	%		18.6	%

Gross profit	$	362,872		$	337,766
Sale of previously written down inventory (Note 5)		(2,098	)		-
Excess and obsolete charge (Note 4)		488			-
Acquisition inventory step-up (Note 7)		-			2,179

Non-GAAP gross profit (Note 11)	$	361,262		$	339,945

Non-GAAP gross profit percentage (Note 11)		44.4	%		43.5	%

Note 1: In 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 2014, we recorded a tax benefit of $3.3 million related to a foreign intercompany dividend to the U.S. and 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 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: 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 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: In 2015, we incurred restructuring charges related to the outsourcing of an international manufacturing operation and the consolidation of certain other foreign manufacturing locations. In 2014, we incurred restructuring charges primarily for severance related costs related to a reduction in workforce at one of our foreign subsidiaries.


Note 9: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude discrete tax benefits and charges, an excess and obsolete inventory charge, income related to the sale of excess and obsolete inventory previously written down to net realizable value, acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs, amortization of intangible assets and the related tax effect of these adjustments.

Note 10: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude an excess and obsolete inventory charge, income related to the sale of excess and obsolete inventory previously written down to net realizable value, acquisition costs, an inventory step-up adjustment related to an acquisition, restructuring costs and amortization of intangible assets.

Note 11: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude income related to the sale of excess and obsolete inventory previously written down to net realizable value and excess and obsolete inventory charges.

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