(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Fourth Quarter and
Full Year 2017 Financial Results

     
2017 was a record year in revenue and GAAP and Non-GAAP EPS

    Annual revenue increased 30% compared to pro-forma 2016 to a record $1.9 billion

    Annual semiconductor revenue increased 45% on a pro-forma basis to a record $1.1 billion

    Annual revenue in advanced markets increased 14% on a pro-forma basis to a record $820 million

    Light and Motion set new quarterly and annual revenue records and in Q4’17 exceeded $200 million in revenue for the first time

Our 2018 January Operating Model shows a 33% increase in Non-GAAP EPS compared to the October 2017 Operating Model

Andover, Mass., January 31, 2018 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported fourth quarter and full year 2017 financial results.

GAAP Financial Results1

                                 
    Q4   Full Year
    2017   2016   2017   2016
Net revenues ($ millions)
  $ 512     $ 405     $ 1,916     $ 1,295  
Operating margin
    23.4 %     15.4 %     21.2 %     12.1 %
Net income ($ millions)
  $ 77.6     $ 45.5     $ 339.1     $ 104.8  
Diluted EPS
  $ 1.41     $ 0.83     $ 6.16     $ 1.94  

Non-GAAP Financial Results1

                                 
    Q4   Full Year
    2017   2016   2017   2016
Net revenues ($ millions)
  $ 512     $ 405     $ 1,916     $ 1,295  
Operating margin
    25.9 %     20.6 %     24.6 %     18.7 %
Net earnings ($ millions)
  $ 94.6     $ 57.2     $ 328.2     $ 164.0  
Diluted EPS
  $ 1.71     $ 1.05     $ 5.96     $ 3.03  

1   The full year 2016 results include the results of Newport Corporation (now the Light and Motion segment) since its acquisition on April 29, 2016.

1

Fourth Quarter Financial Results

Sales were $512 million, an increase of 5% from $486 million in the third quarter of 2017, and an increase of 26% from $405 million in the fourth quarter of 2016.

Fourth quarter net income was $77.6 million, or $1.41 per diluted share, compared to net income of $76.0 million, or $1.38 per diluted share in the third quarter of 2017, and $45.5 million, or $0.83 per diluted share in the fourth quarter of 2016.

Non-GAAP net earnings, which exclude special charges and credits, were $94.6 million, or $1.71 per diluted share, compared to $85.9 million, or $1.56 per diluted share in the third quarter of 2017, and $57.2 million, or $1.05 per diluted share in the fourth quarter of 2016.

Sales to semiconductor customers were $284 million, an increase of 1% compared to a strong third quarter of 2017, and sales to advanced markets were $228 million in the quarter, an increase of 11% sequentially driven largely by strong growth from our Light and Motion Division.

Sales in the Vacuum and Analysis segment, the historic MKS business, set a quarterly record of $311 million, driven by very strong sales to semiconductor customers. Sales in the Light and Motion segment, the historic Newport business, also set a quarterly record of $201 million.

Additional Financial Information

The Company had $543 million in cash and short-term investments as of December 31, 2017 and $398 million outstanding under its Term Loan. During the fourth quarter, the Company made another voluntary Term Loan repayment of $50 million and paid a dividend of $9.8 million or $0.18 per diluted share.

Full Year Results

Sales were a record $1.92 billion, an increase of 30% from $1.47 billion in 2016 on a pro-forma basis (assuming the acquisition of Newport Corporation had occurred as of the beginning of 2016), driven by strong sales to both semiconductor customers as well as customers in thin film manufacturing, industrial manufacturing, and health and life sciences. Sales to semiconductor customers were $1.1 billion, an increase of 45% compared to 2016, also on a pro-forma basis, while sales to advanced markets were $820 million, an increase of 14%.

Sales in the Vacuum and Analysis segment were $1.2 billion, an increase of 38% from $872 million in 2016, driven by very strong sales to semiconductor customers, which increased nearly 50% from 2016.

Sales in the Light and Motion segment were $709 million, an increase of 18% from $602 million in 2016, on a pro-forma basis driven by both sales to semiconductor customers as well as industrial manufacturing customers.

“We are very pleased with our fourth quarter and full year 2017 results, which set new records for revenue and profitability, in both of our segments,” said Gerald Colella, Chief Executive Officer and President. Mr. Colella added, “This strong performance reflects our focused strategy of achieving sustainable and profitable growth by providing customers with innovative technology solutions, continuing to streamline all aspects of our operations, and investing in high-growth solutions and markets. Moreover, our ability to successfully grow and integrate Newport into the existing MKS business helped us deliver these strong results and positions us for future success.”

“The acquisition of Newport Corporation coupled with our organic growth has enabled us to nearly double non-GAAP EPS in 2017 compared to 2016,” said Seth Bagshaw, Senior Vice President and Chief Financial Officer. Mr. Bagshaw added “These achievements are reflected in our newly published January 2018 Operating Model, which demonstrates our continued and long standing efforts to drive improvements in our operating leverage. Furthermore, recently enacted U.S. Federal tax reform legislation is positive for MKS and is expected to result in a significant reduction in our effective tax rate while providing more long term flexibility in our use of cash.”

First Quarter 2018 Outlook

Based on current business levels, the Company expects that sales in the first quarter of 2018 may range from $510 to $550 million, and at these volumes, GAAP net income could range from $1.68 to $1.95 per diluted share and non-GAAP net earnings could range from $1.86 to $2.12 per diluted share. This financial guidance incorporates assumptions made based upon the Company’s current interpretation of the 2017 Tax Cut and Jobs Act, and may change as additional clarification and implementation guidance is issued.

January 2018 Operating Model

The Company also published an updated operating model, which reflects an illustrative revenue level of $2.2 billion, improvements in gross margin, lower interest expense, and the expected impact of the 2017 Tax Cut and Jobs Act. As a result of these improvements, non-GAAP EPS in the model increased by 33% to $8.55 compared to $6.42 in the prior operating model, published in October of 2017, and represents an improvement in non-GAAP EPS of more than 80% compared to the model entering 2017.

A conference call with management will be held on Thursday, February 1, 2018 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 5595206, 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.

About MKS Instruments

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. The Company’s products are derived from 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, RF & DC power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration isolation, and optics. MKS’ primary markets include semiconductor capital equipment, general industrial, life sciences, and research. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results

Non-GAAP amounts exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitions, acquisition integration costs, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to re-pricing of the Company’s term loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effects of the 2017 Tax Cut and Jobs Act, the tax effect of legal entity restructurings, other discrete tax benefits and charges, and the related tax effect of these adjustments. These non-GAAP measures are not in accordance with generally accepted accounting principles in the United States of America (GAAP). MKS’ management believes the presentation of these non-GAAP financial measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results. Annualized GAAP interest expense based upon $780 million principal outstanding and using the LIBOR based interest rate spread in effect on April 29, 2016, was $44 million and included $5 million in debt issuance cost. Annualized GAAP interest expense based upon $398 million in principal currently outstanding and LIBOR plus 200 basis points would be $17.5 million and includes $4 million of debt issuance cost.

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 as well as expected synergies and cost savings from the acquisition of Newport Corporation. 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 major customers, the Company’s ability to successfully integrate Newport’s operations and employees, unexpected risks, costs, charges or expenses resulting from the Newport acquisition or other acquisitions, the terms of the term loan financing, fluctuations in interest rates, the impact of the 2017 Tax Cut and Jobs Act as additional clarification and implementation guidance is issued with respect thereto, the Company’s ability to successfully grow the 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, 2016 filed with 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

2

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)

                         
    Three Months Ended
    December 31, 2017   December 31, 2016   September 30, 2017
Net revenues:
                       
Products
  $ 463,851     $ 359,765     $ 434,710  
Services
    47,949       45,375       51,557  
 
                       
Total net revenues
    511,800       405,140       486,267  
Cost of revenues:
                       
Products
    242,008       194,716       225,174  
Services
    31,466       27,016       33,098  
 
                       
Total cost of revenues
    273,474       221,732       258,272  
Gross profit
    238,326       183,408       227,995  
Research and development
    33,045       32,870       32,548  
Selling, general and administrative
    72,510       67,626       71,839  
Acquisition and integration costs
    634       2,089       2,466  
Restructuring
    1,324       618       10  
Asset impairment
          5,000        
Amortization of intangible assets
    10,797       12,691       10,977  
 
                       
Income from operations
    120,016       62,514       110,155  
Interest income
    1,125       702       873  
Interest expense
    7,989       10,085       7,172  
Other expense, net
    2,155       3,575       2,485  
 
                       
Income from operations before income taxes
    110,997       49,556       101,371  
Provision for income taxes
    33,359       4,069       25,377  
 
                       
Net income
  $ 77,638     $ 45,487     $ 75,994  
 
                       
Net income per share:
                       
Basic
  $ 1.43     $ 0.85     $ 1.40  
Diluted
  $ 1.41     $ 0.83     $ 1.38  
Cash dividends per common share
  $ 0.18     $ 0.17     $ 0.175  
Weighted average shares outstanding:
                       
Basic
    54,318       53,617       54,282  
Diluted
    55,236       54,518       55,101  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 77,638     $ 45,487     $ 75,994  
Adjustments:
                       
Acquisition and integration costs (Note 1)
    634       2,089       2,466  
Fees and expenses relating to re-pricing of term loan (Note 2)
          526       492  
Amortization of debt issuance costs (Note 3)
    3,983       2,430       2,314  
Restructuring (Note 4)
    1,324       618       10  
Asset impairment (Note 5)
          5,000        
Amortization of intangible assets
    10,797       12,691       10,977  
Windfall tax benefit on stock-based compensation (Note 6)
    (658 )           (594 )
Withholding tax on dividends (Note 7)
          1,362        
Tax benefit from a legal entity restructuring (Note 8)
          (6,570 )      
Deferred tax adjustment (Note 9)
    (24,546 )            
Transition tax on accumulated foreign earnings (Note 10)
    28,658              
Tax adjustment related to the sale of a business (Note 11)
    (12,131 )            
Accrued tax on MKS subsidiary distribution (Note 12)
    14,000              
Pro-forma tax adjustments
    (5,083 )     (6,437 )     (5,789 )
 
                       
Non-GAAP net earnings
  $ 94,616     $ 57,196     $ 85,870  
 
                       
Non-GAAP net earnings per share
  $ 1.71     $ 1.05     $ 1.56  
 
                       
Weighted average shares outstanding
    55,236       54,518       55,101  
Income from operations
  $ 120,016     $ 62,514     $ 110,155  
Adjustments:
                       
Acquisition and integration costs (Note 1)
    634       2,089       2,466  
Fees and expenses relating to re-pricing of term loan (Note 2)
          526       492  
Restructuring (Note 4)
    1,324       618       10  
Asset impairment (Note 5)
          5,000        
Amortization of intangible assets
    10,797       12,691       10,977  
 
                       
Non-GAAP income from operations
  $ 132,771     $ 83,438     $ 124,100  
 
                       
Non-GAAP operating margin percentage
    25.9 %     20.6 %     25.5 %
 
                       
Interest expense
  $ 7,989     $ 10,085     $ 7,172  
Amortization of debt issuance costs (Note 3)
    3,983       2,430       2,314  
 
                       
Non-GAAP interest expense
  $ 4,006     $ 7,655     $ 4,858  
 
                       
Net income
  $ 77,638     $ 45,487     $ 75,994  
Interest expense, net
    6,864       9,383       6,299  
Provision for income taxes
    33,359       4,069       25,377  
Depreciation
    9,208       9,478       9,153  
Amortization
    10,797       12,691       10,977  
 
                       
EBITDA
  $ 137,866     $ 81,108     $ 127,800  
 
                       
Stock-based compensation
    4,544       5,402       4,846  
Acquisition and integration costs (Note 1)
    634       2,089       2,466  
Fees and expenses relating to re-pricing of term loan (Note 2)
          526       492  
Restructuring (Note 4)
    1,324       618       10  
Asset impairment (Note 5)
          5,000        
Other adjustments
    839       817       836  
 
                       
Adjusted EBITDA
  $ 145,207     $ 95,560     $ 136,450  
 
                       

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded fees and expenses related to the re-pricing of our Term Loan Credit Agreement during the three month periods ended September 30, 2017 and December 31, 2016.

Note 3: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 4: We recorded restructuring costs, primarily related to the consolidation of two manufacturing plants during the three months ended December 31, 2017. We recorded restructuring costs related to one of our international facilities during the three months ended December 31, 2016.

Note 5: We recorded an asset impairment charge related to a minority interest investment in a privately held company during the three months ended December 31, 2016.

Note 6: We recorded windfall tax benefits on the vesting of stock-based compensation during the three months ended December 31, 2017 and September 30, 2017, respectively, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).

Note 7: We recorded withholding tax on intercompany dividends during the three months ended December 31, 2016.

Note 8: We recorded a tax benefit related to a legal entity restructuring during the three months ended December 31, 2016.

Note 9: We recorded a deferred tax adjustment, which also includes the reversal of a tax accrual on a French dividend, related to U.S. tax reform legislation during the three months ended December 31, 2017.

Note 10*: We recorded a transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended December 31, 2017.

Note 11*: We recorded a tax adjustment resulting from the 2017 Tax Cut and Jobs Act, related to the sale of our Data Analytics Solutions business during the three months ended December 31, 2017.

Note 12*: We recorded an accrual for tax expense on a potential distribution to a subsidiary, related to the 2017 Tax Cut and Jobs Act during the three months ended December 31, 2017.

*The computation of the one-time tax on our offshore earnings pursuant to the 2017 Tax Cut and Jobs Act (the “Tax Act”) as well as our net deferred tax liability is based on our current understanding and assumptions regarding the impact of the Tax Act, and may change as additional clarification and implementation guidance is issued and as the interpretation of the Tax Act evolves over time.

3

MKS Instruments, Inc.
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)

                 
    Twelve Months Ended December 31,
    2017   2016
Net revenues:
               
Products
  $ 1,723,433     $ 1,134,013  
Services
    192,544       161,329  
 
               
Total net revenues
    1,915,977       1,295,342  
Cost of revenues:
               
Products
    901,546       627,850  
Services
    122,980       101,873  
 
               
Total cost of revenues
    1,024,526       729,723  
Gross profit
    891,451       565,619  
Research and development
    132,555       110,579  
Selling, general and administrative
    290,548       229,171  
Acquisition and integration costs
    5,332       27,279  
Restructuring
    3,920       642  
Asset impairment
    6,719       5,000  
Amortization of intangible assets
    45,743       35,681  
 
               
Income from operations
    406,634       157,267  
Interest income
    3,021       2,560  
Interest expense
    30,990       30,611  
Gain on sale of business
    74,856        
Other expense, net
    5,896       1,239  
 
               
Income from continuing operations before income taxes
    447,625       127,977  
Provision for income taxes
    108,493       23,168  
 
               
Net income
  $ 339,132     $ 104,809  
 
               
Net income per share:
               
Basic
  $ 6.26     $ 1.96  
Diluted
  $ 6.16     $ 1.94  
Cash dividends per common share
  $ 0.71     $ 0.68  
Weighted average shares outstanding:
               
Basic
    54,137       53,472  
Diluted
    55,074       54,051  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
               
Net income
  $ 339,132     $ 104,809  
Adjustments:
               
Acquisition and integration costs (Note 1)
    5,332       27,279  
Acquisition inventory step-up (Note 2)
          15,090  
Expenses related to sale of a business (Note 3)
    859        
Excess and obsolete inventory charge (Note 4)
    1,160        
Fees and expenses relating to re-pricing of term loan (Note 5)
    492       1,239  
Amortization of debt issuance costs (Note 6)
    9,405       6,897  
Restructuring (Note 7)
    3,920       642  
Asset impairment (Note 8)
    6,719       5,000  
Gain on sale of business (Note 9)
    (74,856 )      
Net proceeds from an insurance policy (Note 10)
          (1,323 )
Amortization of intangible assets
    45,743       35,681  
Taxes related to the sale of a business (Note 11)
    2,876        
Windfall tax benefit on stock-based compensation (Note 12)
    (11,071 )      
Withholding tax on dividends (Note 13)
          1,362  
Tax benefit from a legal entity restructuring (Note 14)
          (5,038 )
Deferred tax adjustment (Note 15)
    (24,546 )      
Transition tax on accumulated foreign earnings (Note 16)
    28,658        
Accrued tax on MKS subsidiary distribution (Note 17)
    14,000        
Pro-forma tax adjustments
    (19,639 )     (27,617 )
 
               
Non-GAAP net earnings
  $ 328,184     $ 164,021  
 
               
Non-GAAP net earnings per share
  $ 5.96     $ 3.03  
 
               
Weighted average shares outstanding
    55,074       54,051  
Income from operations
  $ 406,634     $ 157,267  
Adjustments:
               
Acquisition and integration costs (Note 1)
    5,332       27,279  
Acquisition inventory step-up (Note 2)
          15,090  
Expenses related to the sale of a business (Note 3)
    859        
Excess and obsolete inventory charge (Note 4)
    1,160        
Fees and expenses relating to re-pricing of term loan (Note 5)
    492       1,239  
Restructuring (Note 7)
    3,920       642  
Asset impairment (Note 8)
    6,719       5,000  
Amortization of intangible assets
    45,743       35,681  
 
               
Non-GAAP income from operations
  $ 470,859     $ 242,198  
 
               
Non-GAAP operating margin percentage
    24.6 %     18.7 %
 
               
Gross profit
  $ 891,451     $ 565,619  
Acquisition inventory step-up (Note 2)
          15,090  
Excess and obsolete inventory charge (Note 4)
    1,160        
 
               
Non-GAAP gross profit
  $ 892,611     $ 580,709  
 
               
Non-GAAP gross profit percentage
    46.6 %     44.8 %
 
               
Interest expense
  $ 30,990     $ 30,611  
Amortization of debt issuance costs (Note 6)
    9,405       6,897  
 
               
Non-GAAP interest expense
  $ 21,585     $ 23,714  
 
               
Net income
  $ 339,132     $ 104,809  
Interest expense, net
    27,969       28,051  
Provision for income taxes
    108,493       23,168  
Depreciation
    36,813       30,245  
Amortization
    45,743       35,681  
 
               
EBITDA
  $ 558,150     $ 221,954  
 
               
Stock-based compensation
    24,378       25,228  
Acquisition and integration costs (Note 1)
    5,332       27,279  
Acquisition inventory step-up (Note 2)
          15,090  
Expenses related to the sale of a business (Note 3)
    859        
Excess and obsolete inventory charge (Note 4)
    1,160        
Fees and expenses relating to re-pricing of term loan (Note 5)
    492       1,239  
Restructuring (Note 7)
    3,920       642  
Asset impairment (Note 8)
    6,719       5,000  
Gain on sale of business (Note 9)
    (74,856 )      
Net proceeds from an insurance policy (Note 10)
          (1,323 )
Other adjustments
    3,244       2,312  
 
               
Adjusted EBITDA
  $ 529,398     $ 297,421  
 
               

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded a charge in cost of sales related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition during the twelve months ended December 31, 2016.

Note 3: We recorded legal, consulting and compensation related expenses related to the sale of a business, which was completed in April of 2017, during the twelve months ended December 31, 2017.

Note 4: We recorded excess and obsolete inventory charges in cost of sales related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants during the twelve months ended December 31, 2017.

Note 5: We recorded fees and expenses related to re-pricings of our Term Loan Credit Agreement.

Note 6: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 7: We recorded restructuring costs related to the consolidation of two manufacturing plants, a restructuring of one of our international facilities and the consolidation of sales offices during the twelve months ended December 31, 2017. We recorded restructuring costs related to one of our international facilities during the twelve months ended December 31, 2016.

Note 8: We recorded an asset impairment charge, primarily related to the write-off of goodwill and intangible assets, in conjunction with the consolidation of two manufacturing plants during the twelve months ended December 31, 2017. We recorded an impairment charge related to a minority interest investment in a privately held company during the twelve months ended December 31, 2016.

Note 9: We recorded a gain on the sale of our Data Analytics Solutions business during the twelve months ended December 31, 2017.

Note 10: We recorded net proceeds from a Company owned life insurance policy during the twelve months ended December 31, 2016.

Note 11: We recorded taxes related to the sale of our Data Analytics Solutions business during the twelve months ended December 31, 2017.

Note 12: We recorded a windfall tax benefit on the vesting of stock-based compensation relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09) during the twelve months ended December 31, 2017.

Note 13: We recorded a withholding tax on intercompany dividends during the twelve months ended December 31, 2016.

Note 14: We recorded a tax benefit related to a legal entity restructuring during the twelve months ended December 31, 2016.

Note 15*: We recorded a deferred tax adjustment, which also includes the reversal of a tax accrual on a French dividend, related to the 2017 Tax Cut and Jobs Act during the twelve months ended December 31, 2017.

Note 16*: We recorded a transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the twelve months ended December 31, 2017.

Note 17*: We recorded an accrual for tax expense on a potential distribution to a subsidiary, related to the 2017 Tax Cut and Jobs Act during the twelve months ended December 31, 2017.

*The computation of the one-time tax on our offshore earnings pursuant to the 2017 Tax Cut and Jobs Act (the “Tax Act”) as well as our net deferred tax liability is based on our current understanding and assumptions regarding the impact of the Tax Act, and may change as additional clarification and implementation guidance is issued and as the interpretation of the Tax Act evolves over time.

4

MKS Instruments, Inc.
Unaudited Consolidated Statements of Cash Flows
(In thousands, except per share data)

                         
    Three Months Ended
    December 31, 2017   December 31, 2016   September 30, 2017
Cash flows from operating activities:
                       
Net income
  $ 77,638     $ 45,487     $ 75,994  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    20,006       22,169       20,130  
Amortization of debt issuance costs and original issue discount
    4,314       2,812       2,643  
Stock-based compensation
    4,544       5,402       4,845  
Provision for excess and obsolete inventory
    4,864       4,994       4,347  
Provision for doubtful accounts
    175       943       139  
Deferred income taxes
    (16,528 )     (29,255 )     (1,157 )
Excess tax benefit from stock-based compensation
          (790 )      
Asset impairment
          5,000        
Other
    (7 )     131       36  
Changes in operating assets and liabilities
    (14,220 )     (4,172 )     (8,014 )
 
                       
Net cash provided by operating activities
    80,786       52,721       98,963  
 
                       
Cash flows from investing activities:
                       
Purchases of investments
    (30,545 )     (152,383 )     (129,430 )
Sales of investments
    9,993       1,404       18,252  
Maturities of investments
    40,563       12,311       31,545  
Purchases of property, plant and equipment
    (13,431 )     (7,164 )     (8,118 )
Other
    66       232        
 
                       
Net cash provided by (used in) investing activities
    6,646       (145,600 )     (87,751 )
 
                       
Cash flows from financing activities:
                       
Restricted cash
    (177 )     316       5,163  
Payments of short-term borrowings
    (16,435 )     (3,453 )     (4,020 )
Proceeds from short and long-term borrowings
    15,394       4,438       4,522  
Payments of long-term borrowings
    (50,000 )     (41,570 )     (125,000 )
Dividend payments
    (9,775 )     (9,112 )     (9,500 )
Excess tax benefit from stock-based compensation
          790        
Net proceeds related to employee stock awards
    2,504       1,186       (1,306 )
 
                       
Net cash used in financing activities
    (58,489 )     (47,405 )     (103,141 )
 
                       
Effect of exchange rate changes on cash and cash equivalents
    (1,152 )     2,033       2,076  
 
                       
Increase (decrease) in cash and cash equivalents
    27,791       (138,251 )     (116,853 )
 
                       
Cash and cash equivalents at beginning of period
    305,977       366,874       422,830  
 
                       
Cash and cash equivalents at end of period
  $ 333,768     $ 228,623     $ 305,977  
 
                       

5

MKS Instruments, Inc.
Unaudited Consolidated Statements of Cash Flows
(In thousands, except per share data)

                 
    Twelve Months Ended
    December 31, 2017   December 31, 2016
Cash flows from operating activities:
               
Net income
  $ 339,132     $ 104,809  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    82,556       65,926  
Amortization of inventory step-up adjustment to fair value
          15,090  
Amortization of debt issuance costs and original issue discount
    10,699       9,265  
Stock-based compensation
    24,378       25,228  
Provision for excess and obsolete inventory
    20,213       16,039  
Provision for doubtful accounts
    825       1,109  
Deferred income taxes
    (9,886 )     (38,822 )
Excess tax benefit from stock-based compensation
          (1,468 )
Asset impairment
    6,719       5,000  
Gain on sale of business
    (74,856 )      
Other
    824       256  
Changes in operating assets and liabilities
    (45,382 )     (22,334 )
 
               
Net cash provided by operating activities
    355,222       180,098  
 
               
Cash flows from investing activities:
               
Net proceeds from the sale of business
    72,509        
Acquisition of businesses, net of cash acquired
          (939,591 )
Purchases of investments
    (229,557 )     (268,458 )
Sales of investments
    53,564       338,996  
Maturities of investments
    157,342       160,917  
Purchases of property, plant and equipment
    (31,287 )     (19,123 )
Other
    66       273  
 
               
Net cash provided by (used in) investing activities
    22,637       (726,986 )
 
               
Cash flows from financing activities:
               
Restricted cash
    4,835       (5,860 )
Payments of short-term borrowings
    (29,711 )     (11,742 )
Proceeds from short-term borrowings
    28,360       18,964  
Payments of long-term borrowings
    (228,141 )     (153,395 )
Proceeds from long-term borrowings
    191       744,653  
Repurchases of common stock
          (1,545 )
Dividend payments
    (38,178 )     (36,361 )
Excess tax benefit from stock-based compensation
          1,468  
Net proceeds related to employee stock awards
    (12,215 )     (1,922 )
 
               
Net cash (used in) provided by financing activities
    (274,859 )     554,260  
 
               
Effect of exchange rate changes on cash and cash equivalents
    2,145       (6,323 )
 
               
Increase in cash and cash equivalents
    105,145       1,049  
 
               
Cash and cash equivalents at beginning of year
    228,623       227,574  
 
               
Cash and cash equivalents at end of year
  $ 333,768     $ 228,623  
 
               

6

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

                                                 
    Three Months Ended December 31, 2017   Three Months Ended September 30, 2017
         Provision (benefit)            Provision    
    Income Before   for   Effective   Income Before   (benefit) for   Effective
     Income Taxes     Income Taxes     Tax Rate     Income Taxes     Income Taxes     Tax Rate 
GAAP                
  $          110,997     $         33,359          30.1%        $         101,371     $         25,377          25.0%     
Adjustments:
                                               
Acquisition and integration costs
    634                     2,466                
(Note 1)
                                               
Fees and expenses relating to
                        492                
re-pricing of term loan (Note 5)
                                               
Amortization of debt issuance
    3,983                     2,314                
costs (Note 6)
                                               
Restructuring (Note 7)
    1,324                     10                
Amortization of intangible assets
    10,797                     10,977                
Windfall tax benefit on
          658                     594          
stock-based compensation (Note 10)
                                               
Deferred tax adjustment (Note 15)
          24,546                              
Transition tax on accumulated
          (28,658 )                            
foreign earnings (Note 16)
                                               
Accrued tax on MKS subsidiary
          (14,000 )                            
distribution (Note 17)
                                               
Tax adjustment related to the sale
          12,131                              
of a business (Note 11)
                                               
Tax effect of pro-forma adjustments
          5,083                     5,789          
 
                                               
Non-GAAP
  $          127,735     $       33,119       25.9%        $        117,630     $         31,760          27.0%     
 
                                               
                         
    Three Months Ended December 31, 2016
         Provision    
    Income Before    (benefit) for   Effective
     Income Taxes     Income Taxes     Tax Rate 
GAAP
  $       49,556     $       4,069       8.2%    
Adjustments:
                       
Acquisition and integration costs (Note 1)
    2,089                
Fees and expenses relating to re-pricing of term loan (Note 5)
    526                
Amortization of debt issuance costs (Note 6)
    2,430                
Restructuring (Note 7)
    618                
Asset impairment (Note 8)
    5,000                
Amortization of intangible assets
    12,691                
Taxes related to a legal entity restructuring (Note 13)
          6,570          
Withholding tax on dividends (Note 14)
          (1,362 )        
Tax effect of pro-forma adjustments
          6,437          
 
                       
Non-GAAP
  $       72,910     $       15,714       21.6%    
 
                       
                                                 
    Twelve Months Ended December 31, 2017   Twelve Months Ended December 31, 2016
         Provision (benefit)            Provision    
    Income Before   for   Effective   Income Before   (benefit) for   Effective
     Income Taxes     Income Taxes     Tax Rate     Income Taxes     Income Taxes     Tax Rate 
GAAP                
  $         447,625     $         108,493          24.2%        $        127,977     $         23,168          18.1%     
Adjustments:
                                               
Acquisition and integration costs
    5,332                     27,279                
(Note 1)
                                               
Acquisition inventory step-up (Note 2)
                        15,090                
Expenses related to the sale of a
    859                                    
business (Note 3)
                                               
Excess and obsolete inventory charge
    1,160                                    
(Note 4)
                                               
Fees and expenses relating to
    492                     1,239                
re-pricing of term loan (Note 5)
                                               
Amortization of debt issuance costs
    9,405                     6,897                
(Note 6)
                                               
Restructuring (Note 7)
    3,920                     642                
Asset impairment (Note 8)
    6,719                     5,000                
Gain on sale of business (Note 9)
    (74,856 )                                  
Amortization of intangible assets
    45,743                     35,681                
Windfall tax benefit on stock-based
          11,071                              
compensation (Note 10)
                                               
Taxes related to the sale of a
          (2,876 )                            
business (Note 11)
                                               
Net proceeds from an insurance policy
                        (1,323 )              
(Note 12)
                                               
Taxes related to a legal entity
                              5,038          
restructuring (Note 13)
                                               
Withholding tax on dividends (Note 14)
                              (1,362 )        
Deferred tax adjustment (Note 15)
          24,546                              
Transition tax on accumulated foreign
          (28,658 )                            
earnings (Note 16)
                                               
Accrued tax on MKS subsidiary
          (14,000 )                            
distribution (Note 17)
                                               
Tax effect of pro-forma adjustments
          19,639                     27,617          
 
                                               
Non-GAAP
  $         446,399     $       118,215       26.5%        $       218,482     $         54,461          24.9%     
 
                                               

Note 1: Acquisition and integration costs during the three and twelve months ended December 31, 2017 and 2016 relate to the Newport Corporation acquisition, which closed during the second quarter of 2016.

Note 2: We recorded a charge in cost of sales related to the step-up of inventory to fair value as a result of the Newport Corporation acquisition, during the twelve months ended December 31, 2016.

Note 3: We recorded expenses related to the sale of a business, which was completed in April of 2017, during the twelve months ended December 31, 2017.

Note 4: We recorded excess and obsolete inventory charges in cost of sales related to the discontinuation of a product line in connection with the consolidation of two manufacturing plants, during the twelve months ended December 31, 2017.

Note 5: We recorded fees and expenses related to the re-pricing of our Term Loan Credit Agreement, during the three months ended September 30, 2017 and December 31, 2016 and the twelve months ended December 31, 2017 and 2016.

Note 6: Amortization of debt issuance costs are affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 7: We recorded restructuring costs primarily related to the consolidation of two manufacturing plants and costs related to a restructuring of one of our international facilities and the consolidation of sales offices during the three and twelve months ended December 31, 2017. We recorded restructuring costs related to the restructuring of one of our international facilities during the twelve months ended December 31, 2016.

Note 8: We recorded an asset impairment charge, during the twelve months ended December 31, 2017, primarily related to the write-off of goodwill and intangible assets, in conjunction with the consolidation of two manufacturing plants. We recorded an impairment charge during the three and twelve months ended December 31, 2016, related to a minority interest investment in a privately held company.

Note 9: We recorded a gain on the sale of our Data Analytics Solutions business during the twelve months ended December 31, 2017.

Note 10: We recorded a windfall tax benefit on the vesting of stock-based compensation, relating to the implementation of a new accounting standard issued by the Financial Statement Accounting Standards Board (Accounting Standards Update 2016-09).

Note 11: We recorded taxes related to the sale of our Data Analytics Solutions business during the twelve months ended December 31, 2017. The three months ended December 31, 2017 includes a tax adjustment related to the sale of our Data Analytics Solutions business resulting from U.S. tax reform legislation.

Note 12: We recorded net proceeds from a Company owned life insurance policy during the twelve months ended December 31, 2016.

Note 13: We recorded a tax expense related to a legal entity restructuring during the twelve months ended December 31, 2016.

Note 14: We recorded withholding tax on intercompany dividends during the three and twelve months ended December 31, 2016.

Note 15*: We recorded a deferred tax adjustment, which also includes the reversal of a tax accrual on a French dividend, related to the 2017 Tax Cut and Jobs Act during the three and twelve months ended December 31, 2017.

Note 16*: We recorded a transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three and twelve months ended December 31, 2017.

Note 17*: We recorded an accrual for tax expense on a potential distribution to a subsidiary, related to the 2017 Tax Cut and Jobs Act during the three and twelve months ended December 31, 2017.

*The computation of the one-time tax on our offshore earnings pursuant to the 2017 Tax Cut and Jobs Act (the “Tax Act”) as well as our net deferred tax liability is based on our current understanding and assumptions regarding the impact of the Tax Act, and may change as additional clarification and implementation guidance is issued and as the interpretation of the Tax Act evolves over time.

MKS Instruments, Inc.
Reconciliation of Q1-18 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

                                 
    Three Months Ended March 31, 2018
    Low Guidance   High Guidance
    $ Amount   $ Per Share   $ Amount   $ Per Share
GAAP net income
  $ 93,200     $ 1.68     $ 108,100     $ 1.95  
Amortization
    11,000       0.20       11,000       0.20  
Deferred financing costs
    900       0.02       900       0.02  
Tax effect of adjustments (Note 1)
    (2,200 )     (0.04 )     (2,300 )     (0.04 )
 
                               
Non-GAAP net earnings
  $ 102,900     $ 1.86     $ 117,700     $ 2.12  
 
                               
Q1 – 18 forecasted shares
            55,400               55,400  

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.

7

MKS Instruments, Inc.
Unaudited Consolidated Balance Sheet
(In thousands)

                 
    December 31, 2017   December 31, 2016
ASSETS
               
Cash and cash equivalents
  $ 333,768     $ 228,623  
Restricted cash
    119       5,287  
Short-term investments
    209,434       189,463  
Trade accounts receivable, net
    300,308       248,757  
Inventories
    339,081       275,869  
Other current assets
    53,543       50,770  
 
               
Total current assets
    1,236,253       998,769  
Property, plant and equipment, net
    171,782       174,559  
Goodwill
    591,047       588,585  
Intangible assets, net
    366,398       408,004  
Long-term investments
    10,655       9,858  
Other assets
    37,883       32,467  
 
               
Total assets
  $ 2,414,018     $ 2,212,242  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Short-term debt
  $ 2,972     $ 10,993  
Accounts payable
    82,518       69,337  
Accrued compensation
    96,147       67,728  
Income taxes payable
    25,106       22,794  
Deferred revenue
    12,842       14,463  
Other current liabilities
    73,945       51,985  
 
               
Total current liabilities
    293,530       237,300  
Long-term debt, net
    389,993       601,229  
Non-current deferred taxes
    56,516       66,446  
Non-current accrued compensation
    51,700       44,714  
Other liabilities
    33,372       20,761  
 
               
Total liabilities
    825,111       970,450  
 
               
Stockholders’ equity:
               
Common stock
    113       113  
Additional paid-in capital
    789,644       777,482  
Retained earnings
    795,698       494,744  
Accumulated other comprehensive loss
    3,452       (30,547 )
 
               
Total stockholders’ equity
    1,588,907       1,241,792  
 
               
Total liabilities and stockholders’ equity
  $ 2,414,018     $ 2,212,242  
 
               

8


The following information was filed by Mks Instruments Inc (MKSI) on Wednesday, January 31, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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