(MKS LOGO)

EXHIBIT 99.1

MKS Instruments Reports Second Quarter 2018 Financial Results

Achieved new quarterly records for revenue and Non-GAAP net earnings

Achieved new quarterly record for revenue to the semiconductor market

Quarterly revenue up 19% compared to Q2 2017

Light and Motion Division achieves new Non-GAAP operating income record

Andover, MA, July 24, 2018 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported second quarter 2018 financial results.

                 
Quarterly Financial Results
(in millions, except per share data)
    Q2 2018   Q1 2018
GAAP Results                
Net revenues
  $ 573     $ 554  
Gross margin
    48.0 %     47.4 %
Operating margin
    26.4 %     23.8 %
Net income
  $ 123     $ 105  
Diluted EPS
  $ 2.22     $ 1.90  
Non-GAAP Results
               
Gross margin
    48.0 %     47.4 %
Operating margin
    28.3 %     26.2 %
Net earnings
  $ 129     $ 114.3  
Diluted EPS
  $ 2.33     $ 2.07  

Second Quarter 2018 Financial Results

Revenue was $573 million, an increase of 3% from $554 million in the first quarter of 2018 and an increase of 19% from $481 million in the second quarter of 2017.

Net income was $123 million, or $2.22 per diluted share, compared to net income of $105 million, or $1.90 per diluted share, in the first quarter of 2018, and $120.4 million, or $2.19 per diluted share, in the second quarter of 2017, which included a gain of $72 million from the sale of its Data Analytics Business Unit.

Non-GAAP net earnings, which exclude special charges and credits, were $129 million, or $2.33 per diluted share, compared to $114.3 million, or $2.07 per diluted share, in the first quarter of 2018, and $77.7 million, or $1.41 per diluted share, in the second quarter of 2017.

Sales to semiconductor customers were a record $336 million, an increase of 19% compared to the second quarter of 2017, and sales to Advanced Markets were $237 million, an increase of 19% compared to the second quarter of 2017.

Sales in the Vacuum and Analysis Division were $368 million, an increase of 19% from the second quarter a year ago. Sales in the Light and Motion Division were $205 million, an increase of 20% from the prior year period.

“We are very pleased with our results for the second quarter of 2018, as we achieved new records for total and semiconductor revenue as well as Non-GAAP net earnings,” said Gerald Colella, Chief Executive Officer.  “We set a strategy five years ago to augment our semi-focused business model with additional solutions that serve the industrial technology sector and other Advanced Markets. Our results demonstrate that this strategy is working, and we are confident that our diverse end markets, combined with our global leadership position in Semiconductor, will continue to drive sustainable and profitable growth for MKS.”

“Since acquiring Newport Corporation two years ago, we have expanded the portion of our revenue from Advanced Markets from approximately 25% to over 40%, a nearly $1 billion annual run rate, based on second quarter revenue,” said Seth Bagshaw, Chief Financial Officer.  “At the same time, we more than doubled the Non-GAAP operating margin for our Light and Motion Division, from approximately 11% in the second quarter of 2016 to over 27% in the second quarter of 2018, demonstrating our ability to drive profitable growth.”

Additional Financial Information

The Company had $631 million in cash and short-term investments and $348 million of Term Loan Debt as of June 30, 2018 and during the second quarter of 2018, MKS paid a dividend of $10.9 million or $0.20 per diluted share, an 11% increase over the previous quarter.

Third Quarter 2018 Outlook

Based on current business levels, the Company expects that revenue in the third quarter of 2018 could range from $470 to $510 million.

At these volumes, GAAP net income could range from $1.40 to $1.66 per diluted share and Non-GAAP net earnings could range from $1.60 to $1.86 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.

Conference Call Details

A conference call with management will be held on Wednesday, July 25, 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 4876837, 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, along with the Company’s earnings press release and supplemental financial information.

About MKS Instruments

MKS Instruments, Inc. is a global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for our customers. Our products are derived from our 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, power, reactive gas generation, vacuum technology, lasers, photonics, sub-micron positioning, vibration control and optics. We also provide services relating to the maintenance and repair of our products, installation services and training. Our primary served markets include semiconductor, industrial technologies, life and health sciences, research and defense. Additional information can be found at www.mksinst.com.

Use of Non-GAAP Financial Results

This release includes measures that are not in accordance with U.S. generally accepted accounting principles (“Non-GAAP measures”). Non-GAAP measures exclude amortization of acquired intangible assets, asset impairments, costs associated with completed and announced acquisitions, acquisition integration costs, an inventory step-up adjustment related to an acquisition, restructuring charges, certain excess and obsolete inventory charges, fees and expenses related to the re-pricings of our term loan, amortization of debt issuance costs, net proceeds from an insurance policy, costs associated with the sale of a business, the tax effect 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 should be viewed in addition to, and not as a substitute for, MKS’ reported results, and may be different from Non-GAAP measures used by other companies. In addition, these Non-GAAP measures are not based on any comprehensive set of accounting rules or principles. MKS management believes the presentation of these Non-GAAP measures is useful to investors for comparing prior periods and analyzing ongoing business trends and operating results.

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. 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 our major customers, the challenges, risks and costs involved with integrating the operations of the companies we have acquired, including our most recent acquisition of Newport Corporation, the Company’s ability to successfully grow our business, potential fluctuations in quarterly results, the terms of our term loan, 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, 2017 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

1

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

                         
    Three Months Ended
    June 30, 2018   June 30, 2017   March 31, 2018
 
          (Note 19)        
Net revenues:
                       
Products
  $ 509,999     $ 426,317     $ 496,677  
Services
    63,141       54,440       57,598  
 
                       
Total net revenues
    573,140       480,757       554,275  
Cost of revenues:
                       
Products
    266,890       230,706       261,321  
Services
    31,373       30,468       30,099  
 
                       
Total cost of revenues
    298,263       261,174       291,420  
Gross profit
    274,877       219,583       262,855  
Research and development
    36,504       33,680       34,857  
Selling, general and administrative
    76,181       71,979       82,949  
Acquisition and integration costs
    (1,168 )     790        
Restructuring
    790       2,064       1,220  
Environmental costs
                1,000  
Asset impairment
          6,719        
Fees and expenses related to repricing of term loan
    378              
Amortization of intangible assets
    10,901       11,468       11,190  
 
                       
Income from operations
    151,291       92,883       131,639  
Interest income
    1,456       507       1,105  
Interest expense
    3,922       6,997       5,430  
Gain on sale of business
          74,856        
Other expense, net
    281       3,277       572  
 
                       
Income from operations before income taxes
    148,544       157,972       126,742  
Provision for income taxes
    25,682       37,532       21,621  
 
                       
Net income
  $ 122,862     $ 120,440     $ 105,121  
 
                       
Net income per share:
                       
Basic
  $ 2.25     $ 2.22     $ 1.93  
Diluted
  $ 2.22     $ 2.19     $ 1.90  
Cash dividends per common share
  $ 0.20     $ 0.18     $ 0.18  
Weighted average shares outstanding:
                       
Basic
    54,719       54,178       54,423  
Diluted
    55,274       55,001       55,286  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
                       
Net income
  $ 122,862     $ 120,440     $ 105,121  
Adjustments:
                       
Acquisition and integration costs (Note 1)
    (1,168 )     790        
Expenses related to sale of a business (Note 2)
          436        
Excess and obsolete inventory charge (Note 3)
          1,160        
Fees and expenses related to repricing of term loan (Note 4)
    378              
Amortization of debt issuance costs (Note 5)
    660       694       1,831  
Restructuring (Note 6)
    790       2,064       1,220  
Environmental costs (Note 7)
                1,000  
Asset impairment (Note 8)
          6,719        
Gain on sale of business (Note 9)
          (74,856 )      
Amortization of intangible assets
    10,901       11,468       11,190  
Windfall tax benefit on stock-based compensation (Note 10)
    (4,752 )     (3,169 )     (3,036 )
Tax adjustment related to the sale of a business (Note 11)
          15,007        
Deferred tax adjustment (Note 12)
                878  
Transition tax on accumulated foreign earnings (Note 13)
    (659 )           (1,668 )
Pro-forma tax adjustments
    (200 )     (3,047 )     (2,247 )
 
                       
Non-GAAP net earnings (Note 14)
  $ 128,812     $ 77,706     $ 114,289  
 
                       
Non-GAAP net earnings per share (Note 14)
  $ 2.33     $ 1.41     $ 2.07  
 
                       
Weighted average shares outstanding
    55,274       55,001       55,286  
Income from operations
  $ 151,291     $ 92,883     $ 131,639  
Adjustments:
                       
Acquisition and integration costs (Note 1)
    (1,168 )     790        
Expenses related to sale of a business (Note 2)
          436        
Excess and obsolete inventory charge (Note 3)
          1,160        
Fees and expenses related to repricing of term loan (Note 4)
    378              
Restructuring (Note 6)
    790       2,064       1,220  
Environmental costs (Note 7)
                1,000  
Asset impairment (Note 8)
          6,719        
Amortization of intangible assets
    10,901       11,468       11,190  
 
                       
Non-GAAP income from operations (Note 15)
  $ 162,192     $ 115,520     $ 145,049  
 
                       
Non-GAAP operating margin percentage (Note 15)
    28.3 %     24.0 %     26.2 %
 
                       
Gross profit
  $ 274,877     $ 219,583     $ 262,855  
Excess and obsolete inventory charge (Note 3)
          1,160        
 
                       
Non-GAAP gross profit (Note 16)
  $ 274,877     $ 220,743     $ 262,855  
 
                       
Non-GAAP gross profit percentage (Note 16)
    48.0 %     45.9 %     47.4 %
 
                       
Interest expense
  $ 3,922     $ 6,997     $ 5,430  
Amortization of debt issuance costs (Note 5)
    660       694       1,831  
 
                       
Non-GAAP interest expense
  $ 3,262     $ 6,303     $ 3,599  
 
                       
Net income
  $ 122,862     $ 120,440     $ 105,121  
Interest expense, net
    2,466       6,490       4,325  
Provision for income taxes
    25,682       37,532       21,621  
Depreciation
    8,984       9,120       9,302  
Amortization
    10,901       11,468       11,190  
 
                       
EBITDA (Note 17)
  $ 170,895     $ 185,050     $ 151,559  
 
                       
Stock-based compensation
    6,366       6,207       10,426  
Acquisition and integration costs (Note 1)
    (1,168 )     790        
Expenses related to sale of a business (Note 2)
          436        
Excess and obsolete inventory charge (Note 3)
          1,160        
Fees and expenses related to repricing of term loan (Note 4)
    378              
Restructuring (Note 6)
    790       2,064       1,220  
Environmental costs (Note 7)
                1,000  
Asset impairment (Note 8)
          6,719        
Gain on sale of business (Note 9)
          (74,856 )      
Other adjustments
          822       772  
 
                       
Adjusted EBITDA (Note 18)
  $ 177,261     $ 128,392     $ 164,977  
 
                       

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016, during the three months ended June 30, 2017. During the second quarter of 2018, we reversed a portion of these costs related to severance agreement provisions that were not met.

Note 2: We recorded legal and consulting expenses during the three months ended June 30, 2017 related to the sale of a business, which was completed in April 2017.

Note 3: We recorded excess and obsolete inventory charges in cost of sales during the three months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.

Note 4: We recorded fees and expenses during the three months ended June 30, 2018 related to the fourth repricing of our Term Loan Credit Agreement.

Note 5: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 6: We recorded restructuring costs during the three months ended June 30, 2018 and March 31, 2018 which were primarily comprised of severance costs related to transferring a portion of our shared services functions to a third party as well as the consolidation of certain shared service functions in Asia. We recorded restructuring costs during the three months ended June 30, 2017, primarily related to the restructuring of one of our international facilities and the consolidation of sales offices.

Note 7: We recorded additional environmental costs during the three months ended March 31, 2018, related to an EPA-designated Superfund site, which was acquired as part of our Newport acquisition.

Note 8: We recorded an asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three months ended June 30, 2017, in connection with the consolidation of two manufacturing plants.

Note 9: We recorded a gain during the three months ended June 30, 2017, related to the sale of our Data Analytics Solutions business.

Note 10: We recorded windfall tax benefits on the vesting of stock-based compensation related to an 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 three months ended June 30, 2017.

Note 12*: We recorded a provisional 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 fourth quarter of 2017 and updated the provisional transition tax during the three months ended June 30, 2018 and March 31, 2018.

Note 13*: We adjusted the transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended June 30, 2018.

Note 14: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, amortization of debt issuance costs, restructuring costs, environmental costs, an asset impairment charge, a gain on the sale of a business, amortization of intangible assets, a windfall tax benefit related to stock compensation expense, taxes related to the sale of a business, a deferred tax adjustment, transition tax on accumulated foreign earnings and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.

Note 15: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs, environmental costs, an asset impairment charge and amortization of intangible assets.

Note 16: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an excess and obsolete inventory charge related to the discontinuation of a product line.

Note 17: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.

Note 18: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs, environmental costs, an asset impairment charge, a gain on the sale of a business and other adjustments as defined in our Term Loan Credit Agreement.

*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.

Note 19: We historically recorded the revenue and related cost of revenue for our spare parts within Products in our Statement of Operations for the Vacuum and Analysis Division. We have now determined that these items are better reflected within Services in our Statement of Operations and have revised the presentation of our previously issued financial statements as shown below:

                         
    Three Months Ended June 30, 2017
    As previously reported   Adjustment   As revised
Net revenues:
                       
Products
  $ 431,950     $ (5,633 )   $ 426,317  
Services
    48,807       5,633       54,440  
 
                       
Total net revenues
    480,757             480,757  
 
                       
Cost of revenues:
                       
Cost of products
    229,304       1,402       230,706  
Cost of services
    31,870       (1,402 )     30,468  
 
                       
Total cost of revenues
  $ 261,174     $     $ 261,174  
 
                       

2

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

                 
    Six Months Ended June 30,
    2018   2017 (Note 19)
Net revenues:
               
Products
  $ 1,006,676     $ 814,255  
Services
    120,739       103,655  
 
               
Total net revenues
    1,127,415       917,910  
Cost of revenues:
               
Products
    528,211       436,540  
Services
    61,472       56,240  
 
               
Total cost of revenues
    589,683       492,780  
Gross profit
    537,732       425,130  
Research and development
    71,361       66,962  
Selling, general and administrative
    159,130       146,199  
Acquisition and integration costs
    (1,168 )     2,232  
Restructuring
    2,010       2,586  
Environmental costs
    1,000        
Asset impairment
          6,719  
Fees and expenses related to repricing of term loan
    378        
Amortization of intangible assets
    22,091       23,969  
 
               
Income from operations
    282,930       176,463  
Interest income
    2,561       1,023  
Interest expense
    9,352       15,829  
Gain on sale of business
          74,856  
Other expense, net
    853       1,256  
 
               
Income from operations before income taxes
    275,286       235,257  
Provision for income taxes
    47,303       49,757  
 
               
Net income
  $ 227,983     $ 185,500  
 
               
Net income per share:
               
Basic
  $ 4.18     $ 3.44  
Diluted
  $ 4.12     $ 3.37  
Cash dividends per common share
  $ 0.38     $ 0.35  
Weighted average shares outstanding:
               
Basic
    54,571       53,973  
Diluted
    55,280       54,979  
The following supplemental Non-GAAP earnings information is presented to aid in understanding MKS’ operating results:
               
Net income
  $ 227,983     $ 185,500  
Adjustments:
               
Acquisition and integration costs (Note 1)
    (1,168 )     2,232  
Expenses related to sale of a business (Note 2)
          859  
Excess and obsolete inventory charge (Note 3)
          1,160  
Fees and expenses related to repricing of term loan (Note 4)
    378        
Amortization of debt issuance costs (Note 5)
    2,491       3,108  
Restructuring (Note 6)
    2,010       2,586  
Environmental costs (Note 7)
    1,000        
Asset impairment (Note 8)
          6,719  
Gain on sale of business (Note 9)
          (74,856 )
Amortization of intangible assets
    22,091       23,969  
Windfall tax benefit on stock-based compensation (Note 10)
    (7,788 )     (9,819 )
Tax adjustment related to the sale of a business (Note 11)
          15,007  
Deferred tax adjustment (Note 12)
    878        
Transition tax on accumulated foreign earnings (Note 13)
    (2,327 )      
Pro-forma tax adjustments
    (2,447 )     (9,710 )
 
               
Non-GAAP net earnings (Note 14)
  $ 243,101     $ 146,755  
 
               
Non-GAAP net earnings per share (Note 14)
  $ 4.40     $ 2.67  
 
               
Weighted average shares outstanding
    55,280       54,979  
Income from operations
  $ 282,930     $ 176,463  
Adjustments:
               
Acquisition and integration costs (Note 1)
    (1,168 )     2,232  
Expenses related to sale of a business (Note 2)
          859  
Excess and obsolete inventory charge (Note 3)
          1,160  
Fees and expenses related to repricing of term loan (Note 4)
    378        
Restructuring (Note 6)
    2,010       2,586  
Environmental costs (Note 7)
    1,000        
Asset impairment (Note 8)
          6,719  
Amortization of intangible assets
    22,091       23,969  
 
               
Non-GAAP income from operations (Note 15)
  $ 307,241     $ 213,988  
 
               
Non-GAAP operating margin percentage (Note 15)
    27.3 %     23.3 %
 
               
Gross profit
  $ 537,732     $ 425,130  
Excess and obsolete inventory charge (Note 3)
          1,160  
 
               
Non-GAAP gross profit (Note 16)
  $ 537,732     $ 426,290  
 
               
Non-GAAP gross profit percentage (Note 16)
    47.7 %     46.4 %
 
               
Interest expense
  $ 9,352     $ 15,829  
Amortization of debt issuance costs (Note 5)
    2,491       3,108  
 
               
Non-GAAP interest expense
  $ 6,861     $ 12,721  
 
               
Net income
  $ 227,983     $ 185,500  
Interest expense, net
    6,791       14,806  
Provision for income taxes
    47,303       49,757  
Depreciation
    18,286       18,452  
Amortization
    22,091       23,969  
 
               
EBITDA (Note 17)
  $ 322,454     $ 292,484  
 
               
Stock-based compensation
    16,792       14,989  
Acquisition and integration costs (Note 1)
    (1,168 )     2,232  
Expenses related to sale of a business (Note 2)
          859  
Excess and obsolete inventory charge (Note 3)
          1,160  
Fees and expenses related to repricing of term loan (Note 4)
    378        
Restructuring (Note 6)
    2,010       2,586  
Environmental costs (Note 7)
    1,000        
Asset impairment (Note 8)
          6,719  
Gain on sale of business (Note 9)
          (74,856 )
Other adjustments
    772       1,569  
 
               
Adjusted EBITDA (Note 18)
  $ 342,238     $ 247,742  
 
               

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016, during the six months ended June 30, 2017. During the second quarter of 2018, we reversed a portion of these costs related to severance agreement provisions that were not met.

Note 2: We recorded legal and consulting expenses during the six months ended June 30, 2017 related to the sale of a business, which was completed in April 2017.

Note 3: We recorded excess and obsolete inventory charges in cost of sales during the six months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.

Note 4: We recorded fees and expenses during the six months ended June 30, 2018 related to the fourth repricing of our Term Loan Credit Agreement.

Note 5: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 6: We recorded restructuring costs during the six months ended June 30, 2018, which were primarily comprised of severance costs related to transferring a portion of our shared services functions to a third party as well as the consolidation of certain shared service functions in Asia. We recorded restructuring costs during the six months ended June 30, 2017, primarily related to the restructuring of one of our international facilities and the consolidation of sales offices.

Note 7: We recorded additional environmental costs during the six months ended June 30, 2018, related to an EPA-designated Superfund site, which was acquired as part of our Newport acquisition.

Note 8: We recorded an asset impairment charge, primarily related to the write-off of goodwill and intangible assets, during the six months ended June 30, 2017, in connection with the consolidation of two manufacturing plants.

Note 9: We recorded a gain during the six months ended June 30, 2017, related to the sale of our Data Analytics Solutions business.

Note 10: Windfall tax benefits on the vesting of stock-based compensation related to an 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 six months ended June 30, 2017.

Note 12*: We recorded a provisional 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 fourth quarter of 2017 and updated the provisional transition tax during the six months ended June 30, 2018.

Note 13*: We adjusted the transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the six months ended June 30, 2018.

Note 14: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, amortization of debt issuance costs, restructuring costs, environmental costs, an asset impairment charge, a gain on the sale of a business, amortization of intangible assets, a windfall tax benefit related to stock compensation expense, taxes related to the sale of a business, a deferred tax adjustment, transition tax on accumulated foreign earnings and the related tax effect of these adjustments to reflect the expected full year effective tax rate in the related period.

Note 15: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs, environmental costs, an asset impairment charge and amortization of intangible assets.

Note 16: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an excess and obsolete inventory charge related to the discontinuation of a product line.

Note 17: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.

Note 18: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, expenses related to the sale of a business, an excess and obsolete inventory charge, fees and expenses related to the repricing of the Term Loan Credit Agreement, restructuring costs, environmental costs, an asset impairment charge, a gain on the sale of a business and other adjustments as defined in our Term Loan Credit Agreement.

*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.

Note 19: We historically recorded the revenue and related cost of revenue for our spare parts within Products in our Statement of Operations for the Vacuum and Analysis Division. We have now determined that these items are better reflected within Services in our Statement of Operations and have revised the presentation of our previously issued financial statements as shown below:

                         
    Six Months Ended June 30, 2017
    As previously reported   Adjustment   As revised
Net revenues:
                       
Products
  $ 824,872     $ (10,617 )   $ 814,255  
Services
    93,038       10,617       103,655  
 
                       
Total net revenues
    917,910             917,910  
 
                       
Cost of revenues:
                       
Cost of products
    434,364       2,176       436,540  
Cost of services
    58,416       (2,176 )     56,240  
 
                       
Total cost of revenues
  $ 492,780     $     $ 492,780  
 
                       

3

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

                         
    Three Months Ended
    June 30, 2018   June 30, 2017   March 31, 2018
Cash flows from operating activities:
                       
Net income
  $ 122,862     $ 120,440     $ 105,121  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    19,885       20,588       20,492  
Amortization of debt issuance costs and original issue discount
    868       1,027       2,019  
Asset impairment
          6,719        
Gain on sale of business
          (74,856 )      
Stock-based compensation
    6,366       6,207       10,426  
Provision for excess and obsolete inventory
    4,959       5,971       5,333  
Provision for doubtful accounts
    261       195       335  
Deferred income taxes
    1,875       9,607       (705 )
Other
    426       711       34  
Changes in operating assets and liabilities
    (47,891 )     12,807       (70,299 )
 
                       
Net cash provided by operating activities
    109,611       109,416       72,756  
 
                       
Cash flows from investing activities:
                       
Net proceeds from sale of business
          72,509        
Purchases of investments
    (99,063 )     (27,290 )     (49,753 )
Sales of investments
    54,433       4,140       8,930  
Maturities of investments
    41,138       29,562       49,596  
Purchases of property, plant and equipment
    (12,428 )     (5,640 )     (9,390 )
 
                       
Net cash (used in) provided by investing activities
    (15,920 )     73,281       (617 )
 
                       
Cash flows from financing activities:
                       
Payments of short-term borrowings
    (17,788 )     (7,863 )     (10,274 )
Proceeds from short and long-term borrowings
    25,082       7,901       11,907  
Payments of long-term borrowings
          (1,571 )     (50,000 )
Dividend payments
    (10,942 )     (9,484 )     (9,808 )
Net payments related to employee stock awards
    (4,131 )     (10,519 )     (8,921 )
 
                       
Net cash used in financing activities
    (7,779 )     (21,536 )     (67,096 )
 
                       
Effect of exchange rate changes on cash and cash equivalents
    631       5,765       1,958  
 
                       
Increase in cash and cash equivalents and restricted cash
    86,543       166,926       7,001  
 
                       
Cash and cash equivalents, including restricted cash at beginning of
    340,888       261,186       333,887  
period
                       
 
                       
Cash and cash equivalents, including restricted cash at end of period
  $ 427,431     $ 428,112     $ 340,888  
 
                       

4

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

                                                 
    Three Months Ended June 30, 2018   Three Months Ended March 31, 2018
     Income Before    Provision   Effective        Provision    
     Income Taxes    (benefit) for   Tax Rate   Income Before   (benefit) for   Effective
             Income Taxes             Income Taxes     Income Taxes     Tax Rate 
GAAP                
  $        148,544     $         25,682          17.3%        $         126,742     $         21,621          17.1%     
Adjustments:
                                               
Acquisition and integration costs
    (1,168 )                                  
(Note 1)
                                               
Fees and expenses related to
    378                                    
repricing of term loan (Note 4)
                                               
Amortization of debt issuance
    660                     1,831                
costs (Note 5)
                                               
Restructuring (Note 6)
    790                     1,220                
Environmental costs (Note 7)
                        1,000                
Amortization of intangible assets
    10,901                     11,190                
Windfall tax benefit on
          4,752                     3,036          
stock-based compensation (Note 10)
                                               
Deferred tax adjustment (Note 12)
                              (878 )        
Transition tax on accumulated
          659                     1,668          
foreign earnings (Note 13)
                                               
Tax effect of pro-forma adjustments
          200                     2,247          
 
                                               
Non-GAAP
  $        160,105     $       31,293          19.5%        $      141,983     $         27,694          19.5%     
 
                                               
                         
    Three Months Ended June 30, 2017
         Provision    Effective
    Income Before    (benefit) for    Tax Rate 
     Income Taxes     Income Taxes         
GAAP
  $       157,972     $       37,532         23.8%    
Adjustments:
                       
Acquisition and integration costs (Note 1)
    790                
Expenses related to sale of a business (Note 2)
    436                
Excess and obsolete inventory charge (Note 3)
    1,160                
Amortization of debt issuance costs (Note 5)
    694                
Restructuring (Note 6)
    2,064                
Asset impairment (Note 8)
    6,719                
Gain on sale of business (Note 9)
    (74,856 )              
Amortization of intangible assets
    11,468                
Windfall tax benefit on stock-based compensation (Note 10)
          3,169          
Tax adjustment related to the sale of a business (Note 11)
          (15,007 )        
Adjustment to pro-forma tax rate
          3,047          
 
                       
Non-GAAP
  $       106,447     $       28,741       27.0%    
 
                       
                                                 
    Six Months Ended June 30, 2018   Six Months Ended June 30, 2017
         Provision   Effective        Provision (benefit)    Effective
    Income Before   (benefit) for   Tax Rate   Income Before   for    Tax Rate 
     Income Taxes     Income Taxes             Income Taxes     Income Taxes         
GAAP                
  $       275,286     $         47,303          17.2%        $     235,257     $         49,757          21.2%     
Adjustments:
                                               
Acquisition and integration costs
    (1,168 )                   2,232                
(Note 1)
                                               
Expenses related to sale of a
                        859                
business (Note 2)
                                               
Excess and obsolete inventory
                        1,160                
charge (Note 3)
                                               
Fees and expenses related to
    378                                    
repricing of term loan (Note 4)
                                               
Amortization of debt issuance
    2,491                     3,108                
costs (Note 5)
                                               
Restructuring (Note 6)
    2,010                     2,586                
Environmental costs (Note 7)
    1,000                                    
Asset impairment (Note 8)
                        6,719                
Gain on sale of business (Note 9)
                        (74,856 )              
Amortization of intangible assets
    22,091                     23,969                
Windfall tax benefit on
          7,788                     9,819          
stock-based compensation (Note 10)
                                               
Tax adjustment related to the sale
                              (15,007 )        
of a business (Note 11)
                                               
Deferred tax adjustment (Note 12)
          (878 )                            
Transition tax on accumulated
          2,327                              
foreign earnings (Note 13)
                                               
Tax effect of pro-forma adjustments
          2,447                     9,710          
 
                                               
Non-GAAP
  $       302,088     $        58,987          19.5%        $     201,034     $     54,279          27.0%     
 
                                               

Note 1: We recorded acquisition and integration costs related to the Newport Corporation acquisition, which closed during the second quarter of 2016, during the three and six months ended June 30, 2017. During the second quarter of 2018, we reversed a portion of these costs related to severance agreement provisions that were not met.

Note 2: We recorded legal and consulting expenses during the three and six months ended June 30, 2017 related to the sale of a business, which was completed in April 2017.

Note 3: We recorded excess and obsolete inventory charges in cost of sales during the three and six months ended June 30, 2017, related to the discontinuation of a product line in connection with the consolidation of two manufacturing sites.

Note 4: We recorded fees and expenses during the three and six months ended June 30, 2018 related to the fourth repricing of our Term Loan Credit Agreement.

Note 5: We recorded additional interest expense related to the amortization of debt issuance costs affiliated with our Term Loan Credit Agreement and ABL Facility.

Note 6: We recorded restructuring costs during the three and six months ended June 30, 2018 and three months ended March 31, 2018, primarily comprised of severance costs related to transferring a portion of our shared services functions to a third party as well as the consolidation of certain shared service functions in Asia. We recorded restructuring costs during the three and six months ended June 30, 2017, primarily related to the restructuring of one of our international facilities and the consolidation of sales offices.

Note 7: We recorded additional environmental costs during the three months ended March 31, 2018 and six months ended June 30, 2018, related to an EPA-designated Superfund site, which was acquired as part of our Newport acquisition.

Note 8: We recorded an asset impairment charge, primarily related to the write-off of goodwill and intangible assets during the three and six months ended June 30, 2017, in connection with the consolidation of two manufacturing plants.

Note 9: We recorded a gain during the three and six months ended June 30, 2017, related to the sale of our Data Analytics Solutions business.

Note 10: We recorded windfall tax benefits on the vesting of stock-based compensation related to an 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 three and six months ended June 30, 2017.

Note 12*: We recorded a provisional 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 fourth quarter of 2017 and updated the provisional transition tax during the three and six months ended June 30, 2018 and three months ended March 31, 2018.

Note 13*: We adjusted the transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three and six months ended June 30, 2018.

*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 Q3-18 Guidance — GAAP Net Income to Non-GAAP Net Earnings
(In thousands, except per share data)

                                 
    Three Months Ended September 30, 2018
    Low Guidance   High Guidance
    $ Amount   $ Per Share   $ Amount   $ Per Share
GAAP net income
  $ 77,600     $ 1.40     $ 91,600     $ 1.66  
Amortization
    10,800       0.20       10,800       0.20  
Deferred financing costs
    600       0.01       600       0.01  
Restructuring
    300       0.01       300       0.01  
Tax effect of adjustments (Note 1)
    (800 )     (0.02 )     (600 )     (0.02 )
 
                               
Non-GAAP net earnings
  $ 88,500     $ 1.60     $ 102,700     $ 1.86  
 
                               
Q3-18 forecasted shares
            55,300               55,300  

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.

5

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

                 
    June 30, 2018   December 31, 2017
ASSETS
               
Cash and cash equivalents, including restricted cash
  $ 427,431     $ 333,887  
Short-term investments
    203,686       209,434  
Trade accounts receivable, net
    339,958       300,308  
Inventories
    384,929       339,081  
Other current assets
    61,720       53,543  
 
               
Total current assets
    1,417,724       1,236,253  
Property, plant and equipment, net
    174,054       171,782  
Goodwill
    588,718       591,047  
Intangible assets, net
    342,684       366,398  
Long-term investments
    10,476       10,655  
Other assets
    39,832       37,883  
 
               
Total assets
  $ 2,573,488     $ 2,414,018  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Short-term debt
  $ 12,511     $ 2,972  
Accounts payable
    87,699       82,518  
Accrued compensation
    75,637       96,147  
Income taxes payable
    17,294       21,398  
Deferred revenue
    10,729       12,842  
Other current liabilities
    78,201       73,945  
 
               
Total current liabilities
    282,071       289,822  
Long-term debt, net
    342,096       389,993  
Non-current deferred taxes
    64,752       61,571  
Non-current accrued compensation
    55,627       51,700  
Other liabilities
    27,504       32,025  
 
               
Total liabilities
    772,050       825,111  
 
               
Stockholders’ equity:
               
Common stock
    113       113  
Additional paid-in capital
    793,384       789,644  
Retained earnings
    1,004,698       795,698  
Accumulated other comprehensive income
    3,243       3,452  
 
               
Total stockholders’ equity
    1,801,438       1,588,907  
 
               
Total liabilities and stockholders’ equity
  $ 2,573,488     $ 2,414,018  
 
               

6


The following information was filed by Mks Instruments Inc (MKSI) on Tuesday, July 24, 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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