EXHIBIT 99.1

 

LOGO

MKS Instruments Reports First Quarter 2019 Financial Results

 

   

Quarterly revenue of $464 million

 

   

GAAP net income of $12.5 million, or $0.23 per diluted share

 

   

Non-GAAP net earnings of $61.3 million, or $1.12 per diluted share

 

   

Successfully completed acquisition of Electro Scientific Industries, Inc. (“ESI”) in the quarter

Andover, MA, April 29, 2019 — MKS Instruments, Inc. (NASDAQ: MKSI), a global provider of technologies that enable advanced processes and improve productivity, today reported first quarter 2019 financial results.

“We’re very pleased with our continued strong execution across the standalone MKS business. Excluding the ESI acquisition, revenue and Non-GAAP net earnings were both above the mid-point of our guidance range for the first quarter,” said Gerald Colella, Chief Executive Officer.

Mr. Colella added, “Our strong customer relationships and technical capabilities have also resulted in a number of important design wins, as we take full advantage of the current moderation in the semiconductor market. The acquisition of ESI further advances our Surround the WorkpieceSM offerings and expands our solutions for Advanced Markets. We plan to leverage this advanced systems expertise and deep technical understanding of laser materials processing interactions to provide rich and robust solutions to meet the challenges of our customers’ evolving technology needs.”

“ESI integration efforts are proceeding ahead of schedule and we are on target to realize $15 million of annualized cost synergies over the next 18 to 36 months,” said Seth Bagshaw, Senior Vice President and Chief Financial Officer. “Furthermore, we exited the quarter with a strong balance sheet and liquidity with over $460 million of cash and short-term investments and trailing twelve-month net leverage ratio of under 1 times.”


Quarterly Consolidated Financial Results

(in millions, except per share data)

 

     Q1 2019     Q4 2018  

GAAP Results

    

Net revenues

   $ 463.6     $ 460.5  

Gross margin

     42.7     45.6

Operating margin

     5.0     20.4

Net income

   $ 12.5     $ 71.6  

Diluted EPS

   $ 0.23     $ 1.32  

Non-GAAP Results

    

Gross margin

     43.8     45.6

Operating margin

     17.7     23.7

Net earnings

   $ 61.3     $ 84.0  

Diluted EPS

   $ 1.12     $ 1.54  

First Quarter 2019 Financial Results

Revenue was $463.6 million and included two months of results from the Company’s acquisition of ESI, which closed on February 1, 2019. Net income was $12.5 million, or $0.23 per diluted share, compared to net income of $71.6 million, or $1.32 per diluted share, in the fourth quarter of 2018, and $105.1 million, or $1.90 per diluted share, in the first quarter of 2018. First quarter net income included additional amortization of intangible assets of $5.1 million and aggregate acquisition and integration costs of $30.2 million associated with the acquisition.

Non-GAAP net earnings, which exclude special charges and credits, were $61.3 million, or $1.12 per diluted share, compared to $84.0 million, or $1.54 per diluted share, in the fourth quarter of 2018, and $114.3 or $2.07 per diluted share, in the first quarter of 2018.

Sales to Advanced Markets were $243 million, an increase of 8% compared to the fourth quarter of 2018, which was primarily attributed to the acquisition of ESI. Sales to semiconductor customers were $221 million, a decrease of 6% compared to the fourth quarter of 2018.

Additional Financial Information

The Company had $462 million in cash and short-term investments and $1 billion of term loan debt outstanding as of March 31, 2019 and during the first quarter of 2019, MKS paid a dividend of $10.8 million or $0.20 per diluted share. The Company has available a $100 million asset-based line of credit.


Second Quarter 2019 Outlook

Based on current business levels, the Company expects that revenue in the second quarter of 2019 could range from $460 to $510 million.

At these volumes, GAAP net income could range from $0.56 to $0.93 per diluted share and non-GAAP net earnings could range from $0.89 to $1.26 per diluted share.

Quarterly Consolidated Non-GAAP Financial Results—Excluding ESI

(in millions, except per share data)

 

     Q1 2019     Q4 2018  

Non-GAAP Results

    

Net revenues

   $ 428.8     $ 460.5  

Gross margin

     44.6     45.6

Operating margin

     18.9     23.7

Net earnings

   $ 64.0     $ 84.0  

Diluted EPS

   $ 1.17     $ 1.54  

Segment Results

In conjunction with the ESI acquisition, the Company has added a third business segment when reporting results. We refer to this new business segment as Equipment & Solutions and it represents primarily the legacy ESI business.

Conference Call Details

A conference call with management will be held on Tuesday, April 30, 2019 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 7138019, 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, optics and laser-based manufacturing solutions. 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, and 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, costs associated with completed acquisitions, acquisition integration costs, fees and expenses related to our term loan, amortization of debt issuance costs, restructuring charges, a customer contract obligation related to an acquisition, environmental costs related to an acquisition, windfall tax benefits from stock-based compensation, accrued taxes on subsidiary distributions, the one-time tax effects of the 2017 Tax Cut and Jobs Act, tax cost on the intercompany sale of an asset and the related tax effects of adjustments impacting pre-tax income. 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, and MKS’ expected synergies and cost savings from its recent acquisition of ESI. 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 ability of MKS to successfully integrate ESI’s operations and employees, unexpected costs, charges or expenses resulting from the ESI acquisition, MKS’ ability to realize


anticipated synergies and cost savings from the ESI acquisition, the terms of our term loan, competition from larger or more established companies in MKS’ markets; MKS’ ability to successfully grow ESI’s business; potential adverse reactions or changes to business relationships resulting from the ESI acquisition, the challenges, risks and costs involved with integrating the operations of the other companies we have acquired, the Company’s ability to successfully grow our 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, 2018 filed with the 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


MKS Instruments, Inc.

Unaudited Consolidated Statement of Operations

(in thousands, except per share data)

 

     Three Months Ended  
     March 31,
2019
     March 31,
2018
     December 31,
2018
 

Net revenues:

        

Products

   $ 397,363      $ 496,677      $ 402,271  

Services

     66,198        57,598        58,270  
  

 

 

    

 

 

    

 

 

 

Total net revenues

     463,561        554,275        460,541  

Cost of revenues:

        

Products

     229,710        261,321        221,766  

Services

     35,733        30,099        28,891  
  

 

 

    

 

 

    

 

 

 

Total cost of revenues

     265,443        291,420        250,657  

Gross profit

     198,118        262,855        209,884  

Research and development

     38,933        34,857        32,461  

Selling, general and administrative

     82,455        82,949        68,166  

Fees and expenses related to incremental term loan

     5,847                

Acquisition and integration costs

     30,167               4,245  

Restructuring

     223        1,220        193  

Customer contract obligation

     1,700                

Environmental costs

            1,000         

Amortization of intangible assets

     15,727        11,190        10,735  
  

 

 

    

 

 

    

 

 

 

Income from operations

     23,066        131,639        94,084  

Interest income

     1,714        1,105        1,698  

Interest expense

     9,119        5,430        3,871  

Other expense, net

     325        572        763  
  

 

 

    

 

 

    

 

 

 

Income from operations before income taxes

     15,336        126,742        91,148  

Provision for income taxes

     2,881        21,621        19,512  
  

 

 

    

 

 

    

 

 

 

Net income

   $ 12,455      $ 105,121      $ 71,636  
  

 

 

    

 

 

    

 

 

 

Net income per share:

        

Basic

   $ 0.23      $ 1.93      $ 1.33  

Diluted

   $ 0.23      $ 1.90      $ 1.32  

Cash dividends per common share

   $ 0.20      $ 0.18      $ 0.20  

Weighted average shares outstanding:

        

Basic

     54,147        54,423        54,005  

Diluted

     54,848        55,286        54,454  


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

 

Net income

   $ 12,455     $ 105,121     $ 71,636  

Adjustments:

      

Acquisition and integration costs (Note 1)

     30,167             4,245  

Acquisition inventory step-up (Note 2)

     5,140              

Fees and expenses related to incremental term loan (Note 3)

     5,847              

Amortization of debt issuance costs (Note 4)

     599       1,831       711  

Restructuring (Note 5)

     223       1,220       193  

Customer contract obligation (Note 6)

     1,700              

Environmental costs (Note 7)

           1,000        

Amortization of intangible assets

     15,727       11,190       10,735  

Windfall tax benefit on stock-based compensation (Note 8)

     (1,389     (3,036     (202

Deferred tax adjustment (Note 9)

           878        

Accrued tax on MKS subsidiary distributions (Note 10)

                 (2,277

Tax cost on the inter-company sale of an asset (Note 11)

                 541  

Transition tax on accumulated foreign earnings (Note 12)

           (1,668      

Pro-forma tax adjustments

     (9,169     (2,247     (1,549
  

 

 

   

 

 

   

 

 

 

Non-GAAP net earnings (Note 13)

   $ 61,300     $ 114,289     $ 84,033  
  

 

 

   

 

 

   

 

 

 

Non-GAAP net earnings per share (Note 13)

   $ 1.12     $ 2.07     $ 1.54  
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

     54,848       55,286       54,454  

Income from operations

   $ 23,066     $ 131,639     $ 94,084  

Adjustments:

      

Acquisition and integration costs (Note 1)

     30,167             4,245  

Acquisition inventory step-up (Note 2)

     5,140              

Fees and expenses related to incremental term loan (Note 3)

     5,847              

Restructuring (Note 5)

     223       1,220       193  

Customer contract obligation (Note 6)

     1,700              

Environmental costs (Note 7)

           1,000        

Amortization of intangible assets

     15,727       11,190       10,735  
  

 

 

   

 

 

   

 

 

 

Non-GAAP income from operations (Note 14)

   $ 81,870     $ 145,049     $ 109,257  
  

 

 

   

 

 

   

 

 

 

Non-GAAP operating margin percentage (Note 14)

     17.7     26.2     23.7
  

 

 

   

 

 

   

 

 

 

Gross profit

   $ 198,118     $ 262,855     $ 209,884  

Acquisition inventory step-up (Note 2)

     5,140              
  

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit (Note 15)

   $ 203,258     $ 262,855     $ 209,884  
  

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit percentage (Note 15)

     43.8     47.4     45.6
  

 

 

   

 

 

   

 

 

 

Interest expense

   $ 9,119     $ 5,430     $ 3,871  

Amortization of debt issuance costs (Note 4)

     599       1,831       711  
  

 

 

   

 

 

   

 

 

 

Non-GAAP interest expense

   $ 8,520     $ 3,599     $ 3,160  
  

 

 

   

 

 

   

 

 

 

Net income

   $ 12,455     $ 105,121     $ 71,636  

Interest expense, net

     7,405       4,325       2,173  

Provision for income taxes

     2,881       21,621       19,512  

Depreciation

     9,484       9,302       9,212  

Amortization

     15,727       11,190       10,735  
  

 

 

   

 

 

   

 

 

 

EBITDA (Note 16)

   $ 47,952     $ 151,559     $ 113,268  
  

 

 

   

 

 

   

 

 

 

Stock-based compensation

     9,274       10,426       5,257  

Acquisition and integration costs (Note 1)

     30,167             4,245  

Acquisition inventory step-up (Note 2)

     5,140              

Fees and expenses related to incremental term loan (Note 3)

     5,847              

Restructuring (Note 5)

     223       1,220       193  

Customer contract obligation (Note 6)

     1,700              

Environmental costs

           1,000        

Other adjustments

     3,337       772        
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (Note 17)

   $ 103,640     $ 164,977     $ 122,963  
  

 

 

   

 

 

   

 

 

 


Note 1: Acquisition and integration costs for the three months ended March 31, 2019 and December 31, 2018, respectively, related to the acquisition of Electro Scientific Industries, Inc. (“ESI”) which closed on February 1, 2019.

Note 2: Costs of revenues during the three months ended March 31, 2019 includes the amortization of the step-up of inventory to fair value as a result of the ESI acquisition.

Note 3: We recorded fees and expenses during the three months ended March 31, 2019 related to Amendment No. 5 of our Term Loan Credit Agreement.

Note 4: We recorded additional interest expense related to the amortization of debt issuance costs associated with our Term Loan Credit Agreement.

Note 5: We recorded restructuring charges during the three months ended March 31, 2019 and December 31, 2018, respectively, which consisted primarily of severance costs related to an organization-wide reduction in workforce. We recorded restructuring costs during the three months ended March 31, 2018, primarily comprised of severance costs related to transferring a portion of our shared service functions to a third party as well as the consolidation of certain shared service functions in Asia.

Note 6: We recorded expense during the three months ended March 31, 2019 related to a contractual obligation we assumed as part of our acquisition of Newport Corporation.

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

Note 8: We recorded windfall tax benefits on the vesting of stock-based compensation.

Note 9: The three months ended March 31, 2018 includes an update to the provisional tax adjustment recorded during the three months ended December 31, 2017 where we recorded a provisional deferred tax adjustment, which also included the reversal of a tax accrual on a French dividend, related to U.S. tax reform legislation.

Note 10: We recorded and adjusted tax accruals related to distributions from MKS subsidiaries.

Note 11: We recorded taxes on the inter-company sale of an asset during the three months ended December 31, 2018.

Note 12: We adjusted the provisional transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended March 31, 2018.

Note 13: The Non-GAAP net earnings and Non-GAAP net earnings per share amounts exclude acquisition and integration costs, the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment to our Term Loan Credit agreement, amortization of debt issuance costs, restructuring costs, a customer contract obligation, environmental costs, amortization of intangible assets, a windfall tax benefit related to stock-based compensation expense, a deferred tax adjustment, accrued tax on MKS subsidiary distributions, tax costs on the inter-company sale of an asset, 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 14: The Non-GAAP income from operations and Non-GAAP operating margin percentages exclude acquisition and integration costs, the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment to our Term Loan Credit Agreement, restructuring costs, a customer contract obligation, environmental costs and amortization of intangible assets.

Note 15: The Non-GAAP gross profit amounts and Non-GAAP gross profit percentages exclude an inventory step-up adjustment related to the acquisition of ESI.

Note 16: EBITDA excludes net interest, income taxes, depreciation and amortization of intangible assets.


Note 17: Adjusted EBITDA excludes stock-based compensation, acquisition and integration costs, the amortization of the step-up of inventory to fair value, fees and expenses related to an amendment of our Term Loan Credit agreement, restructuring costs, a customer contract obligation, environmental costs and other adjustments as defined in our Term Loan Credit Agreement.


MKS Instruments, Inc.

Unaudited Consolidated Balance Sheet

(in thousands)

 

     March 31,
2019
    December 31,
2018
 

ASSETS

    

Cash and cash equivalents

   $ 418,016     $ 644,345  

Short-term investments

     44,326       73,826  

Trade accounts receivable, net

     335,990       295,454  

Inventories

     475,633       384,689  

Other current assets

     86,387       65,790  
  

 

 

   

 

 

 

Total current assets

     1,360,352       1,464,104  

Property, plant and equipment, net

     251,424       194,367  

Right-of-use asset

     65,628        

Goodwill

     1,057,331       586,996  

Intangible assets, net

     619,091       319,807  

Long-term investments

     10,350       10,290  

Other assets

     48,562       38,682  
  

 

 

   

 

 

 

Total assets

   $ 3,412,738     $ 2,614,246  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Short-term debt

   $ 10,281     $ 3,986  

Accounts payable

     95,317       83,825  

Accrued compensation

     61,523       82,350  

Income taxes payable

     14,355       16,358  

Lease liability

     19,459        

Deferred revenue and customer advances

     21,056       14,246  

Other current liabilities

     74,568       62,520  
  

 

 

   

 

 

 

Total current liabilities

     296,559       263,285  

Long-term debt, net

     976,823       343,842  

Non-current deferred taxes

     78,904       48,223  

Non-current accrued compensation

     60,337       55,598  

Non-current lease liability

     49,392        

Other liabilities

     29,862       30,111  
  

 

 

   

 

 

 

Total liabilities

     1,491,877       741,059  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     113       113  

Additional paid-in capital

     844,261       793,932  

Retained earnings

     1,086,409       1,084,797  

Accumulated other comprehensive income

     (9,922     (5,655
  

 

 

   

 

 

 

Total stockholders’ equity

     1,920,861       1,873,187  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,412,738     $ 2,614,246  
  

 

 

   

 

 

 


MKS Instruments, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands, except per share data)

 

     Three Months Ended  
     March 31
2019
    March 31,
2018
    December 31,
2018
 

Cash flows from operating activities:

      

Net income

   $ 12,455     $ 105,121     $ 71,636  

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization

     25,211       20,492       19,947  

Amortization of inventory step-up adjustment to fair value

     5,140              

Amortization of debt issuance costs, original issue discount and soft call premium

     1,202       2,019       934  

Stock-based compensation

     27,838       10,426       5,257  

Provision for excess and obsolete inventory

     5,063       5,333       6,749  

(Recovery) Provision for doubtful accounts

     (440     335       576  

Deferred income taxes

     (2,445     (705     (13,249

Other

     66       34       2,118  

Changes in operating assets and liabilities

     (45,040     (70,299     41,490  
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     29,050       72,756       135,458  
  

 

 

   

 

 

   

 

 

 

Cash flows (used in) provided by investing activities:

      

Acquisition of business, net of cash acquired

     (988,599            

Purchases of investments

     (44,212     (49,753     (39,824

Sales of investments

     154,489       8,930       139,674  

Maturities of investments

     18,684       49,596       46,410  

Proceeds from sale of assets

     35              

Purchases of property, plant and equipment

     (14,529     (9,390     (26,056
  

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (874,132     (617     120,204  
  

 

 

   

 

 

   

 

 

 

Cash flows provided by (used in) financing activities:

      

Payments of short-term borrowings

     (176     (10,274     (9,299

Net proceeds from short and long-term borrowings

     638,638       11,907       7,045  

Payments of long-term borrowings

           (50,000      

Dividend payments

     (10,843     (9,808     (10,797

Net (payments) proceeds related to employee stock awards

     (8,987     (8,921     2,537  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     618,632       (67,096     (10,514
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     121       1,958       (653
  

 

 

   

 

 

   

 

 

 

(Decrease) Increase in cash and cash equivalents

     (226,329     7,001       244,495  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     644,345       333,887       399,850  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 418,016     $ 340,888     $ 644,345  
  

 

 

   

 

 

   

 

 

 


MKS Instruments, Inc.

Reconciliation of GAAP Income Tax Rate to Non-GAAP Income Tax Rate

(In thousands)

 

     Three Months Ended March 31, 2019     Three Months Ended December 31, 2018  
     Income Before      Provision (benefit)      Effective     Income Before      Provision (benefit)     Effective  
     Income Taxes      for Income Taxes      Tax Rate     Income Taxes      for Income Taxes     Tax Rate  

GAAP

   $ 15,336      $ 2,881        18.8   $ 91,148      $ 19,512       21.4

Adjustments:

               

Acquisition and integration costs (Note 1)

     30,167                 4,245           

Acquisition inventory step up (Note 2)

     5,140                           

Fees and expenses related to incremental term loan (Note 3)

     5,847                           

Amortization of debt issuance costs (Note 4)

     599                 711           

Restructuring (Note 5)

     223                 193           

Customer contract obligation (Note 6)

     1,700                           

Amortization of intangible assets

     15,727                 10,735           

Windfall tax benefit on stock-based compensation (Note 8)

            1,389                 202    

Accrued tax on MKS subsidiary distributions (Note 10)

                            2,277    

Tax cost on the inter-company sale of an asset (Note 11)

                            (541  

Tax effect of pro-forma adjustments

            9,169                 1,549    
  

 

 

    

 

 

      

 

 

    

 

 

   

Non-GAAP

   $ 74,739      $ 13,439        18.0   $ 107,032      $ 22,999       21.5
  

 

 

    

 

 

      

 

 

    

 

 

   

 

     Three Months Ended March 31, 2018  
     Income Before      Provision (benefit)      Effective  
     Income Taxes      for Income Taxes      Tax Rate  

GAAP

   $ 126,742      $ 21,621        17.1

Adjustments:

        

Amortization of debt issuance costs (Note 4)

     1,831            

Restructuring (Note 5)

     1,220            

Environmental costs (Note 7)

     1,000            

Amortization of intangible assets

     11,190            

Windfall tax benefit on stock-based compensation (Note 8)

            3,036     

Deferred tax adjustment (Note 9)

            (878   

Transition tax on accumulated foreign earnings (Note 12)

            1,668     

Tax effect of pro-forma adjustments

            2,247     
  

 

 

    

 

 

    

Non-GAAP

   $ 141,983      $ 27,694        19.5
  

 

 

    

 

 

    


Note 1: Acquisition and integration costs for the three months ended March 31, 2019 and December 31, 2018, respectively, related to the acquisition of Electro Scientific Industries, Inc. (“ESI”) which closed on February 1, 2019.

Note 2: Costs of revenues during the three months ended March 31, 2019 includes the amortization of the step-up of inventory to fair value as a result of the ESI acquisition.

Note 3: We recorded fees and expenses during the three months ended March 31, 2019 related to Amendment No. 5 of our Term Loan Credit Agreement.

Note 4: We recorded additional interest expense related to the amortization of debt issuance costs associated with our Term Loan Credit Agreement.

Note 5: We recorded restructuring charges during the three months ended March 31, 2019 and December 31, 2018, respectively, which consisted primarily of severance costs related to an organization-wide reduction in workforce. We recorded restructuring costs during the three months ended March 31, 2018, primarily comprised of severance costs related to transferring a portion of our shared service functions to a third party as well as the consolidation of certain shared service functions in Asia.

Note 6: We recorded expense during the three months ended March 31, 2019 related to a contractual obligation we assumed as part of our acquisition of Newport Corporation.

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

Note 8: We recorded windfall tax benefits on the vesting of stock-based compensation.

Note 9: The three months ended March 31, 2018 includes an update to the provisional tax adjustment recorded during the three months ended December 31, 2017 where we recorded a provisional deferred tax adjustment, which also included the reversal of a tax accrual on a French dividend, related to U.S. tax reform legislation.

Note 10: We recorded and adjusted tax accruals related to distributions from MKS subsidiaries.

Note 11: We recorded taxes on the inter-company sale of an asset during the three months ended December 31, 2018.

Note 12: We adjusted the provisional transition tax on accumulated foreign earnings related to the 2017 Tax Cut and Jobs Act during the three months ended March 31, 2018.

MKS Instruments, Inc.

Reconciliation of Q2-19 Guidance—GAAP Net Income to Non-GAAP Net Earnings

(In thousands, except per share data)

 

     Three Months Ended June 30, 2019  
     Low Guidance      High Guidance  
     $ Amount      $ Per Share      $ Amount      $ Per Share  

GAAP net income

   $ 30,700      $ 0.56      $ 50,900      $ 0.93  

Amortization

     17,600        0.32        17,600        0.32  

Deferred financing costs

     834        0.01        834        0.01  

Integration costs

     1,800        0.03        1,800        0.03  

Inventory step-up amortization

     3,243        0.06        3,243        0.06  

Tax effect of adjustments (Note 1)

     (5,077      (0.09      (5,277      (0.09
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net earnings

   $ 49,100      $ 0.89      $ 69,100      $ 1.26  
  

 

 

    

 

 

    

 

 

    

 

 

 

Q2 -19 forecasted shares

        55,000           55,000  

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.

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