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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(MARK ONE)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission file number 0-23621

MKS INSTRUMENTS, INC.

(Exact name of registrant as specified in its charter)

 

Massachusetts

04-2277512

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

 

 

2 Tech Drive, Suite 201, Andover, Massachusetts

01810

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code (978) 645-5500

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, no par value

 

MKSI

 

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of July 26, 2022, the registrant had 55,742,376 shares of common stock outstanding.

 

 


 

MKS INSTRUMENTS, INC.

FORM 10-Q

INDEX

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1.

FINANCIAL STATEMENTS (Unaudited)

3

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – June 30, 2022 and December 31, 2021

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income – Three and six months ended June 30, 2022 and 2021

4

 

 

 

Condensed Consolidated Statements of Stockholders' Equity – Three and six months ended June 30, 2022 and 2021

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Six months ended June 30, 2022 and 2021

6

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

29

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

41

 

 

ITEM 4.

CONTROLS AND PROCEDURES

41

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

LEGAL PROCEEDINGS

42

 

 

ITEM 1A.

RISK FACTORS

42

 

 

 

 

 

ITEM 6.

EXHIBITS

43

 

 

 

 

SIGNATURES

45

 

2


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

(Unaudited)

 

ASSETS

 

June 30, 2022

 

 

December 31, 2021

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,065

 

 

$

966

 

Short-term investments

 

 

2

 

 

 

76

 

Trade accounts receivable, net of allowance for doubtful accounts of $4 at June 30, 2022 and December 31, 2021

 

 

481

 

 

 

443

 

Inventories

 

 

689

 

 

 

577

 

Other current assets

 

 

112

 

 

 

85

 

Total current assets

 

 

2,349

 

 

 

2,147

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

377

 

 

 

326

 

Right-of-use assets

 

 

170

 

 

 

184

 

Goodwill

 

 

1,220

 

 

 

1,228

 

Intangible assets, net

 

 

544

 

 

 

576

 

Other assets

 

 

89

 

 

 

79

 

Total assets

 

$

4,749

 

 

$

4,540

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

11

 

 

$

9

 

Accounts payable

 

 

181

 

 

 

168

 

Accrued compensation

 

 

84

 

 

 

132

 

Income taxes payable

 

 

31

 

 

 

25

 

Lease liabilities

 

 

18

 

 

 

18

 

Deferred revenue and customer advances

 

 

51

 

 

 

37

 

Other current liabilities

 

 

81

 

 

 

71

 

Total current liabilities

 

 

457

 

 

 

460

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

804

 

 

 

808

 

Non-current deferred taxes

 

 

101

 

 

 

99

 

Non-current accrued compensation

 

 

46

 

 

 

49

 

Non-current lease liabilities

 

 

180

 

 

 

193

 

Other non-current liabilities

 

 

32

 

 

 

44

 

Total liabilities

 

 

1,620

 

 

 

1,653

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred Stock, $0.01 par value per share, 2 shares authorized; none issued and outstanding

 

 

 

 

 

 

Common Stock, no par value, 200 shares authorized; 55.7 and 55.5 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

923

 

 

 

907

 

Retained earnings

 

 

2,240

 

 

 

1,991

 

Accumulated other comprehensive loss

 

 

(34

)

 

 

(11

)

Total stockholders' equity

 

 

3,129

 

 

 

2,887

 

Total liabilities and stockholders' equity

 

$

4,749

 

 

$

4,540

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

3


 

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in millions, except per share data)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

664

 

 

$

657

 

 

$

1,312

 

 

$

1,262

 

Services

 

 

101

 

 

 

93

 

 

 

195

 

 

 

182

 

Total net revenues

 

 

765

 

 

 

750

 

 

 

1,507

 

 

 

1,444

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

377

 

 

 

345

 

 

 

737

 

 

 

667

 

Services

 

 

50

 

 

 

50

 

 

 

98

 

 

 

100

 

Total cost of revenues (exclusive of amortization shown separately below)

 

 

427

 

 

 

395

 

 

 

835

 

 

 

767

 

Gross profit

 

 

338

 

 

 

355

 

 

 

672

 

 

 

677

 

Research and development

 

 

53

 

 

 

50

 

 

 

105

 

 

 

97

 

Selling, general and administrative

 

 

101

 

 

 

97

 

 

 

193

 

 

 

193

 

Acquisition and integration costs

 

 

2

 

 

 

6

 

 

 

10

 

 

 

12

 

Restructuring and other

 

 

3

 

 

 

3

 

 

 

5

 

 

 

8

 

Amortization of intangible assets

 

 

15

 

 

 

13

 

 

 

30

 

 

 

25

 

Gain on sale of long-lived assets

 

 

 

 

 

 

 

 

(7

)

 

 

 

Income from operations

 

 

164

 

 

 

186

 

 

 

336

 

 

 

342

 

Interest income

 

 

1

 

 

 

 

 

 

1

 

 

 

 

Interest expense

 

 

7

 

 

 

6

 

 

 

13

 

 

 

12

 

Other expense (income), net

 

 

2

 

 

 

8

 

 

 

(3

)

 

 

9

 

Income before income taxes

 

 

156

 

 

 

172

 

 

 

327

 

 

 

321

 

Provision for income taxes

 

 

26

 

 

 

26

 

 

 

54

 

 

 

52

 

Net income

 

$

130

 

 

$

146

 

 

$

273

 

 

$

269

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Changes in value of financial instruments designated as
cash flow hedges

 

$

8

 

 

$

 

 

$

25

 

 

$

11

 

Foreign currency translation adjustments

 

 

(38

)

 

 

5

 

 

 

(48

)

 

 

(14

)

Total comprehensive income

 

$

100

 

 

$

151

 

 

$

250

 

 

$

266

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.33

 

 

$

2.64

 

 

$

4.90

 

 

$

4.86

 

Diluted

 

$

2.32

 

 

$

2.63

 

 

$

4.89

 

 

$

4.83

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

55.7

 

 

 

55.4

 

 

 

55.6

 

 

 

55.3

 

Diluted

 

 

55.8

 

 

 

55.7

 

 

 

55.8

 

 

 

55.6

 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

4


 

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions, except per share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at December 31, 2021

 

 

55.5

 

 

$

 

 

$

907

 

 

$

1,991

 

 

$

(11

)

 

$

2,887

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

(6

)

Stock-based compensation

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

143

 

 

 

 

 

 

143

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

Balance at March 31, 2022

 

 

55.6

 

 

 

 

 

 

909

 

 

 

2,122

 

 

 

(4

)

 

 

3,027

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

130

 

 

 

 

 

 

130

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30

)

 

 

(30

)

Balance at June 30, 2022

 

 

55.7

 

 

$

 

 

$

923

 

 

$

2,240

 

 

$

(34

)

 

$

3,129

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Retained

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at December 31, 2020

 

 

55.2

 

 

$

 

 

$

873

 

 

$

1,488

 

 

$

 

 

$

2,361

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Stock-based compensation

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Cash dividend ($0.20 per common share)

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

122

 

 

 

 

 

 

122

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Balance at March 31, 2021

 

 

55.3

 

 

 

 

 

 

878

 

 

 

1,599

 

 

 

(8

)

 

 

2,469

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

Stock-based compensation

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

146

 

 

 

 

 

 

146

 

Other comprehensive income