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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 September 30, 2021

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 October 27, 2021, the registrant had 55,458,911 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 – September 30, 2021 and December 31, 2020

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income – Three and nine months ended September 30, 2021 and 2020

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity – Three and nine months ended September 30, 2021 and 2020

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2021 and 2020

7

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

33

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

46

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

46

 

PART II. OTHER INFORMATION

 

 

ITEM 1.

LEGAL PROCEEDINGS.

47

 

 

ITEM 1A.

RISK FACTORS.

47

 

 

 

 

 

ITEM 6.

EXHIBITS.

48

 

 

 

 

SIGNATURES

50

 

 

2


 

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS.

MKS INSTRUMENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

(Unaudited)

 

ASSETS

 

September 30, 2021

 

 

December 31, 2020

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

633.3

 

 

$

608.3

 

Short-term investments

 

 

246.3

 

 

 

227.7

 

Trade accounts receivable, net of allowance for doubtful accounts of $2.4 and $2.0 at September 30, 2021 and December 31, 2020, respectively

 

 

443.4

 

 

 

392.7

 

Inventories

 

 

550.4

 

 

 

501.4

 

Other current assets

 

 

121.5

 

 

 

74.3

 

Total current assets

 

 

1,994.9

 

 

 

1,804.4

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

316.8

 

 

 

284.3

 

Right-of-use assets

 

 

184.5

 

 

 

184.4

 

Goodwill

 

 

1,226.2

 

 

 

1,066.4

 

Intangible assets, net

 

 

589.5

 

 

 

512.2

 

Long-term investments

 

 

6.4

 

 

 

6.5

 

Other assets

 

 

47.6

 

 

 

45.6

 

Total assets

 

$

4,365.9

 

 

$

3,903.8

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Short-term debt

 

$

9.0

 

 

$

14.5

 

Accounts payable

 

 

150.8

 

 

 

110.6

 

Accrued compensation

 

 

118.9

 

 

 

117.9

 

Income taxes payable

 

 

16.5

 

 

 

18.3

 

Lease liabilities

 

 

17.3

 

 

 

15.8

 

Deferred revenue and customer advances

 

 

37.6

 

 

 

31.2

 

Other current liabilities

 

 

87.0

 

 

 

65.6

 

Total current liabilities

 

 

437.1

 

 

 

373.9

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

809.7

 

 

 

815.0

 

Non-current deferred taxes

 

 

98.5

 

 

 

59.2

 

Non-current accrued compensation

 

 

48.7

 

 

 

49.5

 

Non-current lease liabilities

 

 

193.0

 

 

 

187.4

 

Other non-current liabilities

 

 

50.3

 

 

 

57.9

 

Total liabilities

 

 

1,637.3

 

 

 

1,542.9

 

Commitments and contingencies (Note 19)

 

 

 

 

 

 

 

 

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; 55.5 and 55.2 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 

 

0.1

 

 

 

0.1

 

Additional paid-in capital

 

 

892.8

 

 

 

873.2

 

Retained earnings

 

 

1,853.0

 

 

 

1,487.3

 

Accumulated other comprehensive (loss) income

 

 

(17.3

)

 

 

0.3

 

Total stockholders’ equity

 

 

2,728.6

 

 

 

2,360.9

 

Total liabilities and stockholders’ equity

 

$

4,365.9

 

 

$

3,903.8

 

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

649.1

 

 

$

506.8

 

 

$

1,910.8

 

 

$

1,441.0

 

Services

 

 

92.8

 

 

 

83.0

 

 

 

274.9

 

 

 

228.8

 

Total net revenues

 

 

741.9

 

 

 

589.8

 

 

 

2,185.7

 

 

 

1,669.8

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

344.5

 

 

 

280.7

 

 

 

1,011.8

 

 

 

794.8

 

Services

 

 

49.0

 

 

 

47.1

 

 

 

148.2

 

 

 

127.1

 

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

 

 

393.5

 

 

 

327.8

 

 

 

1,160.0

 

 

 

921.9

 

Gross profit

 

 

348.4

 

 

 

262.0

 

 

 

1,025.7

 

 

 

747.9

 

Research and development

 

 

51.7

 

 

 

42.5

 

 

 

148.9

 

 

 

127.7

 

Selling, general and administrative

 

 

95.8

 

 

 

87.0

 

 

 

288.9

 

 

 

260.3

 

Acquisition and integration costs

 

 

8.6

 

 

 

0.5

 

 

 

20.8

 

 

 

3.4

 

Restructuring and other

 

 

2.0

 

 

 

3.1

 

 

 

9.9

 

 

 

6.8

 

Amortization of intangible assets

 

 

15.0

 

 

 

12.5

 

 

 

40.1

 

 

 

42.6

 

Asset impairment

 

 

 

 

 

 

 

 

 

 

 

1.2

 

COVID-19 related net credits

 

 

 

 

 

 

 

 

 

 

 

(1.2

)

Income from operations

 

 

175.3

 

 

 

116.4

 

 

 

517.1

 

 

 

307.1

 

Interest income

 

 

0.1

 

 

 

0.1

 

 

 

0.4

 

 

 

1.1

 

Interest expense

 

 

6.3

 

 

 

6.6

 

 

 

19.1

 

 

 

22.7

 

Other expense, net

 

 

2.9

 

 

 

1.1

 

 

 

11.5

 

 

 

3.0

 

Income before income taxes

 

 

166.2

 

 

 

108.8

 

 

 

486.9

 

 

 

282.5

 

Provision for income taxes

 

 

33.8

 

 

 

17.1

 

 

 

85.7

 

 

 

48.0

 

Net income

 

$

132.4

 

 

$

91.7

 

 

$

401.2

 

 

$

234.5

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in value of financial instruments designated as

cash flow hedges

 

$

3.0

 

 

$

(0.6

)

 

$

13.9

 

 

$

(7.7

)

Foreign currency translation adjustments

 

 

(18.2

)

 

 

17.1

 

 

 

(31.6

)

 

 

12.1

 

Net unrecognized pension gain

 

 

0.3

 

 

 

0.1

 

 

 

0.2

 

 

 

0.1

 

Unrealized (loss) gain on investments

 

 

 

 

 

 

 

 

(0.1

)

 

 

0.2

 

Total comprehensive income

 

$

117.5

 

 

$

108.3

 

 

$

383.6

 

 

$

239.2

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.39

 

 

$

1.66

 

 

$

7.24

 

 

$

4.26

 

Diluted

 

$

2.38

 

 

$

1.66

 

 

$

7.21

 

 

$

4.24

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

55.5

 

 

 

55.2

 

 

 

55.4

 

 

 

55.1

 

Diluted

 

 

55.7

 

 

 

55.4

 

 

 

55.7

 

 

 

55.3

 

 

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

 

 

Income/(Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

55.2

 

 

$

0.1

 

 

$

873.2

 

 

$

1,487.3

 

 

$

0.3

 

 

$

2,360.9

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

 

(5.3

)

 

 

 

 

 

 

 

 

 

 

(5.3

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

10.0

 

 

 

 

 

 

 

 

 

 

 

10.0

 

Cash dividend ($0.20 per common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11.1

)

 

 

 

 

 

 

(11.1

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

122.3

 

 

 

 

 

 

 

122.3

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.8

)

 

 

(7.8

)

Balance at March 31, 2021

 

 

55.3

 

 

 

0.1

 

 

 

877.9

 

 

 

1,598.5

 

 

 

(7.5

)

 

 

2,469.0

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

 

(2.4

)

 

 

 

 

 

 

 

 

 

 

(2.4

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

8.8

 

 

 

 

 

 

 

 

 

 

 

8.8

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12.2

)

 

 

 

 

 

 

(12.2

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

146.5

 

 

 

 

 

 

 

146.5

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.1

 

 

 

5.1

 

Balance at June 30, 2021

 

 

55.4

 

 

 

0.1

 

 

 

884.3

 

 

 

1,732.8

 

 

 

(2.4

)

 

 

2,614.8

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

 

(0.4

)

 

 

 

 

 

 

 

 

 

 

(0.4

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

8.9

 

 

 

 

 

 

 

 

 

 

 

8.9

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12.2

)

 

 

 

 

 

 

(12.2

)

Comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

132.4

 

 

 

 

 

 

 

132.4

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14.9

)

 

 

(14.9

)

Balance at September 30, 2021