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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, 2023

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 November 6, 2023, the registrant had 66,878,495 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, 2023 and December 31, 2022

3

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income – Three and Nine Months Ended September 30, 2023 and 2022

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity – Three and Nine Months Ended September 30, 2023 and 2022

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2023 and 2022

6

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

ITEM 2.

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

28

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

41

 

 

ITEM 4.

CONTROLS AND PROCEDURES

41

 

PART II. OTHER INFORMATION

 

 

ITEM 1A.

RISK FACTORS

42

 

 

 

 

 

ITEM 5.

OTHER INFORMATION

42

 

 

 

 

 

ITEM 6.

EXHIBITS

43

 

 

 

 

SIGNATURES

44

 

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, 2023

 

 

December 31, 2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

859

 

 

$

909

 

Short-term investments

 

 

1

 

 

 

1

 

Accounts receivable, net of allowance for doubtful accounts of $8 and $11 at September 30, 2023 and December 31, 2022, respectively

 

 

618

 

 

 

720

 

Inventories

 

 

1,009

 

 

 

977

 

Other current assets

 

 

288

 

 

 

187

 

Total current assets

 

 

2,775

 

 

 

2,794

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

761

 

 

 

800

 

Right-of-use assets, net

 

 

227

 

 

 

234

 

Goodwill

 

 

2,540

 

 

 

4,308

 

Intangible assets, net

 

 

2,614

 

 

 

3,173

 

Other assets

 

 

223

 

 

 

186

 

Total assets

 

$

9,140

 

 

$

11,495

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Short-term debt

 

$

87

 

 

$

93

 

Accounts payable

 

 

309

 

 

 

426

 

Other current liabilities

 

 

442

 

 

 

433

 

Total current liabilities

 

 

838

 

 

 

952

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

4,787

 

 

 

4,834

 

Non-current deferred taxes

 

 

595

 

 

 

783

 

Non-current accrued compensation

 

 

139

 

 

 

138

 

Non-current lease liabilities

 

 

208

 

 

 

215

 

Other non-current liabilities

 

 

97

 

 

 

90

 

Total liabilities

 

 

6,664

 

 

 

7,012

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value per share, 2 shares authorized; no shares issued and outstanding

 

 

—

 

 

 

—

 

Common stock, no par value, 200 shares authorized; 66.9 and 66.6 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

—

 

 

 

—

 

Additional paid-in capital

 

 

2,180

 

 

 

2,142

 

Retained earnings

 

 

455

 

 

 

2,272

 

Accumulated other comprehensive (loss) income

 

 

(159

)

 

 

69

 

Total stockholders’ equity

 

 

2,476

 

 

 

4,483

 

Total liabilities and stockholders’ equity

 

$

9,140

 

 

$

11,495

 

 

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 (LOSS) INCOME

(in millions, except per share data)

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

818

 

 

$

841

 

 

$

2,416

 

 

$

2,153

 

Services

 

 

114

 

 

 

113

 

 

 

314

 

 

 

308

 

Total net revenues

 

 

932

 

 

 

954

 

 

 

2,730

 

 

 

2,461

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

446

 

 

 

506

 

 

 

1,326

 

 

 

1,243

 

Services

 

 

60

 

 

 

58

 

 

 

173

 

 

 

156

 

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

 

 

506

 

 

 

564

 

 

 

1,499

 

 

 

1,399

 

Gross profit

 

 

426

 

 

 

390

 

 

 

1,231

 

 

 

1,062

 

Research and development

 

 

71

 

 

 

63

 

 

 

218

 

 

 

168

 

Selling, general and administrative

 

 

167

 

 

 

126

 

 

 

514

 

 

 

319

 

Acquisition and integration costs

 

 

3

 

 

 

31

 

 

 

14

 

 

 

41

 

Restructuring

 

 

1

 

 

 

5

 

 

 

13

 

 

 

10

 

Amortization of intangible assets

 

 

68

 

 

 

47

 

 

 

225

 

 

 

77

 

Goodwill and intangible asset impairments

 

 

—

 

 

 

—

 

 

 

1,827

 

 

 

—

 

Gain on sale of long-lived assets

 

 

(2

)

 

 

—

 

 

 

(2

)

 

 

(7

)

Income (loss) from operations

 

 

118

 

 

 

118

 

 

 

(1,578

)

 

 

454

 

Interest income

 

 

(4

)

 

 

(1

)

 

 

(10

)

 

 

(2

)

Interest expense

 

 

93

 

 

 

80

 

 

 

266

 

 

 

93

 

Other expense (income), net

 

 

7

 

 

 

(1

)

 

 

14

 

 

 

(4

)

Income (loss) before income taxes

 

 

22

 

 

 

40

 

 

 

(1,848

)

 

 

367

 

(Benefit) provision for income taxes

 

 

(17

)

 

 

34

 

 

 

(76

)

 

 

88

 

Net income (loss)

 

$

39

 

 

$

6

 

 

$

(1,772

)

 

$

279

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Changes in value of financial instruments designated as
cash flow hedges

 

$

16

 

 

$

48

 

 

$

45

 

 

$

73

 

Foreign currency translation adjustments

 

 

(96

)

 

 

(227

)

 

 

(269

)

 

 

(275

)

Change in net investment hedge

 

 

21

 

 

 

—

 

 

 

8

 

 

 

—

 

Unrecognized gain (loss) on investments

 

 

4

 

 

 

—

 

 

 

(7

)

 

 

—

 

Net unrecognized pension gain (loss)

 

 

—

 

 

 

5

 

 

 

(5

)

 

 

5

 

Total comprehensive (loss) income

 

$

(16

)

 

$

(168

)

 

$

(2,000

)

 

$

82

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.09

 

 

$

(26.53

)

 

$

4.85

 

Diluted

 

$

0.58

 

 

$

0.09

 

 

$

(26.53

)

 

$

4.84

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

66.9

 

 

 

61.0

 

 

 

66.8

 

 

 

57.4

 

Diluted

 

 

67.1

 

 

 

61.1

 

 

 

66.8

 

 

 

57.6

 

 

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

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2022

 

 

66.6

 

 

$

—

 

 

$

2,142

 

 

$

2,272

 

 

$

69

 

 

$

4,483

 

Net issuance under stock-based plans

 

 

0.1

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

(6

)

Stock-based compensation

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

Comprehensive (loss) income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(42

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

13

 

Balance at March 31, 2023

 

 

66.7

 

 

 

—

 

 

 

2,154

 

 

 

2,215

 

 

 

82

 

 

 

4,451

 

Net issuance under stock-based plans

 

 

0.2

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

Comprehensive loss (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,769

)

 

 

 

 

 

(1,769

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(186

)

 

 

(186

)

Balance at June 30, 2023

 

 

66.9

 

 

 

—

 

 

 

2,168

 

 

 

431

 

 

 

(104

)

 

 

2,495

 

Net issuance under stock-based plans

 

 

—

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

13

 

Cash dividend ($0.22 per common share)

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

Comprehensive income (loss) (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

(55

)

Balance at September 30, 2023

 

 

66.9

 

 

$

—

 

 

$

2,180

 

 

$

455

 

 

$

(159

)

 

$

2,476

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

(