MKS Inc.
TSX : MKX

MKS Inc.

September 09, 2009 07:00 ET

MKS Announces First Quarter Fiscal 2010 Results

WATERLOO, ONTARIO--(Marketwire - Sept. 9, 2009) - MKS Inc. (MKS) (TSX:MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the first quarter of fiscal year 2010 and declared a quarterly cash dividend of US$0.125 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q1 2010 (compared with Q1 2009)

- Total revenue increased 2% to $15.7 million from $15.4 million

- Net income of $1.4 million or $0.14 per share compared to $0.6 million, or $0.06 per share, a 127% increase

- ALM revenue increased 7% to $14.4 million from $13.4 million

- ALM operating income increased to $2.2 million compared to $0.6 million, a 250% increase

- ALM license revenue was unchanged at $5.0 million

- ALM maintenance revenue increased 6% to $6.7 million from $6.3 million

- ALM Service revenue increased 24% to $2.7 million from $2.2 million

- Average headcount increased to 312 from 303.

Closing cash balance at July 31, 2009 was $19.7 million, a $2.6 million increase from the $17.1 million balance at April 30, 2009. During the quarter, MKS paid $1.3 million in dividends.

MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US $0.125 per share on the Company's outstanding common shares in accordance with its dividend policy.

"We are pleased to report rebounding ALM licensing results from two sluggish quarters late last year" said Philip Deck, CEO of MKS. "Combined with steady performance in maintenance and services, our improved licensing results led to our second best quarterly operating profit ever and record cash balances".

"The improvement in license revenue was a direct result of software deployments within major customers" said Michael Harris, MKS President and COO, "We have been awarded significant new mandates from major software engineering companies worldwide and are now starting to see license revenues that they can generate".

The cash dividend on MKS common shares will be payable on October 15, 2009 to shareholders of record at the close of business on September 30, 2009. The dividend is designated as an eligible dividend for the purposes of section 89 of the Income Tax Act (Canada).

Financial Review

Total revenue for the first quarter of fiscal 2010 was $15.7 million, up 2 percent from $15.4 million for the first quarter of fiscal 2009. Net income for the first quarter of fiscal 2010 increased to $1.4 million, or $0.14 per share, compared to $0.6 million or $0.06 per share in the first quarter of fiscal 2009.

First quarter fiscal 2010 ALM revenues were $5.0 million, unchanged from the ALM revenues reported in the first quarter of fiscal 2009.

Outlook

MKS is committed to profitable organic growth in its primary operating segment, ALM. The Company strives to maintain a balance between increasing current shareholder returns and funding research and sales force investments for long-term growth.

The Company expects a continued decline in the Interoperability business of approximately 10 percent annually.

Investor Presentation Details

The Company will hold its Annual Investor Presentation and Update on September 9th, 2009 at 4:00 p.m. EDT to provide an update to investors and to discuss its first quarter performance. The presentation will be held at the Toronto Board of Trade, 1 First Canadian Place, Meeting Room A/B. The presentation will be available on the Company's Web site following the meeting.

About MKS

MKS Inc., the global application lifecycle management (ALM) technology leader, enables software engineering and IT organizations to seamlessly manage their worldwide software development activities. With its flagship product, MKS Integrity, MKS offers support for all software development activities through a single enterprise application, resulting in better global collaboration and higher productivity. MKS supports customers worldwide with offices across North America, Europe and Asia. For more information about MKS, visit our Web site at http://www.mks.com.

Copyright (C) 2009 MKS Inc. MKS and MKS Integrity are trademarks of MKS Inc. All other trademarks mentioned in this release are the property of their respective owners.

This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect the Company's current views with respect to future events and are subject to such risks and uncertainties. Although the Company believes the expectations represented by such forward looking statements are reasonable, there can be no assurance that those expectations will prove to be correct. Many factors could cause our actual results to differ materially from the statements made including those factors detailed from time to time in filings made by the Company with Canadian securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. The Company does not intend and does not assume any obligation to update these forward-looking statements.



MKS Inc.
Consolidated Balance Sheets
(US dollars, thousands, unaudited)

July 31 April 30
2009 2009
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Assets:

Current assets:
Cash and cash equivalents $19,729 $ 17,098
Accounts receivable, net of allowances for
doubtful accounts of $82 (April 30, 2009 - $89) 6,381 7,404
Deferred income taxes 1,378 1,378
Deferred gain on forward contracts 1,905 83
Prepaid expenses and other assets 1,740 1,152
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Total current assets 31,133 27,115

Fixed assets 4,163 4,252
Intangible assets 47 69
Goodwill 2,424 2,424
Deferred income taxes 2,392 3,243
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Total assets $40,159 $ 37,103
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Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 765 $ 1,083
Accrued liabilities 2,912 2,566
Income taxes payable 728 657
Deferred revenue 16,336 16,170
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Total current liabilities 20,741 20,476

Shareholders' equity:
Share capital 56,308 55,627
Accumulated other comprehensive loss (114) (2,076)
Accumulated deficit (36,776) (36,924)
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Total shareholders' equity 19,418 16,627
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Total liabilities and shareholders' equity $40,159 $ 37,103
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MKS Inc.
Consolidated Statements of Operations
(US dollars, thousands, except per share data, unaudited)

July 31 July 31
Three months ended 2009 2008
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Revenue:
License $ 5,624 $ 6,156
Maintenance 7,415 7,035
Service 2,701 2,174
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15,740 15,365

Operating expenses:
Cost of product and support 1,229 1,240
Cost of service 1,731 1,788
Sales and marketing 5,217 5,862
Research and development 3,185 3,158
General and administrative 1,924 1,963
Foreign exchange (gain) loss (41) 34
Stock-based compensation 176 171
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13,421 14,216
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Operating income 2,319 1,149
Interest income, net 4 32
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Income before income taxes 2,323 1,181

Income tax provision:
Current 35 237
Deferred 881 325
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Income tax provision 916 562
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Net income $ 1,407 $ 619
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Earnings per share:
Basic $ 0.14 $ 0.06
Diluted $ 0.14 $ 0.06

Weighted average number of shares outstanding 10,036 10,285
Diluted weighted average number of shares
outstanding 10,118 10,402



MKS Inc.
Consolidated Statements of Cash Flows
(US dollars, thousands, unaudited)

July 31 July 31
Three months ended 2009 2008
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Cash flows provided by operating activities:

Net income $ 1,407 $ 619
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of fixed assets 337 316
Amortization of intangible assets 22 22
Stock-based compensation 176 171
Deferred income taxes 881 325
Loss on disposal of fixed assets 65 25
Change in operating assets and liabilities:
Accounts receivable 1,023 3,830
Prepaid expenses and other assets (588) (314)
Accounts payable, net of deferred compensation (318) (831)
Accrued liabilities 346 (1,592)
Income taxes payable 71 248
Deferred revenue 166 (2,117)
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Net cash provided by operating activities 3,588 702

Cash flows used for investing activities:
Purchase of fixed assets (279) (203)
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Net cash used for investing activities (279) (203)

Cash flows provided by (used for) financing
activities:
Proceeds on issuance of common shares 505 283
Cash paid for shares repurchased for
cancellation - (1,056)
Payment of dividends (1,259) (1,033)
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Net cash (used for) financing activities (754) (1,806)
Effect of exchange rate changes on cash and
cash equivalents 76 (117)
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Change in cash and cash equivalents balances 2,631 (1,424)
Cash and cash equivalents, beginning of period 17,098 12,933
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Cash and cash equivalents, end of period $ 19,729 $ 11,509
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