MKS Inc.
TSX : MKX

MKS Inc.

February 23, 2010 07:55 ET

MKS Announces Third Quarter Fiscal 2010 Results and Quarterly Dividend

WATERLOO, ONTARIO--(Marketwire - Feb. 23, 2010) - MKS Inc. (MKS) (TSX:MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the third quarter of fiscal year 2010 and a quarterly cash dividend of US$0.15 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q3 2010 (compared with Q3 2009)

  • Total revenue of $15.3 million compared to $13.2 million, an increase of 16%

  • License revenue increased 34% to $5.0 million from $3.7 million

  • Maintenance revenue increased 11% to $7.8 million from $7.0 million

  • Service revenue increased 3% to $2.6 million from $2.5 million

  • Operating income increased to $1.7 million compared to $0.4 million, a 310% increase

  • Net income increased 240% to $1.1 million or $0.11 per share compared to $0.3 million, or $0.03 per share.

Closing cash balance at January 31, 2010 was $22.1 million, a $5.0 million increase from the $17.1 million balance at April 30, 2009. During the quarter, MKS paid $1.5 million in dividends.

"We were pleased to see strong growth in our ALM licensing this quarter" said Michael Harris, President and CEO. "As the need for comprehensive management of software engineering and quality processes for advanced manufacturing customers becomes more and more evident, and as capital budgets are restored from the depths of the recession we continue to increase our investment in field operations as the driver to license revenue growth."

"We continue to see steady improvement in financial measures across the board" said Philip C. Deck, Executive Chairman. "Along with rebounding licensing, we saw steady improvements in services and maintenance contributing to strong year to date profitability."

MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US$0.15 per share on the Company's outstanding common shares in accordance with its dividend policy.

The cash dividend on MKS common shares will be payable on April 15, 2010 to shareholders of record at the close of business on March 31, 2010. 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 third quarter of fiscal 2010 was $15.3 million, up 16 percent from $13.2 million for the third quarter of fiscal 2009. Net income for the third quarter of fiscal 2010 increased 240 percent to $1.1 million, or $0.11 per share, compared to $0.3 million or $0.03 per share in the third quarter of fiscal 2009.

Nine month revenues for fiscal 2010 increased 2 percent to $45.7 million compared with revenue of $44.8 million for the same period in fiscal 2009. Nine month net income was $4.1 million, or $0.41 per share, an increase of 80 percent from the net income of $2.3 million, or $0.23 per share, for the same period in fiscal 2009.

Third quarter fiscal 2010 ALM revenues were $13.3 million, up 15 percent from ALM revenues reported in the third quarter of fiscal 2009. Nine month ALM revenues for fiscal 2010 increased 4 percent to $40.7 million from $39.2 million for the first nine months 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 field force investments for long-term growth. The Company is making investments in its field force to meet anticipated increases in demand as the mandates received from major customers mature and the availability of capital to fund those mandates improves.

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

Conference Call Details

The Company will hold a conference call February 23, 2010 at 4:00 p.m. EST to discuss its third quarter performance. Interested parties may access the call by dialing 800-215-1640 or 1-416-620-2418. A digital recording of the call will be available for seven (7) days following the call and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21442609.

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 © 2010 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)
  January 31 2010 April 30 2009
Assets:        
         
Current assets:        
  Cash and cash equivalents $   22,142   $   17,098  
  Accounts receivable, net of allowances for doubtful accounts        
    of $118 (April 30, 2009 – $89) 7,743   7,404  
  Deferred income taxes 1,378   1,378  
  Deferred gain on forward contracts 63   83  
  Prepaid expenses and other assets 1,329   1,152  
Total current assets 32,655   27,115  
Fixed assets 3,889   4,252  
Intangible assets 17   69  
Goodwill 2,424   2,424  
Deferred income taxes 1,400   3,243  
Total assets $   40,385   $   37,103  
         
Liabilities and shareholders' equity:        
         
Current liabilities:        
  Accounts payable $         973   $     1,083  
  Accrued liabilities 3,287   2,566  
  Income taxes payable 407   657  
  Deferred revenue 16,698   16,170  
Total current liabilities 21,365   20,476  
         
Shareholders' equity:        
  Share capital 56,926   55,627  
  Accumulated other comprehensive loss (1,067 ) (2,076 )
  Accumulated deficit (36,839 ) (36,924 )
Total shareholders' equity 19,020   16,627  
Total liabilities and shareholders' equity $   40,385   $   37,103  
         
 
MKS Inc.
Consolidated Statements of Operations
(US dollars, thousands, except per share data, unaudited)
  Three months ended Nine months ended
  January 31 2010 January 31 2009 January 31 2010 January 31 2009
Revenue:              
  License $ 4,963 $ 3,702   $ 14,508   $ 16,283  
  Maintenance 7,750 6,980   22,962   21,066  
  Service 2,599 2,521   8,259   7,487  
  15,312 13,203   45,729   44,836  
               
Operating expenses:              
  Cost of product and support 1,433 1,242   3,803   3,679  
  Cost of service 1,865 1,628   5,427   5,371  
  Sales and marketing 4,976 4,782   14,963   16,038  
  Research and development 3,010 3,182   8,944   9,310  
  General and administrative 2,145 2,022   6,051   5,852  
  Foreign exchange (gain) loss 16 (213 ) (209 ) 340  
  Stock-based compensation 153 142   504   721  
  13,598 12,785   39,483   41,311  
Operating income 1,714 418   6,246   3,525  
Interest income, net 2 11   9   72  
Income before income taxes 1,716 429   6,255   3,597  
               
Income tax provision:              
  Current 124 (122 ) 264   (88 )
  Deferred 486 226   1,867   1,388  
Income tax provision 610 104   2,131   1,300  
Net income $ 1,106 $    325   $   4,124   $   2,297  
         
Earnings per share:        
  Basic $       0.11 $     0.03 $     0.41 $     0.23
  Diluted $       0.11 $     0.03 $     0.41 $     0.23
           
  Weighted average number of shares outstanding 10,110 9,933 10,077 10,105
  Diluted weighted average number of shares outstanding 10,240 9,940 10,189 10,172
 
MKS Inc.
Consolidated Statements of Cash Flows
(US dollars, thousands, unaudited)
  Three months ended Nine months ended
  January 31 2010 January 31 2009 January 31 2010 January 31 2009
Cash flows provided by (used for) operating activities:                
                 
Net income $   1,106   $    325   $   4,124   $  2,297  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation of fixed assets 355   358   1,038   1,019  
Amortization of intangible assets 9   22   52   65  
Stock-based compensation 153   142   504   721  
Deferred income taxes 486   226   1,867   1,388  
Loss on disposal of fixed assets 36   21   110   62  
Change in operating assets and liabilities:                
  Accounts receivable (156 ) 2,845   (339 ) 7,278  
  Prepaid expenses and other assets (21 ) (21 ) (177 ) 237  
  Accounts payable (7 ) (1,052 ) (110 ) (23 )
  Accrued liabilities 382   (388 ) 721   (2,441 )
  Income taxes payable 287   (131 ) (250 ) (289 )
  Deferred revenue 2,172   3,881   528   1,160  
Net cash provided by operating activities 4,802   6,228   8,068   11,474  
                 
Cash flows (used for) investing activities:                
  Purchase of fixed assets (292 ) (235 ) (744 ) (935 )
Net cash (used for) investing activities (292 ) (235 ) (744 ) (935 )
                 
Cash flows provided by (used for) financing activities:                
  Proceeds on issuance of common shares 154   71   795   514  
  Cash paid for shares repurchased for cancellation       (3,534 )
  Payment of dividends (1,518 ) (995 ) (4,039 ) (3,035 )
Net cash (used for) financing activities (1,364 ) (924 ) (3,244 ) (6,055 )
                 
Effect of exchange rate changes on cash and cash equivalents (13 ) 570   964   (1,163 )
Change in cash and cash equivalents balances 3,133   5,639   5,044   3,321  
Cash and cash equivalents, beginning of period 19,009   10,615   17,098   12,933  
Cash and cash equivalents, end of period $  22,142   $ 16,254   $ 22,142   $ 16,254  

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