MKS Inc.
TSX : MKX

MKS Inc.

June 02, 2009 08:00 ET

MKS Announces Fourth Quarter and Fiscal 2009 Results

Company Records Record Annual Operating Profit and Increases Dividend 25%

WATERLOO, ONTARIO--(Marketwire - June 2, 2009) - MKS Inc. (MKS) (TSX:MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the fourth quarter and fiscal year ended April 30, 2009 and declared a quarterly cash dividend of US$0.025 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.



Financial & Operational Highlights:

Fiscal 2009 (compared with fiscal 2008)
- Total revenue decreased 5% to $58.4 million from $61.2 million
- Net income of $4.3 million or $0.09 per share compared to $3.8 million,
or $0.08 per share, a 12% increase
- ALM revenue decreased 5% to $51.0 million from $53.8 million
- ALM operating income of $2.4 million compared to $1.6 million, a 55%
increase
- ALM license revenue decreased 32% to $15.6 million from $22.9 million
- ALM maintenance revenue increased 11% to $25.2 million from $22.7
million
- ALM Service revenue increased 25% to $10.2 million from $8.2 million
- Average headcount increased to 307 from 303.

Q4 2009 (compared with Q4 2008)
- Total revenue decreased 36% to $13.6 million from $21.2 million
- Net income of $2.0 million or $0.04 per share compared to $4.7 million
or $0.09 per share
- ALM revenue decreased 38% to $11.8 million from $19.2 million
- ALM license revenue decreased 74% to $2.8 million from $10.9 million
- Organizations that purchased new or additional licenses in the fourth
quarter include All Nippon Airways, Deutsche Telekom, dSPACE, The
European Aeronautic Defence and Space Company (EADS), Honeywell, ITT
Electronic Systems, Magna and TRW Automotive.


Closing cash balance at April 30, 2009 was $17.1 million, a $4.2 million increase from the $12.9 million balance at April 30, 2008. During the year, MKS paid $4.0 million in dividends as well as repurchased and cancelled 2.2 million shares for a total cost of $3.6 million under the terms of its Normal Course Issuer Bid.

MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US $0.025 per share on the Company's outstanding common shares in accordance with its dividend policy, a 25% increase over the $0.02 per share dividend in the previous quarter.

"In fiscal 2009 we saw clear evidence that major engineering and IT organizations increasingly see that ALM is much more than the sum of its component parts and that their ambitious plans can only be achieved through MKS' vision for unified ALM" said Philip Deck, CEO of MKS. "While many of those customers face intense pressure from the current economic conditions, they are increasingly seeing ALM as a major strategic priority".

"We were pleased to report record annual operating earnings in the face of challenging economic circumstances" said Michael Harris, MKS President and COO, "We had more significant new program wins in 2009 than in any year in our history although they were accompanied by lower average initial orders. As the budget constraints faced by our customers ease, we expect to see these program wins turn into additional license revenue".

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

Financial Review

Revenue for fiscal 2009 was $58.4 million, down 5 percent from $61.2 million from the prior year. Net income for fiscal 2009 was $4.3 million, or $0.09 per share, compared to net income of $3.8 million, or $0.08 per share, reported in fiscal 2008.

Total revenue for the fourth quarter of fiscal 2009 was $13.6 million, down 36 percent from $21.2 million for the fourth quarter of fiscal 2008 (which included a $5 million licensing transaction in the ALM segment that resulted in record revenue and profit for that quarter). Net income for the fourth quarter of fiscal 2009 decreased to $2.0 million, or $0.04 per share, compared to $4.7 million or $0.09 per share in the fourth quarter of fiscal 2008.

Fourth quarter fiscal 2009 ALM revenues were $11.8 million, down 38 percent compared to revenues of $19.2 million reported in the fourth quarter of fiscal 2008.

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

Conference Call Details

The Company will hold a conference call June 2, 2009 at 5:00 p.m. EDT to discuss its fourth quarter performance. Interested parties may access the call by dialing 800-734-1246 or 1-416-620-2013. 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 #21398703.

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. US GAAP
Consolidated Balance Sheets
(US dollars, thousands)

As at April 30 2009 2008
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Assets:

Current assets:
Cash and cash equivalents $ 17,098 $ 12,933
Accounts receivable 7,404 16,054
Deferred income taxes 1,378 1,384
Prepaid expenses and other assets 1,152 1,539
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Total current assets 27,032 31,910

Fixed assets 4,252 4,530
Intangible assets 69 155
Goodwill 2,424 2,424
Deferred income taxes 3,243 3,245
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Total assets $ 37,020 $ 42,264
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Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 1,000 $ 2,430
Accrued liabilities 2,566 5,149
Income taxes payable 657 656
Deferred revenue 16,170 15,460
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Total current liabilities 20,393 23,695


Shareholders' equity:
Share capital 55,627 56,408
Accumulated other comprehensive loss (2,076) (1,894)
Accumulated deficit (36,924) (35,945)
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Total shareholders' equity 16,627 18,569
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Total liabilities and shareholders' equity $ 37,020 $ 42,264
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MKS Inc. US GAAP
Consolidated Statements of Operations
(US dollars, thousands, except per share data)

Years ended April 30 2009 2008 2007
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Revenue:
License $ 20,272 $ 27,178 $ 20,234
Maintenance 27,963 25,837 22,092
Service 10,183 8,170 5,998
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58,418 61,185 48,324

Operating expenses:
Cost of product and support 4,933 4,438 3,691
Cost of service 7,100 6,284 4,865
Sales and marketing 20,960 24,205 22,408
Research and development 12,436 13,886 12,555
General and administrative 7,528 8,767 7,239
Foreign exchange loss (gain) 437 (534) (178)
Stock-based compensation 872 661 1,056
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54,266 57,707 51,636
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Operating income (loss) 4,152 3,478 (3,312)
Interest income, net 80 334 508
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Income (loss) before income taxes 4,232 3,812 (2,804)
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Income tax provision (recovery):
Current 21 (204) (330)
Deferred (75) 176 369
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Income tax provision (recovery) (54) (28) 39
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Net income (loss) $ 4,286 $ 3,840 $ (2,843)
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Earnings (loss) per share:
Basic $ 0.09 $ 0.08 $ (0.06)
Diluted 0.08 0.08 (0.06)

Weighted average number of shares
outstanding 50,343 50,786 50,442
Diluted weighted average number of shares
outstanding 50,597 51,105 50,442


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

Years ended April 30 2009 2008 2007
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Cash flows provided by operating activities:

Net income (loss) $ 4,286 $ 3,840 $ (2,843)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation of fixed assets 1,335 1,341 981
Amortization of intangible assets 86 85 37
Stock-based compensation 872 661 1,056
Deferred income taxes (75) 182 369
Loss on disposal of fixed assets 86 135 -
Change in operating assets and liabilities:
Accounts receivable 8,650 (9,936) 4,908
Prepaid expenses and other assets 387 407 142
Accounts payable, net of deferred
compensation (1,430) 948 (157)
Accrued liabilities (2,583) 2,427 33
Income taxes payable 1 586 (297)
Deferred revenue 710 1,677 1,457
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Net cash provided by operating activities 12,325 2,353 5,686

Cash flows used for investing activities:
Purchase of fixed assets (1,251) (1,238) (2,171)
Purchase of intangible assets - - (277)
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Net cash used for investing activities (1,251) (1,238) (2,448)

Cash flows provided by (used for) financing
activities:
Proceeds on issuance of common shares 671 910 798
Cash paid for shares repurchased for
cancellation (3,557) - -
Payment of dividends (4,032) (4,068) (4,040)
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Net cash (used for) financing activities (6,918) (3,158) (3,242)
Effect of exchange rate changes on cash and
cash equivalents 9 (282) (431)
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Change in cash and cash equivalents balances 4,165 (2,325) (435)
Cash and cash equivalents, beginning of year 12,933 15,258 15,693
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Cash and cash equivalents, end of year $ 17,098 $ 12,933 $ 15,258
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