MKS Inc.

MKS Inc.

November 24, 2009 07:55 ET

MKS Announces Second Quarter Fiscal 2010 Results and Increases Dividend

WATERLOO, ONTARIO--(Marketwire - Nov. 24, 2009) - MKS Inc. (MKS) (TSX:MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the second quarter of fiscal year 2010 and increased its quarterly cash dividend to US$0.15 per share. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.

Financial & Operational Highlights:

Q2 2010 (compared with Q2 2009)

  • Net income increased 19% to $1.6 million or $0.16 per share compared to $1.4 million, or $0.13 per share
  • Total revenue of $14.7 million compared to $16.3 million, a decrease of 10%
  • ALM revenue decreased 9% to $13.0 million from $14.2 million
  • ALM operating income increased to $1.8 million compared to $1.4 million, a 28% increase
  • ALM license revenue decreased 40% to $3.0 million from $5.1 million
  • ALM maintenance revenue increased 10% to $7.0 million from $6.4 million
  • ALM Service revenue increased 6% to $3.0 million from $2.8 million
  • Average headcount increased to 309 from 305.

Closing cash balance at October 31, 2009 was $19.0 million, a $1.9 million increase from the $17.1 million balance at April 30, 2009. During the quarter, MKS paid $1.3 million in dividends.

MKS experienced sharp declines in license revenue in the late fall of 2008 as customers in the automotive, manufacturing and banking sectors, in particular, made drastic reductions in capital spending. The reductions in demand were acute over the past four quarters, with the exception of a large transaction in the first quarter of fiscal 2010. Maintenance revenue continued to grow steadily throughout this period as customers largely kept current on maintenance.

Throughout the last four quarters, MKS has won mandates from major new customers in spite of the inability of many to make immediate license purchases. New customers have continued to engage MKS services personnel to configure the Company's product for future implementations. Although MKS does not expect an increase in capital spending until the first calendar quarter of 2010, when the majority of customers typically establish new capital spending budgets for that year, MKS has begun to make additions to its sales force to respond to signs of increasing demand in key customer sectors.

"We have reported higher profitability in the first half of our fiscal year and have begun to add new sales and solution engineering headcount, which will be essential to re-establishing license revenue growth" said Michael Harris, President and CEO. "Our record services revenue these past two quarters demonstrate our larger and more strategic customers' willingness to invest in MKS Integrity TM, even without capital budgets, as they prepare for extensive deployments."

"We are pleased to be able to raise our dividend based on continued growth in profitability and balance sheet strength" said Philip C. Deck, Executive Chairman. "Our healthy cash balance even at this normal seasonal low point in our cash flow cycle, and the certainty over currency rates provided by our long term hedge position allows us to begin to make new investments in growth."

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, a 20 percent increase over the US$0.125 per share dividend in the previous quarter.

The cash dividend on MKS common shares will be payable on January 15, 2010 to shareholders of record at the close of business on December 31, 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 second quarter of fiscal 2010 was $14.7 million, down 10 percent from $16.3 million for the second quarter of fiscal 2009. Net income for the second quarter of fiscal 2010 increased 19 percent to $1.6 million, or $0.16 per share, compared to $1.4 million or $0.13 per share in the second quarter of fiscal 2009.

Six month revenues for fiscal 2010 decreased 4 percent to $30.4 million compared with revenue of $31.6 million for the same period in fiscal 2009. Six month net income was $3.0 million, or $0.30 per share, an increase of 53 percent from the net income of $2.0 million, or $0.19 per share, for the same period in fiscal 2009.

Second quarter fiscal 2010 ALM revenues were $13.0 million, down 9 percent from ALM revenues reported in the second quarter of fiscal 2009.

Six month ALM revenues for fiscal 2010 decreased 1 percent to $27.4 million from $27.6 million for the first six months of fiscal 2009.


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 plans to make additional investments in its sales force in response to anticipated increases in demand in key customer sectors.

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

Conference Call Details

The Company will hold a conference call November 24, 2009 at 4:00 p.m. EST 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 #21398704.

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

Copyright © 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)

 October 31
      April 30
Current assets:    
 Cash and cash equivalents   $   19,009   $   17,098 
 Accounts receivable, net of allowances for doubtful accounts    
  of $117 (April 30, 2009 – $89) 7,587 7,404 
 Deferred income taxes1,378 1,378 
 Deferred gain on forward contracts367 83 
 Prepaid expenses and other assets 1,308 1,152 
Total current assets 29,649 27,115 
Fixed assets4,002 4,252 
Intangible assets26 69 
Goodwill2,424 2,424 
Deferred income taxes1,920 3,243 
Total assets   $   38,021   $   37,103 
Liabilities and shareholders' equity:    
Current liabilities:    
 Accounts payable   $         980   $     1,083 
 Accrued liabilities 2,905 2,566 
 Income taxes payable120 657 
 Deferred revenue 14,526 16,170 
Total current liabilities 18,531 20,476 
Shareholders' equity:    
 Share capital56,619 55,627 
 Accumulated other comprehensive loss (702) (2,076
 Accumulated deficit(36,427) (36,924
Total shareholders' equity 19,490 16,627 
Total liabilities and shareholders' equity   $   38,021   $   37,103 

MKS Inc.
Consolidated Statements of Operations
(US dollars, thousands, except per share data, unaudited)

 Three months ended Six months ended

October 31
 October 31
 October 31
 October 31
  License   $       3,921   $       6,425   $       9,545   $    12,581
  Maintenance7,797 7,051 15,212 14,086
  Service 2,959 2,792 5,660 4,966
 14,677 16,268 30,417 31,633
Operating expenses:       
  Cost of product and support 1,141 1,197 2,370 2,437
  Cost of service 1,831 1,955 3,562 3,743
  Sales and marketing 4,770 5,394 9,987 11,256
  Research and development2,749 2,970 5,934 6,128
  General and administrative 1,982 1,867 3,906 3,830
  Foreign exchange (gain) loss (184) 519 (225) 553
  Stock-based compensation175 408 351 579
 12,464 14,310 25,885 28,526
Operating income2,213 1,958 4,532 3,107
Interest income, net 3 29 7 61
Income before income taxes 2,216 1,987 4,539 3,168
 Income tax provision:        
  Current105 (203140 34
  Deferred 500 837 1,381 1,162
Income tax provision605 634 1,521 1,196
Net income  $       1,611   $       1,353   $       3,018   $      1,972
Earnings per share:     
 Basic   $         0.16  $         0.13  $         0.30  $         0.19
 Diluted   $         0.16  $         0.13  $         0.30  $         0.19
 Weighted average number of shares outstanding  10,08510,14610,06010,191
  Diluted weighted average number of shares outstanding 10,21010,25410,16410,303

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

 Three months ended Six months ended 
 October 31
 October 31
 October 31
 October 31
Cash flows provided by (used for) operating activities:        
Net income    $       1,611     $      1,353     $       3,018     $      1,972 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:        
Depreciation of fixed assets 346 345 683 661 
Amortization of intangible assets21 21 43 43 
Stock-based compensation175 408 351 579 
Deferred income taxes 500 837 1,381 1,162 
Loss on disposal of fixed assets9 16 74 41 
Change in operating assets and liabilities:        
 Accounts receivable (1,206) 603 (183) 4,433 
 Prepaid expenses and other assets432 572 (156) 258 
 Accounts payable215 341 (103) (512
 Accrued liabilities (7) (461339 (2,053
 Income taxes payable (608) (406(537) (158
 Deferred revenue (1,810) (604(1,644) (2,721
Net cash provided by (used for) operating activities(322) 3,025 3,266 3,705 
Cash flows (used for) investing activities:        
 Purchase of fixed assets (173) (497(452) (700
Net cash (used for) investing activities(173) (497(452) (700
Cash flows provided by (used for) financing activities:        
 Proceeds on issuance of common shares136 160 641 443 
 Cash paid for shares repurchased for cancellation (2,478 (3,534
 Payment of dividends(1,262) (1,007(2,521) (2,040
Net cash (used for) financing activities(1,126) (3,325(1,880) (5,131
Effect of exchange rate changes on cash and cash equivalents901 (97977 (192
Change in cash and cash equivalents balances(720) (8941,911 (2,318
Cash and cash equivalents, beginning of period 19,729 11,509 17,098 12,933 
Cash and cash equivalents, end of period     $     19,009     $    10,615     $     19,009     $    10,615 

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