MKS Inc.
TSX : MKX

MKS Inc.

February 23, 2011 07:00 ET

MKS Announces Third Quarter Fiscal 2011 Results

WATERLOO, ONTARIO--(Marketwire - Feb. 23, 2011) - 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 2011. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles(1).

Financial & Operational Highlights:

Q3 2011 (compared with Q3 2010)



-- Total revenue of $18.0 million compared to $15.3 million, an increase of
17%
-- License revenue of $6.2 million compared to $5.0 million, an increase of
25%
-- Maintenance revenue of $8.3 million compared to $7.8 million, an
increase of 7%
-- Service revenue of $3.5 million compared to $2.6 million, an increase of
35%
-- Operating income of $1.7 million was unchanged
-- Net income of $2.0 million, or $0.20 per share, compared to $1.1
million, or $0.11 per share, an increase of 83%
-- Key license transactions at Biotronik, Ciena, Daimler, Deutsche Telekom,
IDEXX Laboratories Inc., Mitsubishi Fuso Truck, Mylan, Nokia, ST
Electronics, Stratec Biomedical Systems AG, TomTom and Varian Medical
Systems


Closing cash balance at January 31, 2011 was $23.7 million, a $1.1 million decrease from the $24.8 million balance at April 30, 2010, and up $1.9 million from the $21.8 million at October 31, 2010. During the quarter MKS paid $2.1 million in dividends.

"We continued to make significant progress in signing new embedded systems customers, particularly in the automotive sector. These new customer wins are evidence of the effectiveness of the investments we have been making throughout the year" said Michael Harris, President and CEO. "We believe that these new names position us well for growth in the quarters ahead."

"We were pleased to see another quarter of growth driven by licensing activity" said Philip C. Deck, Executive Chairman. "While the implementation of our investment strategy in sales and engineering held back profit growth this quarter, we have now largely completed the majority of the plan. We continue to be confident that fiscal 2011 results will show significant growth in revenue and profits driven by licensing."

MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US$0.20 per share on the Company's outstanding common shares.

The cash dividend on MKS common shares will be payable on April 14, 2011 to shareholders of record at the close of business on March 31, 2011. 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 2011 was $18.0 million, up 17 percent from $15.3 million for the third quarter of fiscal 2010. Net income for the third quarter of fiscal 2011 increased 83 percent to $2.0 million, or $0.20 per share, compared to $1.1 million or $0.11 per share in the third quarter of fiscal 2010.

Nine month revenue for fiscal 2011 increased 11 percent to $50.7 million compared with revenue of $45.7 million for the same period in fiscal 2010. Nine month net income was $5.4 million, or $0.52 per share, an increase of 31 percent from the net income of $4.1 million, or $0.41 per share, for the same period in fiscal 2010.

Conference Call Details

MKS will hold a conference call on February 23, 2011 at 8:30 a.m. EST to discuss its quarterly performance. Interested parties may access the call by dialing 1-800-215-1640 or 1-416-620-2418. A digital recording of the call will be available for seven days following the call and may be accessed by dialing 1-800-558-5253 or 416-626-4100 and by entering reservation #21442612.

About MKS

MKS enables organizations to reduce the overwhelming complexity of developing software intensive products thereby removing barriers to rapid innovation.

MKS Integrity manages all systems and software development processes and connects all engineering artifacts, including requirements, models, code and test, ensuring comprehensive lifecycle traceability. MKS Integrity's open architecture integrates disparate tools into a streamlined engineering process, allowing orchestration of engineering change and collaboration across the technology supply chain. With MKS Integrity, engineering teams improve productivity and quality, streamline compliance and gain complete product visibility, which ultimately drives more innovative products into the market.

With offices worldwide, MKS supports customers across industries including, Automotive, Aerospace & Defense, High Tech Electronics and Medical Devices. For more information about MKS and MKS Integrity, visit our web site at http://www.mks.com.

Copyright (C) 2011 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 MKS's current views with respect to future events and are subject to such risks and uncertainties. Although MKS 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 MKS 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. MKS does not intend and does not assume any obligation to update these forward-looking statements.



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

January 31 April 30
2011 2010
----------------------------------------------------------------------------
Assets:

Current assets:
Cash and cash equivalents $ 23,717 $ 24,755
Accounts receivable, net of allowances for
doubtful accounts
of $160 (April 30, 2010 - $124) 12,131 10,685
Income taxes receivable 556 556
Deferred gain on forward contracts 442 -
Future income taxes 2,540 2,540
Prepaid expenses and other assets 1,977 1,643
----------------------------------------------------------------------------
Total current assets 41,363 40,179
Fixed assets 4,317 3,632
Intangible assets 7 15
Goodwill 4,494 4,494
Income taxes receivable 2,676 3,019
Future income taxes 4,211 4,522
----------------------------------------------------------------------------
Total assets $ 57,068 $ 55,861
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 2,231 $ 2,028
Accrued liabilities 3,939 4,163
Deferred loss on forward contracts - 488
Income taxes payable 721 959
Deferred revenue 18,811 17,221
----------------------------------------------------------------------------
Total current liabilities 25,702 24,859
Future income taxes 1,101 1,007
----------------------------------------------------------------------------
Total long term liabilities 1,101 1,007
Shareholders' equity:
Share capital 67,659 66,698
Accumulated other comprehensive loss (88) 321
Accumulated deficit (37,306) (37,027)
----------------------------------------------------------------------------
Total shareholders' equity 30,265 29,995
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 57,068 $ 55,861
----------------------------------------------------------------------------
----------------------------------------------------------------------------





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

Three months ended Nine months ended
----------------------------------------------------------------------------
January 31 January 31 January 31 January 31
2011 2010 2011 2010
----------------------------------------------------------------------------
Revenue:
License $ 6,192 $ 4,963 $ 16,291 $ 14,508
Maintenance 8,257 7,750 23,854 22,962
Service 3,508 2,599 10,515 8,259
----------------------------------------------------------------------------
17,957 15,312 50,660 45,729

Operating expenses:
Cost of product and
support 1,575 1,433 4,406 3,803
Cost of service 2,412 1,865 6,935 5,427
Sales and marketing 5,969 4,976 16,580 14,963
Research and
development 3,720 2,974 10,213 8,814
General and
administrative 2,200 2,145 6,011 6,051
Foreign exchange
(gain) loss 56 16 (428) (720)
Stock-based
compensation 188 153 457 504
----------------------------------------------------------------------------
16,120 13,562 44,174 38,842
----------------------------------------------------------------------------
Operating income 1,837 1,750 6,486 6,887
Interest income, net 3 2 9 9
----------------------------------------------------------------------------
Income before income
taxes 1,840 1,752 6,495 6,896
Income tax provision
(recovery):
Current (218) 160 790 394
Deferred 31 486 303 1,867
----------------------------------------------------------------------------
Income tax provision
(recovery) (187) 646 1,093 2,261
----------------------------------------------------------------------------
Net income $ 2,027 $ 1,106 $ 5,402 $ 4,635
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share:
Basic $ 0.20 $ 0.11 $ 0.52 $ 0.46
Diluted $ 0.19 $ 0.11 $ 0.51 $ 0.45

Weighted average
number of shares
outstanding 10,363 10,110 10,315 10,077
Diluted weighted
average number of
shares outstanding 10,807 10,240 10,665 10,189

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

Three months ended Nine months ended
----------------------------------------------------------------------------
January 31 January 31 January 31 January 31
2011 2010 2011 2010
----------------------------------------------------------------------------
Cash flows provided by
(used for) operating
activities:
Net income $ 2,027 $ 1,106 $ 5,402 $ 4,635
Adjustments to
reconcile net income
to net cash provided
by (used for)
operating activities:
Depreciation of fixed
assets 313 355 1,007 1,038
Amortization of
intangible assets 3 9 8 52
Stock-based
compensation 188 153 457 504
Deferred income taxes 31 486 303 1,867
Loss on disposal of
fixed assets 86 36 118 110
Non-cash foreign
exchange gains - - - (511)
Change in operating
assets and
liabilities:
Accounts receivable (1,776) (156) (1,446) (339)
Prepaid expenses and
other assets (317) (21) (334) (177)
Accounts payable 646 (7) 203 (110)
Accrued liabilities 518 382 (224) 721
Income taxes payable
/receivable (472) 287 105 (250)
Deferred revenue 3,763 2,172 1,590 528
----------------------------------------------------------------------------
Net cash provided by
(used for) operating
activities 5,010 4,802 7,189 8,068
Cash flows (used for)
investing activities:
Purchase of fixed
assets (884) (292) (1,782) (744)
----------------------------------------------------------------------------
Net cash (used for)
investing activities (884) (292) (1,782) (744)
Cash flows provided by
(used for) financing
activities:
Proceeds on issuance
of common shares 134 154 1,238 795
Common shares
purchased for
restricted share
units granted - - (734) -
Payment of dividends (2,074) (1,518) (5,684) (4,039)
----------------------------------------------------------------------------
Net cash (used for)
financing activities (1,940) (1,364) (5,180) (3,244)
Effect of exchange rate
changes on cash and
cash equivalents (238) (13) (1,265) 964
----------------------------------------------------------------------------
Change in cash and cash
equivalents balances 1,948 3,133 (1,038) 5,044
Cash and cash
equivalents, beginning
of period 21,769 19,009 24,755 17,098
----------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $ 23,717 $ 22,142 $ 23,717 $ 22,142
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

January 31 April 30
2011 2010
----------------------------------------------------------------------------
Assets:

Current assets:
Cash and cash equivalents $ 23,717 $ 24,755
Accounts receivable, net of allowances for
doubtful accounts
of $160 (April 30, 2010 - $124) 12,131 10,685
Income taxes receivable 556 556
Deferred gain on forward contracts 442 -
Deferred income taxes 2,540 2,540
Prepaid expenses and other assets 1,977 1,643
----------------------------------------------------------------------------
Total current assets 41,363 40,179
Fixed assets 4,317 3,632
Intangible assets 7 15
Goodwill 2,424 2,424
Income taxes receivable 2,676 3,019
Deferred income taxes 4,211 4,522
----------------------------------------------------------------------------
Total assets $ 54,998 $ 53,791
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and shareholders' equity:

Current liabilities:
Accounts payable $ 2,231 $ 2,028
Accrued liabilities 3,939 4,163
Deferred loss on forward contracts - 488
Income taxes payable 721 959
Deferred revenue 18,811 17,221
----------------------------------------------------------------------------
Total current liabilities 25,702 24,859
Deferred income taxes 1,101 1,007
----------------------------------------------------------------------------
Total long term liabilities 1,101 1,007
Shareholders' equity:
Share capital 58,887 57,926
Accumulated other comprehensive loss (522) (113)
Accumulated deficit (30,170) (29,888)
----------------------------------------------------------------------------
Total shareholders' equity 28,195 27,925
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 54,998 $ 53,791
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Three months ended Nine months ended
----------------------------------------------------------------------------
January 31 January 31 January 31 January 31
2011 2010 2011 2010
----------------------------------------------------------------------------
Revenue:
License $ 6,192 $ 4,963 $ 16,291 $ 14,508
Maintenance 8,257 7,750 23,854 22,962
Service 3,508 2,599 10,515 8,259
----------------------------------------------------------------------------
17,957 15,312 50,660 45,729

Operating expenses:
Cost of product
and support 1,575 1,433 4,406 3,803
Cost of service 2,412 1,865 6,935 5,427
Sales and
marketing 5,969 4,976 16,580 14,963
Research and
development 3,820 3,010 10,525 8,944
General and
administrative 2,200 2,145 6,011 6,051
Foreign exchange
(gain) loss 56 16 (428) (209)
Stock-based
compensation 188 153 457 504
----------------------------------------------------------------------------
16,220 13,598 44,486 39,483
----------------------------------------------------------------------------
Operating income 1,737 1,714 6,174 6,246
Interest income, net 3 2 9 9
----------------------------------------------------------------------------
Income before income
taxes 1,740 1,716 6,183 6,255
Income tax
provision
(recovery):
Current (318) 124 478 264
Deferred 31 486 303 1,867
----------------------------------------------------------------------------
Income tax provision
(recovery) (287) 610 781 2,131
----------------------------------------------------------------------------
Net income $ 2,027 $ 1,106 $ 5,402 $ 4,124
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share:
Basic $ 0.20 $ 0.11 $ 0.52 $ 0.41
Diluted $ 0.19 $ 0.11 $ 0.51 $ 0.41

Weighted average
number of shares
outstanding 10,363 10,110 10,315 10,077
Diluted weighted
average number of
shares outstanding 10,807 10,240 10,665 10,189

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

Three months ended Nine months ended
----------------------------------------------------------------------------
January 31 January 31 January 31 January 31
2011 2010 2011 2010
----------------------------------------------------------------------------
Cash flows provided by
(used for) operating
activities:
Net income $ 2,027 $ 1,106 $ 5,402 $ 4,124
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation of fixed
assets 313 355 1,007 1,038
Amortization of
intangible assets 3 9 8 52
Stock-based
compensation 188 153 457 504
Deferred income taxes 31 486 303 1,867
Loss on disposal of
fixed assets 86 36 118 110
Change in operating
assets and
liabilities:
Accounts receivable (1,776) (156) (1,446) (339)
Prepaid expenses and
other assets (317) (21) (334) (177)
Accounts payable 646 (7) 203 (110)
Accrued liabilities 518 382 (224) 721
Income taxes
payable/receivable (472) 287 105 (250)
Deferred revenue 3,763 2,172 1,590 528
----------------------------------------------------------------------------
Net cash provided by
operating activities 5,010 4,802 7,189 8,068
Cash flows (used for)
investing activities:
Purchase of fixed
assets (884) (292) (1,782) (744)
----------------------------------------------------------------------------
Net cash (used for)
investing activities (884) (292) (1,782) (744)
Cash flows provided by
(used for) financing
activities:
Proceeds on issuance
of common shares 134 154 1,238 795
Common shares
purchased for
restricted share
units granted - - (734) -
Payment of dividends (2,074) (1,518) (5,684) (4,039)
----------------------------------------------------------------------------
Net cash (used for)
financing activities (1,940) (1,364) (5,180) (3,244)
Effect of exchange rate
changes on cash and
cash equivalents (238) (13) (1,265) 964
----------------------------------------------------------------------------
Change in cash and cash
equivalents balances 1,948 3,133 (1,038) 5,044
Cash and cash
equivalents, beginning
of period 21,769 19,009 24,755 17,098
----------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $ 23,717 $ 22,142 $ 23,717 $ 22,142
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(1) Under Canadian GAAP, operating income was $1.8 million in Q3 2011, unchanged from Q3 2010. The difference in Canadian GAAP operating income compared to US GAAP operating income is due to a classification difference of Investment Tax Credits (ITCs). Under Canadian GAAP, ITCs are accounted for as a reduction of operating expenses. Under US GAAP, ITCs are accounted for as a reduction of the current tax provision. Under Canadian GAAP, net income was $4.6 million for the nine months ended January 31, 2010 compared to net income under US GAAP of $4.1 million for the same period. This difference is due to a foreign exchange gain under Canadian GAAP which was accounted for as an equity transaction under US GAAP. All other figures disclosed under US GAAP are the same under Canadian GAAP.

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