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Share Name | Share Symbol | Market | Type |
---|---|---|---|
MKS Instruments Inc | NASDAQ:MKSI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
4.04 | 3.42% | 122.02 | 53.07 | 135.96 | 123.74 | 121.11 | 121.86 | 612,390 | 05:00:03 |
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☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
☐
|
TRA
NSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
Massachusetts
|
04-2277512
|
|
(State or other Jurisdiction of
Incorporation or Organization) |
(IRS Employer
Identification No.) |
|
2 Tech Drive, Suite 201
,
Andover
,
Massachusetts
|
01810
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
Common Stock
, no par value
|
MKSI
|
Nasdaq Global Select Market
|
Accelerated filer
☐
|
Non-accelerated
filer
☐
|
Smaller reporting company
☐
|
Emerging growth company
☐
|
PART I
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Item 1.
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2
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Item IA.
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8
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Item 1B.
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31
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Item 2.
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32
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Item 3.
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32
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Item 4.
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33
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PART II
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Item 5.
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34
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Item 6.
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36
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Item 7.
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38
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Item 7A.
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59
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Item 8.
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61
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Item 9.
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123
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Item 9A.
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123
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Item 9B.
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124
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PART III
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Item 10.
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125
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Item 11.
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125
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Item 12.
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125
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Item 13.
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125
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Item 14.
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125
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PART IV
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Item 15.
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126
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Item 16.
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130
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132
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Item 1.
|
Business
|
• |
Pressure and Vacuum Control Solutions Products
|
• |
Materials Delivery Solutions Products
|
• |
Power Delivery Products
|
• |
Plasma and Reactive Gas Products
|
• |
Laser Products
|
• |
Photonics Products
|
• | product quality, performance and price; |
• | historical customer relationships; |
• | breadth of product line; |
• | ease of use; |
• | manufacturing capabilities and responsiveness; and |
• | customer service and support. |
Item 1A.
|
Risk Factors
|
• | incur additional indebtedness; |
• | pay certain dividends on our capital stock or redeem, repurchase or retire certain capital stock or certain other indebtedness; |
• | make certain investments, loans and acquisitions; |
• | engage in certain transactions with our affiliates; |
• | sell assets, including capital stock of our subsidiaries; |
• | materially alter the business we conduct; |
• | consolidate or merge; |
• | incur liens; and |
• | engage in sale-leaseback transactions. |
• | failure to make required payments; |
• | failure to comply with certain agreements or covenants; |
• | materially breaching any representation or warranty made or deemed made in connection with the respective credit facility; |
• | failure to pay, or cause acceleration of, certain other indebtedness; |
• | certain events of bankruptcy and insolvency; |
• | failure to pay certain judgments; and |
• | a change in control of us. |
• | a worldwide economic slowdown or disruption in the global financial markets; |
• | fluctuations in our customers’ capital spending, industry cyclicality (particularly in the semiconductor and consumer electronics industries), market seasonality (particularly in the research and defense and consumer electronics industries), levels of government funding available to our customers (particularly in the life and health sciences and research and defense markets) and other economic conditions within the markets we serve; |
• | the timing of the receipt of orders within a given period and the level of orders from major customers; |
• | demand for our products and the products sold by our customers; |
• | shipment and delivery delays; |
• | disruption in sources of supply; |
• | production capacity constraints; |
• | government regulatory and trade restrictions in the countries we manufacture and sell our products; |
• | specific features requested by customers; |
• | the timing and level of cancellations and delays of orders in backlog for our products; |
• | natural disasters or other events beyond our control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war); |
• | the timing of product shipments and revenue recognition within a given quarter; |
• | variations in the mix of products we sell; |
• | changes in our pricing practices or in the pricing practices of our competitors or suppliers; |
• | our timing in introducing new products; |
• | engineering and development investments relating to new product introductions, and significant changes to our manufacturing and outsourcing operations; |
• | market acceptance of any new or enhanced versions of our products; |
• | timing of new product introductions by our competitors; |
• | timing and level of inventory obsolescence, scrap and warranty expenses; |
• | the availability, quality and cost of components and raw materials we use to manufacture our products; |
• | changes in our effective tax rates; |
• | changes in our capital structure, including cash, marketable securities and debt balances, and changes in interest rates; |
• | changes in bad debt expense based on the collectability of our accounts receivable; |
• | timing, type, and size of acquisitions and divestitures, and related expenses and charges; |
• | fluctuations in currency exchange rates; |
• | our expense levels; |
• | impairment of goodwill and amortization of intangible assets; and |
• | fees, expenses and settlement costs or judgments against us relating to litigation or regulatory compliance. |
• | our ability to maintain relationships with existing key customers; |
• | our ability to attract new customers and satisfy any required qualification periods; |
• | our ability to introduce new products in a timely manner for existing and new customers; and |
• | the successes of our OEM customers in creating demand for their capital equipment products that incorporate our products. |
• | our ability to gain significant customers in new, emerging segments of our markets |
• | adverse changes or instability in the political or economic conditions in countries or regions where we manufacture or sell our products, for example, the uncertainty associated with the exit of the United Kingdom from the European Union (“EU”); |
• | challenges of administering our diverse business and product lines globally; |
• | the actions of government regulatory authorities, including embargoes, executive orders, import and export restrictions, tariffs, currency controls, trade restrictions and trade barriers (including retaliatory actions), license requirements, environmental and other regulatory requirements and other rules and regulations applicable to the manufacture, import and export of our products, all of which are complicated and potentially conflicting, often require significant investments in cost, time and resources for compliance, and may impose strict and severe penalties for noncompliance; |
• | greater risk of violations of applicable U.S. and international anti-corruption and trade laws by our employees, sales representatives, distributors or other agents; |
• | longer accounts receivable collection periods and longer payment cycles; |
• | overlapping, differing or more burdensome tax structures and laws; |
• | the potential that certain tax benefits may be revoked or reclaimed; |
• | adverse currency exchange rate fluctuations; |
• | reduced or inconsistent protection of intellectual property; |
• | shipping and other logistics complications; |
• | the imposition of restrictions on currency conversion or the transfer of funds; |
• | compliance costs and withholding taxes associated with the repatriation of our overseas earnings; |
• |
increased risk of exposure to significant health concerns (such as the recent
COVID-19
coronavirus, Sudden Acute Respiratory Syndrome, Avian Influenza, the H7N9, Ebola or Zika viruses), which could disrupt our sales, manufacturing and logistical activities, as well as the activities of our suppliers and our customers;
|
• | the expropriation of private enterprises; |
• | more complex and burdensome labor laws and practices in countries where we have employees; |
• | cultural and management style differences; |
• | preference for locally-produced products; |
• | changes in labor conditions and difficulties in staffing and managing foreign operations, including, but not limited to, the formation of labor unions; |
• | difficulties in staffing and managing each of our individual international operations; and |
• | increased risk of exposure to civil unrest, terrorism and military activities. |
• | the difficulty of integrating the operations, technology and personnel of the acquired companies; |
• | the potential disruption of our ongoing business and distraction of management; |
• | possible internal control weaknesses of the acquired companies; |
• | significant expenses related to the acquisitions, including any resulting shareholder litigation; |
• | the assumption of unknown or contingent liabilities associated with acquired businesses; |
• |
the potential to incur or record significant cash or
non-cash
charges or write-down the carrying value of intangible assets and goodwill obtained in the acquisition, which could adversely impact our cash flow or lower our earnings in the period or periods for which we incur such charges or write-down such assets;
|
• | potentially incompatible cultural differences between the two companies; |
• | incorporating the acquired company’s technology and products into our current and future product lines, and successfully generating market demand for these expanded product lines; |
• | potential additional geographic dispersion of operations; |
• | the difficulty in achieving anticipated synergies and efficiencies; |
• | the difficulty in leveraging the acquired company and our combined technologies and capabilities across our product lines and customer base; |
• | potential sales disruptions as a result of integrating the acquired company’s sales channels with our sales channels; and |
• | our ability to retain key customers, suppliers and employees of an acquired company. |
• | volatility in the availability and cost of materials, including rare earth elements; |
• | information technology or infrastructure failures; and |
• |
natural disasters or other events beyond our control (such as earthquakes at our facilities in California and Portland, Oregon, floods or storms, regional economic downturns, pandemics such as the recent
COVID-19
virus, social unrest, political instability, terrorism, or acts of war), particularly where we or our suppliers, subcontractors and contract manufacturers conduct manufacturing.
|
• | the potential inability to obtain an adequate supply of required components; |
• | quality and reliability problems with components, which in turn adversely affects our products’ quality and reliability; |
• | prohibitively higher component prices due to the imposition of tariffs; |
• |
supply chain disruptions resulting from the relocation of our
low-cost
and sole and single source suppliers to less-developed countries, such as the movement of some suppliers from China to the Philippines or Vietnam;
|
• | reduced control over pricing and timing of delivery of components; and |
• | the potential inability of our suppliers to develop technologically advanced products to support our growth and development of new products. |
• | maintaining historical customer relationships and obtaining new customers; |
• | continued technological advancement; |
• | product quality, performance and price; |
• | breadth of product line; |
• | manufacturing capabilities; and |
• | customer service and support. |
• | loss of customers; |
• | increased costs of product returns and warranty expenses; |
• | increased costs required to analyze and mitigate the defects or problems; |
• | damage to our reputation; |
• | failure to attract new customers or achieve market acceptance; |
• | diversion of development and engineering resources; and/or |
• | legal action by our customers. |
Item 2.
|
Properties
|
Country
|
City
|
|
Sq. Ft.
|
|
Activity
|
Reportable
Segment |
|
Lease
Expires
|
|
|||||||||
CHINA
|
Shenzhen
|
302,000
|
Manufacturing
|
Vacuum & Analysis
|
August 31, 2025
|
|||||||||||||
FRANCE
|
(1)
|
183,000
|
Manufacturing, Research and Development
|
Light & Motion
|
Owned
|
|||||||||||||
ISRAEL
|
Jerusalem
|
118,000
|
Manufacturing, Sales, Research and Development
|
Light & Motion
|
(2)
|
|||||||||||||
MEXICO
|
Nogales
|
174,700
|
Manufacturing, Service
|
Vacuum & Analysis and Light & Motion
|
(3)
|
|||||||||||||
UNITED STATES
|
Andover, MA
|
158,000
|
Corporate Headquarters, Manufacturing, Research and Development
|
Vacuum & Analysis
|
(4)
|
|||||||||||||
|
Irvine, CA
|
254,900
|
Manufacturing, Research and Development
|
Light & Motion
|
(5)
|
|||||||||||||
|
Rochester, NY
|
156,000
|
Manufacturing, Sales, Customer Support, Service, Research and Development
|
Vacuum & Analysis
|
Owned
|
|||||||||||||
|
Santa Clara, CA
|
139,500
|
Manufacturing, Customer Support, Research and Development
|
Light & Motion
|
March 31, 2021
|
|||||||||||||
|
Wilmington, MA
|
118,000
|
Manufacturing, Customer Support, Service, Research and Development
|
Vacuum & Analysis
|
Owned
|
|||||||||||||
|
Portland, OR
|
197,017
|
Manufacturing, Office, and Warehouse
|
Equipment & Solutions
|
(6)
|
(1) |
MKS owns two facilities, one in
Beaune-la-Rolande
with 57,000 square feet and one in Brigueil with 126,000 square feet.
|
(2) | MKS owns one facility with 70,000 square feet and leases two other facilities with 38,000 square feet and 10,000 square feet, both with a lease expiration date of December 31, 2020. |
(3) | MKS Vacuum & Analysis leases a facility with 124,200 square feet with a lease expiration date of September 1, 2023 and also leases another facility for Light & Motion with 50,500 square feet with a lease expiration date of July 31, 2028. |
(4) | MKS owns one facility with 82,000 square feet and leases another facility with 76,000 square feet with a lease expiration date of November 30, 2026. |
(5) | MKS leases a facility with 212,300 square feet with a lease expiration date of February 28, 2022, of which 20,000 square feet is vacant. MKS leases another facility with 42,600 square feet with a lease expiration date of February 28, 2022, which is currently vacant. |
(6) | MKS sold three separate buildings, in 2019, as part of sale and leaseback transactions and will lease back the buildings over varying terms into 2021. One building lease has an expiration of May 31, 2020 and the other two building leases have an expiration of May 31, 2021. |
Item 3.
|
Legal Proceedings
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
|||||||||||||
MKS Instruments, Inc.
|
$ |
100.00
|
$ |
100.24
|
$ |
168.06
|
$ |
269.74
|
$ |
185.96
|
$ |
319.70
|
|||||||||||||
Nasdaq Market Index
|
$ |
100.00
|
$ |
106.96
|
$ |
116.45
|
$ |
150.96
|
$ |
146.67
|
$ |
200.49
|
|||||||||||||
Morningstar Semiconductor Equipment &
Materials/Scientific & Technical Instruments
*
|
$ |
100.00
|
$ |
87.08
|
$ |
111.78
|
$ |
167.05
|
$ |
140.53
|
$ |
233.18
|
*
|
Semiconductor Equipment & Materials and Scientific & Technical Instruments indices weighted equally. |
Item 6.
|
Selected Financial Data
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
||||||||||
|
(in thousands, except per share data)
|
|||||||||||||||||||
Statement of Operations Data(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net revenues
|
$ |
1,899,773
|
$ |
2,075,108
|
$ |
1,915,977
|
$ |
1,295,342
|
$ |
813,524
|
||||||||||
Gross profit(2)
|
$ |
830,431
|
$ |
979,476
|
$ |
891,451
|
$ |
565,619
|
$ |
362,872
|
||||||||||
Income from operations(3)
|
$ |
219,851
|
$ |
494,059
|
$ |
406,634
|
$ |
157,267
|
$ |
156,612
|
||||||||||
Net income(4)
|
$ |
140,386
|
$ |
392,896
|
$ |
339,132
|
$ |
104,809
|
$ |
122,297
|
||||||||||
Basic net income per share
|
$ |
2.57
|
$ |
7.22
|
$ |
6.26
|
$ |
1.96
|
$ |
2.30
|
||||||||||
Diluted net income per share
|
$ |
2.55
|
$ |
7.14
|
$ |
6.16
|
$ |
1.94
|
$ |
2.28
|
||||||||||
Cash dividends paid per common share
|
$ |
0.80
|
$ |
0.78
|
$ |
0.71
|
$ |
0.68
|
$ |
0.68
|
||||||||||
Balance Sheet Data
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents, including restricted cash
|
$ |
414,572
|
$ |
644,345
|
$ |
333,887
|
$ |
233,910
|
$ |
227,574
|
||||||||||
Short-term investments
|
$ |
109,417
|
$ |
73,826
|
$ |
209,434
|
$ |
189,463
|
$ |
430,663
|
||||||||||
Working capital
|
$ |
1,115,866
|
$ |
1,200,819
|
$ |
946,431
|
$ |
761,469
|
$ |
848,527
|
||||||||||
Total assets
|
$ |
3,416,320
|
$ |
2,614,246
|
$ |
2,414,018
|
$ |
2,212,242
|
$ |
1,273,347
|
||||||||||
Short-term debt(5)
|
$ |
12,099
|
$ |
3,986
|
$ |
2,972
|
$ |
10,993
|
$ |
—
|
||||||||||
Long-term debt, net(5)
|
$ |
871,667
|
$ |
343,842
|
$ |
389,993
|
$ |
601,229
|
$ |
—
|
||||||||||
Other liabilities(6)
|
$ |
203,628
|
$ |
133,932
|
$ |
145,296
|
$ |
131,921
|
$ |
21,482
|
||||||||||
Stockholders’ equity
|
$ |
2,023,344
|
$ |
1,873,187
|
$ |
1,588,907
|
$ |
1,241,792
|
$ |
1,160,881
|
(1) | The Statement of Operations Data and the Balance Sheet Data for 2019, 2018, 2017 and 2016 include statement of operations data and assets and liabilities acquired as a result of the acquisition of Newport Corporation (“Newport”) in April 2016 (the “Newport Merger”). In addition, the Statement of Operations Data and the Balance Sheet Data for 2019 include statement of operations data and assets and liabilities acquired as a result of the acquisition of Electro Scientific Industries, Inc. (“ESI”) in February 2019 (the “ESI Merger”). |
(2) |
Gross profit for 2019 includes a $7.6 million charge for the amortization of inventory
step-up
to fair value related to the ESI Merger. Gross profit for 2016 includes a $15.1 million charge for the amortization of the inventory
step-up
to fair value related to the Newport Merger.
|
(3) |
Income from operations for 2019 includes $7.6 million of amortization of inventory
step-up
to fair value, $37.3 million of acquisition and integration costs primarily related to our acquisition of ESI, $6.6 million of fees and expenses related to our Term Loan Facility, as defined and described further in Item 7 of this Annual Report on Form
10-K,
$7.0 million of restructuring and other costs and $4.7 million of asset impairment charges. These charges are offset by a $6.8 million gain on sale of a long-lived asset. Income from operations for 2018 includes $3.6 million of restructuring charges and $3.1 million of acquisition and integration costs, which is primarily comprised of acquisition costs related to the ESI Merger. Income from operations for 2017 includes $6.7 million of an asset impairment charge, primarily related to the
write-off
of goodwill and intangible assets in conjunction with the consolidation of two manufacturing plants, $5.3 million of acquisition and integration costs from the Newport Merger and $3.9 million of restructuring charges. Income from operations for 2016 includes a $15.1 million charge for the amortization of the inventory
step-up
to fair value, $27.3 million of acquisition and integration costs from the Newport Merger and $5.0 million of an asset impairment charge. Income from operations for 2015 includes $2.1 million of restructuring charges.
|
(4) |
Net income for 2019 includes charges, net of tax, of $32.9 million of acquisition and integration costs, $5.8 million of amortization of inventory
step-up
to fair value, $5.1 million of fees and expenses related to
|
our Term Loan Facility related to the ESI Merger, $3.9 million of amortization of debt issuance costs, $5.1 million of restructuring and other costs, $4.7 million of asset impairment charges and $5.4 million of tax cost on the inter-company sale of an asset. These charges are offset by a $5.2 million gain on sale of long-lived assets and $2.2 million of windfall tax benefit on the vesting of stock-based compensation. Net income for 2018 includes an $8.3 million windfall tax benefit on the vesting of stock-based compensation and $5.0 million of accrued taxes on MKS subsidiary distributions. Net income for 2017 includes charges, net of tax, of $6.7 million of an asset impairment charge, $3.4 million of acquisition and integration costs and $3.7 million of restructuring charges. Net income for 2017 also includes a gain, net of tax of $72.0 million related to the sale of a business, a $28.7 million transition tax on accumulated foreign earnings, a $14.0 million tax accrual on a distribution to a subsidiary, a $24.5 million deferred tax adjustment, which also includes the reversal of a tax accrual on an intercompany dividend related to the 2017 Tax Cut and Jobs Act, a $11.1 million windfall tax benefit on the vesting of stock-based compensation and an adjustment, net of tax of $5.9 million of amortization of debt issuance costs relating to our Term Loan Facility used to partially finance the Newport Merger. Net income for 2016 includes charges, net of tax, of $9.8 million of amortization of inventory
step-up
to fair value, $19.0 million of acquisition and integration costs, $5.0 million of asset impairment charges and a $2.0 million withholding tax on dividends. These charges are offset by a tax benefit of $5.0 million for a legal entity restructuring. Net income for 2015 includes charges, net of tax, of $1.4 million of restructuring costs and also includes $7.7 million in tax credits for reserve releases related to the settlement of tax audits.
|
(5) | Short-term and long-term debt, net, includes $9.0 million and $871.7 million, respectively, in 2019, long-term debt, net includes $343.8 million in 2018, $389.3 million in 2017 and short-term and long-term debt, net includes $6.3 million and $600.7 million, respectively, in 2016, related to our Term Loan Facility. |
(6) |
Other liabilities include
non-current
deferred taxes,
non-current
accrued compensation and
non-current
lease liability.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
• | Identify the contract with a customer |
• | Identify the performance obligations in the contract |
• | Determine the transaction price |
• | Allocate the transaction price to performance obligations in the contract |
• | Recognize revenue when or as the Company satisfies a performance obligation |
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Net revenues:
|
|
|
||||||
Product
|
84.8
|
% |
88.4
|
% | ||||
Service
|
15.2
|
11.6
|
||||||
Total net revenues
|
100.0
|
% |
100.0
|
% | ||||
Cost of revenues:
|
|
|
||||||
Product
|
48.1
|
46.7
|
||||||
Service
|
8.2
|
6.1
|
||||||
Total cost of revenues
|
56.3
|
52.8
|
||||||
Gross profit
|
43.7
|
% |
47.2
|
% | ||||
Research and development
|
8.6
|
6.5
|
||||||
Selling, general and administrative
|
17.4
|
14.4
|
||||||
Acquisition and integration costs
|
2.0
|
0.1
|
||||||
Restructuring and other
|
0.4
|
0.3
|
||||||
Fees and expenses related to repricing of Term Loan Facility
|
0.3
|
—
|
||||||
Amortization of intangible assets
|
3.5
|
2.1
|
||||||
Gain on the sale of long-lived assets
|
(0.3
|
) |
—
|
|||||
Asset impairment
|
0.2
|
—
|
||||||
Income from operations
|
11.6
|
% |
23.8
|
% | ||||
Interest income
|
0.3
|
0.3
|
||||||
Interest expense
|
2.3
|
0.8
|
||||||
Other expense, net
|
0.2
|
0.1
|
||||||
Income from operations before income taxes
|
9.4
|
% |
23.2
|
% | ||||
Provision for income taxes
|
2.0
|
4.3
|
||||||
Net income
|
7.4
|
% |
18.9
|
% | ||||
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Product
|
$ |
1,611.3
|
$ |
1,835.2
|
||||
Service
|
288.5
|
239.9
|
||||||
Total net revenues
|
$ |
1,899.8
|
$ |
2,075.1
|
||||
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Vacuum & Analysis
|
$ |
990.5
|
$ |
1,260.9
|
||||
Light & Motion
|
725.6
|
814.2
|
||||||
Equipment & Solutions
|
183.7
|
—
|
||||||
Total net revenues
|
$ |
1,899.8
|
$ |
2,075.1
|
||||
|
Years Ended December 31,
|
% Points
Change
|
|
|||||||||
(As a percentage of net revenues)
|
2019
|
|
2018
|
|
||||||||
Product
|
43.3
|
% |
47.2
|
% |
(3.9
|
)% | ||||||
Service
|
46.0
|
% |
47.3
|
% |
(1.3
|
)% | ||||||
Total gross profit percentage
|
43.7
|
% |
47.2
|
% |
(3.5
|
)% | ||||||
|
Years Ended December 31,
|
% Points
Change
|
|
|||||||||
(As a percentage of net revenues)
|
2019
|
|
2018
|
|
||||||||
Vacuum & Analysis
|
43.0
|
% |
45.8
|
% |
(2.8
|
)% | ||||||
Light & Motion
|
46.1
|
49.3
|
(3.2
|
) | ||||||||
Equipment & Solutions
|
36.8
|
—
|
—
|
|||||||||
Total net revenues
|
43.7
|
% |
47.2
|
% |
(3.5
|
)% | ||||||
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Research and development expenses
|
$ |
164.1
|
$ |
135.7
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Selling, general and administrative expenses
|
$ |
330.3
|
$ |
298.1
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Acquisition and integration costs
|
$ |
37.3
|
$ |
3.1
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Restructuring and other
|
$ |
7.0
|
$ |
4.6
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Fees and expenses related to repricing of Term Loan Facility
|
$ |
6.6
|
$ |
0.4
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Amortization of intangible assets
|
$ |
67.4
|
$ |
43.5
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Gain on sale of long-lived assets
|
$ |
(6.8
|
) | $ |
—
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Asset impairment
|
$ |
4.7
|
$ |
—
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Interest expense, net
|
$ |
38.7
|
$ |
11.2
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Other expense, net
|
$ |
3.3
|
$ |
1.9
|
|
Years Ended December 31,
|
|||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
||||
Provision for income taxes
|
$ |
37.5
|
$ |
88.1
|
|
Payment Due By Period
|
|||||||||||||||||||||||
|
|
|
Less than
|
|
|
|
|
|
After
|
|
|
|
||||||||||||
Contractual Obligations (In thousands)
|
Total
|
|
1 Year
|
|
1-3
years
|
|
3-5
years
|
|
5 years
|
|
Other
|
|
||||||||||||
Operating lease obligations
|
$ |
65,391
|
$ |
20,227
|
$ |
21,374
|
$ |
12,917
|
$ |
10,873
|
$ |
—
|
||||||||||||
Purchase obligations(1)
|
302,270
|
258,137
|
30,737
|
10,615
|
2,781
|
—
|
||||||||||||||||||
Pension obligations
|
38,651
|
1,133
|
2,519
|
3,020
|
31,979
|
—
|
||||||||||||||||||
Debt
|
895,576
|
12,099
|
18,031
|
17,937
|
847,509
|
—
|
||||||||||||||||||
Other long-term liabilities reflected on the Balance Sheet under U.S. GAAP(2)
|
120,669
|
—
|
7,147
|
433
|
77,907
|
35,182
|
||||||||||||||||||
Total
|
$ |
1,422,557
|
$ |
291,596
|
$ |
79,808
|
$ |
44,922
|
$ |
971,049
|
$ |
35,182
|
||||||||||||
(1) | As of December 31, 2019, we have entered into purchase commitments for certain inventory components and other equipment and services used in our normal operations. The majority of these purchase commitments covered by these arrangements are for periods less than a year and aggregate to approximately $258.1 million. |
(2) | The majority of this balance relates to deferred tax liabilities. |
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
|
(in thousands, except per share data)
|
|||||||||||
Net Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
1,611,297
|
|
|
$
|
1,835,202
|
|
|
$
|
1,701,301
|
|
Services
|
|
|
288,476
|
|
|
|
239,906
|
|
|
|
214,676
|
|
Total net revenues
|
|
|
1,899,773
|
|
|
|
2,075,108
|
|
|
|
1,915,977
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
913,482
|
|
|
|
969,288
|
|
|
|
906,369
|
|
Services
|
|
|
155,860
|
|
|
|
126,344
|
|
|
|
118,157
|
|
Total cost of revenues (exclusive of amortization shown separately below)
|
|
|
1,069,342
|
|
|
|
1,095,632
|
|
|
|
1,024,526
|
|
Gross profit
|
|
|
830,431
|
|
|
|
979,476
|
|
|
|
891,451
|
|
Research and development
|
|
|
164,061
|
|
|
|
135,720
|
|
|
|
132,555
|
|
Selling, general and administrative
|
|
|
330,346
|
|
|
|
298,118
|
|
|
|
290,056
|
|
Acquisition and integration costs
|
|
|
37,262
|
|
|
|
3,113
|
|
|
|
5,332
|
|
Restructuring and other
|
|
|
6,983
|
|
|
|
4,567
|
|
|
|
3,920
|
|
Fees and expenses related to repricing of Term Loan Facility
|
|
|
6,637
|
|
|
|
378
|
|
|
|
492
|
|
Amortization of intangible assets
|
|
|
67,402
|
|
|
|
43,521
|
|
|
|
45,743
|
|
Gain on sale of long-lived assets
|
|
|
(6,773
|
)
|
|
|
—
|
|
|
|
—
|
|
Asset impairment
|
|
|
4,662
|
|
|
|
—
|
|
|
|
6,719
|
|
Income from operations
|
|
|
219,851
|
|
|
|
494,059
|
|
|
|
406,634
|
|
Interest income
|
|
|
5,453
|
|
|
|
5,775
|
|
|
|
3,021
|
|
Interest expense
|
|
|
44,135
|
|
|
|
16,942
|
|
|
|
30,990
|
|
Gain on sale of business
|
|
|
—
|
|
|
|
—
|
|
|
|
74,856
|
|
Other expense, net
|
|
|
3,333
|
|
|
|
1,942
|
|
|
|
5,896
|
|
Income before income taxes
|
|
|
177,836
|
|
|
|
480,950
|
|
|
|
447,625
|
|
Provision for income taxes
|
|
|
37,450
|
|
|
|
88,054
|
|
|
|
108,493
|
|
Net income
|
|
$
|
140,386
|
|
|
$
|
392,896
|
|
|
$
|
339,132
|
|
Other comprehensive income
, net of tax
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in value of financial instruments designated as cash flow hedges
|
|
$
|
(10,013
|
)
|
|
$
|
4,942
|
|
|
$
|
(4,568
|
)
|
Foreign currency translation adjustments
|
|
|
(6,111
|
)
|
|
|
(14,161
|
)
|
|
|
37,172
|
|
Unrecognized pension
(loss)
gain
|
|
|
(536
|
)
|
|
|
149
|
|
|
|
323
|
|
Unrealized
gain
(loss) on investments
|
|
|
25
|
|
|
|
(37
|
)
|
|
|
1,072
|
|
Total comprehensive income
|
|
$
|
123,751
|
|
|
$
|
383,789
|
|
|
$
|
373,131
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.57
|
|
|
$
|
7.22
|
|
|
$
|
6.26
|
|
Diluted
|
|
$
|
2.55
|
|
|
$
|
7.14
|
|
|
$
|
6.16
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
54,711
|
|
|
|
54,406
|
|
|
|
54,137
|
|
Diluted
|
|
|
55,111
|
|
|
|
54,992
|
|
|
|
55,074
|
|
|
Common Stock
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Total
Stockholders’
Equity
|
|
|||||||||||||||
|
|
|
||||||||||||||||||||||
(in thousands, except share data)
|
Shares
|
|
Amount
|
|
||||||||||||||||||||
Balance at December 31, 2016
|
53,672,861
|
$ |
113
|
$ |
777,482
|
$ |
494,744
|
$ |
(30,547
|
) | $ |
1,241,792
|
||||||||||||
Net issuance under stock-based plans
|
682,674
|
(12,216
|
) |
(12,216
|
) | |||||||||||||||||||
Stock-based compensation
|
24,378
|
24,378
|
||||||||||||||||||||||
Cash dividend ($0.71 per common share)
|
(38,178
|
) |
(38,178
|
) | ||||||||||||||||||||
Comprehensive income (net of tax):
|
|
|
||||||||||||||||||||||
Net income
|
339,132
|
339,132
|
||||||||||||||||||||||
Other comprehensive
gain
|
|
33,999
|
33,999
|
|||||||||||||||||||||
Balance at December 31, 2017
|
54,355,535
|
$ |
113
|
$ |
789,644
|
$ |
795,698
|
$ |
3,452
|
$ |
1,588,907
|
|||||||||||||
Net issuance under stock-based plans
|
502,150
|
(11,104
|
) |
(11,104
|
) | |||||||||||||||||||
Stock-based compensation
|
|
27,262
|
27,262
|
|||||||||||||||||||||
Stock repurchase
|
(818,131
|
) |
(11,870
|
) |
(63,130
|
) |
(75,000
|
) | ||||||||||||||||
Cash dividend ($0.78 per common share)
|
(42,405
|
) |
(42,405
|
) | ||||||||||||||||||||
Accounting Standards Codification Topic 606 adjustment
|
1,738
|
1,738
|
||||||||||||||||||||||
Comprehensive income (net of tax):
|
|
|
|
|||||||||||||||||||||
Net income
|
392,896
|
392,896
|
||||||||||||||||||||||
Other comprehensive loss
|
|
(9,107
|
) |
(9,107
|
) | |||||||||||||||||||
Balance at December 31, 2018
|
54,039,554
|
$ |
113
|
$ |
793,932
|
$ |
1,084,797
|
$ |
(5,655
|
) | $ |
1,873,187
|
||||||||||||
Net issuance under stock-based plans
|
556,629
|
(11,010
|
) |
|
(11,010
|
) | ||||||||||||||||||
Settlement of share-based compensation awards(1)
|
30,630
|
30,630
|
||||||||||||||||||||||
Stock-based compensation
|
50,318
|
50,318
|
||||||||||||||||||||||
Cash dividend ($0.80 per common share)
|
(43,528
|
)
|
(43,528
|
)
|
||||||||||||||||||||
Stock dividends accrued
|
435
|
(435
|
) |
—
|
||||||||||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
(4
|
)
|
|
Comprehensive income (net of tax):
|
|
|
|
|
|
|||||||||||||||||||
Net income
|
140,386
|
140,386
|
||||||||||||||||||||||
Other comprehensive loss
|
|
(16,635
|
)
|
(16,635
|
)
|
|||||||||||||||||||
Balance at December 31, 2019
|
54,596,183
|
$ |
113
|
$ |
864,305
|
$ |
1,181,216
|
$ |
(22,290
|
) | $ |
2,023,344
|
||||||||||||
(1)
|
Represents the vested but unissued portion of Electro Scientific Industries, Inc. (“ESI”) share-based compensation awards as of the acquisition date of February 1, 2019 as described further in Note 12.
|
|
Years Ended December 31,
|
|||||||||||
|
201
9
|
|
201
8
|
|
201
7
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|||||||||
Net income
|
$ |
140,386
|
$ |
392,896
|
$ |
339,132
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|||||||||
Depreciation and amortization
|
110,034
|
79,853
|
82,556
|
|||||||||
Amortization of inventory
step-up
adjustment to fair value
|
7,624
|
—
|
—
|
|||||||||
Amortization of debt issuance cost and original issue discount
|
7,074
|
4,718
|
10,699
|
|||||||||
Stock-based compensation
|
49,194
|
27,262
|
24,378
|
|||||||||
Provision for excess and obsolete inventory
|
24,734
|
22,324
|
20,213
|
|||||||||
Provision for doubtful accounts
|
(728
|
) |
1,435
|
825
|
||||||||
Deferred income taxes
|
(4,215
|
) |
(19,388
|
) |
(4,831
|
) | ||||||
Gain on sale of long-lived asset
|
(6,773
|
)
|
—
|
—
|
||||||||
Gain on sale of business
|
—
|
—
|
(74,856
|
)
|
||||||||
Asset impairment
|
|
|
4,662
|
|
|
|
—
|
|
|
|
6,719
|
|
Other
|
870
|
2,649
|
824
|
|||||||||
Changes in operating assets and liabilities, net of business acquired:
|
|
|
|
|||||||||
Trade accounts receivable
|
(93
|
) |
(546
|
) |
(44,077
|
) | ||||||
Inventories
|
(29,289
|
) |
(73,779
|
) |
(72,471
|
) | ||||||
Income taxes payable
|
(12,374
|
) |
(11,430
|
) |
12,805
|
|||||||
Other current and
non-current
assets
|
(9,830
|
) |
(1,639
|
) |
(8,631
|
) | ||||||
Current and non-current accrued compensation
|
(4,191
|
) |
(8,649
|
) |
32,502
|
|||||||
Other current and
non-current
liabilities
|
(8,424
|
) |
(3,948
|
) |
18,030
|
|||||||
Accounts payable
|
(24,152
|
) |
2,023
|
11,405
|
||||||||
Net cash provided by operating activities
|
244,509
|
413,781
|
355,222
|
|||||||||
Cash flows (used in) provided by investing activities:
|
|
|
|
|||||||||
Acquisition of business, net of cash acquired
|
(988,599
|
)
|
—
|
—
|
||||||||
Net proceeds from sale of business
|
—
|
—
|
72,509
|
|||||||||
Purchases of investments
|
(246,315
|
) |
(253,598
|
) |
(229,557
|
) | ||||||
Maturities of investments
|
142,571
|
181,749
|
157,342
|
|||||||||
Sales of investments
|
166,915
|
207,542
|
53,564
|
|||||||||
Proceeds from sale of assets
|
|
|
42,079
|
|
|
|
—
|
|
|
|
—
|
|
Purchases of property, plant and equipment
|
(63,904
|
) |
(62,941
|
) |
(31,287
|
) | ||||||
Other
|
—
|
—
|
66
|
|||||||||
Net cash (used in) provided by investing activities
|
(947,253
|
) |
72,752
|
22,637
|
||||||||
Cash flows provided by (used in) financing activities:
|
||||||||||||
Net proceeds from short and long-term borrowings
|
642,207 | 67,669 | 28,551 | |||||||||
Payments of short-term borrowings
|
(5,375
|
) |
(67,163
|
) |
(29,711
|
) | ||||||
Payments of long-term borrowings
|
(106,116
|
) |
(50,003
|
) |
(228,141
|
) | ||||||
Repurchases of common stock
|
—
|
(75,000
|
) |
—
|
||||||||
Net payments related to employee stock awards
|
(11,010
|
) |
(11,104
|
) |
(12,216
|
) | ||||||
Dividend payments
|
(43,528
|
) |
(42,405
|
)
|
(38,178
|
) | ||||||
Net cash provided by (used in) financing activities
|
476,178
|
(178,006
|
) |
(279,695
|
) | |||||||
Effect of exchange rate changes on cash and cash equivalents
|
(3,207
|
)
|
|
|
1,931
|
|
|
|
1,813
|
|
||
(Decrease) increase in cash and cash equivalents
|
(229,773
|
) |
310,458
|
99,977
|
||||||||
Cash and cash equivalents at beginning of period
|
644,345
|
|
|
|
333,887
|
|
|
|
233,910
|
|||
Cash and cash equivalents at end of period
|
$
|
414,572
|
$
|
644,345
|
$
|
333,887
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|||||||||
Cash paid during the period for:
|
||||||||||||
Interest
|
|
$
|
39,899
|
|
|
$
|
14,593
|
|
|
$
|
20,467
|
|
Income taxes
|
|
$
|
35,512
|
|
|
$
|
91,765
|
|
|
$
|
104,691
|
|
1)
|
Business Description
|
2)
|
Basis of Presentation
|
3)
|
Summary of Significant Accounting Policies
|
|
•
|
Identify the contract with a customer
|
|
•
|
Identify the performance obligations in the contract
|
|
•
|
Determine the transaction price
|
|
•
|
Allocate the transaction price to performance obligations in the contract
|
|
•
|
Recognize revenue when or as the Company satisfies a performance obligation
|
4)
|
Recently Issued Accounting Pronouncements
|
5)
|
Leases
|
|
|
Twelve Months
Ended December 31, 2019 |
|
|
Lease cost:
|
|
|
|
|
Operating lease(1)
|
|
$
|
23,176
|
|
Leases with a term less than 12 months
|
|
|
4,305
|
|
|
|
|
|
|
Total lease cost
|
|
$
|
27,481
|
|
|
|
|
|
|
(1)
|
Operating lease cost includes an immaterial amount of variable expenses and sublease rental income.
|
Year Ending December 31,
|
|
Amount
|
|
|
2020
|
|
$
|
22,299
|
|
2021
|
|
|
14,862
|
|
2022
|
|
|
9,006
|
|
2023
|
|
|
7,563
|
|
2024
|
|
|
6,660
|
|
Thereafter
|
|
|
11,387
|
|
|
|
|
|
|
Total lease payments
|
|
|
71,777
|
|
Less: imputed interest
|
|
|
6,386
|
|
|
|
|
|
|
Total operating lease liabilities
|
|
$
|
65,391
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
|
|
2019
|
|
$
|
20,106
|
|
2020
|
|
|
17,142
|
|
2021
|
|
|
10,325
|
|
2022
|
|
|
5,573
|
|
2023
|
|
|
4,410
|
|
Thereafter
|
|
|
8,739
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
66,295
|
|
|
|
|
|
|
6)
|
Revenue from Contracts with Customers
|
|
|
Years Ended December 31,
|
|
|||||
2019
|
|
2018
|
|
|||||
Beginning balance, January 1(1)
|
|
$
|
17,474
|
|
|
$
|
27,800
|
|
Deferred revenue and customer advances assumed in ESI Merger
|
|
|
4,629
|
|
|
—
|
|
|
Additions to deferred revenue and customer advances
|
|
|
77,727
|
|
|
|
73,171
|
|
Amount of deferred revenue and customer advances recognized in income
|
|
|
(75,046
|
)
|
|
|
(83,497
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance, December 31(2)
|
|
$
|
24,784
|
|
|
$
|
17,474
|
|
|
|
|
|
|
|
|
|
|
(
1
)
|
Beginning deferred revenue and customer advances as of January 1, 2019 included $8,134 of current deferred revenue, $3,228 of long-term deferred revenue and $6,112 of current customer advances.
|
(
2
)
|
Ending deferred revenue and customer advances as of December 31, 2019 included
$12,441 of current deferred revenue, $3,290 of long-term deferred revenue and $9,053 of current customer advances.
|
|
|
Year Ended December 31, 2019
|
|
|||||||||||||
|
|
Vacuum &
Analysis
|
|
|
Light &
Motion
|
|
|
Equipment &
Solutions |
|
|
Total
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
819,078
|
|
|
$
|
663,730
|
|
|
$
|
128,489
|
|
|
$
|
1,611,297
|
|
Services
|
|
|
171,445
|
|
|
|
61,840
|
|
|
|
55,191
|
|
|
|
288,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
990,523
|
|
|
$
|
725,570
|
|
|
$
|
183,680
|
|
|
$
|
1,899,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
|||||||||||||
|
|
Vacuum &
Analysis
|
|
|
Light &
Motion
|
|
|
Equipment &
Solutions |
|
|
Total
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
1,080,343
|
|
|
$
|
754,859
|
|
|
$
|
—
|
|
|
$
|
1,835,202
|
|
Services
|
|
|
180,519
|
|
|
|
59,387
|
|
|
|
—
|
|
|
|
239,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
1,260,862
|
|
|
$
|
814,246
|
|
|
$
|
—
|
|
|
$
|
2,075,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|||||||||||||
|
|
Vacuum &
Analysis
|
|
|
Light &
Motion
|
|
|
Equipment &
Solutions |
|
|
Total
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
1,047,639
|
|
|
$
|
653,662
|
|
|
$
|
—
|
|
|
$
|
1,701,301
|
|
Services
|
|
|
159,818
|
|
|
|
54,858
|
|
|
|
—
|
|
|
|
214,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
1,207,457
|
|
|
$
|
708,520
|
|
|
$
|
—
|
|
|
$
|
1,915,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7)
|
Investments
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Available-for-sale
investments:
|
|
|
||||||
Time deposits and certificates of deposit
|
$ |
13,045
|
$ |
102
|
||||
Bankers’ acceptance drafts
|
4,043
|
989
|
||||||
Asset-backed securities
|
—
|
9,113
|
||||||
Commercial paper
|
61,205
|
19,359
|
||||||
Corporate obligations
|
—
|
9,352
|
||||||
U.S. treasury obligations
|
5,000
|
13,298
|
||||||
U.S. agency obligations
|
26,124
|
21,613
|
||||||
|
$ |
109,417
|
$ |
73,826
|
||||
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Available-for-sale
investments:
|
|
|
||||||
Group insurance contracts
|
$ |
5,854
|
$ |
5,890
|
||||
Cost method investments:
|
|
|
||||||
Minority interest in a private company(1)
|
—
|
4,400
|
||||||
|
$ |
5,854
|
$ |
10,290
|
||||
(1)
|
During 2019, the Company recognized $4,700 of impairment charges, which included an impairment of $4,400 of a long-term cost method investment in a private company.
|
As of December 31, 2019:
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits and certificates of deposit
|
|
$
|
13,045
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,045
|
|
Bankers’ acceptance drafts
|
|
|
4,043
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,043
|
|
Commercial paper
|
|
|
61,498
|
|
|
|
—
|
|
|
|
(293
|
)
|
|
|
61,205
|
|
U.S. treasury obligations
|
|
|
4,999
|
|
|
|
1
|
|
|
|
—
|
|
|
|
5,000
|
|
U.S. agency obligations
|
|
|
26,123
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
26,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
109,708
|
|
|
$
|
3
|
|
|
$
|
(294
|
)
|
|
$
|
109,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019:
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
(Losses)
|
|
Estimated
Fair Value
|
|
||||||||
Long-term investments:
|
|
|
|
|
||||||||||||
Available-for-sale
investments:
|
|
|
|
|
||||||||||||
Group insurance contracts
|
$ |
5,261
|
$ |
593
|
$ |
—
|
$ |
5,854
|
||||||||
As of December 31, 2018:
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
(Losses)
|
|
Estimated
Fair Value
|
|
||||||||
Short-term investments:
|
|
|
|
|
||||||||||||
Available-for-sale
investments:
|
|
|
|
|
||||||||||||
Time deposits and certificates of deposit
|
$ |
102
|
$ |
—
|
$ |
—
|
$ |
102
|
||||||||
Bankers’ acceptance drafts
|
989
|
—
|
—
|
989
|
||||||||||||
Asset-backed securities
|
9,121
|
1
|
(9
|
) |
9,113
|
|||||||||||
Commercial paper
|
19,504
|
—
|
(145
|
) |
19,359
|
|||||||||||
Corporate obligations
|
9,367
|
—
|
(15
|
) |
9,352
|
|||||||||||
U.S. treasury obligations
|
13,294
|
4
|
—
|
13,298
|
||||||||||||
U.S. agency obligations
|
21,617
|
2
|
(6
|
) |
21,613
|
|||||||||||
|
$ |
73,994
|
$ |
7
|
$ |
(175
|
) | $ |
73,826
|
|||||||
As of December 31, 2018:
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
(Losses)
|
|
Estimated
Fair
Value
|
|
||||||||
Long-term investments:
|
|
|
|
|
||||||||||||
Available-for-sale
investments:
|
|
|
|
|
||||||||||||
Group insurance contracts
|
$ |
5,546
|
$ |
344
|
$ |
—
|
$ |
5,890
|
||||||||
8)
|
Fair Value Measurements
|
Level 1
|
|
Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
Level 2
|
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments or securities or derivative contracts that are valued using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
|
|
|
|
Level 3
|
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
||||||||||
Description
|
|
December 31,
2019
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
288
|
|
|
$
|
288
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Time deposits and certificates of deposit
|
|
|
2,190
|
|
|
|
—
|
|
|
|
2,190
|
|
|
|
—
|
|
Commercial paper
|
|
|
42,559
|
|
|
|
—
|
|
|
|
42,559
|
|
|
|
—
|
|
U.S. treasury obligations
|
|
|
2,700
|
|
|
|
—
|
|
|
|
2,700
|
|
|
|
|
|
U.S. agency obligations
|
|
|
17,071
|
|
|
|
—
|
|
|
|
17,071
|
|
|
|
—
|
|
Restricted cash – money market funds
|
|
|
333
|
|
|
|
333
|
|
|
|
—
|
|
|
|
—
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits and certificates of deposit
|
|
|
13,045
|
|
|
|
—
|
|
|
|
13,045
|
|
|
|
—
|
|
Bankers’ acceptance drafts
|
|
|
4,043
|
|
|
|
—
|
|
|
|
4,043
|
|
|
|
—
|
|
Commercial paper
|
|
|
61,205
|
|
|
|
—
|
|
|
|
61,205
|
|
|
|
—
|
|
U.S. treasury obligations
|
|
|
5,000
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
—
|
|
U.S. agency obligations
|
|
|
26,124
|
|
|
|
—
|
|
|
|
26,124
|
|
|
|
—
|
|
Group insurance contracts
|
|
|
5,854
|
|
|
|
—
|
|
|
|
5,854
|
|
|
|
—
|
|
Derivatives – currency forward contracts
|
|
|
1,074
|
|
|
|
—
|
|
|
|
1,074
|
|
|
|
—
|
|
Derivatives – interest rate hedge - current
|
|
|
843
|
|
|
|
—
|
|
|
|
843
|
|
|
|
—
|
|
Funds in investments and other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli pension assets
|
|
|
16,713
|
|
|
|
—
|
|
|
|
16,713
|
|
|
|
—
|
|
Deferred compensation plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds and exchange traded funds
|
|
|
2,002
|
|
|
|
—
|
|
|
|
2,002
|
|
|
|
—
|
|
Money market securities
|
|
|
485
|
|
|
|
—
|
|
|
|
485
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
201,529
|
|
|
$
|
621
|
|
|
$
|
200,908
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives – currency forward contracts
|
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
259
|
|
|
$
|
—
|
|
Derivatives – interest rate hedge –
non-current
|
|
|
6,510
|
|
|
|
—
|
|
|
|
6,510
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
6,769
|
|
|
$
|
—
|
|
|
$
|
6,769
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, including restricted cash(1)
|
|
$
|
65,141
|
|
|
$
|
621
|
|
|
$
|
64,520
|
|
|
$
|
—
|
|
Short-term investments
|
|
|
109,417
|
|
|
|
—
|
|
|
|
109,417
|
|
|
|
—
|
|
Other current assets
|
|
|
1,917
|
|
|
|
—
|
|
|
|
1,917
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
176,475
|
|
|
$
|
621
|
|
|
$
|
175,854
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments
|
|
$
|
5,854
|
|
|
$
|
—
|
|
|
$
|
5,854
|
|
|
$
|
—
|
|
Other assets
|
|
|
19,200
|
|
|
|
—
|
|
|
|
19,200
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term assets
|
|
$
|
25,054
|
|
|
$
|
—
|
|
|
$
|
25,054
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
259
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
6,510
|
|
|
$
|
—
|
|
|
$
|
6,510
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The cash and cash equivalent amounts presented in the table above does not include cash of $349,431 as of December 31, 2019.
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|||||||||||||
Description
|
December 31,
2018
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
||||||||
Assets:
|
|
|
|
|
||||||||||||
Cash equivalents:
|
|
|
|
|
||||||||||||
Money market funds
|
$ |
180,340
|
$ |
180,340
|
$ |
—
|
$ |
—
|
||||||||
Time deposits and certificates of deposit
|
850
|
—
|
850
|
—
|
||||||||||||
Commercial paper
|
2,687
|
—
|
2,687
|
—
|
||||||||||||
U.S. agency obligations
|
3,418
|
—
|
3,418
|
—
|
||||||||||||
Restricted cash – money market funds
|
110
|
110
|
—
|
—
|
||||||||||||
Available-for-sale
securities:
|
|
|
|
|
||||||||||||
Time deposits and certificates of deposit
|
102
|
—
|
102
|
—
|
||||||||||||
Bankers’ acceptance drafts
|
989
|
—
|
989
|
—
|
||||||||||||
Asset-backed securities
|
9,113
|
—
|
9,113
|
—
|
||||||||||||
Commercial paper
|
19,359
|
—
|
19,359
|
—
|
||||||||||||
Corporate obligations
|
9,352
|
—
|
9,352
|
—
|
||||||||||||
U.S. treasury obligations
|
13,298
|
—
|
13,298
|
—
|
||||||||||||
U.S. agency obligations
|
21,613
|
—
|
21,613
|
—
|
||||||||||||
Group insurance contracts
|
5,890
|
—
|
5,890
|
—
|
||||||||||||
Derivatives – currency forward contracts
|
2,485
|
—
|
2,485
|
—
|
||||||||||||
Funds in investments and other assets:
|
|
|
|
|
||||||||||||
Israeli pension assets
|
14,408
|
—
|
14,408
|
—
|
||||||||||||
Derivatives – interest rate hedge –
non-current
|
6,083
|
—
|
6,083
|
—
|
||||||||||||
Total assets
|
$ |
290,097
|
$ |
180,450
|
$ |
109,647
|
$ |
—
|
||||||||
Liabilities:
|
|
|
|
|
||||||||||||
Derivatives – currency forward contracts
|
$ |
1,168
|
$ |
—
|
$ |
1,168
|
$ |
—
|
||||||||
Reported as follows:
|
|
|
|
|
||||||||||||
Assets:
|
|
|
|
|
||||||||||||
Cash and cash equivalents, including restricted cash(1)
|
$ |
187,405
|
$ |
180,450
|
$ |
6,955
|
$ |
—
|
||||||||
Short-term investments
|
73,826
|
—
|
73,826
|
—
|
||||||||||||
Other current assets
|
2,485
|
—
|
2,485
|
—
|
||||||||||||
Total current assets
|
$ |
263,716
|
$ |
180,450
|
$ |
83,266
|
$ |
—
|
||||||||
Long-term investments(2)
|
$ |
5,890
|
$ |
—
|
$ |
5,890
|
$ |
—
|
||||||||
Other assets
|
20,491
|
—
|
20,491
|
—
|
||||||||||||
Total long-term assets
|
$ |
26,381
|
$ |
—
|
$ |
26,381
|
$ |
—
|
||||||||
Liabilities:
|
|
|
|
|
||||||||||||
Other current liabilities
|
$ |
1,168
|
$ |
—
|
$ |
1,168
|
$ |
—
|
||||||||
(1) | The cash and cash equivalent amounts presented in the table above do not include cash of $456,940 as of December 31, 2018. |
(2)
|
The long-term investments presented in the table above do not include our minority interest investment in a private company, which is accounted for under the cost method.
|
9)
|
Derivatives
|
|
December 31, 2019
|
|||||||
Currency Hedged (Buy/Sell)
|
Gross Notional
Value
|
|
Fair Value
(1)
|
|
||||
U.S. Dollar/Japanese Yen
|
$ |
45,899
|
$ |
43
|
||||
U.S. Dollar/South Korean Won
|
51,733
|
167
|
||||||
U.S. Dollar/Euro
|
15,670
|
221
|
||||||
U.S. Dollar/U.K. Pound Sterling
|
8,279
|
(166
|
) | |||||
U.S. Dollar/Taiwan Dollar
|
33,093
|
(450
|
) | |||||
Total
|
$ |
154,674
|
$ |
(185
|
) | |||
|
December 31, 2018
|
|||||||
Currency Hedged (Buy/Sell)
|
Gross Notional
Value
|
|
Fair Value
(1)
|
|
||||
U.S. Dollar/Japanese Yen
|
$ |
43,770
|
$ |
(478
|
) | |||
U.S. Dollar/South Korean Won
|
59,149
|
570
|
||||||
U.S. Dollar/Euro
|
23,515
|
688
|
||||||
U.S. Dollar/U.K. Pound Sterling
|
11,827
|
323
|
||||||
U.S. Dollar/Taiwan Dollar
|
21,133
|
214
|
||||||
Total
|
$ |
159,394
|
$ |
1,317
|
||||
(1) | Represents the (payable) receivable amount included in the consolidated balance sheet. |
|
Years Ended December 31,
|
|||||||
Derivatives Designated as Hedging Instruments
|
2019
|
|
2018
|
|
||||
Derivative asset:
|
|
|
||||||
Forward exchange contracts(1)
|
$ |
1,074
|
$ |
2,485
|
||||
Foreign currency interest rate hedge(2)
|
|
|
843
|
|
|
|
6,083
|
|
Derivative liability:
|
|
|
|
|
|
|
||
Forward exchange contracts(1)
|
(1,259
|
) |
(1,168
|
) | ||||
Foreign currency interest rate hedge(2)
|
(6,510
|
) |
—
|
|||||
Total net derivative (liability) asset designated as hedging instruments
|
$ |
(5,852
|
) | $ |
7,400
|
|||
(1) |
The derivative asset of $1,074 and derivative liability of $1,259
related to the forward foreign exchange contracts are classified in other current assets and other current liabilities in the consolidated balance sheet as of December 31, 2019. The derivative asset of
$2,485
and derivative liability of
$1,168
related to the forward foreign exchange contracts are classified in other current assets and other current liabilities in the consolidated balance sheet as of December 31, 2018. These forward foreign exchange contracts are subject to a master netting agreement with one financial institution. However, the Company has elected to record these contracts on a gross basis in the balance sheet.
|
(2) |
The foreign currency interest rate hedge asset of
$843
is classified in other current assets in the consolidated balance sheet as of December 31, 2019. The foreign currency interest rate hedge liability of
$6,510
is classified in other non-current liabilities in the consolidated balance sheet as of December 31, 2019. The foreign currency rate hedge asset of $6,083 is classified in other assets in the consolidated balance sheet as of December 31, 2018.
|
Derivatives Designated as Cash Flow Hedging Instruments
|
Years Ended December 31,
|
|||||||||||
2019
|
|
2018
|
|
2017
|
|
|||||||
Forward exchange contracts:
|
|
|
|
|||||||||
Net (loss) gain recognized in OCI, net of tax(1)
|
$ |
(10,013
|
) | $ |
4,942
|
$ |
(4,568
|
) | ||||
Net gain (loss) reclassified from OCI into income(2)
|
$ |
5,658
|
$
|
(3,367
|
) |
$
|
(2,685
|
) |
(1) | Net change in the fair value of the effective portion classified in OCI. |
(2) |
Effective portion classified
in
cost of products.
|
|
Years Ended December 31,
|
|||||||||||
Derivatives Not Designated as Hedging Instruments
|
2019
|
|
2018
|
|
2017
|
|
||||||
Forward exchange contracts:
|
|
|
|
|||||||||
Net (loss)
gain
recognized in income(1)
|
$ |
(1,314
|
) | $ |
105
|
$ |
(3,416
|
) |
(1) | The Company enters into forward foreign exchange contracts to hedge against changes in the balance sheet for certain subsidiaries to mitigate the risk associated with certain foreign currency transactions in the ordinary course of business. These derivatives are not designated as cash flow hedging instruments and gains or losses from these derivatives are recorded immediately in other expense, net in 2019, 2018 and 2017. |
10
)
|
Inventories
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Raw material
|
$ |
288,771
|
$ |
235,593
|
||||
Work-in-process
|
79,367
|
61,908
|
||||||
Finished goods
|
94,008
|
87,188
|
||||||
|
$ |
462,146
|
$ |
384,689
|
||||
11)
|
Property, Plant and Equipment
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Land
|
$ |
11,926
|
$ |
11,448
|
||||
Buildings
|
113,303
|
104,023
|
||||||
Machinery and equipment
|
396,193
|
330,821
|
||||||
Furniture and fixtures, office equipment and software
|
186,651
|
149,145
|
||||||
Leasehold improvements
|
80,389
|
66,569
|
||||||
Construction in progress
|
46,926
|
44,823
|
||||||
|
835,388
|
706,829
|
||||||
Less: accumulated depreciation
|
593,517
|
512,462
|
||||||
|
$ |
241,871
|
$ |
194,367
|
||||
1
2
)
|
Acquisitions and Dispositions
|
Cash paid for outstanding shares(1)
|
$ |
1,032,671
|
||
Settlement of share-based compensation awards(2)
|
30,630
|
|||
Total purchase price
|
1,063,301
|
|||
Less: cash and cash equivalents acquired
|
(44,072
|
) | ||
Total purchase price, net of cash and cash equivalents acquired
|
$ |
1,019,229
|
||
(1) |
Represents cash paid of $30.00 per share for approximately 34,422,361
|
(2) | Represents the vested but unissued portion of ESI share-based compensation awards as of the acquisition date of February 1, 2019. |
Current assets (excluding inventory)
|
$ |
208,009
|
||
Inventory
|
81,696
|
|||
Intangible assets
|
316,200
|
|||
Goodwill
|
473,951
|
|||
Property, plant and equipment
|
65,489
|
|||
Long-term assets
|
9,633
|
|||
Total assets acquired
|
1,154,978
|
|||
Current liabilities
|
51,479
|
|||
Non-current
deferred taxes
|
33,039
|
|||
Other long-term liabilities
|
7,159
|
|||
Total liabilities assumed
|
91,677
|
|||
Fair value of assets acquired
,
and liabilities assumed
|
1,063,301
|
|||
Less: Cash and cash equivalents acquired
|
(44,072
|
) | ||
Total purchase price, net of cash and cash equivalents acquired
|
$ |
1,019,229
|
||
Completed technology
-
Laser
|
$ |
255,700
|
12 years
|
|||||
Completed technology
-
Non-Laser
|
18,300
|
10 years
|
||||||
Trademarks and trade names
|
14,400
|
7 years
|
||||||
Customer relationships
|
25,400
|
10 years
|
||||||
Backlog
|
2,400
|
1 year
|
||||||
|
$ |
316,200
|
|
|||||
|
Year
Ended
December 31,
|
|
||
|
|
2019
|
|
|
Total net revenues
|
$ |
183,680
|
||
Net
loss
|
$ |
(33,446
|
) | |
Net
loss
per share:
|
|
|||
Basic
|
$ |
(0.61
|
) | |
Diluted
|
$ |
(0.61
|
) | |
|
Year
Ended
s
December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Total net revenues
|
$ |
1,914,561
|
$ |
2,445,711
|
||||
Net
income
|
$ |
171,537
|
$ |
424,778
|
||||
Net
income
per share:
|
|
|
||||||
Basic
|
$ |
3.14
|
$ |
7.81
|
||||
Diluted
|
$ |
3.11
|
$ |
7.72
|
||||
|
|
|
|
|
|
|
|
|
(1)
|
Incremental amortization and depreciation expense related to the estimated fair value of identifiable intangible assets and property, plant and equipment from the purchase price allocation.
|
|
(2)
|
Revenue and cost of goods sold adjustments as a result of the reduction in deferred revenue and the cost related to their estimated fair value.
|
(3)
|
Incremental interest expense related to the Company’s 2019 Incremental Term Loan Facility, as defined in Note 15.
|
|
(4)
|
The exclusion of acquisition costs and inventory
step-up
amortization for the year ended December 31, 2019 and the addition of these items to the year ended December 31, 2018.
|
|
(5)
|
The estimated tax impact of the above adjustments.
|
1
3
)
|
Goodwill and Intangible Assets
|
|
2019
|
2018
|
||||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Impairment
Loss
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Impairment
Loss
|
|
Net
|
|
||||||||||||
Beginning balance at January
1
|
$ |
731,272
|
$ |
(144,276
|
) | $ |
586,996
|
$ |
735,323
|
$ |
(144,276
|
) | $ |
591,047
|
||||||||||
Acquired goodwill(1)
|
473,951
|
—
|
473,951
|
—
|
—
|
—
|
||||||||||||||||||
Foreign currency translation
|
(2,493
|
) |
—
|
(2,493
|
) |
(4,051
|
) |
—
|
(4,051
|
) | ||||||||||||||
Ending balance at December 31
|
$ |
1,202,730
|
$ |
(144,276
|
) | $ |
1,058,454
|
$ |
731,272
|
$ |
(144,276
|
) | $ |
586,996
|
||||||||||
(1) |
During the twelve months ended December 31, 2019, the Company recorded $
473,951
of goodwill related to the ESI Merger.
|
As of December 31, 2019
|
Gross
|
|
Accumulated
Impairment
Charges
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
|
|
||||||||||
Completed technology(1)
|
$
|
446,431
|
$ |
(105
|
) | $ |
(178,310
|
) | $ |
(208
|
) | $ |
267,808
|
|||||||
Customer relationships(1)
|
308,144
|
(1,406
|
) |
(84,167
|
) |
(1,361
|
) |
221,210
|
||||||||||||
Patents, trademarks, trade names and other
|
120,895
|
—
|
(45,505
|
) |
222
|
75,612
|
||||||||||||||
|
$ |
875,470
|
$ |
(1,511
|
) | $ |
(307,982
|
) | $ |
(1,347
|
) | $ |
564,630
|
|||||||
(1) |
During the twelve months ended December 31, 2019, the Company recorded $
316,200
of separately identified intangible assets related to the ESI Merger, of which $
274,000
was completed technology, $
25,400
was customer relationships and $
16,800
was trademarks, trade names and backlog. Separately, on January 1, 2019, the Company reclassified $
6,428
of gross favorable lease assets and $
3,445
of related accumulated amortization from patents, trademarks, trade names and other to the
right-of-use
asset line in the balance sheet.
|
As of December 31, 2018
|
Gross
|
|
Accumulated
Impairment
Charges
|
|
Accumulated
Amortization
|
|
Foreign
Currency
Translation
|
|
Net
|
|
||||||||||
Completed technology
|
$ |
172,431
|
$ |
(105
|
) | $ |
(137,283
|
) | $ |
(73
|
) | $ |
34,970
|
|||||||
Customer relationships
|
282,744
|
(1,406
|
) |
(63,788
|
) |
(269
|
) |
217,281
|
||||||||||||
Patents, trademarks, trade names and other
|
110,523
|
—
|
(42,954
|
) |
(13
|
) |
67,556
|
|||||||||||||
|
$ |
565,698
|
$ |
(1,511
|
) | $ |
(244,025
|
) | $ |
(355
|
) | $ |
319,807
|
|||||||
Year
|
Amount
|
|
||
2020
|
$ |
55,808
|
||
2021
|
47,720
|
|||
2022
|
45,254
|
|||
2023
|
44,902
|
|||
2024
|
43,985
|
|||
Thereafter
|
$ |
271,061
|
1
4
)
|
Product Warranties
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Beginning balance
|
$ |
10,399
|
$ |
10,104
|
||||
Assumed product warranty liability from ESI Merger
|
7,177
|
—
|
||||||
Provision for product warranties
|
17,397
|
15,987
|
||||||
Direct and other charges to warranty liability
|
(20,100
|
) |
(15,692
|
) | ||||
Ending balance(1)
|
$ |
14,873
|
$ |
10,399
|
||||
(1) |
Short-term product warranty of $
12,085
and long-term product warranty of $
2,788
, each as of December 31, 2019, are included within other current liabilities and other non-current liabilities, respectively, within the accompanying consolidated balance sheet. Short-term product warranty of $
9,986
and long-term product warranty of $
413
as of December 31, 2018, are included within other current liabilities and other non-current liabilities, respectively, within the accompanying consolidated balance sheet.
|
1
5
)
|
Debt
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
||
Short-term debt:
|
|
|
|
|
|
|
|
|
Japanese lines of credit
|
|
$
|
2,558
|
|
|
$
|
2,724
|
|
Japanese receivables financing facility
|
|
|
573
|
|
|
|
665
|
|
Other debt
|
|
|
—
|
|
|
|
597
|
|
Term Loan Facility
|
|
|
8,968
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,099
|
|
|
$
|
3,986
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
||||
Long-term debt:
|
|
|
||||||
Other debt
|
$ |
94
|
$ |
86
|
||||
Term Loan Facility, net(1)
|
871,573
|
343,756
|
||||||
|
$ |
871,667
|
$ |
343,842
|
||||
(1) |
Net of deferred financing fees, original issuance discount and
re-pricing
fee in the aggregate of $
11,810
and $
4,708
as of December 31, 2019 and 2018, respectively.
|
Year
|
Amount
|
|
||
2020
|
$ |
12,099
|
||
2021
|
9,062
|
|||
2022
|
8,968
|
|||
2023
|
8,968
|
|||
2024
|
8,968
|
|||
Thereafter
|
847,511
|
1
6
)
|
Income Taxes
|
|
|
Years Ended December 31,
|
|
|||||||||
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|||
U.S. Federal income tax statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
35.0
|
%
|
Federal tax credits
|
|
|
(2.9
|
)
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
State income taxes, net of federal benefit
|
|
|
2.3
|
|
|
|
1.3
|
|
|
|
1.0
|
|
Effect of foreign operations taxed at various rates
|
|
|
(4.4
|
)
|
|
|
(1.3
|
)
|
|
|
(12.1
|
)
|
Qualified production activity tax benefit
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.4
|
)
|
Executive compensation
|
|
|
5.8
|
|
|
|
—
|
|
|
|
—
|
|
Gain on intercompany sale of assets
|
|
|
2.9
|
|
|
|
—
|
|
|
|
—
|
|
Benefit of a capital loss
|
|
|
(1.2
|
)
|
|
|
—
|
|
|
|
—
|
|
Foreign derived intangible income deduction
|
|
|
(3.8
|
)
|
|
|
(2.1
|
)
|
|
|
—
|
|
Global intangible low taxed income, net of foreign tax credits
|
|
|
2.6
|
|
|
|
0.4
|
|
|
|
—
|
|
Transition tax, net of foreign tax credits
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
6.4
|
|
Revaluation of deferred income taxes
|
|
|
(1.4
|
)
|
|
|
(0.3
|
)
|
|
|
(5.0
|
)
|
Revaluation of prepaid taxes
|
|
|
—
|
|
|
|
1.6
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
(0.3
|
)
|
|
|
(1.3
|
)
|
|
|
(2.5
|
)
|
Deferred tax asset valuation allowance
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
Release of income tax reserves (including interest)
|
|
|
(0.8
|
)
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
Foreign dividends, net of foreign tax credits
|
|
|
0.6
|
|
|
|
(1.0
|
)
|
|
|
3.3
|
|
Other
|
|
|
0.6
|
|
|
|
1.2
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1
|
%
|
|
|
18.3
|
%
|
|
|
24.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Income before income taxes:
|
|
|
|
|||||||||
United States
|
$ |
2,279
|
$ |
287,309
|
$ |
224,979
|
||||||
Foreign
|
175,557
|
193,641
|
222,646
|
|||||||||
|
$ |
177,836
|
$ |
480,950
|
$ |
447,625
|
||||||
Current taxes:
|
|
|
|
|||||||||
United States
|
$ |
6,790
|
$ |
41,428
|
$ |
77,023
|
||||||
State
|
2,068
|
8,094
|
6,149
|
|||||||||
Foreign
|
32,807
|
57,920
|
30,152
|
|||||||||
|
41,665
|
107,442
|
113,324
|
|||||||||
Deferred taxes:
|
|
|
|
|||||||||
United States
|
(1,743
|
) |
(2,533
|
) |
(16,250
|
) | ||||||
State and Foreign
|
(2,472
|
) |
(16,855
|
) |
11,419
|
|||||||
|
(4,215
|
) |
(19,388
|
) |
(4,831
|
) | ||||||
Provision for income taxes
|
$ |
37,450
|
$ |
88,054
|
$ |
108,493
|
||||||
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Deferred tax assets:
|
|
|
||||||
Carry-forward losses and credits
|
$ |
59,189
|
$ |
23,675
|
||||
Inventory and warranty reserves
|
29,661
|
17,945
|
||||||
Accrued expenses and other reserves
|
12,607
|
10,260
|
||||||
Stock-based compensation
|
8,580
|
5,351
|
||||||
Executive supplemental retirement benefits
|
1,556
|
5,972
|
||||||
Lease liability
|
|
|
15,284
|
|
|
|
—
|
|
Unrealized net loss
|
|
|
2,741
|
|
|
|
—
|
|
Other
|
2,347
|
2,396
|
||||||
Total deferred tax assets
|
$ |
131,965
|
$ |
65,599
|
||||
Deferred tax liabilities:
|
|
|
||||||
Acquired intangible assets
and
goodwi
ll
|
$ |
(128,144
|
) | $ |
(74,120
|
) | ||
Depreciation and amortization
|
(14,072
|
) |
(8,332
|
) | ||||
Loan costs
|
(2,317
|
) |
(1,108
|
) | ||||
Right-of-use
asset
|
|
|
(14,415
|
)
|
|
|
—
|
|
Foreign withholding taxes
|
(5,008
|
) |
(3,176
|
) | ||||
Unrealized net gain
|
—
|
(1,952
|
) | |||||
Total deferred tax liabilities
|
(163,956
|
) |
(88,688
|
) | ||||
Valuation allowance
|
(27,360
|
) |
(17,936
|
) | ||||
Net deferred tax liabilities
|
$ |
(59,351
|
) | $ |
(41,025
|
) | ||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Balance at beginning of year
|
$ |
32,684
|
$ |
27,345
|
$ |
25,465
|
||||||
Increases
|
9,324
|
934
|
640
|
|||||||||
Increases for the current year
|
3,219
|
6,091
|
4,340
|
|||||||||
Reductions related to expiration of statutes of limitations and audit settlements
|
(1,734
|
) |
(1,686
|
) |
(3,100
|
) | ||||||
Balance at end of year
|
$ |
43,493
|
$ |
32,684
|
$ |
27,345
|
||||||
1
7
)
|
Stock-Based Compensation
|
|
•
|
all RSUs granted under any Newport equity plan that were outstanding immediately prior to the effective time of the Newport Merger, and as to which shares of Newport common stock were not fully distributed in connection with the closing of the Newport Merger (the “Newport RSUs”), and
|
|
•
|
all SARs granted under any Newport equity plan, whether vested or unvested, that were outstanding immediately prior to the effective time of the Newport Merger (the “Newport SARs”).
|
|
•
|
all RSUs that vest based solely on the satisfaction of service conditions, granted under any ESI equity plan, arrangement or agreement (“ESI Plan”) that were outstanding immediately prior to the effective time of the ESI Merger, and as to which shares of ESI common stock were not fully distributed in connection with the closing of the ESI Merger (“ESI Time-Based RSUs”),
|
|
•
|
all RSUs that were granted subject to vesting based on both the achievement of performance goals and the satisfaction of service conditions granted under any ESI Plan that were outstanding immediately prior to the effective time of the ESI Merger (“ESI Performance-Based RSUs and collectively with the ESI Time-Based RSUs, the “ESI RSUs”), and
|
|
•
|
all SARs granted under any ESI Plan, whether vested or unvested, that were outstanding immediately prior to the effective time of the ESI Merger and held by an individual who was a service provider of ESI as of the date on which the effective time of the ESI Merger occurred (the “ESI SARs”).
|
|
Year Ended December 31, 2019
|
|||||||
|
RSUs
|
|
Weighted Average
Grant Date Fair
Value
|
|
||||
RSUs — beginning of period
|
647,394
|
$ |
74.04
|
|||||
Assumed from ESI Merger
|
|
|
736,133
|
|
|
$
|
84.10
|
|
Accrued dividend shares
|
5,222
|
$ |
85.67
|
|||||
Granted
|
434,970
|
$ |
87.11
|
|||||
Vested
|
(577,688
|
) | $ |
70.27
|
||||
Forfeited or expired
|
(143,498
|
) | $ |
89.55
|
||||
RSUs — end of period
|
1,102,533
|
$ |
85.93
|
|||||
|
Year Ended December 31, 2019
|
|||||||
|
Outstanding and
Exercisable SARs |
|
Weighted Average
Base Value
|
|
||||
SARs — beginning of period
|
177,538
|
$ |
28.52
|
|||||
Assumed from ESI Merger
|
|
|
12,787
|
|
|
$
|
17.38
|
|
Exercised
|
(77,473
|
) | $ |
26.29
|
||||
Forfeited or expired
|
(3,998
|
) | $ |
23.00
|
||||
SARs Outstanding — end of period
|
108,854
|
$ |
29.05
|
|||||
|
Number
of Shares
|
|
Weighted Average
Base Value |
|
Weighted Average
Remaining
Contractual Life
(years) |
|
Aggregate Intrinsic
Value
|
|
||||||||
SARs outstanding and exercisable
|
108,854
|
$ |
29.05
|
1.6
|
$ |
8,813
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Stock-based compensation expense by type of award:
|
|
|
|
|||||||||
RSUs
|
$ |
47,005
|
$ |
24,883
|
$ |
22,428
|
||||||
SARs
|
73
|
98
|
529
|
|||||||||
Employee stock purchase plan
|
2,116
|
2,281
|
1,421
|
|||||||||
Total stock-based compensation
|
$ |
49,194
|
27,262
|
24,378
|
||||||||
Windfall tax effect on stock-based compensation
|
(2,244
|
) |
(8,277
|
) |
(11,071
|
) | ||||||
Net effect on net income
|
$ |
46,950
|
$ |
18,985
|
$ |
13,307
|
||||||
Effect on net earnings per share:
|
|
|
|
|||||||||
Basic
|
$
|
0.86
|
$ |
0.35
|
$ |
0.25
|
||||||
Diluted
|
$
|
0.85
|
$ |
0.35
|
$ |
0.24
|
||||||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Cost of revenues
|
$ |
2,789
|
$ |
3,516
|
$ |
3,894
|
||||||
Research and development expense
|
3,847
|
2,750
|
2,816
|
|||||||||
Selling, general and administrative expense
|
20,457
|
20,996
|
17,668
|
|||||||||
Acquisition and integration related expense
|
|
|
21,728
|
|
|
|
—
|
|
|
|
—
|
|
Restructuring related expense
|
|
|
373
|
|
|
|
—
|
|
|
|
—
|
|
Total
pre-tax
stock-based compensation expense
|
$ |
49,194
|
$ |
27,262
|
$ |
24,378
|
||||||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Employee stock purchase plan rights:
|
|
|
|
|||||||||
Expected life (years)
|
0.5
|
0.5
|
0.5
|
|||||||||
Risk-free interest rate
|
2.4
|
% |
1.8
|
% |
0.8
|
% | ||||||
Expected volatility
|
38.7
|
% |
38.6
|
% |
26.5
|
% | ||||||
Expected annual dividends per share
|
$ |
0.80
|
$ |
0.76
|
$ |
0.69
|
18)
|
Stockholders’ Equity
|
1
9
)
|
Employee Benefit Plans
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Service cost
|
$ |
828
|
$ |
657
|
||||
Interest cost on projected benefit obligations
|
471
|
433
|
||||||
Expected return on plan assets
|
(111
|
) |
(115
|
) | ||||
Amortization of actuarial net loss
|
136
|
127
|
||||||
|
$ |
1,324
|
$ |
1,102
|
||||
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Change in projected benefit obligations:
|
|
|
||||||
Projected benefit obligations, beginning of year
|
$ |
24,885
|
$ |
25,736
|
||||
Assumed in ESI Merger
|
|
|
3,522
|
|
|
|
—
|
|
Service cost
|
828
|
657
|
||||||
Interest cost
|
471
|
433
|
||||||
Actuarial loss (gain)
|
2,057
|
(98
|
) | |||||
Benefits paid
|
(1,469
|
) |
(895
|
) | ||||
Currency translation adjustments
|
(242
|
) |
(948
|
) | ||||
Projected benefit obligations, end of year
|
$ |
30,052
|
$ |
24,885
|
||||
Change in plan assets:
|
|
|
||||||
Fair value of plan assets, beginning of year
|
$ |
7,822
|
$ |
8,152
|
||||
Assumed in ESI Merger
|
|
|
1,272
|
|
|
|
—
|
|
Company contributions
|
1,846
|
324
|
||||||
Gain (loss) on plan assets
|
591
|
(56
|
) | |||||
Benefits paid
|
(569
|
) |
(369
|
) | ||||
Currency translation adjustments
|
131
|
(229
|
) | |||||
Fair value of plan assets, end of year
|
11,093
|
7,822
|
||||||
Net underfunded status
|
$ |
(18,959
|
) |
$
|
(17,063
|
) | ||
|
Estimated benefit
payments |
|
||
2020
|
$ |
1,133
|
||
2021
|
1,302
|
|||
2022
|
1,217
|
|||
2023
|
1,537
|
|||
2024
|
1,483
|
|||
2025-2029
|
8,646
|
|||
|
$ |
15,318
|
||
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|||
Discount rate
|
1.4
|
% |
|
|
1.9
|
% | ||
Rate of increase in salary levels
|
2.2
|
% |
|
|
2.1
|
% | ||
Expected long-term rate of return on assets
|
2.1
|
% |
|
|
1.9
|
% |
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
|
||||||||||||
|
Amount
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
||||||
Cash
|
$ |
430
|
4
|
% |
|
$ |
193
|
|
|
|
2
|
% | ||||
Debt securities
|
8,023
|
72
|
|
4,855
|
|
|
|
62
|
||||||||
Equity securities
|
1,519
|
14
|
|
1,342
|
|
|
|
17
|
||||||||
Other
|
1,121
|
10
|
|
1,432
|
|
|
|
19
|
||||||||
|
|
|
|
|||||||||||||
|
$ |
11,093
|
100
|
% |
|
$ |
7,822
|
|
|
|
100
|
% | ||||
|
|
|
|
|
|
|
|
20
)
|
Net Income Per Share
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Numerator:
|
|
|
|
|||||||||
Net income
|
$
|
140,386
|
$ |
392,896
|
$ |
339,132
|
||||||
Denominator:
|
|
|
|
|||||||||
Shares used in net income per common share — basic
|
54,711,000
|
54,406,000
|
54,137,000
|
|||||||||
Effect of dilutive securities
|
400,000
|
586,000
|
937,000
|
|||||||||
Shares used in net income per common share — diluted
|
55,111,000
|
54,992,000
|
55,074,000
|
|||||||||
Net income per common share:
|
|
|
|
|||||||||
Basic
|
$
|
2.57
|
$ |
7.22
|
$ |
6.26
|
||||||
Diluted
|
$
|
2.55
|
$ |
7.14
|
$ |
6.16
|
2
1)
|
Business Segment, Geographic Area, Product Information and Significant Customer Information
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Vacuum & Analysis
|
$ |
990,523
|
$ |
1,260,862
|
$ |
1,207,457
|
||||||
Light & Motion
|
725,570
|
814,246
|
708,520
|
|||||||||
Equipment & Solutions
|
183,680
|
—
|
—
|
|||||||||
|
$ |
1,899,773
|
$ |
2,075,108
|
$ |
1,915,977
|
||||||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Gross profit by reportable segment:
|
|
|
|
|||||||||
Vacuum & Analysis
|
$ |
426,464
|
$ |
577,552
|
$ |
551,078
|
||||||
Light & Motion
|
336,764
|
401,924
|
340,373
|
|||||||||
Equipment & Solutions
|
67,203
|
—
|
—
|
|||||||||
Total gross profit by reportable segment
|
830,431
|
979,476
|
891,451
|
|||||||||
Operating expenses:
|
|
|
|
|||||||||
Research and development
|
164,061
|
135,720
|
132,555
|
|||||||||
Selling, general and administrative
|
330,346
|
298,118
|
290,056
|
|||||||||
Acquisition and integration costs
|
37,262
|
3,113
|
5,332
|
|||||||||
Restructuring and other
|
6,983
|
4,567
|
3,920
|
|||||||||
Fees and expenses related to repricing of Term Loan Facility
|
6,637
|
378
|
492
|
|||||||||
Amortization of intangible assets
|
67,402
|
43,521
|
45,743
|
|||||||||
Gain on sale of long-lived assets
|
(6,773
|
) |
—
|
—
|
||||||||
Asset impairment
|
4,662
|
—
|
6,719
|
|||||||||
Income from operations
|
219,851
|
494,059
|
406,634
|
|||||||||
Interest income
|
5,453
|
5,775
|
3,021
|
|||||||||
Interest expense
|
44,135
|
16,942
|
30,990
|
|||||||||
Gain on sale of business
|
—
|
—
|
74,856
|
|||||||||
Other expense, net
|
3,333
|
1,942
|
5,896
|
|||||||||
Income before income taxes
|
177,836
|
480,950
|
447,625
|
|||||||||
Provision for income taxes
|
37,450
|
88,054
|
108,493
|
|||||||||
Net income
|
$ |
140,386
|
$ |
392,896
|
$ |
339,132
|
||||||
|
Vacuum & Analysis
|
|
Light & Motion
|
|
Equipment &
Solutions |
|
Total
|
|
||||||||
December 31, 2019:
|
|
|
|
|
||||||||||||
Capital expenditures
|
$ |
34,130
|
$ |
23,045
|
$ |
6,729
|
$ |
63,904
|
||||||||
December 31, 2018:
|
|
|
|
|
||||||||||||
Capital expenditures
|
$ |
40,144
|
$ |
22,797
|
$ |
—
|
$ |
62,941
|
||||||||
December 31, 2017:
|
|
|
|
|
||||||||||||
Capital expenditures
|
$ |
17,111
|
$ |
14,176
|
$ |
—
|
$ |
31,287
|
||||||||
|
Vacuum &
Analysis
|
|
Light &
Motion
|
|
Equipment &
Solutions |
|
Total
|
|
||||||||
December 31, 2019:
|
|
|
|
|
||||||||||||
Depreciation and amortization
|
$ |
16,826
|
$ |
53,857
|
$ |
39,351
|
$ |
110,034
|
||||||||
December 31, 2018:
|
|
|
|
|
||||||||||||
Depreciation and amortization
|
$ |
20,808
|
$ |
59,045
|
$ |
—
|
$ |
79,853
|
||||||||
December 31, 2017:
|
|
|
|
|
||||||||||||
Depreciation and amortization
|
$ |
20,297
|
$ |
62,259
|
$ |
—
|
$ |
82,556
|
||||||||
|
|
Vacuum &
Analysis
|
|
|
Light &
Motion |
|
|
Equipment &
Solutions |
|
|
Corporate,
Eliminations
and Other
|
|
|
Total
|
|
|||||
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
185,889
|
|
|
$
|
147,150
|
|
|
$
|
40,125
|
|
|
$
|
(32,100
|
)
|
|
$
|
341,064
|
|
Inventory
|
|
|
224,815
|
|
|
|
163,768
|
|
|
|
73,458
|
|
|
|
105
|
|
|
|
462,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
$
|
410,704
|
|
|
$
|
310,918
|
|
|
$
|
113,583
|
|
|
$
|
(31,995
|
)
|
|
$
|
803,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vacuum &
Analysis
|
|
Light &
Motion |
|
Equipment &
Solutions |
|
Corporate,
Eliminations
and
Other
|
|
Total
|
|
||||||||||
December 31, 2018:
|
|
|
|
|
|
|||||||||||||||
Segment assets:
|
|
|
|
|
|
|||||||||||||||
Accounts receivable
|
$ |
171,604
|
$ |
140,658
|
$ |
—
|
$ |
(16,808
|
) | $ |
295,454
|
|||||||||
Inventory
|
222,965
|
161,658
|
—
|
66
|
384,689
|
|||||||||||||||
Total segment assets
|
$ |
394,569
|
$ |
302,316
|
$ |
—
|
$ |
(16,742
|
) | $ |
680,143
|
|||||||||
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Total segment assets
|
$ |
803,210
|
$ |
680,143
|
||||
Cash and cash equivalents and short-term investments
|
523,989
|
718,171
|
||||||
Other current assets
|
106,348
|
65,790
|
||||||
Property, plant and equipment, net
|
241,871
|
194,367
|
||||||
Right-of-use asset
|
|
|
64,497
|
|
|
|
—
|
|
Goodwill and intangible assets, net
|
1,623,084
|
906,803
|
||||||
Other assets and long-term assets
|
53,321
|
48,972
|
||||||
Consolidated total assets
|
$ |
3,416,320
|
$ |
2,614,246
|
||||
|
Years Ended December 31,
|
|||||||||||
Net revenues:
|
2019
|
|
2018
|
|
2017
|
|
||||||
United States
|
$ |
888,370
|
$ |
1,022,660
|
$ |
955,284
|
||||||
China
|
178,618
|
127,681
|
97,072
|
|||||||||
South Korea
|
167,651
|
203,567
|
212,763
|
|||||||||
Japan
|
143,081
|
193,264
|
167,318
|
|||||||||
Germany
|
150,584
|
159,508
|
122,339
|
|||||||||
Other
|
371,469
|
368,428
|
361,201
|
|||||||||
|
$ |
1,899,773
|
$ |
2,075,108
|
$ |
1,915,977
|
||||||
|
Years Ended
|
|||||||
Long-lived assets:(1)
|
201
9
|
|
201
8
|
|
||||
United States
|
$
|
208,323
|
$
|
146,687
|
||||
Europe
|
41,433
|
26,794
|
||||||
Asia
|
89,567
|
50,572
|
||||||
|
$
|
339,323
|
$
|
224,053
|
||||
(1)
|
Long-lived assets include property, plant and equipment, net, right-of-use assets, and certain other assets, and exclude goodwill, intangible assets and long-term tax-related accounts.
|
|
Years Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
||||
Reportable segment:
|
|
|
||||||
Vacuum & Analysis
|
$ |
196,717
|
$ |
197,126
|
||||
Light & Motion
|
388,463
|
389,870
|
||||||
Equipment & Solutions
|
473,274
|
—
|
||||||
Total goodwill
|
$ |
1,058,454
|
$ |
586,996
|
||||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Advanced Manufacturing Components
|
$ |
1,482,808
|
$ |
1,835,202
|
$ |
1,701,301
|
||||||
Global Service
|
288,476
|
239,906
|
214,676
|
|||||||||
Advanced Manufacturing Systems
|
128,489
|
—
|
—
|
|||||||||
|
$ |
1,899,773
|
$ |
2,075,108
|
$ |
1,915,977
|
||||||
2
2
)
|
Restructuring
and Other
|
|
2019
|
|
2018
|
|
||||
Balance at January 1
|
$ |
2,632
|
$ |
3,244
|
||||
Charged to expense
|
5,532
|
3,567
|
||||||
Payments and adjustments
|
(4,428
|
)
|
(4,179
|
) | ||||
Balance at December 31
|
$ |
3,736
|
$ |
2,632
|
||||
2
3
)
|
Commitments and Contingencies
|
|
Quarter Ended
|
|||||||||||||||
|
March 31
|
|
June 30
|
|
Sept. 30
|
|
Dec. 31
|
|
||||||||
|
(Table in thousands, except per share data)
(Unaudited)
|
|||||||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues
|
$ |
463,561
|
$ |
474,110
|
$ |
462,451
|
$ |
499,651
|
||||||||
Gross profit
|
198,118
|
211,027
|
205,004
|
216,282
|
||||||||||||
Income from operations
|
23,066
|
63,902
|
66,820
|
66,063
|
||||||||||||
Net income
|
$ |
12,455
|
$ |
37,739
|
$ |
47,428
|
$ |
42,764
|
||||||||
Net income per share:
|
|
|
|
|
||||||||||||
Basic
|
$ |
0.23
|
$ |
0.69
|
$ |
0.86
|
$ |
0.78
|
||||||||
Diluted
|
$ |
0.23
|
$ |
0.69
|
$ |
0.86
|
$ |
0.77
|
||||||||
Cash dividends paid per common share
|
$ |
0.20
|
$ |
0.20
|
$ |
0.20
|
$ |
0.20
|
||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues
|
$ |
554,275
|
$ |
573,140
|
$ |
487,152
|
$ |
460,541
|
||||||||
Gross profit
|
262,855
|
274,877
|
231,860
|
209,884
|
||||||||||||
Income from operations
|
131,639
|
151,291
|
117,045
|
94,084
|
||||||||||||
Net income
|
$ |
105,121
|
$ |
122,862
|
$ |
93,277
|
$ |
71,636
|
||||||||
Net income per share:
|
|
|
|
|
||||||||||||
Basic
|
$ |
1.93
|
$ |
2.25
|
$ |
1.71
|
$ |
1.33
|
||||||||
Diluted
|
$ |
1.90
|
$ |
2.22
|
$ |
1.70
|
$ |
1.32
|
||||||||
Cash dividends paid per common share
|
$ |
0.18
|
$ |
0.20
|
$ |
0.20
|
$ |
0.20
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
• | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures of the Company are being made only in accordance with authorization of our management and directors of the Company; and |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
Financial Statements:
|
|
|||
61
|
||||
65
|
||||
66
|
||||
67
|
||||
68
|
||||
69
|
Exhibit
No.
|
|
Title
|
||
+2.1(1)
|
||||
+3.1(2)
|
||||
+3.2(3)
|
||||
+3.3(4)
|
||||
+3.4(5)
|
||||
4.1
|
||||
4.2
|
||||
+10.1(6)
|
||||
+10.2(7)
|
||||
+10.3(8)
|
Exhibit
No.
|
|
Title
|
||
+10.4(9)
|
||||
+10.5(10)
|
||||
+10.6(11)
|
||||
+10.7(12)
|
||||
+10.8(11)
|
||||
+10.9(13)
|
||||
+10.10(5)*
|
||||
+10.11(5)*
|
||||
+10.12(5)*
|
||||
+10.13(14)*
|
||||
+10.14(15)*
|
||||
+10.15(16)*
|
||||
+10.16(17)*
|
||||
+10.17(15)*
|
||||
+10.18(18)*
|
||||
+10.19(19)*
|
||||
+10.20(19)*
|
||||
+10.21(19)*
|
||||
+10.22(19)*
|
||||
+10.23(19)*
|
Exhibit
No.
|
|
Title
|
||
+10.24(19)*
|
||||
+10.25(20)*
|
||||
+10.26(21)*
|
||||
+10.27(18)*
|
||||
+10.28(13)*
|
||||
10.29*
|
||||
+10.30(22)*
|
||||
+10.31(14)*
|
||||
+10.32(14)*
|
||||
+10.33(14)*
|
||||
+10.34(14)*
|
||||
+10.35(14)*
|
||||
+10.36(14)*
|
||||
+10.37(14)*
|
||||
+10.38(14)*
|
||||
+10.39(14)*
|
||||
+10.40(23)*
|
||||
21.1
|
||||
23.1
|
||||
31.1
|
||||
31.2
|
||||
32.1
|
Exhibit
No.
|
|
Title
|
||
101.INS**
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|||
101.SCH**
|
Inline XBRL Taxonomy Extension Schema Document
|
|||
101.CAL**
|
Inline XBRL Taxonomy Calculation Linkbase
|
|||
101.DEF**
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|||
101.LAB**
|
Inline XBRL Taxonomy Labels Linkbase Document
|
|||
101.PRE**
|
Inline XBRL Taxonomy Presentation Linkbase Document
|
|||
104
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
|
+ | Previously filed |
* | Management contract or compensatory plan arrangement |
** | Filed with this Annual Report on Form 10-K for the year ended December 31, 2019 are the following documents formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations and Comprehensive Income; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements. |
(1) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on October 30, 2018.
|
(2) |
Incorporated by reference to the Registration Statement on Form
S-4
(File No.
333-49738),
filed with the Securities and Exchange Commission on November 13, 2000.
|
(3) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2001 (File No.
000-23621),
filed with the Securities and Exchange Commission on August 14, 2001.
|
(4) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2002 (File No.
000-23621),
filed with the Securities and Exchange Commission on August 13, 2002.
|
(5) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
(File No.
000-23621),
filed with the Securities and Exchange Commission on May 6, 2014.
|
(6) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on April 29, 2016.
|
(7) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on June 9, 2016.
|
(8) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on December 14, 2016.
|
(9) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on July 6, 2017.
|
(10) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on April 12, 2018.
|
(11) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on February 1, 2019.
|
(12) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K,
filed with the Securities and Exchange Commission on October 1, 2019
|
(13) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2019 (File No.
000-23621),
filed with the Securities and Exchange Commission on August 7, 2019.
|
(14) |
Incorporated by reference to the Registrant’s Annual Report on Form
10-K
for the year ended December 31, 2018 (File
No.000-23621)
filed with the Securities and Exchange Commission on February 26, 2019.
|
(15) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2018 (File No.
000-23621),
filed with the Securities and Exchange Commission on May 8, 2018.
|
(16) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on July 5, 2005
|
(17) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on October 24, 2013.
|
(18) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on November 1, 2018.
|
(19) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended March 31, 2016 (File No.
000-23621),
filed with the Securities and Exchange Commission on May 6, 2016.
|
(20) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on November 20, 2019.
|
(21) |
Incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2016 (File No.
000-23621),
filed with the Securities and Exchange Commission on August 3, 2016.
|
(22) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
filed with the Securities and Exchange Commission on May 11, 2018.
|
(23) |
Incorporated by reference to the Registrant’s Current Report on Form
8-K
with the Securities and Exchange Commission on February 12, 2020.
|
(b) | Exhibits |
(c) | Financial Statement Schedules |
Item 16.
|
Form 10-K Summary
|
|
|
|
Additions
|
|
|
|
|
|||||||||||||||||
Description
|
Balance at
Beginning
of
Year
|
|
Acquisition
Beginning
Balance
|
|
Charged to
Costs and
Expenses
|
|
Charged
to Other
Accounts
|
|
Deductions &
Write-offs
|
|
Balance at
End of Year
|
|
||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Allowance for doubtful accounts:
|
|
|||||||||||||||||||||||
Years ended December 31,
|
|
|
|
|
|
|
||||||||||||||||||
2019
|
$ |
5,243
|
$ |
201
|
$ |
(728
|
) | $ |
—
|
$ |
(2,933
|
) | $ |
1,783
|
||||||||||
2018
|
$ |
4,135
|
$ |
—
|
$ |
1,435
|
$ |
—
|
$ |
(327
|
) | $ |
5,243
|
|||||||||||
2017
|
$ |
3,909
|
$ |
—
|
$ |
825
|
$ |
—
|
$ |
(599
|
) | $ |
4,135
|
|
|
|
Additions
|
|
|
|
|
|||||||||||||||||
Description
|
Balance at
Beginning
of
Year
|
|
Acquisition
Beginning
Balance
|
|
Charged to
Costs and
Expenses
|
|
Charged
to Other
Accounts
|
|
Deductions &
Write-offs
|
|
Balance at
End of Year
|
|
||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Allowance for sales returns:
|
|
|||||||||||||||||||||||
Years ended December 31,
|
|
|
|
|
|
|
||||||||||||||||||
2019
|
$ |
1,033
|
$ |
—
|
$ |
200
|
$ |
—
|
$ |
162
|
$ |
1,395
|
||||||||||||
2018
|
$ |
1,295
|
$ |
—
|
$ |
124
|
$ |
—
|
$ |
(386
|
) | $ |
1,033
|
|||||||||||
2017
|
$ |
1,138
|
$ |
—
|
$ |
(142
|
) | $ |
—
|
$ |
299
|
$ |
1,295
|
|
|
|
Additions
|
|
|
|
|
|||||||||||||||||
Description
|
Balance at
Beginning
of
Year
|
|
Acquisition
Beginning
Balance
|
|
Charged to
Costs and
Expenses
|
|
Charged
to Other
Accounts
|
|
Deductions
|
|
Balance at
End of Year
|
|
||||||||||||
|
(in thousands)
|
|||||||||||||||||||||||
Valuation allowance on deferred tax asset:
|
|
|||||||||||||||||||||||
Years ended December 31,
|
|
|
|
|
|
|
||||||||||||||||||
2019
|
$ |
17,936
|
$ |
5,876
|
$ |
4,934
|
$ |
—
|
$ |
(1,386
|
)
|
$ |
27,360
|
|||||||||||
2018
|
$ |
13,629
|
$ |
—
|
$ |
4,825
|
$ |
—
|
$ |
(518
|
) | $ |
17,936
|
|||||||||||
2017
|
$ |
12,527
|
$ |
—
|
$ |
1,603
|
$ |
—
|
$ |
(501
|
) | $ |
13,629
|
MKS INSTRUMENTS, INC.
|
||
|
|
|
By:
|
|
/s/ John T.C. Lee
|
|
|
John T.C. Lee
President and Chief Executive Officer
(Principal Executive Officer)
|
SIGNATURES
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
/s/ John R. Bertucci
John R. Bertucci
|
|
Chairman of the Board of Directors
|
|
February
28
, 2020
|
|
|
|
|
|
/s/ John T.C. Lee
John T.C. Lee
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
February
28
, 2020
|
|
|
|
|
|
/s/ Seth H. Bagshaw
Seth H. Bagshaw
|
|
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
|
|
February
28
|
|
|
|
|
|
/s/ Rajeev Batra
Rajeev Batra
|
|
Director
|
|
February
28
|
|
|
|
|
|
/s/ Gregory R. Beecher
Gregory R. Beecher
|
|
Director
|
|
February
2
, 2020
8
|
|
|
|
|
|
/s/ Gerald G. Colella
Gerald G. Colella
|
|
Director
|
|
February
28
, 2020
|
|
|
|
|
|
/s/ Rick D. Hess
Rick D. Hess
|
|
Director
|
|
February
28
, 2020
|
|
|
|
|
|
/s/ Jacqueline F. Moloney
Jacqueline F. Moloney
|
|
Director
|
|
February
28
2020
,
|
|
|
|
|
|
/s/ Elizabeth A. Mora
Elizabeth A. Mora
|
|
Director
|
|
February
28
, 2020
|
|
|
|
|
|
/s/ Michelle M. Warner
Michelle M. Warner
|
|
Director
|
|
February
28
, 2020
|
1 Year MKS Instruments Chart |
1 Month MKS Instruments Chart |
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