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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRA
NSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Massachusetts
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04-2277512
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(State or other Jurisdiction of
Incorporation or Organization) |
(IRS Employer
Identification No.) |
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2 Tech Drive, Suite 201
,
Andover
,
Massachusetts
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01810
|
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(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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||
Common Stock
, no par value
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MKSI
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Nasdaq Global Select Market
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Accelerated filer
☐
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Non-accelerated
filer
☐
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Smaller reporting company
☐
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Emerging growth company
☐
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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.
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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.
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Properties
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Country
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City
|
|
Sq. Ft.
|
|
Activity
|
Reportable
Segment |
|
Lease
Expires
|
|
|||||||||
CHINA
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Shenzhen
|
302,000
|
Manufacturing
|
Vacuum & Analysis
|
August 31, 2025
|
|||||||||||||
FRANCE
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(1)
|
183,000
|
Manufacturing, Research and Development
|
Light & Motion
|
Owned
|
|||||||||||||
ISRAEL
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Jerusalem
|
118,000
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Manufacturing, Sales, Research and Development
|
Light & Motion
|
(2)
|
|||||||||||||
MEXICO
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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)
|
|||||||||||||
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Irvine, CA
|
254,900
|
Manufacturing, Research and Development
|
Light & Motion
|
(5)
|
|||||||||||||
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Rochester, NY
|
156,000
|
Manufacturing, Sales, Customer Support, Service, Research and Development
|
Vacuum & Analysis
|
Owned
|
|||||||||||||
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Santa Clara, CA
|
139,500
|
Manufacturing, Customer Support, Research and Development
|
Light & Motion
|
March 31, 2021
|
|||||||||||||
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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
|
Exhibit 4.1
MKS
MKS INSTRUMENTS, INC. COMMON STOCK SEE REVERSE
FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS CUSIP 55306N 10 4
THIS CERTIFIES THAT is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE, OF
MKS INSTRUMENTS, INC.
transferable Certificate and only the on shares the books represented of
the Corporation hereby areby issued the holder underhereof and subject in person to the or laws by duly of The authorized Commonwealth attorney upon of Massachusetts surrender of this and Certi to the ficate article properly s of Organization
endorsed. This and By-IN laws WITNESS of the Corporation, WHEREOF, allthe as amended Corporation from has time caused to time this . This Certi Certificate ficate to be is not signed valid by unless the
facsimile countersigned signatures and of registered its duly authorized by the Transfer officers Agent and and a facsimile Registrarseal . of its corporate seal to be hereunto affixed.
Dated: TREASURER PRESIDENT COUNTERSIGNED AMERICAN STOCK AND TRANSFER REGISTERED: & TRUST COMPANY, LLC (Brooklyn, TRANSFER New York) AGENT AND REGISTRAR By: AUTHORIZED SIGNATURE
711 ARMSTRONG LANE, COLUMBIA, TN 38401 PROOF MKS INSTRUMENTS, OF: DECEMBER 12, INC 2019 . (931) 388-3003 WO - 19000474 FACE OPERATOR: DKS SALES: HOLLY
GRONER 931-490-7660 NEW COLORS SELECTED FOR PRINTING: INTAGLIO PRINTS IN SC-3 DARK GREEN. LOGO PRINTS IN
PMS 647 BLUE. PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: OK AS IS OK WITH CHANGES MAKE CHANGES AND SEND ANOTHER PROOF
MKS INSTRUMENTS, INC.
stockholder The Corporation
upon written has request, more than a copy one of class the full of stock text ofauthorized the preferences,voting to be issuedpowers, . The Corporation qualifications willand furnish special without and relative charge rights to each of the shares
of each class of stock (and any series thereof) authorized to be issued by the Corporation.
lawsThe or regulations: following abbreviations, when used in the
inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable
TEN COM as tenants in common
TEN ENT as tenants by entireties
JT TEN as join tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT
(Cust) Custodian
(Minor) under Uniform Gifts to Minors Act (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE IDENTIFYING INSERT SOCIAL
NUMBER SECURITY OF ASSIGNEE OR OTHER
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated
(Signature)
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Exhibit 4.2
MKS INSTRUMENTS, INC.
DESCRIPTION OF CAPITAL STOCK REGISTERED
UNDER SECTION 12 OF THE EXCHANGE ACT
The following description is a summary of the terms of our capital stock registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the Exchange Act) and is qualified in its entirety by reference to our Restated Articles of Organization, as amended (Charter) and our Amended and Restated By-laws (By-laws), each of which is incorporated by reference as an exhibit to this Annual Report on Form 10-K, and certain applicable provisions of Massachusetts law. As used in this Description of Capital Stock Registered Under Section 12 of the Exchange Act, the terms Company, we, our and us refer to MKS Instruments, Inc.
Authorized Capital Shares
Our authorized capital stock consists of 200,000,000 shares of common stock, no par value per share (Common Stock), and 2,000,000 shares of preferred stock, $0.01 par value per share (Preferred Stock).
Common Stock
Voting Rights. Holders of our Common Stock are entitled to one vote per share on all matters voted on by the shareholders, including the election of directors. Our Common Stock does not have cumulative voting rights.
Board of Directors. Our By-laws divide the board of directors into three classes with staggered three-year terms. Under our By-laws, any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled by vote of a majority of our directors then in office, unless and until filled by the shareholders. Furthermore, our By-laws provides that the authorized number of directors may be changed only by the resolution of our board of directors. The classification of our board of directors and the limitations on the ability of our shareholders to change the authorized number of directors and fill vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.
Advance Notice Requirements. Our By-laws require that we be given advance notice of proposals that shareholders wish to present for action at an annual meeting of shareholders (Annual Meeting), including director nominations (other than proposals made in compliance with Rule 14a-8 of the Exchange Act). The required written notice must be delivered to our Secretary at our principal office at least 90 days but no more than 120 days prior to the first anniversary of the preceding years Annual Meeting or it will be considered untimely. However, in the event that the date of the Annual Meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding years Annual Meeting, a shareholders notice must be received no earlier than the 120th day prior to the Annual Meeting and not later than the close of business on the later of (i) the 90th day prior to the Annual Meeting and (ii) the seventh day following the day on which notice of the date of the Annual Meeting was mailed or public disclosure of the date of the Annual Meeting was made, whichever occurs first.
Action by Written Consent; Special Meetings. Although our Charter and By-laws allow shareholders to act by written consent, such written consent must be signed by all shareholders entitled to vote on the matter to be approved. This significantly restricts the ability of our shareholders to act by written consent.
In addition, under our By-laws, special meetings of shareholders may be called only by our President or our Board of Directors. In addition, upon written application by one or more shareholders holding at least 40% of the shares of stock entitled to vote on the matter, special meetings of shareholders may be called by our Secretary.
Dividend Rights. Subject to the rights of holders of outstanding shares of Preferred Stock, if any, the holders of Common Stock are entitled to receive dividends, if any, that may be declared from time to time by our Board of Directors in its discretion out of funds legally available for the payment of dividends.
Liquidation Rights. Subject to the rights of holders of outstanding shares of Preferred Stock, if any, holders of Common Stock will share ratably in all assets legally available for distribution to our shareholders in the event of dissolution.
Other Rights and Preferences. Our Common Stock has no sinking fund or redemption provisions or preemptive, conversion or exchange rights.
Blank Check Preferred Stock.
Our Charter allows our Board of Directors to issue shares of Preferred Stock without the further approval of our shareholders. This is sometimes referred to as blank check preferred stock. The effects of such issuance, among other things, could include the dilution in the voting power of our Common Stock if the Preferred Stock has voting rights and the reduction or restriction of the rights of holders of Common Stock to receive a payment in the event of any liquidation, dissolution or winding up of our Company. In some circumstances, the issuance of Preferred Stock may render more difficult or expensive or tend to discourage a merger, tender offer, or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management. In addition, our Board of Directors could utilize the shares of Preferred Stock in order to adopt a shareholder rights plan, or poison pill, which could have the effect of discouraging or delaying a takeover of our Company.
Provisions of Our Charter and By-laws and Massachusetts Law that Could Delay or Defer a Change in Control. Our Charter and Bylaws contain provisions that may make the acquisition of control of our Company without the approval of our Board of Directors more difficult, as described above.
2
The Massachusetts General Laws contain anti-takeover provisions regarding, among other things, business combinations with an affiliated shareholder. In general, the Massachusetts General Laws prevent a publicly held Massachusetts corporation from engaging in a business combination, as defined in the Massachusetts General Laws, with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless:
|
before the date on which the person became an interested shareholder, the board of directors of the corporation approved either the business combination or the transaction in which the person became an interested shareholder; |
|
the interested shareholder acquires at least 90% of the outstanding voting stock of the corporation at the time it becomes an interested shareholder; or |
|
the business combination is approved by the board of directors and the holders of at least two-thirds of the outstanding voting stock of the corporation voting at a meeting, excluding the voting stock owned by the interested shareholder. |
An interested shareholder is generally a person owning 5% or more of the outstanding voting stock of the corporation. A business combination includes mergers, consolidations, stock and asset sales and other transactions with the interested shareholder that result in a financial benefit to the interested shareholder.
The Massachusetts General Laws also contain control share acquisitions provisions. We have elected to opt out of the control share acquisitions provisions, however, we may opt into these control share acquisitions provisions by amending our By-laws. In general, the control share acquisitions provisions of the Massachusetts General Laws provide that any person, including his, her or its affiliates, who acquires shares of a corporation that are subject to the control share acquisitions statute and whose shares represent one-fifth or more, one-third or more, or a majority or more, of the voting power of the corporation in the election of directors, cannot exercise any voting power with respect to those shares, or any shares acquired by the person within 90 days before or after an acquisition of this nature, unless these voting rights are authorized by the shareholders of the corporation.
The authorization of voting rights requires the affirmative vote of the holders of a majority of the outstanding voting shares, excluding shares owned by:
|
the person making an acquisition of this nature; |
|
any officer of the corporation; and |
|
any employee who is also a director of the corporation. |
There are several other types of share acquisitions that are not subject to these provisions of the Massachusetts General Laws, including acquisitions of shares under a tender offer, merger or consolidation which is made in connection with an agreement to which the corporation is a party, and acquisitions of shares directly from the corporation or a wholly-owned subsidiary of the corporation.
3
Exhibit 10.29
EMPLOYMENT AGREEMENT
MKS Instruments, Inc., a Massachusetts corporation (the Company), and James A. Schreiner of Savage, MN (Employee) agree, effective September 16, 2019, as follows.
1. Employment. The Company is employing Employee on an at-will basis in the position of Chief Operating Officer. Employee agrees to comply with the Companys policies.
2. Confidential Information Agreement. Employee will sign and deliver to the Company, at the same time that Employee executes this Employment Agreement, the Confidential Information, Intellectual Property and Non-Solicitation Agreement of MKS Instruments, Inc. (Confidential Information Agreement) that is Attachment 1 to this Employment Agreement.
3. Duty to The Company. While employed by the Company, Employee: (a) will devote his or her full working time and best efforts to the business of the Company; and (b) will not (without the prior, express, written consent of the Chief Executive Officer of the Company) engage in any business activity (whether or not for gain) that interferes with Employees work for the Company. Notwithstanding the previous sentence, this Employment Agreement does not prohibit Employee from managing his or her personal investments or engaging in charitable and unpaid professional activities (including serving on charitable and professional boards), so long as doing so does not materially interfere with Employees work for the Company or violate Section 7 of this Employment Agreement.
4. Compensation.
(a) Base Salary. The Company will pay Employee base salary at the rate of $400,000 per year (the Base Salary), in accordance with the Companys normal payroll practices. The Company may review and adjust the amount of the Base Salary from time to time in its sole discretion.
(b) Incentive Compensation Plan. Employee will be entitled to participate in the Companys Annual Corporate Management/Key Employee Bonus Plan, to the extent applicable to Employees position.
(c) Stock Incentive Plan. Employee will be entitled to participate in the Companys stock incentive plan to the extent applicable to Employees position.
(d) Benefits. Employee will be eligible to participate in the Companys generally available employee benefit plans, which currently include medical, dental, vision, life, accidental death and dismemberment, short-term disability and long-term disability insurance, a 401(k) savings plan and an employee stock purchase plan, subject to the terms and conditions of each plan.
(e) Paid Time Off. Employee will be eligible for 15 days of paid vacation per year, plus paid sick time and holidays, all subject to the terms and conditions of the Companys policies.
(f) Expenses. The Company will reimburse Employee for expenses Employee reasonably incurs in performing his or her duties, to the extent provided in the Companys expense reimbursement policies. Reimbursement of expenses in one tax year will not affect reimbursement of expenses in any other tax year.
5. End of Employment. Either Employee or the Company may end the employment relationship at any time, for any reason, with or without notice or cause. The employment relationship will end automatically and immediately upon Employees death or entitlement to long-term disability benefits under the Companys long-term disability program. The date on which Employees employment ends, whether as the result of a resignation by Employee, a termination of employment by the Company, or an automatic termination of employment upon death or disability, is referred to in this Employment Agreement as the Employment End Date. If Employee resigns or the Company terminates Employees employment, the Company will (in either case) have the right at any time, for any reason in its sole discretion to decide the Employment End Date. In no event will the Companys deciding the Employment End Date following Employees resignation be considered termination by the Company of Employees employment.
6. Company Obligations Upon End of Employment. When the employment relationship ends, the Company will have no obligation to pay or provide Employee at any time any compensation, payment or benefit of any kind, except as expressly provided in Sections 6(a) though through 6(e) below.
(a) Minimum Obligations. When the employment relationship ends, no matter how it ends: (i) the Company will pay Employee any unpaid Base Salary through the Employment End Date; (ii) Employee will be entitled to accrued, vested benefits under the Companys benefit plans and programs to the extent provided in Section 4(d); (iii) the Company will pay Employee for any accrued but unused vacation; and (iv) the Company will reimburse Employee for any unreimbursed expenses incurred through the Employment End Date to the extent provided in Section 4(f).
(b) 30 Days Base Salary After Certain Resignations. If Employee provides the Company at least 30 days advance written notice of resignation of employment, is an active employee in good standing at the time of such notice and continues to perform his or her duties diligently and professionally to the extent requested thereafter, the Company will pay Employee his or her Base Salary for at least 30 days after such notice, even if the Employment End Date is earlier.
(c) 30 Days Base Salary After Certain Terminations. If the Company terminates Employees employment other than for Cause, as defined below, the Company will provide Employee with written notice of termination and pay Employee his or her Base Salary for at least 30 days after such notice of termination, even if the Employment End Date is earlier.
(d) Eligibility for Ordinary Severance Compensation. If the Company terminates Employees employment, Employee will be eligible for Ordinary
2
Severance Compensation, as described below, provided that all of the following conditions are satisfied: (i) the Companys primary reason for terminating Employees employment was a change to the Companys business needs (such as reduction in force or elimination of position) and not Cause as defined below; (ii) Employee has complied with and continues to comply with all of Employees obligations under this Employment Agreement and the Confidential Information Agreement; and (iii) Employee executes, provides to the Company within 45 days after the Employment End Date and does not thereafter revoke or attempt to revoke, a general release of claims, which may at the Companys option and in the Companys sole discretion include post-employment restrictions substantially identical to the post-employment restrictions contained in Section 7 below, all in a form satisfactory to the Company (General Release Agreement). The Companys good-faith determination that one or more of the conditions listed above has not been satisfied will be binding and conclusive.
(e) Ordinary Severance Compensation. If employee becomes eligible for Ordinary Severance Compensation:
(i) Base Salary. The Company will pay Employee, within 14 days after the General Release Agreement become irrevocable, a lump sum in an amount equal to 12 months of Base Salary.
(ii) Continuation of Benefits. For a period of 12 months after the Employment End Date, to the extent Employee elects to continue group medical, vision, or dental insurance coverage under COBRA and timely remits the amount of premium assessed to similarly situated active employees for comparable coverage, the Company will pay the Companys usual share of such premiums. Benefits payable under this Section 6(e)(ii) will terminate to the extent Employee ceases to be eligible for COBRA coverage under the Companys medical benefits plan. Notwithstanding the foregoing, the Company will not pay the contribution toward COBRA coverage described above to the extent that the Company reasonably determines that doing so would subject the Company to the excise tax under Section 4980D of the Internal Revenue Code (the Code) (as a result of discriminatory coverage under a group health plan).
(f) Eligibility for Enhanced Severance Compensation. Employee will become eligible for the Enhanced Severance Compensation, as described below, instead of Ordinary Severance Compensation under Section 6(d) and (e) above or under any other program or policy of the Company, if and only if all of the following conditions are satisfied: (i) the Company terminates Employees employment without Cause (as defined below) or Employee resigns for Good Reason (as defined below); (ii) the Employment End Date is within 24 months after the effective date of a Change in Control (as defined below); (iii) Employee has complied with and continues to comply with all of Employees obligations under this Employment Agreement and the Confidential Information Agreement; and (iv) Employee executes, provides to the Company within 45 days after the Employment End Date and does not thereafter revoke or attempt to revoke, a General Release Agreement, as defined above. The Companys good-faith determination that one or more of the conditions listed above has not been satisfied will be binding and conclusive.
3
(g) Enhanced Severance Compensation. If Employee becomes eligible for the Enhanced Severance Compensation:
(i) Base Salary. The Company will pay Employee, within 14 days after the General Release Agreement become irrevocable, a lump sum in an amount equal to one and one half times annual Base Salary (determined without regard to any reduction in Base Salary giving rise to Good Reason, as defined below).
(ii) Incentive Compensation. The Company will pay Employee, within 14 days after the General Release Agreement becomes irrevocable, a lump sum equal to one and one half times the annual amount of incentive compensation for which Employee was eligible under any Incentive Compensation Plan of the Company then in effect for the year containing the Employment End Date. Additionally, the Employee will receive a payment for target bonus, prorated for the current year.
(iii) Continuation of Benefits. For a period of 18 months after the Employment End Date, to the extent Employee elects to continue group medical, vision, or dental insurance coverage under COBRA and timely remits the amount of premium assessed to similarly situated active employees for comparable coverage, the Company will pay the Companys usual share of such premiums. Benefits payable under this Section 6(g)(iii) will terminate to the extent Employee ceases to be eligible for COBRA coverage under the Companys medical benefits plan. Notwithstanding the foregoing, the Company will not pay the contribution toward COBRA coverage described above to the extent that the Company reasonably determines that doing so would subject the Company to the excise tax under Section 4980D of the Internal Revenue Code (the Code) (as a result of discriminatory coverage under a group health plan).
(iv) Restricted Stock Units or Stock Appreciation Rights. Employees unvested equity awards as of the Employment End Date will be subject to accelerated vesting to the extent provided in the respective equity award agreement issued to Employee under the then effective MKS Instruments, Inc. equity incentive plan (including the MKS Instruments, Inc. 2014 Stock Incentive Plan.
(h) No Obligation to Mitigate Damages; Effect on Other Contractual Rights. Employee will not be required to mitigate damages, by seeking other employment or otherwise, as a condition of receiving any portion of the Ordinary Severance Compensation or the Enhanced Severance Compensation. Nor will the Ordinary Severance Compensation or the Enhanced Severance Compensation be reduced by any compensation earned by Employee as the result of employment by an employer other than the Company or a direct or indirect parent, subsidiary or affiliate of the Company after the Employment End Date. Nothing in this Section 6(h) is intended to or shall delay, prevent or require any compensation for any termination of COBRA benefits that may occur pursuant to Section 6(e)(ii) or Section 6(g)(iii) above.
4
(i) Cause. Cause to terminate Employees employment will exist if Employee:
(i) commits a felony or engages in fraud, misappropriation or embezzlement;
(ii) knowingly fails or refuses to perform Employees duties in a material way and, to the extent that the Company determines such failure or refusal can reasonably be cured, fails or refuses to effect a cure within 10 days after the Company notifies Employee in writing of the failure or refusal;
(iii) knowingly causes, or knowingly creates a serious risk of causing, material harm to the Companys business or reputation; or
(iv) breaches, in a material way, this Employment Agreement, the Confidential Information Agreement or any other agreement between Employee and the Company, and, to the extent that the Company determines such breach can reasonably be cured, fails or refuses to effect a cure within 10 days after the Company notifies Employee in writing of the breach.
(j) Good Reason. Good Reason for Employee to resign will exist if, without Employees express written consent:
(i) the Company materially reduces Employees position, duties or responsibilities;
(ii) the Company reduces Employees Base Salary as in effect on the date hereof or as the same may be increased from time to time during the term of this Employment Agreement;
(iii) the Company changes Employees principal place of work to a location more than 50 miles from Employees current principal place of work.
Notwithstanding the foregoing, an action described above will not constitute Good Reason unless: (A) Employee, within 30 days after the he or she learns, or with reasonable diligence should have learned, of such action, delivers to the Company written notice identifying the action as Good Reason and demanding its correction; (B) the Company fails to correct such event within 30 days after receipt of such notice; and (C) Employee resigns for Good Reason within 90 days after the date Employee learned, or with reasonable diligence should have learned, of such action.
(k) Change in Control. For purposes of this Employment Agreement, the term Change in Control will mean the first to occur of any of the following events: (i) any person (as that term is used in Section 13 and 14(d)(2) of the
5
Securities Exchange Act of 1934 (Exchange Act)) becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of fifty percent (50%) or more of MKS capital stock entitled to vote in the election of directors; (ii) the shareholders of MKS approve any consolidation or merger of MKS other than a consolidation or merger of MKS in which the holders of the common stock of MKS immediately prior to the consolidation or merger hold more than fifty percent (50%) of the common stock of the surviving corporation immediately after the consolidation or merger; or (iii) the shareholders of MKS approve the sale or transfer of all or substantially all of the assets of MKS to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which MKS is a member.
7. Non-Competition.
(a) During Employees MKS Employment (as defined below) and for 12 months immediately thereafter (together, the Non-Compete Period), Employee will not engage in or otherwise carry on, directly or indirectly anywhere in the world (as principal, agent, employee, employer, investor, shareholder (except for holdings of no greater than 1% of the total outstanding shares in a publicly-traded company), consultant, partner, member, manager, financier or in any other individual or representative capacity of any kind whatsoever), any Competitive Activity (as defined below).
(b) MKS Employment means the period beginning on the first day that Employee is employed by the Company and ending on the first day on which Employee is no longer employed by any MKS Entity (as defined below).
(c) MKS Entity means (i) the Company; (ii) any current or future parent, subsidiary or affiliate of the Company; or (iii) any successor or assign of (i) or (ii).
(d) Competitive Activity means business or activity competitive with an MKS Entity but only to the extent that business or activity is related to, similar to, or competitive with the activities of the business unit(s), division(s), laborator(y)(ies), facilit(y)(ies) and other operational unit(s) in or for which Employee performed work for an MKS Entity or about which Employee acquired Proprietary Information (as defined in the Confidential Information Agreement).
(e) The Non-Compete Period shall be extended to two (2) years upon Employees breach of his/her fiduciary duty and/or unlawful taking, physically or electronically, of property belonging to the Company.
(f) If any court of competent jurisdiction determines that this Section 7 is unenforceable because the Non-Compete Period is too long or because Competitive Activity includes too great a range of activities or too wide a geographic scope, the parties agree that this Section 7 should be interpreted to extend only over the maximum period of time or range of activities or geographic scope as to which it may be enforceable.
(g) The post-employment restrictions on Employees conduct contained in this Employment Agreement and in the Confidential Information Agreement will continue to apply even if Employees duties, title, compensation, location or other terms or conditions of employment change, and even if such change or changes are material.
6
(h) The Company and Employee agree that violation by Employee of any of the provisions of this Section 7 of this Employment Agreement would cause the Company irreparable harm beyond what could reasonably or adequately be compensated in damages, and that the Company would therefore be entitled (in addition to the Companys other remedies) to an injunction, declaratory judgment or restraining order against any such violation or threatened violation.
(i) Employee has had an opportunity to have this Agreement reviewed by an attorney before signing.
(j) Employee acknowledges and agrees that this non-competition covenant is supported by the following mutually-agreed upon consideration, which the parties acknowledge and agree is fair and reasonable: at-will employment with the Company, the compensation and benefits associated therewith and the other terms and conditions of this Agreement.
(k) If and to the extent Employee is employed in California, the provisions of this Section 7 shall not apply.
8. Code Section 409A Compliance.
(a) Where this Employment Agreement refers to Employees termination of employment for purposes of receiving any payment, whether such a termination has occurred will be determined in accordance with Section 409A of the Internal Revenue Code (the Code) and Treasury Regulation Section 1.409A-1(h) (or any successor provisions) to the extent required by law.
(b) To the extent that benefits under Section 6 are contingent upon Employee providing a General Release Agreement, Employee will sign and return the General Release Agreement within the reasonable time period designated by the Company, which will not be more than 45 days. If the period for Employee to review a General Release Agreement plus any revocation period crosses calendar years, payments contingent upon the Release will be made in the later calendar year. Any payments contingent upon the General Release Agreement that would otherwise be made during the period for review and revocation of the General Release Agreement will be made, provided that the General Release Agreement is timely executed and returned to the Company and not revoked, on the first scheduled payment date after such period ends. Each payment in respect of Employees termination of employment under Section 6 of the Employment Agreement is designated as a separate payment for Section 409A purposes.
(c) If Employee is designated as a specified Executive within the meaning of Code Section 409A (while the Company is publicly traded), any deferred compensation payment subject to Section 409A to be made during the six-month period following Employees termination of employment will be withheld and the amount of the payments withheld will be paid in a lump sum, without interest, during the seventh month after Employees termination; provided, however, that if
7
Employee dies prior to the expiration of such six month period, payment to Employees beneficiary will be made as soon as reasonably practicable following Employees death. The Company will identify in writing delivered to Employee any payments it reasonably determines are subject to delay under this Section 8(c). In no event will the Company have any liability or obligation with respect to taxes for which Employee may become liable as a result of the application of Code Section 409A.
9. Code Sections 280G/4999. If (a) any payments or benefits to Employee in connection with this Employment Agreement (Payments) would be subject to the excise tax imposed by Code Section 4999 (the Parachute Tax), (b) paying Employee a lesser amount would avoid the Parachute Tax entirely and (c) payment of such lesser amount would, after taking into account applicable federal, state and local income taxes and the Parachute Tax, result in Employee receiving a greater after-tax payment than if the Company made the Payments in full, then the Company will pay Employee such lesser amount instead of making the Payments in full. The reporting and payment of any Parachute Tax will in all events be Employees responsibility. The Company will not in any event provide a gross-up or any other payment to compensate Employee for the payment of the Parachute Tax or for any reduction in the Payments. The Company will withhold from the Payments any amounts it reasonably determines are required under Code Section 4999(c) and the Treasury Regulations thereunder.
10. Withholding. The Company will deduct from the amounts payable to Employee pursuant to this Employment Agreement all withholding amounts and deductions required by law or authorized by Employee.
11. Changes to Plans and Policies. Nothing in this Employment Agreement will: (a) require the Company or its affiliates to establish, maintain or continue any incentive compensation plan, stock incentive plan or other benefit plan, policy or arrangement; (b) restrict the right of the Company or any of its affiliates to amend, modify or terminate any such plan, policy or arrangement; (c) entitle Employee to participate in any such plan policy or arrangement at any specified level (or at all) in any year; or (d) prevent any future change to any such plan, policy or arrangement from applying to Employee in accordance with the terms of the change.
12. Assignment. The rights and obligations of the Company under this Employment Agreement will inure to the benefit of, and be binding upon, the Companys successors and assigns. The rights and obligations of Employee under this Employment Agreement will inure to the benefit of, and will be binding upon, Employees heirs, executors and legal representatives. Employee may not delegate or assign any obligations under this Employment Agreement.
13. Entire Agreement and Severability. This Employment Agreement and the Confidential Information Agreement supersede any and all other agreements, either oral or in writing, between Employee and the Company with respect to the Companys employment of Employee. They contain all of the covenants and agreements between the parties with respect to such employment. Neither party is entering into this Employment Agreement on the basis of any representation, inducement, promise or agreement, oral or otherwise, by any party, or by any one acting on behalf of any party, which is not stated herein. Any modification of this Employment Agreement will be
8
effective only if it is in writing and signed by both parties to this Employment Agreement. If any provision in this Employment Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or invalidated in any way.
14. Miscellaneous. This Employment Agreement and the rights and obligations of the parties hereunder will be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, excluding (but only to the extent permitted by law) its conflict of laws and choice of law rules. The parties agree that service of any process, summons, notice or document by U.S. certified mail or overnight delivery by a generally recognized commercial courier service to Employees last known address (or any mode of service recognized to be effective by applicable law) will be effective service of process for any action, suit or proceeding brought against Employee. The failure of either party hereto to enforce any right under this Employment Agreement will not be considered a waiver of that right, or of damages caused thereby, or of any other rights under this Employment Agreement.
15. Arbitration and Waiver of Jury Trial.
(a) Any Legal Dispute (as defined below) between Employee and any MKS Entity (or between Employee and any employee or agent of any MKS Entity, to the extent directly or indirectly arising from or relating in any way to Employees employment with or separation from the Company) will be resolved by final and binding arbitration. Notwithstanding the foregoing sentence, the Company may, in its sole discretion, obtain preliminary injunctive relief enforcing the provisions of the Confidential Information Agreement or Section 7 of this Employment Agreement from any court of competent jurisdiction.
(b) Legal Dispute means a dispute about legal rights or legal obligations, including but not limited to any rights or obligations arising under this Employment Agreement; the Confidential Information Agreement; any other agreement; any applicable legal or equitable doctrine; any applicable common law theory; or any applicable federal, state or local, statute, regulation or other legal requirement.
(c) The arbitration will be held in the Commonwealth of Massachusetts. It will be conducted in accordance with the then-prevailing Employment Arbitration Rules of the American Arbitration Association.
(d) Notwithstanding any other provision of this Employment Agreement or any other agreement or of any arbitration rules, no Legal Dispute involving any MKS Entity may be included in any class or collective arbitration or any other class or collective proceeding. The exclusive method for resolving any such Legal Dispute will be arbitration on an individual basis.
(e) Any issues about whether a dispute is subject to arbitration will be determined by a court of competent jurisdiction and not by an arbitrator. Any issues about the meaning or enforceability of Section 15(d) will be decided by a court of competent jurisdiction and not by an arbitrator.
9
(f) The Company, Employee and the arbitrator will treat all aspects of the arbitration proceedings, including without limitation, discovery, testimony and other evidence, briefs and the award, as strictly confidential, except that the arbitration award may be disclosed to the extent necessary to enforce the award, the provisions of the Confidential Information Agreement, or the provisions of this Employment Agreement.
(g) Employee and the Company understand and acknowledge that by agreeing to arbitrate the disputes covered by this Section 15, they are waiving the right to resolve those disputes in court and waiving any right to a jury trial with respect to those disputes.
16. Knowing and Voluntary Agreement. Employee understands that Employee has the right to consult counsel before signing this Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed, in the Commonwealth of Massachusetts, this Employment Agreement as a sealed instrument, all as of the day, month and year first written above.
MKS INSTRUMENTS, INC.
By: | ||
/s/ CarolAnn Chory | Dated: August 3, 2019 | |
Name: CarolAnn Chory | ||
Title: Consultant, Global Talent Acquisition |
/s/ J. A. Schreiner | Dated: August 6, 2019 | |
Employee Signature | ||
Mr. James A. Schreiner 8320 West 132nd Street |
||
Savage, MN 55378 |
10
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY | JURISDICTION OF INCORPORATION | |
Beijing Newport Spectra-Physics Technologies Co., Ltd. | China | |
Electro Scientific Industries Europe Ltd | United Kingdom | |
Electro Scientific Industries GmbH | Germany | |
Electro Scientific Industries Singapore Pte. Ltd. | Singapore | |
Electro Scientific Industries, Inc. | Oregon | |
Eolite Systems SAS | France | |
ESI China, Inc. | Oregon | |
ESI Electronic Equipment (Shanghai) Co., Ltd. | China | |
ESI International Corporation | Oregon | |
ESI Japan, K.K. | Japan | |
ESI Korea, Inc. | Korea | |
ESI Vietnam Company Limited | Vietnam | |
High Q Laser GmbH | Austria | |
Micro-Controle Spectra-Physics S.A.S. | France | |
MKS Denmark ApS | Denmark | |
MKS German Holding GmbH | Germany | |
MKS Instruments (China) Company Ltd. | China | |
MKS Instruments (Hong Kong) Limited | Hong Kong | |
MKS Instruments (Singapore) Pte. Ltd. | Singapore | |
MKS Instruments Deutschland GmbH | Germany | |
MKS Instruments ESI Switzerland GmbH | Switzerland | |
MKS Instruments Holdings Ltd | United Kingdom | |
MKS Instruments Israel Ltd. | Israel | |
MKS Instruments Italy S.r.l. | Italy | |
MKS Instruments Mexico S. de R.L. de C.V. | Mexico | |
MKS Instruments UK Limited | United Kingdom | |
MKS Spectra Holdings Limited | United Kingdom | |
MKS Japan, Inc. | Japan | |
MKS Korea Ltd. | Korea | |
MKS Taiwan Technology Limited | Taiwan | |
Newport Corporation | Nevada | |
Newport Instruments Canada Corporation | Canada | |
Newport Laser Holding GmbH | Austria | |
Newport Ophir Holdings Ltd. | Israel | |
Newport Opto-Electronics Technologies (Korea), LLC | Korea | |
Newport Opto-Electronics Technologies (Singapore) Pte. Ltd. | Singapore | |
Newport Opto-Electronics Technologies (Wuxi) Company Limited | China | |
Newport Spectra-Physics B.V. | Netherlands | |
Newport Spectra-Physics GmbH | Germany | |
Newport Spectra-Physics Limited | United Kingdom | |
Ophir Japan Ltd. | Japan | |
Ophir Optics S.R.L. | Romania | |
Ophir Optronics GmbH | Germany | |
Ophir Optronics Ltd. | Israel | |
Ophir Optronics Solutions Ltd. | Israel | |
Ophir Spiricon Europe GmbH | Germany | |
Ophir-Spiricon, LLC | Utah | |
Spectra-Physics, K.K. | Japan | |
V-Gen Ltd. | Israel |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-34450 and 333-109753) and Form S-8 (Nos.333-78069, 333-78071, 333-78073, 333-31224, 333-54486, 333-54488, 333-54490, 333-90498, 333-90500, 333-90502, 333-116385, 333-116387, 333-116389, 333-127221, 333-161211, 333-195750, 333-211026, and 333-229483) of MKS Instruments, Inc. of our report dated February 28, 2020 relating to the consolidated financial statements and financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 28, 2020
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/RULE 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, John T.C. Lee, certify that:
1. |
I have reviewed this annual report on Form 10-K of MKS Instruments, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any changes in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: February 28, 2020 |
/s/ John T.C. Lee |
|
John T.C. Lee President and Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/RULE 15d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Seth H. Bagshaw, certify that:
1. |
I have reviewed this annual report on Form 10-K of MKS Instruments, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any changes in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: February 28, 2020 |
/s/ Seth H. Bagshaw |
|
Seth H. Bagshaw Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of MKS Instruments, Inc. (the Company) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, John T.C. Lee, President and Chief Executive Officer of the Company, and Seth H. Bagshaw, Senior Vice President, Chief Financial Officer and Treasurer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on his knowledge:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: February 28, 2020 |
/s/ John T.C. Lee |
|
John T.C. Lee President and Chief Executive Officer (Principal Executive Officer) |
Dated: February 28, 2020 |
/s/ Seth H. Bagshaw |
|
Seth H. Bagshaw Senior Vice President, Chief Financial Officer and Treasurer |