MKS INC 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, 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 and includes those policies and procedures that: • 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, we used the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective. Our internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report, which appears in Item 8 of this Annual Report on Form 10-K. 108 Changes in Internal Control over Financial Reporting Our management concluded that a material weakness existed as of December 31, 2022, as previously disclosed in “Item 9A–Controls and Procedures of our Annual Report on Form 10-K for the year ended December 31, 2022, as we did not maintain sufficient information technology (“IT”) controls to prevent or detect, on a timely basis, unauthorized access to the Company’s financial reporting systems. Specifically, we did not design and maintain effective controls with regard to our financial reporting systems related to access authentication, intrusion detection and response capability, and backup and restoration such that recovery from a cybersecurity incident could be performed in a more timely manner. This material weakness did not result in a misstatement to the annual or interim consolidated financial statements previously filed or included in this Annual Report on Form 10-K. However, it could have resulted in a material misstatement to the annual or interim consolidated financial statements that would not have been prevented or detected. Subsequently, the Company has taken corrective action to remediate and address the IT control deficiencies that aggregated to the noted material weakness. The Company added in its systems various new controls and enhanced existing controls to strengthen our cybersecurity. Based on testing performed by management, implemented controls are designed to operate, and are operating, effectively and the material weakness has been remediated as of December 31, 2023. Except for the changes noted above in connection with the initiatives to remediate the material weakness, there was no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Othe r Information For the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a trading arrangement for the sale or purchase of Company securities that is either (1) a contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or (2) a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 109 PART III Item 10. Directors, Executive Of ficers and Corporate Governance The information required by this item will be set forth under the captions “Proposal One — Election of Directors,” “Directors,” “Corporate Governance,” “Executive Officers,” “Corporate Governance — Code of Business Conduct and Ethics” and “Corporate Governance — Board of Directors Meetings and Committees of the Board of Directors — Audit Committee” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission (“SEC”) no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. We are also required under Item 405 of Regulation S-K to provide information concerning delinquent filers of reports under Section 16 of the Securities and Exchange Act of 1934, as amended. This information will be set forth under the caption “Delinquent Section 16(a) Reports,” if applicable, in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. Item 11. Executi ve Compensation The information required by this item will be set forth under the captions “Executive Officers,” “Executive Compensation – Compensation Discussion and Analysis,” “Corporate Governance – Board of Director Meetings and Committees of the Board of Directors – Compensation Committee - Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Director Compensation” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and, other than the information required by Item 402(v) of Regulation S-K, is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters The information required by Item 403 of Regulation S-K will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. The information required by Item 201(d) of Regulation S-K will be set forth under the caption “Equity Compensation Plan Information” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. Item 13. Certain Relationships and Relate d Transactions and Director Independence The information required by this item will be set forth under the captions “Corporate Governance – Board Independence” and “Corporate Governance – Transactions with Related Persons” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. Item 14. Principal Accou ntant Fees and Services The information required by this item will be set forth under the caption “Audit and Financial Accounting Oversight — Principal Accountant Fees and Services” in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, to be filed with the SEC no later than 120 days after the end of our fiscal year, and is incorporated herein by reference. 110 PART IV Item 15. Exhibits and Fina ncial Statement Schedules (a) The following documents are filed as a part of this Annual Report on Form 10-K: 1. Financial Statements . The following Consolidated Financial Statements are included under Item 8 of this Annual Report on Form 10-K. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 63 Consolidated Balance Sheets at December 31, 2023 and 2022 65 Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2023, 2022 and 2021 66 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 67 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 68 Notes to Consolidated Financial Statements 69 2. Financial Statement Schedules. The following consolidated financial statement schedule is included in this Annual Report on Form 10-K. Schedule II – Valuation and Qualifying Accounts Schedules other than those listed above have been omitted since they are either not required or information is otherwise included. 3. Exhibits. The following exhibits are filed as part of this Annual Report on Form 10-K. Exhibit No. Title +3.1(1) Restated Articles of Organization of the Registrant +3.2(2) Articles of Amendment to Restated Articles of Organization, as filed with the Secretary of State of Massachusetts on May 18, 2001 +3.3(3) Articles of Amendment to Restated Articles of Organization, as filed with the Secretary of State of Massachusetts on May 16, 2002 +3.4(4) Amended and Restated By-Laws of the Registrant +4.1(5) Specimen certificate representing the Common Stock +4.2(5) Description of Capital Stock Registered Under Section 12 of the Exchange Act +10.1(6) Credit Agreement, dated as of August 17, 2022, by and among the Registrant, the lenders and letter of credit issuers party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent +10.2(7) First Amendment to Credit Agreement, dated as of October 3, 2023, by and among the Registrant, as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto +10.3(8) Second Amendment to Credit Agreement, dated as of January 22, 2024, by and among the Registrant, as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto 111 Exhibit No. Title +10.4(9) Third Amendment to Credit Agreement, dated as of February 13, 2024, by and among the Registrant, as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender and letter of credit issuer party thereto +10.5(10)* 2022 Stock Incentive Plan +10.6(11)* Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2022 Stock Incentive Plan +10.7(11)* Form of Restricted Stock Unit Agreement for Employees under the 2022 Stock Incentive Plan for 2022 +10.8(12)* Form of Restricted Stock Unit Agreement for Employees under the 2022 Stock Incentive Plan for 2023 10.9* Form of Restricted Stock Unit Agreement for Employees under the 2022 Stock Incentive Plan for 2024 (Standard) 10.10* Form of Restricted Stock Unit Agreement for Employees under the 2022 Stock Incentive Plan for 2024 (rTSR) +10.11(4)* 2014 Stock Incentive Plan +10.12(4)* 2014 Employee Stock Purchase Plan +10.13(13)* Form of Restricted Stock Unit Agreement for Employees under the 2014 Stock Incentive Plan +10.14(14)* Employment Agreement, dated October 22, 2013, between Gerald G. Colella and the Registrant +10.15(15)* Amendment, dated March 27, 2018, to Employment Agreement, dated as of October 22, 2013, between Gerald G. Colella and the Registrant +10.16(16) * Second Amendment, dated October 29, 2018, to Employment Agreement, dated as of October 22, 2013, between Gerald G. Colella and the Registrant +10.17(17)* Employment Agreement, dated as of November 18, 2019, between John T.C. Lee and the Registrant +10.18(18)* Employment Agreement, effective August 1, 2016, between Seth Bagshaw and the Registrant +10.19(16)* Amendment, dated October 29, 2018, to Employment Agreement, effective August 1, 2016, by and between Seth Bagshaw and the Registrant +10.20(19)* Employment Agreement, effective August 1, 2016, between Kathleen Burke and the Registrant, as amended on October 29, 2018 +10.21(5)* Employment Agreement, effective September 16, 2019, between James A. Schreiner and the Registrant +10.22(20)* Amendment, dated October 25, 2021, to Employment Agreement, effective September 16, 2019, between James A. Schreiner and the Registrant +10.23(21)* Employment Agreement, effective February 18, 2021, between Mark Gitin, the Registrant and Newport Corporation +10.24(21)* Employment Agreement, effective January 1, 2020, between David Henry and the Registrant +10.25(21)* Employment Agreement, effective February 17, 2021, between Eric Taranto and the Registrant +10.26(22)* Management Incentive Plan 21.1 Subsidiaries of the Registrant 23.1 Consent of PricewaterhouseCoopers LLP 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934 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 112 Exhibit No. Title 97.1 Dodd-Frank Compensation Recovery Policy 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 with Embedded Linkbase Documents 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, 2023 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 (Loss) Income; (iii) the Consolidated Statements of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to Consolidated Financial Statements. The following materials from MKS Instruments, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, are formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive (Loss) Income, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. (1) 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. (2) 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. (3) 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. (4) 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. (5) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 000-23621), filed with the Securities and Exchange Commission on February 28, 2020. (6) 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 August 17, 2022. (7) 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 October 3, 2023. (8) 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 January 22, 2024. (9) 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 February 14, 2024. (10) Incorporated by reference to the Registration Statement on Form S-8 (File No. 333-264817), filed with the Securities and Exchange Commission on May 10, 2022. (11) 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 11, 2022. (12) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2022 (File No. 000-23621), filed with the Securities and Exchange Commission on March 14, 2023. (13) 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. (14) 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 October 24, 2013. 113 (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 (File No. 000-23621), filed with the Securities and Exchange Commission on November 1, 2018. (17) 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 November 20, 2019. (18) 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. (19) 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. (20) 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 October 29, 2021. (21) Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020 (File No.000-23621), filed with the Securities and Exchange Commission on February 23, 2021. (22) 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 February 11, 2022. (b) Exhibits MKS hereby files as exhibits to its Annual Report on Form 10-K those exhibits listed in Item 15(a) above. Item 16. Form 10-K Summary Not applicable. 114 MKS Instruments, Inc. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in millions) 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 Allowance for doubtful accounts: Years ended December 31, 2023 $ 11 $ — $ — $ — $ ( 5 ) $ 6 2022 $ 4 $ 10 $ 2 $ — $ ( 5 ) $ 11 2021 $ 2 $ — $ 1 $ — $ 1 $ 4 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 Allowance for sales returns: Years ended December 31, 2023 $ 1 $ — $ — $ — $ — $ 1 2022 $ 2 $ — $ ( 1 ) $ — $ — $ 1 2021 $ 1 $ — $ 1 $ — $ — $ 2 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 Valuation allowance on deferred tax asset: Years ended December 31, 2023 $ 181 $ — $ 12 $ — $ ( 3 ) $ 190 2022 $ 26 $ 156 $ — $ — $ ( 1 ) $ 181 2021 $ 31 $ — $ 2 $ — $ ( 7 ) $ 26 115 SIGNA TURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 2023 to be signed on its behalf by the undersigned, thereunto duly authorized on the 27th day of February 2024. MKS INSTRUMENTS, INC. By: /s/ John T.C. Lee John T.C. Lee President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. SIGNATURES TITLE DATE /s/ Gerald G. Colella Chairman of the Board of Directors February 27, 2024 Gerald G. Colella /s/ John T.C. Lee President, Chief Executive Officer and Director (Principal Executive Officer) February 27, 2024 John T.C. Lee /s/ Seth H. Bagshaw Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) February 27, 2024 Seth H. Bagshaw /s/ Rajeev Batra Director February 27, 2024 Rajeev Batra /s/ Peter J. Cannone III Director February 27, 2024 Peter J. Cannone III /s/ Joseph B. Donahue Director February 27, 2024 Joseph B. Donahue /s/ Jacqueline F. Moloney Director February 27, 2024 Jacqueline F. Moloney /s/ Elizabeth A. Mora Director February 27, 2024 Elizabeth A. Mora /s/ Michelle M. Warner Director February 27, 2024 Michelle M. Warner 116