What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-27 · 621 added, 601 removed, 886 unchanged (58% of the section changed)

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We have audited the accompanying consolidated balance sheets of MKS Instruments, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive (loss) income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2023 appearing after Item 16 (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing after Item 16 (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interim and Annual Goodwill Impairment Assessments – Equipment Solutions (ESB), Electronics (EL) and General Metal Finishing (GMF) Reporting Units

As described in Notes 3 and 13 to the consolidated financial statements, the Company’s net goodwill balance was $2,554 million as of December 31, 2023, and the goodwill associated with the ESB, EL and GMF reporting units was $87 million, $1,401 million and $318 million, respectively.

Management assesses goodwill for impairment on an annual basis as of October 31 or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired.

During the quarter ended June 30, 2023, management concluded there was a triggering event at each of its ESB, EL and GMF reporting units.

The interim goodwill impairment test as of June 30, 2023 resulted in impairment charges of $372 million, $826 million and $428 million at the ESB, EL and GMF reporting units, respectively.

The annual goodwill impairment test resulted in impairment charges of $13 million and $48 million at the ESB and EL reporting units, respectively.

In the quantitative assessment, management compares the fair value of the reporting unit to its carrying amount, which includes goodwill.

If the fair value exceeds the carrying value, no impairment loss exists.

If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.

For each of the three reporting units, management performed a quantitative assessment of goodwill using a weighting of an income approach and market approach.

The income approach was based upon projected future cash flows that were discounted to present value and an assumed terminal growth rate.

The key underlying assumptions included forecasted revenues, which incorporated external market data, terminal growth rate, gross profit and operating expenses, as well as an applicable discount rate for each reporting unit.

The market approach for each of the three reporting units incorporated observed multiples of guideline public companies.

The market approach for the EL and GMF reporting units also incorporated multiples from guideline transactions.

The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments of the ESB, EL and GMF reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the ESB, EL and GMF reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to forecasted revenues, gross profits, operating expenses, terminal growth rates, discount rates, and multiples of guideline public companies for ESB, EL and GMF, and multiples from guideline transactions for EL and GMF;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Revenue Recognition – Certain Product Revenue

As described in Note 3 to the consolidated financial statements, revenue is recognized when or as obligations under the terms of a contract with a customer have been satisfied by the Company and control has transferred to the customer.

The majority of the Company’s performance obligations, and associated revenue, are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

The Company’s total net product revenue was $3.1 billion for the year ended December 31, 2024, of which a majority relates to certain product revenue.

The principal consideration for our determination that performing procedures relating to revenue recognition for certain product revenue is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition for certain product revenue.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s ESB, EL and GMF reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the ESB, EL and GMF reporting units;

(ii) evaluating the appropriateness of the income and market approaches used by management;

(iii) testing the completeness and accuracy of underlying data used in the income and market approaches;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to forecasted revenues, gross profits, operating expenses, terminal growth rates, discount rates, and multiples as applicable to the valuation approach and reporting units described above.

Evaluating management’s assumptions related to forecasted revenues, gross profits, operating expenses, and terminal growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the ESB, EL and GMF reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approaches and (ii) the reasonableness of the discount rates and multiples assumptions.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recording of revenue for certain product revenue at the consideration once control passes to the customer.

These procedures also included, among others (i) testing revenue recognized for a sample of certain product revenue transactions by obtaining and inspecting source documents, such as purchase orders, invoices, and proof of shipment or delivery;

(ii) testing revenue recognized for a sample of certain product revenue transactions before and after period end by obtaining and inspecting source documents, such as purchase orders, invoices and proof of shipment or delivery;

and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2024 and, for confirmations not returned, obtaining and inspecting source documents, such as purchase orders, invoices, proof of shipment or delivery, and subsequent cash receipts

/s/ PricewaterhouseCoopers LLP

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Cash and cash equivalents

Short-term investments

Trade accounts receivable, net of allowance for doubtful accounts of

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Non-current accrued compensation

Non-current lease liability

Non-current lease liabilities

Other non-current liabilities

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Preferred stock, $ 0.01 par value, 2 shares authorized;

no shares issued

and outstanding

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Retained earnings

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total stockholders’ equity

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MKS Instruments, Inc.

Consolidated Statements of Opera tions and Comprehensive (Loss) Income

Consolidated Statements of Opera tions and Comprehensive Income (Loss)

(in millions, except per share data)

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Acquisition and integration costs

Restructuring

Restructuring and other

Fees and expenses related to repricing of Term Loan Facility

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Gain on sale of long-lived assets

(Loss) income from operations

Income (loss) from operations

Interest income

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Loss on extinguishment of debt

Other expense, net

(Loss) income before income taxes

Other (income) expense, net

Income (loss) before income taxes

(Benefit) provision for income taxes

Net (loss) income

Other comprehensive (loss) income, net of tax:

Net income (loss)

Other comprehensive income (loss), net of tax:

Changes in value of financial instruments designated as cash flow

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Change in net investment hedge

Unrecognized pension (loss) gain

Unrecognized pension gain (loss)

Unrealized loss on investments

Total comprehensive (loss) income

Net (loss) income per share:

Total comprehensive income (loss)

Net income (loss) per share:

Weighted average common shares outstanding:

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Net issuance under stock-based plans

Shares issued for Atotech Acquisition

Stock-based compensation

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Comprehensive income (net of tax):

Other comprehensive loss

Other comprehensive income

Balance at December 31, 2022

Net issuance under stock-based plans

Shares issued for Atotech Acquisition

Stock-based compensation

Cash dividend ($ 0.88 per common share)

Comprehensive income (net of tax):

Other comprehensive income

Comprehensive loss (net of tax):

Other comprehensive loss

Balance at December 31, 2023

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Stock-based compensation

Purchase of capped calls related to Convertible Notes

Cash dividend ($ 0.88 per common share)

Comprehensive loss (net of tax):

Comprehensive income (loss) (net of tax):

Other comprehensive loss

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Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

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Goodwill and intangible asset impairments

Unrealized loss (gain) on derivatives not designated as hedging instruments

Unrealized loss (gain) on foreign currency and derivative instruments

Amortization of debt issuance costs and original issue discount

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Maturities of investments

Sales of investments

Proceeds from sale of long-lived assets

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Payments of borrowings

Purchase of capped calls related to Convertible Notes

Payments of deferred financing fees

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Effect of exchange rate changes on cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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(2) Basis of Presentation

The Consolidated Financial Statements include the accounts of MKS and its wholly owned subsidiaries.

The terms “MKS” and the “Company” refer to MKS Instruments, Inc.

and its subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to current period presentation.

As a result of rounding, there may be immaterial differences in amounts presented and certain calculations may not sum to the total number expressed in each category or tie to a corresponding schedule.

The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition and allowance for doubtful accounts, inventory valuation, warranty costs, pension plan valuations, stock-based compensation, intangible assets, goodwill, other long-lived assets, in-process research and development (“IPR&D”) and income taxes.

On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, inventory valuation, warranty costs, pension plan valuations, stock-based compensation expense, intangible assets, goodwill, long-lived assets, income taxes and derivatives.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

The Company has three reportable segments:

the Vacuum Solutions Division (“VSD”), the Photonics Solutions Division (“PSD”) and the Materials Solutions Division (“MSD”) as described in Note 21.

During the quarter ended March 31, 2024, the Company moved its Optical Sensing Products (“OSP”) product line from the PSD segment to the VSD segment.

The purpose of this realignment was to group the OSP products with related semiconductor products within the VSD segment.

Prior periods have been recast to reflect this change.

(3) Summary of Significant Accounting Policies

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Revenue is recognized when or as obligations under the terms of a contract with a customer have been satisfied and control has transferred to the customer.

The Company recognizes revenue over time for contracts relating to the manufacturing, modifications and retrofits of its plating equipment, as the equipment is

The majority of the Company’s performance obligations, and associated revenue,

MKS INSTRUMENTS, INC.

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(in millions, except per share data)

built to customer specification, and the Company has an enforceable right to payment for the performance completed to date.

are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments.

The Company recognizes revenue over time for contracts relating to the manufacturing, modifications and retrofits of its plating equipment, as the equipment is built to customer specification, and the Company has an enforceable right to payment for the performance completed to date.

For these sales, the Company uses the cost-to-cost input method to measure progress.

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Sales tax, value add tax, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.

The Company’s normal payment terms are 30 to 60 days, but vary by the type and location of its customers and the products or services offered.

The Company’s normal payment terms are generally 30 to 60 days but vary by the type and location of its customers and the products or services offered.

The time between invoicing and when payment is due is not significant .

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The Company’s standard assurance warranty period is normally 12 to 24 months.

The Company sells separately priced service contracts and extended warranty contracts related to certain of its products, in particular related to our plating and laser-based products.

The Company sells separately priced service contracts and extended warranty contracts related to certain of its products, in particular related to its plating and laser-based products.

The separately priced contracts generally range from 12 to 60 months.

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The Company’s research and development efforts include numerous projects, which generally have a duration of 3 to 36 months.

Acquired IPR&D expenses, if acquired in a business combination, are capitalized at fair value as an intangible asset until the related project is completed, and are then amortized over the estimated useful life of the product.

The Company monitors projects and, if they are abandoned, the Company writes them off.

Acquired in-process research and development (“IPR&D”) expenses, if acquired in a business combination, are capitalized at fair value as an intangible asset until the related project is completed and are then amortized over the estimated useful life of the product.

The Company monitors projects and, if they are abandoned, writes them off.

Advertising Costs

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For leases with a term of one year or less the Company has elected not to record the lease asset or liability.

The lease payments are recognized in the consolidated statements of operations and comprehensive (loss) income on a straight-line basis over the lease term.

The lease payments are recognized in the consolidated statements of operations and comprehensive income (loss) on a straight-line basis over the lease term.

The Company includes lease costs within cost of revenues and operating expenses.

Stock-Based Compensation

The accounting for share-based compensation expense requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values.

For restricted stock units (“RSUs”), the fair value is measured on the date of grant and expensed normally over a t hree-

The accounting for share-based compensation expense requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors based on estimated fair values.

MKS INSTRUMENTS, INC.

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(in millions, except per share data)

y ear period.

awards include (i) time-based restricted stock units (“RSUs”), (ii) performance-based RSUs based on the achievement of adjusted EBITDA targets (the “Adjusted EBITDA RSUs”), (iii) performance-based RSUs based on the Company’s total shareholder return relative to a group of peers over a three-year performance period (the “rTSR RSUs”) and (iv) employee stock purchase plan rights.

For RSUs, the fair value is measured on the date of grant and expensed normally over a three-year period.

The Company does not include a forfeiture rate in the fair value measurement at the date of grant.

The Company determines the fair value of time-based RSUs based on the closing market price of the Company’s common stock on the date of the award.

The Company determines the original fair value of Adjusted EBITDA RSUs based upon the closing market price of the Company’s stock on the date of the award and adjusts the fair value quarterly during the first year based upon actual and forecasted results against Adjusted EBITDA targets.

The Company estimates the fair value of rTSR RSUs using the Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock.

Such values are recognized as expense on a straight-line basis for time-based awards and rTSR RSUs and using the accelerated graded vesting method for Adjusted EBITDA RSUs, all over the requisite service periods.

The Company also provides certain employees with the opportunity to purchase shares through its 2014 Employee Stock Purchase Plan (“2014 ESPP”).

The Company estimates the fair value of shares issued under the 2014 ESPP using the Black-Scholes pricing model, which incorporates a number of complex and subjective variables, including expected stock price volatility over the term of the awards, expected life, risk-free interest rate and expected dividends.

The Company estimates the fair value of employee stock purchase plan rights using the Black-Scholes model which incorporates a number of complex and subjective variables, including expected stock price volatility over the term of the awards, expected life, risk-free interest rate and expected dividends.

Management determined that blended volatility, a combination of historical and implied volatility, is more reflective of market conditions and a better indicator of expected volatility than historical or implied volatility alone.

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As a result, if factors change and the Company uses different assumptions, stock-based compensation expense could be materially different in the future.

Accumulated Other Comprehensive (Loss) Income

Accumulated Other Comprehensive Income (Loss)

For foreign subsidiaries where the functional currency is the local currency, assets and liabilities are translated into U.S.

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Revenue and expenses are translated at average rates of exchange prevailing during the year.

Translation adjustments resulting from this process are recorded to accumulated Other Comprehensive (Loss) Income (“OCI”).

Unrealized gains and losses on securities classified as available-for-sale and unrecognized pension gains and losses are included in OCI in consolidated stockholders’ equity.

For derivative instruments designated as cash-flow hedges and interest rate swap hedges, the effective portion of the derivative’s gain (loss) is initially reported as a component of OCI and is subsequently recognized in earnings when the hedged exposure is recognized in earnings.

Net (Loss) Income Per Share

Basic net (loss) income per share is based on the weighted average number of common shares outstanding and diluted net (loss) income per share is based on the weighted average number of common shares outstanding and all potential dilutive common equivalent shares outstanding.

Translation adjustments resulting from this process are recorded to Other Comprehensive Income (Loss) (“OCI”).

There were translation adjustment losses included in accumulated OCI, net of taxes, of $ 292 and $ 79 , as of December 31, 2024 and 2023, respectively.

Unrealized gains and losses on securities classified as available-for-sale and unrecognized pension gains and losses are included in accumulated OCI in consolidated stockholders’ equity.

There were derivative gains included in accumulated OCI, net of taxes, of $ 30 and $ 31 , as of December 31, 2024 and 2023, respectively.

The related tax effects of these OCI items are recorded in income tax expense within the statement of income, upon reclassification from accumulated OCI.

Net Income (Loss) Per Share

Basic net income (loss) per share is based on the weighted average number of common shares outstanding and diluted net income (loss) per share is based on the weighted average number of common shares outstanding and all potential dilutive common equivalent shares outstanding.

The dilutive effect of equity awards is determined under the treasury stock method using the average market price for the period.

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Debt securities that the Company does not have the intent and ability to hold to maturity are classified as “available-for-sale” and are carried at fair value.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The Company classifies investments with maturity dates greater than twelve months in short-term investments rather than long-term investments.

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The Company maintains cash and cash equivalents with financial institutions, including some banks with which it has borrowings.

The Company enters into

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

foreign exchange forward contracts with high credit-quality financial institutions in order to minimize credit risk exposure.

The Company enters into foreign exchange forward contracts with high credit-quality financial institutions in order to minimize credit risk exposure.

The Company’s largest customers are primarily concentrated in the semiconductor industry, and a limited number of these customers account for a significant portion of the Company’s revenues.

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The Company regularly reviews inventory quantities on hand and records a provision to write-down excess and obsolete inventory to its estimated net realizable value, if less than cost, based primarily on its estimated forecast of product demand.

Once the Company’s inventory value is written-down and a new cost basis has been established, the inventory value is not increased due to demand increases.

Property, Plant and Equipment

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When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in earnings.

Depreciation is provided on the straight-line method over the estimated useful lives of ten to fifty years for buildings and building improvements, and three to eighteen years for machinery and equipment, furniture and fixtures, office equipment and software.

Depreciation is provided on the straight-line method over the estimated useful lives of ten to fifty years for buildings and building improvements, and three to fifteen years for machinery and equipment, furniture and fixtures, office equipment and software.

Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the leased asset.

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Key areas of estimation and judgment may include the selection of valuation approaches, cost of capital, market characteristics, cost structure, impacts of synergies, and estimates of terminal value, among other factors.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

While the Company uses estimates and assumptions as part of the purchase price allocation process to estimate the value of assets acquired and liabilities assumed, estimates are inherently uncertain and subject to refinement.

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These include acquired customer lists, completed technology, patents, trademarks, trade names, backlog and IPR&D.

Intangible assets, other than IPR&D, are amortized from one to eighteen years on a straight-line basis, which represents the estimated periods of benefit and the expected pattern of consumption.

Definite-lived intangible assets, other than IPR&D, are amortized from one to eighteen years on a straight-line basis, which represents the estimated periods of benefit and the expected pattern of consumption.

IPR&D is not subject to amortization until reclassification into completed technology.

Upon completion of a project, the Company

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

expects the corresponding IPR&D intangible assets to be amortized over an estimated useful life of eight to nine years .

Upon completion of a project, the Company expects the corresponding IPR&D intangible assets to be amortized over an estimated useful life of eight to nine years .

Indefinite-lived intangible assets, such as trade names, are not amortized;

they are subject to annual impairment testing as well as testing upon the occurrence of any event that indicates a potential impairment.

Goodwill is the amount by which the cost of acquired net assets exceeded the fair value of those net assets on the date of acquisition.

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If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.

Impairment of Long-Lived Assets

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.

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If the future undiscounted cash flows are less than their carrying value, impairment exists.

The impairment is measured as the difference between the carrying value and the fair value of the underlying asset.

The impairment is

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

measured as the difference between the carrying value and the fair value of the underlying asset.

Fair values are based on estimates of market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk.

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The resulting translation adjustments are included in OCI in consolidated stockholders’ equity.

Foreign exchange transaction gains and losses are classified in other expense, net in the statement of operations and comprehensive (loss) income.

In 2022, published official exchange rates for Turkey indicated that the three-year cumulative inflation rate exceeded 100 % and therefore is considered to be a hyper inflationary economy.

Accordingly, the Company has changed the functional currency of its subsidiary in Turkey from the Turkish lira to the U.S.

dollar, which is the consolidated

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

group’s reporting currency.

The required remeasurement of assets and liabilities denominated in Turkish lira into U.S.

dollar did not have a material impact on the Company’s results of operations.

Net foreign exchange losses resulting from re-measurement were $ 30 , $ 5 , and $ 9 for the years ended December 31, 2023, 2022, and 2021 , respectively, and are included in other expense, net.

Foreign exchange transaction gains and losses are classified in other (income) expense, net in the statement of operations and comprehensive income (loss).

Net foreign exchange losses resulting from re-measurement were $ 0 , $ 30 , and $ 5 for the years ended December 31, 2024, 2023, and 2022 , respectively, and are included in other (income) expense, net.

These amounts do not reflect the corresponding gain (loss) from foreign exchange forward contracts, which are included in cost of sales.

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The Company also has defined benefit retirement plans at certain of its foreign subsidiaries.

The majority of these defined benefit plans are frozen and do not allow new employees to join the plan.

The Company accounts for these plans based on the provisions of ASC Topic 715, “Compensation-Retirement Benefits.” Some of the key assumptions used to calculate the pension expense and projected benefit obligation include the discount rate, rate of forecasted salary increases, the expected long-term rate of return on plan assets and expected mortality.

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Income tax effects resulting from changes in tax law are accounted for by the Company in the period in which the law is enacted and the effects are recorded as a component of provision for income taxes from continuing operations.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

As a result of the Company's global operating activities and variable interest rate borrowings, the Company is exposed to market risks from changes in foreign currency exchange rates and interest rates, which may adversely affect its operating results and financial position.

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The Company does not enter into derivative instruments for trading or speculative purposes.

The Company used derivative instruments, such as foreign exchange forward contracts and options, to manage certain foreign currency exposure, and interest rate swaps and interest rate caps to manage certain interest rate exposure.

The Company uses derivative instruments, such as foreign exchange forward contracts and options, to manage certain foreign currency exposure, and interest rate swaps and interest rate caps to manage certain interest rate exposure.

Changes in fair value of derivative instruments are recognized in the consolidated statement of operations or, if hedge accounting is applied, in OCI for the effective portion of the changes in fair value.

The cash flows resulting from

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

foreign exchange forward contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities.

The cash flows resulting from foreign exchange forward contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities.

All derivatives are stated at fair value in the consolidated balance sheets.

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2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide certain interim periods disclosures that are currently only required annually.

Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”).

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of this ASU on its disclosures within the consolidated financial statements.

ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements.

The Company adopted this standard during fiscal year 2024.

The adoption of this standard only impacts disclosures and did not have a material impact on the Company’s consolidated financial statements.

Income Taxes (Topic 740):

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2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid.

2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

Improvements to Income Tax Disclosures (“ASU 2023-09”), which focuses on the rate reconciliation and income taxes paid.

ASU 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local and foreign and by jurisdiction if the amount is at least 5 % of total income tax payments, net of refunds received.

For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented.

The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

(5) Acquisitions

On August 17, 2022 (the “Effective Date”), the Company completed the acquisition of Atotech Limited (“Atotech” and such transaction, the “Atotech Acquisition”), through the acquisition of the entire issued share capital of Atotech by Atotech Manufacturing, Inc.

(“Bidco”), a Delaware corporation and indirect wholly owned subsidiary of the Company.

The Atotech Acquisition was implemented by means of a scheme of arrangement under the laws of Jersey

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

(the “Scheme”) pursuant to the definitive agreement entered into by the Company and Atotech on July 1, 2021 (as amended, the “Implementation Agreement”).

Atotech, which the Company operates as the Materials Solutions Division (“MSD”), develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing.

Applying a comprehensive systems-and-solutions approach, Atotech's portfolio includes chemistry, equipment, software, and services for innovative and high-technology applications in a wide variety of end markets.

Atotech further broadens the Company’s capabilities by bringing leadership in critical chemistry solutions for electronics and packaging and specialty industrial applications.

On the Effective Date, pursuant to the Scheme and in accordance with the terms and conditions of the Implementation Agreement, Bidco acquired each issued and outstanding ordinary share of Atotech in exchange for per share consideration of $ 16.20 in cash and 0.0552 of a share of Company common stock.

The Company funded the payment of the aggregate cash consideration with a combination of cash on hand and the proceeds from the Term Loan Facility, as defined in Note 15.

As a result of the Atotech Acquisition, the Company issued an aggregate of 10.7 shares of Company common stock to the former Atotech shareholders.

The purchase price of Atotech consisted of the following:

Cash consideration to Atotech stockholders, net

Value of MKS shares issued

Repayment of Atotech senior secured term loans

Settlement of accelerated Atotech share-based awards

Total purchase price, net of cash and cash equivalents acquired

Under the acquisition method of accounting, the total purchase price was allocated to the acquired tangible and intangible assets and assumed liabilities of Atotech based on their fair values as of the Effective Date, except for contract assets and liabilities, which remain at book value in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed was allocated to goodwill and none of this goodwill or intangible assets will be deductible for tax purposes.

The Company believes the amount of goodwill relative to identifiable intangible assets relates to several factors, including (1) broadening its position in key electronics and industrial markets to offer complementary solutions, and (2) leveraging component and systems expertise to provide robust solutions to meet its customers’ evolving technology needs.

The following table summarizes the allocation of the purchase price to the fair values assigned to assets acquired and liabilities assumed at the Effective Date inclusive of immaterial measurement period adjustments:

Cash and cash equivalents

Accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Total assets acquired

Accounts payable

Other current liabilities

Non-current deferred taxes

Non-current accrued compensation

Other non-current liabilities

Total liabilities assumed

Fair value of assets acquired and liabilities assumed

Cash and cash equivalents acquired

Total purchase price, net of cash and cash equivalents acquired

The fair value of the acquired intangible assets was determined using the income approach.

In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

growth rates, gross profit and operating expenses.

Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations.

The valuations were based on the information that was available during the one-year measurement period that existed as of the Effective Date and the expectations and assumptions that have been deemed reasonable by the Company's management.

The size and breadth of the Atotech Acquisition necessitated the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the fair value of certain tangible and intangible assets acquired and liabilities assumed as of the Effective Date and the related tax impacts of any changes made.

The measurement period is now complete.

The following table reflects the allocation of the acquired intangible assets and related estimate of useful lives at the Effective Date:

Customer relationships

11 - 14 years

Completed technology

In-process research and development

The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful lives.

Upon completion of the related projects, the Company expects the IPR&D intangible asset to be amortized over its estimated useful life of eight to nine years .

During the fourth quarter of 2022, the Company recorded adjustments to balances reported as of, and for the period ended, September 30, 2022, resulting from foreign currency translation of the preliminary allocation of intangible assets and goodwill from the Atotech Acquisition in August 2022 and the related effect on cumulative translation adjustment and deferred tax liabilities.

The adjustments recorded were to correct an overstatement of goodwill of $ 43 , intangible assets, net of $ 56 , and non-current deferred tax liabilities of $ 38 , and an understatement of both accumulated OCI and OCI of $ 61 .

These adjustments that the Company recorded did not affect net income, earnings per share or the consolidated statements of cash flows.

The Company assessed these adjustments in accordance with SEC Staff Accounting Bulletin (“SAB”) No.

99 and SAB No.

108 and determined they were not material to the interim financial statements taken as a whole.

Pro Forma Results

The following unaudited pro forma financial information presents the combined results of operations of the Company as if the Atotech Acquisition had occurred on January 1, 2021.

The unaudited pro forma financial information is not necessarily indicative of what the Company’s consolidated results of operations actually would have been had the acquisition occurred on the assumed date.

In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined Company.

Years Ended December 31,

Total net revenues

The unaudited pro forma information for the year ended December 31, 2022 and 2021 give effect primarily to the following:

• applying the Company’s accounting policies;

• incremental interest expense related to the Term Loan Facility;

• incremental amortization of acquired intangible assets related to the estimated fair value from the purchase price allocation;

• the exclusion of inventory step-up amortization in 2022 and the addition of this amortization to 2021;

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

• incremental depreciation of acquired property, plant and equipment related to the estimated fair value from the purchase price allocation;

• incremental compensation expense for share-based compensation arrangements;

• the estimated tax impact of the above adjustments.

Photon Control

On July 15, 2021 , the Company completed its acquisition of Photon Control Inc.

(“Photon Control”), a Canadian corporation (the “Photon Control Acquisition”), pursuant to a definitive agreement (the “Arrangement Agreement”).

Photon Control designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position used in semiconductor wafer fabrication.

At the effective time of the Photon Control Acquisition and pursuant to the terms and conditions of the Arrangement Agreement, each share of Photon Control’s common stock issued and outstanding as of immediately prior to the effective time of the Photon Control Acquisition, was converted into the right to receive CAD 3.60 per share in cash, without interest and subject to deduction for any required withholding tax.

The Company funded the payment of the aggregate consideration with available cash on hand.

Photon Control is included in the Company’s PSD segment.

The purchase price of Photon Control consisted of the following:

Cash paid for outstanding shares

Cash and cash equivalents acquired

Total purchase price, net of cash and cash equivalents acquired

Under the acquisition method of accounting, the total estimated acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Photon Control based on their fair values as of the acquisition date.

Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill.

None of the goodwill or intangible assets will be deductible for tax purposes.

The Company believes the amount of goodwill relative to identifiable intangible assets relates to enhancing the Company’s Surround the Wafer® offering by adding optical sensors for temperature control for critical etch and deposition applications in semiconductor wafer fabrication.

The following table summarizes the allocation of the purchase price to the fair values assigned to assets acquired and liabilities assumed at the date of the Photon Control Acquisition:

Current assets

Intangible assets

Other non-current assets

Total assets acquired

Current liabilities

Non-current deferred taxes

Other long-term liabilities

Total liabilities assumed

Fair value of assets acquired and liabilities assumed

Cash and cash equivalents acquired

Total purchase price, net of cash and cash equivalents acquired

The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful lives.

The following table reflects the allocation of the acquired intangible assets and related estimate of useful lives:

Completed technology

Customer relationships

An entity may apply the amendments prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods or may apply the amendments retrospectively by providing the revised disclosures for all periods presented.

The Company is currently evaluating the impact on its consolidated financial statement disclosures;

however, adoption will not impact its consolidated balance sheets, cash flows or income statements.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

The fair value of the acquired intangible assets was determined using the income approach.

In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue growth rates, gross profit and operating expenses.

Fair value estimates are based on complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

The valuations were based on the information that was available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by the Company’s management.

There are inherent uncertainties and management judgment required in these determinations.

This acquisition resulted in a purchase price that exceeded the estimated fair value of tangible and intangible assets, the excess amount of which was allocated to goodwill.

The results of operations of the Photon Control business from the Photon Control Acquisition closing date of July 15, 2021 through December 31, 2021, were not material to the Company's results of operations.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements.

The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact on its consolidated financial statement disclosures;

however, adoption will not impact its consolidated balance sheets, cash flows or income statements.

(5) Revenue from Contracts with Customers

Contract assets as of December 31, 2023 and 2022 were $ 26 and $ 46 , respectively, and were included in other current assets.

Contract assets as of December 31, 2024 and 2023 were $ 30 and $ 26 , respectively.

A roll forward of the Company’s deferred revenue and customer advances is as follows:

Beginning balance, January 1 (1)

Assumed deferred revenue and customer advances from Atotech Acquisition

Additions to deferred revenue and customer advances

9 unchanged sentences

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers:

Year Ended December 31, 2023

Net revenues:

Total net revenues

Year ended December 31, 2022

Net revenues:

The following table summarizes revenue from contracts with customers in the Company’s three end markets:

Semiconductor, Electronics and Packaging, and Specialty Industrial.

Years Ended December 31,

Semiconductor

Electronics and Packaging

Specialty Industrial

Total net revenues

Refer to Note 21 for revenue by reportable segment, geography and groupings of similar products.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

Year Ended December 31, 2021

Net revenues:

Total net revenues

Refer to Note 22 for revenue by reportable segment, geography and groupings of similar products.

(7) Investments

For both short-term and long-term investments, the cost approximates the fair value.

For the years ended December 31, 2023 and 2022, the gross unrealized gains and losses were immaterial.

Management has the ability, if necessary, to liquidate any of its investments in order to meet the Company’s liquidity needs in the next 12 months.

Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as short-term on the accompanying consolidated balance sheets.

Interest income is accrued as earned.

Dividend income is recognized as income on the date the security trades “ex-dividend.” Realized gains or losses are reflected in income and were no t material in 2023, 2022 and 2021 .

(6) Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share:

Years Ended December 31,

Net income (loss)

Shares used in net income (loss) per common share – basic

Effect of dilutive securities

Shares used in net income (loss) per common share – diluted

Net income (loss) per common share:

Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per common share is computed by dividing the diluted net income (loss) available to common shareholders by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period.

The dilutive effect of equity awards is calculated based on the average stock price for the relevant period, using the treasury stock method.

In periods in which a net loss is recognized, the impact of RSUs is not included as they are antidilutive.

The dilutive effect of the Convertible Notes is calculated under the if-converted method.

Shares that would be issued if the Convertible Notes were converted are not included in the calculation of diluted net income (loss) per common share as the Company’s share price is below the initial conversion price and inclusion would be antidilutive.

In 2024 and 2022 , the Company had an immaterial quantity of RSUs that were antidilutive and were excluded from the computation of diluted weighted-average shares.

(7) Fair Value Measurements

11 unchanged sentences

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, the Company categorizes such assets and liabilities based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset.

In such cases, the Company categorizes such assets and liabilities based on the lowest level input that is significant to the fair

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

Assets and liabilities of the Company measured at fair value on a recurring basis as of December 31, 2023, are summarized as follows:

value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Assets and liabilities of the Company are measured at fair value on a recurring basis as of December 31, 2024, and are summarized as follows:

Fair Value Measurements at Reporting Date Using

7 unchanged sentences

Time deposits

Equity securities

Available-for-sale securities:

1 unchanged sentence

Foreign exchange forward contracts

Interest rate hedge - current

Interest rate hedge - non-current

Interest rate swaps - current

Interest rate swaps - non-current

Pension and deferred compensation plan assets

Foreign exchange forward contracts

Foreign exchange forward contracts-current

Interest rate swaps - current

Total liabilities

8 unchanged sentences

(in millions, except per share data)

Assets and liabilities of the Company measured at fair value on a recurring basis as of December 31, 2022, are summarized as follows:

Assets and liabilities of the Company are measured at fair value on a recurring basis as of December 31, 2023, and are summarized as follows:

Fair Value Measurements at Reporting Date Using

6 unchanged sentences

Money market funds

Time deposits

Available-for-sale securities:

Time deposits and certificates of deposit

Group insurance contracts

Foreign exchange forward contracts

Interest rate hedge-non-current

Interest rate caps - current

Interest rate swaps - non-current

Pension and deferred compensation plan assets

3 unchanged sentences

Cash and cash equivalents (1)

Short-term investments

Other current assets

3 unchanged sentences

Other Fair Value Disclosures

The estimated fair value and carrying value of the Company’s debt as of December 31, 2023 and 2022 is as follows:

The estimated carrying value and fair value of the Company’s debt as of December 31, 2024 and 2023 is as follows:

Years Ended December 31,

Carrying Value

Total debt, excluding deferred financing costs

The estimated fair value of the Company’s debt was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy.

Term Loan Facility

Convertible Notes

The estimated carrying value of the Company’s Term Loan Facility, as defined and further described in Note 15, was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy.

The estimated fair value of the Company’s Convertible Notes, as defined and further described in Note 15, was determined based on the last traded price of the Convertible Notes for the period ended December 31, 2024, and falls under Level 2 of the fair value hierarchy.

Money Market Funds

Money market funds are cash and cash equivalents and are classified within Level 1 of the fair value hierarchy.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

Money Market Funds

Money market funds are cash and cash equivalents and are classified within Level 1 of the fair value hierarchy.

Pension and Deferred Compensation Plan Assets

1 unchanged sentence

These investments are set aside for retirement benefits of certain of the Company's subsidiaries.

As a result of the Company’s global operating activities, the Company is exposed to market risks from changes in foreign currency exchange rates and variable interest rates, which may adversely affect its operating results and financial position.

As a result of the Company’s global operating activities and variable interest rate borrowings, the Company is exposed to market risks from changes in foreign currency exchange rates and interest rates, which may adversely affect its operating results and financial position.

When deemed appropriate, the Company minimizes its risks from foreign currency exchange rate and interest rate fluctuations through the use of derivative financial instruments.

The principal market in which the Company executes its foreign exchange forward contracts, options and interest rate swaps is the institutional market in an over-the-counter environment with a relatively high level of price transparency.

The market participants usually are large commercial banks.

The foreign exchange forward contracts, options and interest rate hedge are valued using broker quotations, or market transactions and are classified within Level 2 of the fair value hierarchy.

The principal market in which the Company executes its foreign currency and interest rate contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency.

The market participants are typically large commercial banks.

The contracts are valued using broker quotations or market transactions.

(8) Derivatives and Net Investment Hedge

Foreign Exchange Forward Contracts

The Company hedges a portion of its forecasted foreign currency-denominated intercompany sales of inventory, over a maximum period of eighteen months , using foreign exchange forward contracts accounted for as cash-flow hedges.

The Company hedges a portion of its forecasted foreign currency-denominated intercompany sales of inventory, over a maximum period of twenty-four months, using foreign exchange forward contracts accounted for as cash-flow hedges.

To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the hedge accounting criteria, changes in the derivatives' fair value are not included in current earnings but are included in OCI in stockholders' equity.

1 unchanged sentence

To the extent that a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded in earnings in the period it occurs.

The cash flows resulting from foreign exchange forward contracts are classified in the consolidated statements of cash flows as part of cash flows from operating activities.

The Company does not enter into derivative instruments for trading or speculative purposes.

The Company also enters into foreign exchange forward contracts to hedge against changes in the consolidated balance sheets 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.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The following tables provide a summary of the primary net hedging positions and fair values of foreign exchange forward contracts outstanding as of December 31, 2023 and 2022:

December 31, 2023

Currency Hedged (Buy/Sell)

Fair Value Liability

dollar/Japanese yen

dollar/South Korean won

dollar/Taiwan dollar

dollar/Singapore dollar

dollar/Chinese renminbi

Euro/Chinese renminbi

Euro/Canadian dollar

dollar/Mexican peso

pound sterling/U.S.

December 31, 2022

Currency Hedged (Buy/Sell)

Fair Value (Liability) Asset

dollar/Japanese yen

dollar/South Korean won

dollar/Taiwan dollar

pound sterling

dollar/Singapore dollar

dollar/Chinese renminbi

Euro/Chinese renminbi

pound sterling/Euro

The following table provides a summary of the net (losses) gains on derivatives designated as cash flow hedging instruments:

The Company also enters into foreign exchange forward contracts to hedge against certain monetary asset and liability accounts on the consolidated balance sheet 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 (income) expense, net.

The following table summarizes the net notional values of foreign exchange forward contracts outstanding as of December 31, 2024 and December 31, 2023:

Years Ended December 31,

Forward exchange contracts:

Net (losses) gains recognized in OCI, net of tax

Net gains (losses) reclassified from accumulated OCI into income

The net amount of existing (losses) gains as of December 31, 2023 expected to be reclassified from OCI into earnings within the next 12 months is immaterial.

Derivatives designated as hedging instruments:

Foreign exchange forward contracts-cash flow hedges

Derivatives not designated as hedging instruments:

Foreign exchange forward contracts-balance sheet hedges

For both periods presented in the table, the Japanese yen and the South Korean won were the largest notional contracts for designated cash flow hedges.

For 2024, the British pound and Chinese yuan were the largest notional contracts for balance sheet hedges not designated as a hedging instrument.

For 2023, the Euro and British pound were the largest notional contracts for balance sheet hedges not designated as a hedging instrument.

Net Investment Hedge

On January 1, 2023, the Company designated certain Euro-denominated debt as a net investment hedge to hedge a portion of its net investments in certain of its entities with functional currencies denominated in the Euro.

As of December 31, 2023, the Company designated as a net investment hedge € 593 million in aggregate principal amount of its Euro Tranche B issued in August 2022.

For these net investment hedges, the Company defers recognition of the foreign currency remeasurement gains and losses within the foreign currency translation adjustment component of OCI.

There was no net investment hedge designated in 2022 and all remeasurement gains and losses were recorded to the consolidated statements of operations and comprehensive (loss) income.

On January 22, 2024, the Company prepaid its USD Tranche A in full using, in part, a € 250 incremental borrowing under its Euro Tranche B, each as defined and further described in Note 15.

On January 22, 2024, the Company designated the additional € 250 of its Euro Tranche B as a net investment hedge.

As of December 31, 2024, the total principal amount outstanding under its Euro Tranche B was € 596 and the entire balance was designated as a net investment hedge.

As of December 31, 2023, the

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

total principal amount outstanding under its Euro Tranche B was € 593 and the entire balance was designated as a net investment hedge.

For these net investment hedges, the Company records foreign currency remeasurement gains and losses within a component of OCI.

Recognition in earnings of amounts previously recorded in accumulated OCI is limited to circumstances such as complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.

Interest Rate Agreements

The Company has various interest rate swap agreements that exchange a forward-looking term rate based on the variable secured overnight financing rate (“ Term SOFR”) paid on the outstanding balance of its Term Loan Facility, as defined and further described in Note 15, to a fixed rate.

The Company acquired USD London Interbank Offered Rate (“USD LIBOR”) interest rate cap agreements as a result of the Atotech Acquisition and had utilized these agreements to offset the variable Term SOFR on its Term Loan Facility.

The Company has various interest rate swap agreements maturing through January 31, 2029, that exchange a one-month forward-looking term rate based on the variable secured overnight financing rate (“Term SOFR”) paid on the outstanding balance of its USD Term Loan Facility, as defined and further described in Note 15, to a fixed rate.

The notional value of the agreements was $ 2,600 and $ 2,300 as of December 31, 2024 and December 31, 2023, respectively.

The Company acquired USD London Interbank Offered Rate (“LIBOR”) interest rate cap agreements as a result of its acquisition of Atotech Limited (“Atotech”) on August 17, 2022 (the “Atotech Acquisition”) and had utilized these agreements to offset Term SOFR on its Term Loan Facility.

The notional value of the agreements was $ 700 as of December 31, 2023 and expired on January 31, 2024 .

Effective June 30, 2023, the Company’s USD LIBOR based interest rate caps were converted to Term SOFR.

1 unchanged sentence

The conversions from USD LIBOR to Term SOFR did not have a material impact on the Company’s results of operations.

The table below summarizes interest rate swaps and interest rate caps outstanding at December 31, 2023 and December 31, 2022:

Years Ended December 31,

Effective Date

Notional Amount at December 31, 2023

Interest Rate Swaps

April 5, 2019

March 31, 2023

June 30, 2023

February 28, 2025

June 30, 2023

February 28, 2025

September 30, 2022

September 30, 2026

January 2, 2024

January 31, 2028

September 30, 2022

September 30, 2027

January 2, 2024

January 31, 2029

September 30, 2022

September 30, 2026

December 28, 2023

December 31, 2027

Interest Rate Caps

June 30, 2023

January 31, 2024

June 30, 2023

January 31, 2024

The interest rate swaps are recorded at fair value on the consolidated balance sheets and changes in the fair value are recognized in OCI.

The interest rate swaps are recorded at fair value on the balance sheet and changes in the fair value are recognized in OCI.

To the extent these arrangements are no longer effective hedges, the hedging relationship will be discontinued and changes in the fair value of the hedging instruments from the last assessment period that were effective up to the current period will be recorded immediately in earnings.

1 unchanged sentence

If the Company determines that the interest payments are unlikely to occur, amounts previously recorded in OCI will be reclassified to earnings immediately.

Changes in the fair value of interest rate caps are recorded immediately in earnings, as the Company has not designated these instruments as hedges and therefore these instruments do not qualify for hedge accounting.

The following table provides a summary of (losses) gains on derivatives not designated as cash flow hedging instruments:

Changes in the fair value of interest rate caps were recorded immediately in earnings, as the Company did not designate these instruments as hedges and therefore these instruments did not qualify for hedge accounting.

The cash flows resulting from interest rate agreements are classified in cash flows from operating activities.

The following table summarizes the net gains (losses) on derivatives designated as cash flow hedging instruments:

Years Ended December 31,

Net (losses) gains recognized in income

Foreign exchange forward contracts-cash flow hedges:

Net (losses) gains recognized in OCI, net of tax

Net gains (losses) reclassified from accumulated OCI into cost of revenues

Interest rate hedges:

Net (losses) gains recognized in OCI, net of tax

Net gains (losses) reclassified from accumulated OCI into interest expense

The Compan y expects a gain of approximately $ 7 to be reclassified from OCI into cost of revenues during the next twelve months related to foreign exchange forward contracts.

The Company expects a gain of approximately $ 17 to be reclassified from OCI into interest expense during the next twelve months related to interest rate swaps.

The following table summarizes the net gains (losses) on derivatives not designated as hedging instruments:

Years Ended December 31,

Net (losses) gains recognized in other (income) expense, net

The interest rate caps resulted in a reduction of $ 3 , $ 30 and $ 5 to interest expense in 2024, 2023 and 2022, respectively.

Currency Option Agreements

In connection with financing the Atotech Acquisition, the Company issued euro denominated term loan debt.

In anticipation of entering into these Euro denominated loans, the Company purchased foreign currency option contracts

In anticipation of issuing this debt, the Company purchased foreign currency option contracts in 2021 to fix the conversion

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

in 2021 to fix the conversion of € 300 into U.S.

The options settled on January 31, 2022 and the Company recorded a gain of $ 5 , net of premiums, which is included in other expense, net.

In conjunction with the Photon Control Acquisition, which closed in July 2021, the Company entered into a foreign currency contract to hedge the Canadian dollar purchase price.

In 2021, the Company recorded a fair value realized loss of $ 10 , which is included in other expense, net.

of EUR 300 into U.S.

The options settled on January 31, 2022, and the Company recorded a gain of $ 5 , net of premiums, in 2022 which is included in other (income) expense, net in the table above.

Derivative instruments are subject to master netting arrangements.

However, the Company has elected to record these contracts on a gross basis in the consolidated balance sheet.

The location and fair value amounts of derivative instruments reported in the consolidated balance sheet is disclosed in Note 7.

(9) Inventories

16 unchanged sentences

The non-real estate leases are mainly comprised of automobiles but also include office equipment and other lower-valued items.

The elements of lease expense were as follows:

Years Ended December 31,

Operating lease (1)

Finance lease costs

Short-term lease

Total lease cost

(1) Operating lease expense includes an immaterial amount of variable expenses, offset by certain sublease rental income.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

Leases consist of the following:

Years Ended December 31,

Operating lease cost (1)

Finance lease cost

Short-term lease

Total lease cost

(1) Operating lease cost includes an immaterial amount of variable expenses, offset by certain sublease rental income.

Supplemental cash flow information related to leases was as follows:

10 unchanged sentences

Years Ended December 31,

Weighted-average remaining lease term-operating leases

Weighted-average remaining lease term-finance leases

Weighted-average remaining lease term years-operating leases

Weighted-average remaining lease term years-finance leases

Weighted-average discount rate-operating leases

6 unchanged sentences

Amounts presented above do not include payments relating to immaterial leases excluded from the consolidated balance sheets as well as leases with terms of less than twelve months.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

(12) Acquisitions

On August 17, 2022 (the “Effective Date”), the Company completed the Atotech Acquisition, through the acquisition of the entire issued share capital of Atotech by Atotech Manufacturing, Inc.

(“Bidco”), a Delaware corporation and indirect wholly owned subsidiary of the Company.

The Atotech Acquisition was implemented by means of a scheme of arrangement under the laws of Jersey (the “Scheme”) pursuant to the definitive agreement entered into by the Company and Atotech on July 1, 2021 (as amended, the “Implementation Agreement”).

Atotech, which the Company operates as MSD, develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing.

Applying a comprehensive systems-and-solutions approach, Atotech's portfolio includes chemistry, equipment and services for innovative and high-technology applications in a wide variety of end markets.

Atotech further broadens the Company’s capabilities by bringing leadership in critical chemistry solutions for electronics and packaging and specialty industrial applications.

The Company funded the payment of the aggregate cash consideration with a combination of cash on hand and the proceeds from the Term Loan Facility, as defined in Note 15.

As a result of the Atotech Acquisition, the Company issued an aggregate of 10.7 shares of Company common stock to the former Atotech shareholders.

The purchase price of Atotech consisted of the following:

Cash consideration to Atotech stockholders, net

Value of MKS shares issued

Repayment of Atotech senior secured term loans

Settlement of accelerated Atotech share-based awards

Total purchase price, net of cash and cash equivalents acquired

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Cash and cash equivalents

Accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Total assets acquired

Accounts payable

Other current liabilities

Non-current deferred taxes

Non-current accrued compensation

Other non-current liabilities

Total liabilities assumed

Fair value of assets acquired and liabilities assumed

Cash and cash equivalents acquired

Total purchase price, net of cash and cash equivalents acquired

The fair value of the acquired intangible assets was determined using the income approach.

In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue growth rates, gross profit and operating expenses.

Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions.

The measurement period is now complete.

The following table reflects the allocation of the acquired intangible assets and related estimate of useful lives at the Effective Date:

Customer relationships

11 - 14 years

Completed technology

In-process research and development

The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful liv es.

Upon completion of the related projects, the Company expects the IPR&D intangible asset to be amortized over its estimated useful life of eight to nine years .

These adjustments that the Company recorded did not affect net income, earnings per share or the consolidated statements of cash flows.

The Company assessed these adjustments in accordance with SEC Staff

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Accounting Bulletin (“SAB”) No.

99 and SAB No.

108 and determined they were not material to the interim financial statements taken as a whole.

Pro Forma Results

The following unaudited pro forma financial information presents the combined results of operations of the Company as if the Atotech Acquisition had occurred on January 1, 2022.

In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined Company.

December 31, 2022

Total net revenues

The unaudited pro forma information for the year ended December 31, 2022 give effect primarily to the following:

• Applying the Company’s accounting policies;

• Incremental interest expense related to the Term Loan Facility;

• Incremental amortization of acquired intangible assets related to the estimated fair value from the purchase price allocation;

• The exclusion of inventory step-up amortization in 2022;

• Incremental depreciation of acquired property, plant and equipment related to the estimated fair value from the purchase price allocation;

• Incremental compensation expense for share-based compensation arrangements;

• The estimated tax impact of the above adjustments.

(13) Goodwill and Intangible Assets

7 unchanged sentences

If the fair value of the reporting unit is less than the carrying value of the reporting unit, a goodwill impairment is recorded.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Amortizable intangible assets and other long-lived assets are also subject to an impairment test if there is an indicator of impairment.

2 unchanged sentences

The Company regularly monitors current business conditions and other factors, including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results.

The Company’s stock price and any estimated control premium are factors affecting the assessment of the fair value of the Company’s underlying reporting units for purposes of performing any goodwill impairment assessment.

The Company’s stock price and any estimated control premium are factors affecting the

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

assessment of the fair value of the Company’s underlying reporting units for purposes of performing any goodwill impairment assessment.

The changes in the carrying amount of goodwill and accumulated impairment losses were as follows:

Gross Carrying Amount

Accumulated Impairment Loss

Gross Carrying Amount

Accumulated Impairment Loss

Beginning balance at January 1

Impairment of goodwill

Acquired goodwill

Foreign currency translation and measurement period adjustments

Ending balance at December 31

As of October 31, 2024, the Company performed its annual impairment assessment of goodwill using a qualitative assessment for all of its reporting units.

The Company determined that it was more likely than not that the fair values were more than the carrying values for each of the reporting units.

During the quarter ended June 30, 2023, the Company identified softer industry demand, particularly in the personal computer and smartphone markets, and concluded there was a triggering event at each of its electronics (“EL”) and general metal finishing reporting (“GMF”) units, which together constitute MSD, and the equipment solutions business (“ESB”) reporting unit of PSD.

For MSD, the Company concluded information on the softening of industry demand as of the filing date of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 did not exist as of the Effective Date.

For each of the three reporting units, the Company performed a quantitative assessment of goodwill using a weighting of an income approach and market approach.

16 unchanged sentences

For the IPR&D intangible asset within the EL reporting unit, the forecasted undiscounted future cash flows utilized were consistent with the Company’s goodwill analysis, with estimated time to complete in-process projects of up to 2 years, and a discount rate of 12.5 %.

During the quarter ended September 30, 2023, the Company identified a further decrease in demand and an increase in the discount rate at the ESB reporting unit.

The Company performed a quantitative assessment of goodwill using an income approach that was based upon projected future cash flows that were discounted to present value and an assumed terminal growth rate.

The key underlying assumptions included forecasted revenues, which incorporated external market data, terminal growth rate, gross profit and operating expenses, as well as the discount rate.

The Company concluded that there was no goodwill or intangible asset impairment at the ESB reporting unit in the third quarter.

The Company also considered other quantitative and qualitative considerations, including the decline in public market capitalization since June 30, 2023, and determined there were no triggering events for its other reporting units or asset groups in the third quarter.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

As of October 31, 2023, the Company performed its annual goodwill and intangible asset impairment assessment by bypassing the qualitative assessment and using a quantitative assessment for all its reporting units.

For the EL, GMF and ESB reporting units, the Company performed a quantitative assessment of goodwill using an equal weighting of an income approach and market approach and for the VSD and remaining PSD reporting units used an income approach.

As of October 31, 2023, the Company performed its annual goodwill and intangible asset impairment assessment using a quantitative assessment for all its reporting units.

For the EL, GMF and ESB reporting units, the Company performed a quantitative assessment of goodwill using an equal weighting of the income approach and market approach and for the VSD and PSD reporting units only used an income approach.

The income approach was based upon projected future cash flows that were discounted to present value and an assumed terminal growth rate.

The key underlying assumptions included forecasted revenues, which incorporated external market data, the terminal growth rate, gross profit and operating expenses, as well as an applicable discount rate for each reporting unit.

The market approach incorporated observed multiples of guideline public companies.

The market approach for the EL and GMF reporting units also incorporated multiples from guideline transactions.

Fair value estimates are based on complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions that have been deemed reasonable by the Company’s management.

There are inherent uncertainties and management judgment required in these determinations.

The market approach for the electronics and general metal finishing reporting units also incorporated multiples from guideline transactions.

This quantitative assessment during the quarter ended December 31, 2023 resulted in the following:

2 unchanged sentences

Remaining Goodwill

General Metal Finishing

Equipment Solutions Business

Equipment Solutions

There was no goodwill impairment at any of the Company’s other reporting units.

The Company will continue to monitor for future triggering events which could result in an impairment charge.

In addition, the Company used an income approach to determine the fair value of the long-lived and indefinite lived intangible assets within these reporting units (Level 3 within the fair value hierarchy).

1 unchanged sentence

After evaluating forecast updates and carrying values, the Company did not identify impairments at any other of its reporting units.

The changes in the carrying amount of goodwill and accumulated impairment losses were as follows:

Beginning balance at January 1

Impairment of goodwill

Acquired goodwill

Foreign currency translation and measurement period adjustments

Ending balance at December 31

During the twelve months ended December 31, 2022, the Company recorded goodwill related to the Atotech Acquisition.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Intangible Assets

4 unchanged sentences

Foreign Currency

Translation and Measurement

Period Adjustments

Completed technology

1 unchanged sentence

Patents, trademarks, trade names and other

During the twelve months ended December 31, 2023, $ 117 of IPR&D included with patents, trademarks, trade names and other was reclassified into completed technology.

As of December 31, 2023

Accumulated Impairment

Translation and Measurement Period Adjustments

Completed technology

1 unchanged sentence

Patents, trademarks, trade names and other

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

During the twelve months ended December 31, 2023, $ 117 of IPR&D included with patents, trademarks, trade names and other was reclassified into completed technology.

Aggregate amortization expense related to acquired intangible assets for 2024, 2023 and 2022 was $ 245 , $ 295 and $ 146 , respectively.

Aggregate net amortization expense related to acquired intangible assets for future years is:

Aggregate amortization expense related to acquired intangible assets for future years is:

The Company excluded from the above table intangible assets of $ 56 of indefinite-lived trademarks and trade names, which were not subject to amortization.

6 unchanged sentences

Years Ended December 31,

Beginning balance

Beginning of period

Provision for product warranties

Assumed product warranty liability from Atotech Acquisition

Direct and other charges to warranty liability

Ending balance

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Charges to warranty liability

End of period

Short-term product warranties of $ 14 and long-term product warranties of $ 8 , each as of December 31, 2024, are included within other current liabilities and other non-current liabilities, respectively, within the accompanying consolidated balance sheets.

4 unchanged sentences

Long-term debt:

Term Loan Facility

Debt issuance costs - Term Loan Facility

Term Loan Facility, net

Long-term debt is net of remaining deferred financing fees, original issuance discount and repricing fees in the aggregate of $ 164 and $ 195 as of December 31, 2023 and 2022, respectively.

Convertible Notes

Debt issuance costs - Convertible Notes

Convertible Notes, net

Total long-term debt, net

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Credit Facilities

In connection with the completion of the Atotech Acquisition, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto (the “Credit Agreement”).

The Credit Agreement provides for (i) a senior secured term loan facility comprised of three tranches:

a $ 1,000 loan (the “USD Tranche A”), a $ 3,600 loan (the “2022 USD Tranche B” and together with the 2023 USD Tranche B (as defined below), as the context may require, the “USD Tranche B”) and a € 600 loan (the “Euro Tranche B” and together with the USD Tranche A and the USD Tranche B, the “Term Loan Facility”), each of which were borrowed in full on the Effective Date, and (ii) a senior secured revolving credit facility of $ 500 (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), with the commitments under each of the foregoing facilities subject to increase from time to time subject to certain conditions .

The USD Tranche A and the Revolving Facility have a maturity date in August 2027 while the USD Tranche B and Euro Tranche B have a maturity date in August 2029 .

B orrowings under the Credit Facilities bear interest at a rate per annum equal to, at the Company’s option, any of the following, plus, in each case, an applicable margin:

(a) with respect to the USD Tranche A, the Revolving Facility and, prior to the effectiveness of the First Amendment (as defined below), the USD Tranche B, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50 %, (2) the prime rate quoted in The Wall Street Journal , or (3) a forward-looking term rate based on Term SOFR (plus an applicable credit spread adjustment) for an interest period of one month, plus 1.00 %;

In connection with the completion of the Atotech Acquisition, on August 17, 2022 (the “Effective Date”) the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Barclays Bank PLC, and the lenders from time to time party thereto (the “Credit Agreement”).

The Credit Agreement provided for (i) a senior secured term loan facility comprised of three tranches:

a $ 1,000 loan (the “USD Tranche A”), a $ 3,600 loan (as further increased, refinanced and otherwise modified as described herein, the “USD Tranche B”) and a € 600 loan (as further increased and otherwise modified as described herein, the “Euro Tranche B” and together with the USD Tranche A and the USD Tranche B, the “Term Loan Facility”), each of which were borrowed in full on the Effective Date, and (ii) a senior secured revolving credit facility of $ 500 (as further increased and otherwise modified as described herein, the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”), with the commitments under each of the foregoing facilities subject to increase from time to time subject to certain conditions.

The proceeds of the Term Loan Facility were used on the Effective Date, among other things, to fund a portion of the consideration payable in connection with the Atotech Acquisition and to refinance the existing term loan and revolving credit facilities of the Company and certain indebtedness of Atotech.

Initially, borrowings under the Credit Facilities bore interest at a rate per annum equal to, at the Company’s option, any of the following, plus, in each case, an applicable margin:

(a) with respect to the USD Tranche A, the Revolving Facility and the USD Tranche B, (x) a base rate determined by reference to the highest of (1) the federal funds effective rate plus 0.50 %, (2) the prime rate quoted in The Wall Street Journal, or (3) a forward-looking term rate based on Term SOFR (plus an applicable credit spread adjustment) for an interest period of one month, plus 1.00 %;

and (y) a Term SOFR rate (plus an applicable credit spread adjustment) for the interest period relevant to such borrowing, subject to a rate floor of (I) with respect to the USD Tranche B, 0.50 % and (II) with respect to the USD Tranche A and the Revolving Facility, 0.0 %;

and (b) with respect to the Euro Tranche B, a Euro Interbank Offered Rate (“EURIBOR”) rate determined by reference to the costs of funds for Euro deposits for the interest period relevant to such borrowing adjusted for certain additional costs, subject to a EURIBOR rate floor of 0.0 %.

The USD Tranche A was issued with original issue discount of 0.25 % of the principal amount thereof.

The 2022 USD Tranche B and the Euro Tranche B were issued with original issue discount of 2.00 % of the principal amount thereof.

The applicable margin for borrowings under the USD Tranche A is 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings.

Prior to the effectiveness of the First Amendment, the applicable margin for borrowings under the USD Tranche B was 1.75 % with respect to base rate borrowings and 2.75 % with respect to Term SOFR borrowings.

The applicable margin for borrowings under the Euro Tranche B is 3.00 %.

The applicable margin for borrowings under the Revolving Facility is 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings .

Initially, the applicable margins for borrowings under the Credit Facilities were (i) under the USD Tranche A, 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings, (ii) under the USD Tranche B, 1.75 % with respect to base rate borrowings and 2.75 % with respect to Term SOFR borrowings, (iii) under the Euro Tranche B, 3.00 % and (iv) under the Revolving Facility, 1.50 % with respect to base rate borrowings and 2.50 % with respect to Term SOFR borrowings.

In addition to paying interest on outstanding principal under the Credit Facilities, the Company is required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility.

The commitment fee is subject to adjustment based on the Company’s first lien net leverage ratio as of the end of the preceding fiscal quarter.

The Company must also pay customary letter of credit fees and agency fees.

As of December 31, 2024, the commitment fee was 0.25 % per annum, representing a downward adjustment from 0.375 % as of June 30, 2024.

On October 3, 2023 (the “First Amendment Effective Date”), the Company entered into the First Amendment to Credit Agreement (the “First Amendment”), which refinanced all of the $ 3,564 outstanding USD Tranche B to (i) decrease the applicable margin for the USD Tranche B from 1.75 % to 1.50 % with respect to base rate borrowings and from 2.75 % to 2.50 % with respect to Term SOFR borrowings and (ii) remove the credit spread adjustment applicable to Term SOFR borrowings of the USD Tranche B.

On January 22, 2024 (the “Second Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”), pursuant to which the Company (i) borrowed additional USD Tranche B loans in an aggregate principal amount of $ 490 and additional Euro Tranche B loans in an aggregate principal amount of € 250 (collectively, the “Incremental Tranche B Loans”) and (ii) used a portion of the proceeds of the Incremental Tranche B Loans to prepay the USD Tranche A in full in an aggregate principal amount of $ 744 .

On February 13, 2024, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”), pursuant to which the Company increased the available borrowing capacity under the Revolving Facility by $ 175 (the “Incremental Revolving Commitments”).

As of December 31, 2024, the available borrowing capacity under the Revolving Facility was $ 675 .

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

In a ddition to paying interest on outstanding principal under the Credit Facilities, the Company is required to pay a commitment fee in respect of the unutilized commitments under the Revolving Facility.

The initial commitment fee is 0.375 % per annum.

Commencing with the delivery of financial statements with respect to the first quarter ending after the closing of the Credit Agreement, the commitment fee is subject to downward adjustment based on the Company’s first lien net leverage ratio as of the end of the preceding quarter.

The Company must also pay customary letter of credit fees and agency fees .

On October 3, 2023 (the “First Amendment Effective Date”), the Company entered into the First Amendment to Credit Agreement (the “First Amendment”), which refinanced all of the $ 3,564 outstanding 2022 USD Tranche B (such refinanced loans, the “2023 USD Tranche B”) to (i) decrease the applicable margin for the USD Tranche B from 1.75 % to 1.50 % with respect to base rate borrowings and from 2.75 % to 2.50 % with respect to Term SOFR borrowings and (ii) remove the credit spread adjustments applicable to borrowings of the USD Tranche B based on Term SOFR.

The 2023 USD Tranche B were issued with original issue discount of 0.25 % of the principal amount thereof .

On October 31, 2023, the Company made a voluntary prepayment of $ 100 aggregate principal on the USD Tranche A.

On December 12, 2022, the Company made a voluntary prepayment of $ 100 aggregate principal on the USD Tranche A.

On July 23, 2024 (the “Fourth Amendment Effective Date”), the Company entered into the Fourth Amendment to Credit Agreement (the “Fourth Amendment”), pursuant to which the Company (i) refinanced its existing USD Tranche B loan and Euro Tranche B loan with a new $ 2,650 USD Tranche B loan and a new € 800 Euro Tranche B loan, (ii) decreased the applicable margin for the USD Tranche B from 2.50 % to 2.25 % with respect to Term SOFR borrowings and from 1.50 % to 1.25 % with respect to base rate borrowings and (iii) decreased the applicable margin for the Euro Tranche B from 3.00 % to 2.75 %.

On July 23, 2024, immediately prior to the effectiveness of the Fourth Amendment, the Company made a voluntary prepayment of $ 110 aggregate principal amount under the Term Loan Facility, consisting of $ 69 principal amount of its USD Tranche B loan and € 38 principal amount of its Euro Tranche B loan.

The USD Tranche B and the Euro Tranche B were issued on the Effective Date with original issue discount of 2.00 % of the principal amounts thereof.

The USD Tranche B was issued on the First Amendment Effective Date with original issue discount of 0.25 % of the principal amount thereof.

The Incremental Tranche B Loans were issued with original issue discount of 0.25 % of the principal amount thereof.

The Company incurred $ 242 of deferred financing fees and original issue discount related to the term loans under the Term Loan Facility funded on the Effective Date, which are included in long-term debt, net in the accompanying consolidated balance sheets and are being amortized to interest expense over the estimated life of the term loans using the effective interest method.

A portion of the deferred financing fees and original issue discount was accelerated in connection with the extinguishment of the Company’s previously existing term loan facility concurrently with the Company’s entry into the Term Loan Facility .

T he Company incurred $ 11 of deferred financing fees and original issue discount related to the term loans under the 2023 USD Tranche B funded on the First Amendment Effective Date, of which $ 9 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method.

The Company recorded an $ 8 loss on extinguishment of debt in connection with the First Amendment of the 2022 USD Tranche B.

In connection with the various voluntary prepayments in 2022 and 2023, the Company wrote off a portion of the deferred financing costs related to the prepayments.

The Company incurred $ 11 of deferred financing fees and original issue discount related to the USD Tranche B funded on the First Amendment Effective Date, of which $ 9 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method.

The Company recorded an $ 8 loss on extinguishment of debt in connection with the First Amendment.

The Company incurred $ 5 of deferred financing fees and original issue discount related to the Incremental Tranche B Loans funded on the Second Amendment Effective Date, of which $ 2 is included in long-term debt, net in the accompanying consolidated balance sheets and is being amortized to interest expense over the estimated life of the term loans using the effective interest method.

The Company recorded a $ 9 loss on extinguishment of debt in connection with the Second Amendment.

The Company recorded a $ 5 loss on extinguishment of debt in connection with the Fourth Amendment as a result of the acceleration of deferred financing and original issue discounts.

Under the Credit Agreement, the Company is required to prepay outstanding term loans, subject to certain exceptions, with portions of its annual excess cash flow as well as with the net cash proceeds of certain of its asset sales, certain casualty and condemnation events and the incurrence or issuances of certain debt.

1 unchanged sentence

The Company may voluntarily prepay outstanding loans under the Credit Facilities from time to time, subject to certain conditions, without premium or penalty other than customary “breakage” costs with respect to Term SOFR or EURIBOR loans;

provided, however, that subject to certain exceptions, (i) if on or prior to the date that was twelve months after the Effective Date, the Company prepaid any loans under the 2022 USD Tranche B or the Euro Tranche B in connection with a repricing transaction, the Company would have been required to pay a prepayment premium of 1.00 % of the aggregate principal amount of the loans so prepaid and (ii) if on or prior to the date that is six months after the First Amendment Effective Date, the Company prepaid any loans under the 2023 USD Tranche B in connection with a repricing transaction, the Company must pay a prepayment premium of 1.00 % of the aggregate principal amount of the loans so prepaid.

provided, however, that subject to certain exceptions, if on or prior to the date that is six months after the Fourth Amendment Effective Date, the Company prepays any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction, the Company must pay a prepayment premium of 1.00 % of the aggregate principal amount of the loans so prepaid.

Additionally, the Company may voluntarily reduce the unutilized portion of the commitment amount under the Revolving Facility.

The Company is required to make scheduled quarterly payments each equal to 1.25 % of the original principal amount of the USD Tranche A (increasing to 1.875 % in years 3 and 4 and 2.50 % in year 5), 0.25 % of the original principal amount of the Euro Tranche B and 0.25 % of the original principal amount of the 2023 USD Tranche B, with the balance due thereunder on the fifth anniversary of the closing date in the case of the USD Tranche A and the seventh anniversary of the closing date in the case of the USD Tranche B and the Euro Tranche B .

Prior to the repayment in full of the USD Tranche A, the Company was required to make scheduled quarterly payments each equal to 1.25 % of the original principal amount of the USD Tranche A.

The Company is required to make scheduled quarterly payments each equal to approximately $ 10 with respect to the USD Tranche B and approximately € 2 with respect to the Euro Tranche B, in each case with the balance due thereunder on the seventh anniversary of the Effective Date.

There is no scheduled amortization under the Revolving Facility.

Any principal amount outstanding under the Revolving Facility is due and payable in full on the fifth anniversary of the Effective Date.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

There is no scheduled amortization under the Revolving Facility.

Any principal amount outstanding under the Revolving Facility is due and payable in full on the fifth anniversary of the closing date.

The Company incurred $ 7 of costs in connection with the Revolving Facility, which were capitalized and included in other assets in the accompanying consolidated balance sheets and are being amortized to interest expense over the estimated life of four years .

As a result of the termination of the Company’s previously existing revolving credit facility concurrently with the Company’s entry into the Revolving Facility, the Company wrote off an immaterial amount of previously capitalized debt issuance costs .

All obligations under the Credit Facilities are guaranteed by certain of the Company’s wholly-owned domestic subsidiaries and are required to be guaranteed by certain of the Company’s future wholly-owned domestic subsidiaries, and are secured by substantially all of the Company’s assets and the assets of such subsidiaries, subject to certain exceptions and exclusions.

Under the Credit Agreement, the Company has the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) $ 1,011 and (2) 75 % of consolidated EBITDA, plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt) .

Under the Credit Agreement, the Company has the ability to incur additional incremental debt facilities in an amount up to (x) the greater of (1) $ 1,011 and (2) 75 % of consolidated last twelve months earnings before interest, taxes, depreciation, and amortization (“EBITDA”), plus (y) an amount equal to the sum of all voluntary prepayments of term loans under the Term Loan Facility, plus (z) an additional unlimited amount subject to pro forma compliance with certain leverage ratio tests (based on the security and priority of such incremental debt) .

Under the USD Tranche A and the Revolving Facility, so long as any USD Tranche A loans (or commitments in respect thereof) are outstanding as of the end of any fiscal quarter, the Company may not allow its total net leverage ratio as of the end of such fiscal quarter to be greater than 5.25 to 1.00 for the fiscal quarters ending December 31, 2023 through September 30, 2024, with an annual step-down of 0.25 :1.00 and subject to a step-up of 0.50 :1.00 for the four full fiscal quarter period following any material acquisition, not to exceed 5.50 to 1.00 .

14 unchanged sentences

As of December 31, 2024, the Company was in compliance with all covenants under the Credit Agreement.

The Company also paid certain customary fees to and expenses of JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., HSBC Securities (USA) Inc.

The Company paid certain customary fees to and expenses of (i) JPMorgan Chase Bank, N.A., Barclays Bank PLC, BofA Securities, Inc., Citibank, N.A., HSBC Securities (USA) Inc.

and Mizuho Bank, Ltd.

in their respective capacities as lead arrangers and bookrunners in connection with the Credit Facilities.

The proceeds of the 2023 USD Tranche B were used on the First Amendment Effective Date to refinance the 2022 USD Tranche B.

The Company also paid certain customary fees to and expenses of JPMorgan Chase Bank, N.A.

in its capacity as lead arranger in connection with the 2023 USD Tranche B.

As of December 31, 2023 , after total principal prepayments of $ 200 and regularly scheduled principal payments of $ 109 , the aggregate outstanding principal amount of the Term Loan Facility was $ 4,953 and the weighted average interest rate was 7.7 % .

in their respective capacities as lead arrangers and bookrunners in connection with the Credit Facilities on the Effective Date, (ii) JPMorgan Chase Bank, N.A.

in its capacity as lead arranger in connection with each of the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment and (iii) the lenders providing the Incremental Revolving Commitments pursuant to the Third Amendment.

As described further below under “Convertible Notes,” on May 16, 2024, the Company completed a private offering of convertible senior notes.

A significant portion of the net proceeds from the offering was used to repay approximately $ 1,206 of the USD Tranche B.

As a result of the repayment, the Company recorded a $ 38 loss on extinguishment of debt.

As of December 31, 2024, the weighted average interest rate of the Term Loan Facility was 6.4 %.

The Revolving Facility has a maturity date in August 2027 while the USD Tranche B and Euro Tranche B have a maturity date in August 2029.

As of December 31, 2024 there were no borrowings under the Revolving Facility.

2 unchanged sentences

(in millions, except per share data)

Convertible Notes

On May 16, 2024, the Company completed a private offering of $ 1,400 aggregate principal amount of its convertible senior notes due 2030 (the “Convertible Notes”).

The Convertible Notes were sold in a private placement under a purchase agreement, dated as of May 13, 2024 (the “Purchase Agreement”), entered into by and between the Company and each of Morgan Stanley & Co.

Morgan Securities LLC, BofA Securities, Inc.

and Mizuho Securities USA LLC, as representatives of the several initial purchasers named therein, for resale to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended .

The aggregate principal amount of the Convertible Notes sold in the offering was $ 1,400 , which included $ 200 aggregate principal amount of the Convertible Notes issued pursuant to an option to purchase, within a 13-day period beginning on, and including, the date on which the Convertible Notes were first issued, which the initial purchasers exercised in full on May 14, 2024 and which additional purchase was also completed on May 16, 2024 .

The net proceeds from the offering were approximately $ 1,374 after deducting the initial purchasers’ discounts and commissions and estimated offering expenses paid by the Company.

The Company used approximately $ 167 of the net proceeds from the offering to pay the cost of the capped call transactions described below.

The Company used the remaining net proceeds from the offering to repay approximately $ 1,206 in borrowings outstanding under the USD Tranche B, together with accrued interest, as well as for general corporate purposes .

Indenture and the Convertible Notes

On May 16, 2024, the Company entered into an indenture (the “Indenture”) with respect to the Convertible Notes with U.S.

Bank Trust Company, National Association, as trustee (the “Trustee”).

Under the Indenture, the Convertible Notes are senior unsecured obligations of the Company and bear interest at a coupon rate of 1.25 % per annum, with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024.

The Convertible Notes will mature on June 1, 2030 , unless earlier converted, redeemed or repurchased in accordance with their terms .

Subject to certain conditions, on or after June 5, 2027, the Company may redeem for cash all or any portion of the Convertible Notes at a redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately preceding the date the notice of redemption is sent .

The conversion rate for the Convertible Notes is initially 6.4799 shares of the Company’s common stock per one thousand dollars principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $ 154.32 per share.

The conversion rate is subject to adjustment upon the occurrence of certain events .

Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

Prior to March 1, 2030, noteholders may convert all or any portion of their Convertible Notes only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the second scheduled trading day immediately preceding the maturity date.

If the Company undergoes a fundamental change (as defined in the Indenture) prior to the maturity date of the Convertible Notes, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date .

The Indenture contains customary terms and covenants, including that upon certain events of default that are occurring and continuing, either the Trustee or the holders of at least 25 % in aggregate principal amount of the outstanding Convertible Notes may declare 100 % of the principal of, and accrued and unpaid interest, if any, on, all the Convertible Notes to be due and payable .

As of December 31, 2024, the Convertible Notes are classified as a long-term liability, net of issuances costs, on the consolidated balance sheet.

The Convertible Notes were issued at par and costs associated with the issuance of the Convertible Notes are amortized to interest expense over the contractual term of the Convertible Notes.

As of December 31, 2024, the effective interest rate of the Convertible Notes was 1.56 %.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Capped Call Transactions

On May 13, 2024, in connection with the pricing of the Convertible Notes, and on May 14, 2024, in connection with the exercise in full by the initial purchasers of their option to purchase additional Convertible Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers of the Convertible Notes or their respective affiliates and other financial institutions.

The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon conversion of any Convertible Notes and/or offset any cash payments that the Company is required to make in excess of the principal amount of any converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap initially equal to $ 237.42 per share, which represents a premium of 100 % over the last reported sale price of $ 118.71 per share of the Company’s common stock on The Nasdaq Global Select Market on May 13, 2024, and is subject to customary adjustments under the terms of the capped call transactions.

The Company evaluated the capped call transactions and determined that they should be accounted for separately from the Convertible Notes.

The cost of $ 167 to purchase the capped call transactions was recorded as a reduction to additional paid-in capital in the consolidated balance sheet as the capped call transactions are indexed to the Company’s own stock and met the criteria to be classified in stockholders' equity.

The Company’s interest expense is as follows:

Years Ended December 31,

Term Loan Facility:

Contractual interest expense

Amortization of debt issuance costs as interest expense

Total interest expense on Term Loan Facility

Convertible Notes:

Contractual interest expense

Amortization of debt issuance costs as

interest expense

Total interest expense on Convertible Notes

Other interest expense, net (1)

Total interest expense

(1) Other interest expense, net primarily consists of interest (income) expense related to the Company’s interest rate swap and interest rate cap agreements.

Lines of Credit and Borrowing Arrangements

3 unchanged sentences

Contractual maturities of the Company’s debt obligations as of December 31, 2024 are as follows:

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

(16) Other Current Liabilities

9 unchanged sentences

A reconciliation of the Company’s effective tax rate to the U.S.

federal statutory rate is as follows:

federal income tax statutory rate is as follows:

Years Ended December 31,

federal income tax statutory rate

Goodwill impairment

Foreign derived intangible income deduction

Change in valuation allowance

Withholding taxes, net of foreign tax credits

Federal tax credits

State income taxes, net of federal benefit

Effect of foreign operations taxed at various rates

Change in income tax reserves (including interest)

Base erosion waiver of deductions

State income taxes, net of federal benefit

Executive compensation

Foreign derived intangible income deduction

Foreign subpart F income taxed in the U.S., net of foreign tax credits

Global intangible low taxed income, net of foreign tax credits

Stock-based compensation

Deferred tax asset valuation allowance

Change in income tax reserves (including interest)

Withholding taxes on foreign dividends, net of foreign tax credits

Goodwill impairment

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

The components of (loss) income before income taxes and the related (benefit) provision for income taxes consist of the following:

The components of income (loss) before income taxes and the related (benefit) provision for income taxes consist of the following:

Years Ended December 31,

(Loss) income before income taxes:

Income (loss) before income taxes:

United States

Current taxes:

United States

Deferred taxes:

United States

(Benefit) provision for income taxes

1 unchanged sentence

Deferred tax assets:

Interest, loss, and credit carryforwards

Interest expense carryforwards

Net operating loss carryforwards

Tax credit carryforwards

Capitalized research and development

Inventory and warranty reserves

Lease liability

Inventory and warranty reserves

Accrued expenses and other reserves

Stock-based compensation

Total deferred tax assets

3 unchanged sentences

Acquired intangible assets and goodwill

Depreciation and amortization

Right-of-use asset

Foreign withholding taxes

Unrealized gain

Depreciation and amortization

Total deferred tax liabilities

Net deferred tax liabilities

As of December 31, 2023, the Company had U.S.

federal and state as well as foreign gross research and other tax credit carryforwards of $ 41 .

Included in the total carryforwards are $ 11 of credits that can be carried forward indefinitely while the remaining credits expire at various dates through 2037 .

The Company also had U.S.

federal and state as well as foreign gross net operating loss and capital loss carryforwards of $ 349 .

Included in the total carryforwards are $ 55 of losses that can be carried forward indefinitely while the remaining losses expire at various dates through 2041 .

The Company has $ 688 of foreign interest carryforwards that can be carried forward indefinitely.

On a quarterly basis, the Company evaluates both positive and negative evidence that affects the realizability of its net deferred tax assets and assesses the need for a valuation allowance.

The future benefit to be derived from its deferred tax assets is dependent upon its ability to generate sufficient future taxable income to realize the assets.

During 2024, the Company decreased its valuation allowance by $ 39 , primarily related to the valuation allowance recorded in connection with certain foreign interest and net operating loss carryforwards.

During 2023, the Company increased its valuation allowance by $ 9 , primarily related to the valuation allowance recorded in connection with certain foreign interest and net operating loss carryforwards.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

Deferred taxes have been recorded related to historical outside basis differences, primarily unremitted earnings, of certain of the Company’s foreign subsidiaries.

During 2024, the Company recorded a tax benefit of $ 8 related to such taxes for prior periods.

As of December 31, 2024, the Company had U.S.

federal and state as well as foreign gross research and other tax credit carryforwards of $ 16 , $ 39 and $ 0 , respectively.

Included in the total carryforwards are $ 1 of federal and $ 20 of state credits that can be carried forward indefinitely while the remaining credits expire at various dates through 2038 .

The Company also had U.S.

federal and state as well as foreign gross net operating loss and capital loss carryforwards of $ 3 , $ 41 and $ 273 , respectively.

Included in the total carryforwards are $ 2 , $ 1 and $ 50 of losses from federal, state and foreign that can be carried forward indefinitely while the remaining losses expire at various dates through 2043 .

The Company had $ 371 and $ 362 of U.S.

federal and foreign interest carryforwards, respectively, that can be carried forward indefinitely.

Although the Company believes that its tax positions are consistent with applicable U.S.

3 unchanged sentences

Balance at beginning of year

Increases (decreases) for tax positions taken during prior years

(Decreases) increases for tax positions taken during prior years

Increases for tax positions taken during the current year

Reductions related to expiration of statutes of limitations and

audit settlements

Reductions related to expiration of statutes of limitations and audit settlements

Balance at end of year

The net increase in gross unrecognized tax benefits in 2023 was primarily due to the addition of unrecognized U.S.

federal tax credits.

The net increase in gross unrecognized tax benefits in 2024 was primarily due to the addition of income tax reserves related to intercompany transactions.

The Company also recorded an offsetting asset of $ 18 against these reserves.

The Company accrues interest and, if applicable, penalties for any uncertain tax positions.

7 unchanged sentences

The statute of limitations for the Company’s tax filings in other jurisdictions varies between fiscal years 2019 through present.

The Company also has certain U.S.

federal and state as well as foreign tax loss and credit carryforwards that are open for examination for tax years 2003 to the present.

In addition, the 2017 U.S.

federal transition tax remains open for examination.

On a quarterly basis, the Company evaluates both positive and negative evidence that affects the realizability of its net deferred tax assets and assesses the need for a valuation allowance.

The future benefit to be derived from its deferred tax assets is dependent upon its ability to generate sufficient future taxable income to realize the assets.

During 2023, the Company increased its valuation allowance by $ 9 , primarily related to the valuation allowance recorded in connection with foreign interest and net operating loss carryforwards.

During 2022, the Company increased its valuation allowance by $ 155 , primarily related to the valuation allowance recorded for foreign interest and net operating loss carryforwards associated with the Atotech Acquisition.

Deferred taxes have been recorded related to historical outside basis differences, primarily unremitted earnings, of certain of the Company’s foreign subsidiaries.

During 2023, the Company recorded a tax benefit of $ 3 related to such taxes for prior periods.

The Company also has certain prior year federal credit carryforwards and state tax loss and credit carryforwards that are subject to examination to the extent used in an open year.

(18) Stock-Based Compensation

5 unchanged sentences

The price at which an employee’s purchase option is exercised for each offering period is the lower of (1) 90 % of the closing price of the common stock on the Nasdaq Global Select Market on the day that the offering commences, or (2) 90 % of the closing price of the common stock on the day that the offering terminates.

The Company issued 0.1 shares of common stock during each of 2023, 2022 and 2021 to employees who participated in the 2014 ESPP at exercise

The Company issued 0.1 shares of common stock

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

prices of $ 74.95 and $ 74.30 per share in 2023, $ 111.15 and $ 75.47 per share in 2022, and $ 126.00 and $ 136.94 per share in 2021.

during each of 2024, 2023 and 2022 to employees who participated in the 2014 ESPP at exercise prices of $ 102.28 and $ 75.77 per share in 2024, $ 74.95 and $ 74.30 per share in 2023, and $ 111.15 and $ 75.47 per share in 2022.

The Company recorded an immaterial amount of compensation expense related to the 2014 ESPP in 2024, 2023 and 2022.

As of December 31, 2024 there were 1.2 shares reserved for future issuance under the 2014 ESPP.

13 unchanged sentences

Time-based RSUs granted to employees generally vest 33 % per year beginning on the first anniversary of the date of grant.

Performance-based RSUs granted to the Company’s executive officers in 2023, 2022 and 2021 were based on the Company’s achievement of adjusted EBITDA for each respective year, defined as GAAP operating income excluding any charges or income not related to the operating performance of the Company plus depreciation and stock compensation expense, set at varying revenue levels.

The final number of performance-based RSUs that vest varies based on the level of performance achieved from 0 % to 200 % of the underlying target shares granted in 2023, 2022 and 2021 .

The performance-based RSUs earned generally vest 33 % per year beginning on the first anniversary of the date of grant.

Adjusted EBITDA RSUs granted to the Company’s executive officers in 2024, 2023 and 2022 were based on the Company’s achievement of adjusted EBITDA for each respective year, defined as GAAP operating income excluding any charges or income not related to the operating performance of the Company plus depreciation and stock compensation expense, set at varying revenue levels.

The final number of Adjusted EBITDA RSUs that vest varies based on the level of performance achieved from 0 % to 200 % of the underlying target shares granted in 2024, 2023 and 2022.

The Adjusted EBITDA RSUs earned generally vest 33 % per year beginning on the first anniversary of the date of grant.

For rTSR RSUs, the vesting is dependent on the Company's total shareholder return relative to a group of peers over the performance period.

RSUs granted to certain employees who meet certain retirement eligibility requirements will vest in full upon each such employee’s retirement and are expensed immediately.

RSUs granted to directors generally vest at the earliest of (1) one day prior to the next annual meeting, (2) 13 months from date of grant, or (3) the effective date of a change in control of the Company.

In connection with the Atotech Acquisition, all Atotech time-based RSUs and performance-based RSU awards outstanding immediately prior to the completion of the Atotech Acquisition were cancelled and replaced with the Company's time-based RSUs under the 2022 Plan in accordance with the Implementation Agreement.

These RSUs are subject to the terms and conditions of the 2022 Plan and the related RSU agreements.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The Company determines the fair value of time-based RSUs based on the closing market price of the Company’s common stock on the date of the award.

The Company recorded an immaterial amount of compensation expense related to the rTSR RSUs in 2024.

The following tables present the activity for the RSUs under the Plans:

Year Ended December 31, 2024

Weighted Average Grant Date Fair Value

Weighted Average Grant Date Fair Value Per Share

RSUs — beginning of period

Vested or forfeited

RSUs — end of period

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Year Ended December 31, 2023

Weighted Average Grant Date Fair Value

Weighted Average Grant Date Fair Value Per Share

RSUs — beginning of period

Vested or forfeited

RSUs — end of period

Year Ended December 31, 2022

Weighted Average Grant Date Fair Value Per Share

RSUs — beginning of period

RSUs issued in Atotech Acquisition

RSUs — end of period

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The total fair value of RSUs vested during 2024, 2023 and 2022 was approximately $ 66 , $ 40 and $ 40 , respectively.

As of December 31, 2024, the unrecognized compensation cost related to RSUs was approximately $ 45 and will be recognized over an estimated weighted average amortization period of 1 year.

Stock-Based Compensation Expense

The Company recognized the full impact of its share-based payment plans in the consolidated statements of operations and comprehensive income.

The Company recognized the full impact of its share-based payment plans in the consolidated statements of operations and comprehensive income (loss).

The following table reflects the effect of recording stock-based compensation:

3 unchanged sentences

Total stock-based compensation

Windfall tax effect on stock-based compensation

Net effect on net (loss) income

Effect on net (loss) earnings per share:

The pre-tax effect within the consolidated statements of operations and comprehensive (loss) income of recording stock-based compensation was as follows:

(Excess tax benefit)/shortfall from stock-based compensation

Net effect on net income (loss)

Effect on net earnings (loss) per share:

The pre-tax effect within the consolidated statements of operations and comprehensive income (loss) of recording stock-based compensation was as follows:

Years Ended December 31,

3 unchanged sentences

Total pre-tax stock-based compensation expense

Valuation Assumptions

The Company determines the fair value of RSUs based on the closing market price of the Company’s common stock on the date of the award and estimates the fair value of employee stock purchase plan rights using the Black-Scholes valuation model.

Such values are recognized as expense on a straight-line basis for time-based awards and using the accelerated graded vesting method for performance-based awards, both over the requisite service periods.

The weighted average fair value per share of employee stock purchase plan rights granted in 2023, 2022 and 2021 was $ 20.88 , $ 29.68 , and $ 33.55 , respectively.

The fair value of employee stock purchase plan rights was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:

Years Ended December 31,

Employee stock purchase plan rights:

Expected life (years)

Risk-free interest rate

Expected volatility

Expected annual dividends per share

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Expected volatilities are based on a combination of implied and historical volatilities of the Company’s common stock;

the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns;

and the risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

The total fair value of RSUs vested during 2023, 2022 and 2021 was approximately $ 40 , $ 40 and $ 57 , respectively.

Am immaterial value of SARs was included in 2022 and 2021.

As of December 31, 2023, the unrecognized compensation cost related to RSUs was approximately $ 46 and will be recognized over an estimated weighted average amortization period of 1 year.

(19) Stockholders’ Equity

10 unchanged sentences

On February 10, 2025 , the Company’s Board of Directors declared a quarterly cash dividend of $ 0.22 per share to be paid on March 7, 2025 to Stockholders of record as of February 24, 2025 .

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Future dividend declarations, if any, as well as the record and payment dates for such dividends, are subject to the final determination of the Company’s Board of Directors.

6 unchanged sentences

The Company’s contributions were immaterial for 2024, 2023 and 2022.

The Company maintains a bonus plan which provides cash awards to certain employees, at the discretion of the Compensation Committee of the Company’s Board of Directors, based upon the Company’s operating results.

In addition, certain of the Company’s foreign locations also have various bonus plans based upon local operating results and employee performance.

The Company maintains a management incentive bonus plan (“MIP”) which provides cash awards to certain employees, at the discretion of the Compensation Committee of the Company’s Board of Directors, based upon certain metrics tied to the Company’s consolidated financial results.

In addition, certain of the Company’s foreign locations also have various bonus plans, which in 2024 were generally based upon the same consolidated financial results as the MIP.

In 2023 and 2022, these foreign bonus plans were based upon local operating results and employee performance.

The Company may also grant certain sign-on and spot bonuses when applicable.

The total bonus expense was $ 38 , $ 63 and $ 48 for 2024, 2023 and 2022, respectively.

Defined Benefit Pension Plans.

The Company has a number of defined benefit pension plans at many of its foreign location, which cover most of its full-time employees at these respective locations.

In addition, the Company has certain pension assets and liabilities

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

relating to its former employees in the United Kingdom.

The Company has a number of defined benefit pension plans at many of its foreign locations covering some employees at these respective locations.

The majority of these defined benefit plans are frozen and do not allow new employees to join the plans.

One of the Company’s German pension plans is unfunded, as permitted under the plan and applicable laws.

As a result of the Atotech Acquisition, the Company assumed all assets and liabilities of Atotech’s defined benefit pension plans.

For financial reporting purposes, the Company obtained actuarial reports supporting the calculation of net periodic pension costs that used a number of actuarial assumptions, including a discount rate for plan obligations, an assumed rate of return on pension plan assets and an assumed rate of compensation increase for employees covered by the various plans.

For financial reporting purposes, the Company obtained actuarial reports supporting the calculations of net periodic pension costs that used a number of actuarial assumptions, including a discount rate for plan obligations, an assumed rate of return on pension plan assets and an assumed rate of compensation increase for employees covered by the various plans.

The Company reviewed these actuarial assumptions and concluded they were reasonable based upon management’s judgment, considering known trends and uncertainties.

4 unchanged sentences

Expected return on plan assets

Amortization of actuarial net loss

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The changes in projected benefit obligations and plan assets, as well as the ending balance sheet amounts for the Company’s defined benefit plans, were as follows:

2 unchanged sentences

Projected benefit obligations, beginning of year

Liabilities assumed through Atotech Acquisition

Interest cost

Actuarial loss (gain)

Actuarial (gain) loss

Benefits paid

3 unchanged sentences

Fair value of plan assets, beginning of year

Assets assumed through Atotech Acquisition

Company contributions

4 unchanged sentences

Net underfunded status

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

As of December 31, 2024, the estimated benefit payments for the Company’s defined benefit plans for the next 10 years were as follows:

6 unchanged sentences

In determining the expected long-term rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes, and economic and other indicators of future performance.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Plan assets were held in the following categories as a percentage of total plan assets:

9 unchanged sentences

These assets are invested in group insurance contracts through the insurance companies administering these plans, in accordance with applicable pension laws.

These group insurance contracts have a guaranteed minimum rate of return ranging from 2.0 % to 4.25 %, depending on the contract.

These group insurance contracts have a guaranteed minimum rate of return ranging from 2.25 % to 4.00 % in 2024 and 2.00 % to 4.25 % in 2023, depending on the contract.

Because these assets were not separate legal assets of the pension plan, they were not included in the Company’s plan assets shown above.

1 unchanged sentence

Such assets are included in other assets in the accompanying consolidated balance sheet.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

(21) Net (Loss) Income Per Share

The following is a reconciliation of basic to diluted net (loss) income per share:

Years Ended December 31,

Net (loss) income

Shares used in net (loss) income per common share – basic

Effect of dilutive securities

Shares used in net (loss) income per common share – diluted

Net (loss) income per common share:

Basic earnings per share (“EPS”) is computed by dividing income available to holders of the Company’s common stock by the weighted-average number of common shares outstanding during the period.

The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding (using the treasury stock method) if securities containing potentially dilutive common shares had been converted to such common shares, and if such conversion is dilutive.

In periods in which a net loss is recognized, the impact of RSUs is not included as they are antidilutive.

In 2022 and 2021 , the Company had an immaterial quantity of RSUs that were antidilutive and were excluded from the computation of diluted weighted-average shares.

(21) Business Segment, Geographic Area, Product Information and Significant Customer Information

2 unchanged sentences

The Company has a diverse base of customers across its three end markets, semiconductor, electronics and packaging, and specialty industrial.

The CODM utilizes total gross profit for the purposes of making decisions about allocating resources and assessing performance.

Segment gross margin is the primary measure used by the CODM to assess segment performance and to decide how to allocate resources.

The Company’s CODM assesses segment performance and decides how to allocate resources using segment gross margin among other measures.

Gross margin is utilized to drive decisions in the annual forecasting process when making decisions about allocating capital and personnel to the segments.

The Company has three reporting segments, VSD, PSD and MSD as described below.

VSD delivers foundational technology solutions to leading edge semiconductor manufacturing, electronics and packaging and specialty industrial applications.

VSD products are derived from the Company’s core competencies in pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and vacuum technology.

PSD provides a full range of solutions including lasers, beam measurement and profiling, precision motion control, vibration isolation systems, photonics instruments, temperature sensing, opto-mechanical components, optical elements, systems for flexible PCB laser processing, laser-based systems for high-density interconnect PCB and package manufacturing.

VSD delivers foundational technology solutions to semiconductor manufacturing, electronics and packaging and specialty industrial applications.

VSD products are derived from the Company’s core competencies in vacuum technologies, including pressure measurement and control, flow measurement and control, gas and vapor delivery, gas composition analysis, electronic control technology, reactive gas generation and delivery, power generation and delivery, and fiber optic temperature and position sensing.

PSD provides a broad range of solutions including lasers, beam measurement and profiling, precision motion control, vibration isolation systems, photonics instruments, opto-mechanical components, optical elements, laser-based systems for flexible PCB laser processing, laser-based systems for high-density interconnect PCB and package substrate manufacturing.

MSD develops leading process and manufacturing technologies for advanced surface modification, electroless and electrolytic plating, and surface finishing.

Applying a comprehensive systems-and-solutions approach, MSD’s portfolio includes chemistry, equipment, software, and services for innovative and high-technology applications in a wide variety of end-markets.

Applying a comprehensive systems-and-solutions approach, MSD’s portfolio includes chemistry, equipment and services for innovative and high-technology applications in the electronics and packaging and specialty industrial markets.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The Company derives its segment results directly from the manner in which results are reported in its management reporting system.

2 unchanged sentences

For each reportable segment, the Company also provides services relating to the maintenance and repair of its products, installation services and training.

Unallocated corporate expenses represent those costs not specifically related to the operations of each segment and are managed separately at the corporate level and primarily relate to labor costs of global functions such as supply chain, quality control and operations.

The following tables sets forth the details of gross profit by reportable segment and then reconciles to income (loss) before income taxes for each year presented:

Year Ended December 31, 2024

Revenues by segment

Total cost of revenues (exclusive of amortization shown separately below) (1)

Segment gross profit

Segment gross profit percentage

Reconciliation to income before income taxes

Operating expenses:

Research and development

Selling, general and administrative

Acquisition and integrated costs

Restructuring and other

Fees and expenses related to repricing of Term Loan Facility

Amortization of intangible assets

Unallocated corporate expenses

Income from operations

Interest income

Interest expense

Loss on extinguishment of debt

Other (income) expense, net

Income before income taxes

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

The following table sets forth net revenues by reportable segment:

Years Ended December 31,

The following table sets forth a reconciliation of segment gross profit to consolidated net income:

Years Ended December 31,

Gross profit by reportable segment:

Total gross profit by reportable segment

Year Ended December 31, 2023

Revenues by segment

Total cost of revenues (exclusive of amortization shown separately below) (1)

Segment gross profit

Segment gross profit percentage

Reconciliation to loss before income taxes

Operating expenses:

1 unchanged sentence

Selling, general and administrative

Acquisition and integration costs

Acquisition and integrated costs

Restructuring

3 unchanged sentences

Gain on sale of long-lived assets

(Loss) income from operations

Unallocated corporate expenses

Loss from operations

Interest income

1 unchanged sentence

Loss on extinguishment of debt

Other expense, net

(Loss) income before income taxes

(Benefit) provision for income taxes

Net (loss) income

Other (income) expense, net

Loss before income taxes

Year Ended December 31, 2022

Revenues by segment

Total cost of revenues (exclusive of amortization shown separately below) (1)

Segment gross profit

Segment gross profit percentage

Reconciliation to income before income taxes

Operating expenses:

Research and development

Selling, general and administrative

Acquisition and integrated costs

Restructuring

Amortization of intangible assets

Gain on sale of long-lived assets

Unallocated corporate expenses

Income from operations

Interest income

Interest expense

Other (income) expense, net

Income before income taxes

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

(1) The significant expense category and amount aligns with the segment-level information that is regularly provided to the CODM.

The following table set forth capital expenditures by reportable segment:

4 unchanged sentences

Total depreciation and amortization

Total income tax expense is not presented by reportable segment because the necessary information is not available or used by the CODM.

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

The following table sets forth segment assets by reportable segment:

5 unchanged sentences

Total segment assets

The Company adjusted the accounts receivable, net balances as of December 31, 2022 to correct for immaterial errors in the segments.

The following is a reconciliation of segment assets to consolidated total assets:

receivable, net

December 31, 2022

Total segment assets

Cash and cash equivalents and short-term investments

Other current assets

Property, plant and equipment, net

Right-of-use assets

Goodwill and intangible assets, net

Other assets and long-term assets

Consolidated total assets

Geographic Area

Information about the Company’s operations by geographic region is presented in the tables below.

Net revenues from unaffiliated customers are based on the location in which the sale originated.

Intercompany sales between geographic areas are at tax transfer prices and have been eliminated from consolidated net revenues.

Years Ended December 31,

Net revenues:

United States

The Company adjusted the net revenues by geographic area balances as of December 31, 2022 to correct for immaterial errors by location.

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

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.

Long-lived assets:

United States

The following tables reconciles total segment assets to total assets:

Total segment assets

Cash and cash equivalents

Other current assets

Property, plant and equipment, net

Right-of-use assets, net

Goodwill and intangible assets, net

Goodwill associated with each of the Company’s reportable segments is as follows:

1 unchanged sentence

Gross goodwill at December 31, 2023

Movement of OSP product line

Foreign currency translation and measurement period adjustments

3 unchanged sentences

Accumulated goodwill impairment at December 31, 2024

Goodwill, net of accumulated impairment, foreign currency translation and measurement period adjustments, at December 31, 2023

Goodwill, net of accumulated impairment and foreign currency translation at December 31, 2024

Reportable segment:

Gross goodwill at December 31, 2022

Foreign currency translation and measurement period adjustments

Gross goodwill at December 31, 2023

Accumulated goodwill impairment at December 31, 2022

Impairment charge

Accumulated goodwill impairment at December 31, 2023

Goodwill, net of accumulated impairment and foreign currency translation at December 31, 2023

Geographic Area

Information about the Company’s operations by geographic area is presented in the tables below.

Starting in the second quarter of 2024, the Company changed its basis of reporting geographical net revenues from the location in which the sale originated to the shipped-to location of the end customer.

Prior periods have been recast to reflect this change, which was

MKS INSTRUMENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

made to better align with how management reviews geographic net revenues.

Intercompany sales between geographic areas are at tax transfer prices and have been eliminated from consolidated revenues.

Years Ended December 31,

Net revenues:

United States

Long-lived assets include property, plant and equipment, net, right-of-use assets, net and certain other assets.

Long-lived assets:

United States

The Company sells products and services to thousands of customers worldwide, in a wide range of end markets.

Revenues from its top ten customers accounted for 32 % , 30 % and 42 % of net revenues for 2024, 2023, and 2022, respectively.

For the year ended December 31, 2023 , no customer represented 10% or more of the Company’s net revenues.

For the year ended December 31, 2022 , the Company had one customer that represented 14% and one customer that represented 10% of net revenues.

For the years ended December 31, 2024 and 2023, no customer represented 10% or more of the Company’s net revenues.

For the year ended December 31, 2022 , the Company had one customer that represented 14% and one customer that represented 10% of net revenues.

(22) Restructuring and Other

Restructuring

Restructuring costs were $ 20 in 2023, related to severance costs due to global cost-saving initiatives.

Restructuring costs were $ 10 in 2022 , primarily related to severance costs due to a global cost-saving initiative, the closure of two facilities in Europe, the movement of certain products to low-cost regions as well as executive payments related to the Atotech Acquisition.

The Company recorded restructuring charges of $ 4 in 2024, primarily related to severance costs incurred as a result of a global cost-saving initiative implemented in the fourth quarter of 2023.

The Company recorded restructuring charges of $ 20 in 2023, primarily related to severance costs incurred as a result of various global cost-saving initiatives implemented in 2023.

The activity related to the Company’s restructuring accrual is shown below:

Balance at January 1

Years Ended December 31,

Restructuring accrual, beginning of period

Charged to expense

Payments and adjustments

Balance at December 31

Restructuring accrual, end of period

MKS INSTRUMENTS, INC.

1 unchanged sentence

(in millions, except per share data)

The Company recorded other charges of $ 2 in 2024 related to legal matters.

(23) Commitments and Contingencies

1 unchanged sentence

The majority of the purchase commitments covered by these arrangements are for periods of less than one year and aggregate to approximately $ 544 .

Legal Proceedings

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business.

1 unchanged sentence

(24) Subsequent Events

On January 22, 2024 (the “Second Amendment Effective Date”), the Company entered into the Second Amendment to Credit Agreement (the “Second Amendment”).

Pursuant to the Second Amendment, the Company (i) borrowed additional USD tranche B loans (the “Incremental USD Tranche B Loans”) in an aggregate principal amount of $ 490 , (ii) borrowed additional Euro Tranche B loans (the “Incremental Euro Tranche B Loans” and together with the Incremental USD Tranche B Loans, the “Incremental Tranche B Loans”) in an aggregate principal amount of € 250 and (iii) used a portion of the proceeds of the Incremental Tranche B Loans to prepay the Company’s USD Tranche A in full in an aggregate principal amount of $ 744 .

Remaining proceeds of the Incremental Tranche B Loans were used to pay fees and expenses in connection with the Second Amendment and will be used for working capital and general corporate purposes.

The Incremental USD Tranche B Loans and the Incremental Euro Tranche B Loans have identical terms to the Company’s existing USD Tranche B and Euro Tranche B loans (collectively, together with the Incremental Tranche B Loans, the “Tranche B Loans”), respectively, under the Credit Agreement.

Additionally, pursuant to the Second Amendment, the 1.00 % prepayment premium applicable to any Tranche B Loans prepaid in connection with certain repricing transactions was extended for a period of six months following the Second Amendment Effective Date.

The Incremental Tranche B Loans were issued with original issue discount of 0.25 %.

In connection with the execution of the Second Amendment, the Company paid customary fees and expenses to JPMorgan Chase Bank, N.A.

On February 5, 2024, the Company made a voluntary prepayment of $ 50 aggregate principal amount on the USD Tranche B.

On February 13, 2024, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”).

Pursuant to the Third Amendment, the Company increased the available borrowing capacity under the Revolving Facility by $ 175 million (the “Incremental Revolving Commitments”), from $ 500 million to $ 675 million.

In connection with the execution of the Third Amendment, the Company paid customary fees and expenses to the lenders providing the Incremental Revolving Commitments and to JPMorgan Chase Bank, N.A.

On January 24, 2025, the Company entered into the Fifth Amendment to Credit Agreement, by and among us as parent borrower, the other loan parties party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and each lender party thereto (the “Fifth Amendment”).

Pursuant to the Fifth Amendment, the Company (i) refinanced its existing USD Tranche B loan and Euro Tranche B loan with a new $ 2,529 USD Tranche B loan and a new € 596 Euro Tranche B loan, (ii) decreased the applicable margin for the USD Tranche B from 2.25 % to 2.00 % with respect to Term SOFR borrowings and from 1.25 % to 1.00 % with respect to base rate borrowings, (iii) decreased the applicable margin for the Euro Tranche B from 2.75 % to 2.50 % and (iv) extended the period during which a 1.00 % prepayment premium may be required if the Company prepays any loans under the USD Tranche B or the Euro Tranche B in connection with a repricing transaction until the date that is six months following the Fifth Amendment Effective Date.

The repriced USD Tranche B loan and Euro Tranche B loan were issued without original issue discount.

In connection with the execution of the Fifth Amendment, the Company paid customary fees and expenses to JPMorgan Chase Bank, N.A.

On January 24, 2025, concurrently with the effectiveness of the Fifth Amendment, the Company made a voluntary prepayment of $ 100 principal amount of USD Tranche B loans, reducing the principal amount of USD Tranche B loan from $ 2,629 to $ 2,529 .

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data