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Press release from Marketwire

MKS Announces Second Quarter Fiscal 2011 Results and Increases Quarterly Dividend

Tuesday, November 23, 2010

MKS Announces Second Quarter Fiscal 2011 Results and Increases Quarterly Dividend07:00 EST Tuesday, November 23, 2010WATERLOO, ONTARIO--(Marketwire - Nov. 23, 2010) - MKS Inc. (MKS) (TSX:MKX) the global application lifecycle management (ALM) technology leader, today announced its financial results for the second quarter of fiscal year 2011 and a 14% increase to its quarterly cash dividend. All amounts are reported in US dollars under United States Generally Accepted Accounting Principles.Financial & Operational Highlights:Q2 2011 (compared with Q2 2010) Total revenue of $17.4 million compared to $14.7 million, an increase of 19% License revenue of $5.6 million compared to $3.9 million, an increase of 42% Maintenance revenue of $8.0 million compared to $7.8 million, an increase of 3% Service revenue of $3.8 million compared to $3.0 million, an increase of 29% Operating income of $3.2 million compared to $2.2 million, an increase of 45% Net income of $2.4 million, or $0.23 per share, compared to $1.6 million, or $0.16 per share, an increase of 49% Key license transactions at Denso, ITT Electronics, Magna, Mitsubishi Electric, RIM, Robert Bosch, Rolls Royce, and Volkswagen Closing cash balance at October 31, 2010 was $21.8 million, a $3.0 million decrease from the $24.8 million balance at April 30, 2010, and up $0.9 million from the $20.9 million at July 31, 2010. During the quarter MKS paid $1.8 million in dividends."We were pleased to report strong second quarter results driven by excellent license performance. The outstanding quality of our global customers is testament to the strategic position that we are winning in the embedded systems market." said Michael Harris, President and CEO. "We have steadily established MKS Integrity as the market standard for global manufacturers who recognized that software has become their most critical factor in product innovation.""With continued new customer wins among the largest embedded systems customers globally, we are also proving the robustness of our financial model." said Philip C. Deck, Executive Chairman. "Our strong financial performance this quarter supported our continued confidence in our performance for the full fiscal year 2011."MKS also announced today that its Board of Directors has declared a quarterly cash dividend of US$0.20 per share on the Company's outstanding common shares, an increase of 14% from the previous quarter.The cash dividend on MKS common shares will be payable on January 14, 2011 to shareholders of record at the close of business on December 31, 2010. The dividend is designated as an eligible dividend for the purposes of section 89 of the Income Tax Act (Canada).Financial Review Total revenue for the second quarter of fiscal 2011 was $17.4 million, up 19 percent from $14.7 million for the second quarter of fiscal 2010. Net income for the second quarter of fiscal 2011 increased 49 percent to $2.4 million, or $0.23 per share, compared to $1.6 million or $0.16 per share in the second quarter of fiscal 2010. Six month revenue for fiscal 2011 increased 8 percent to $32.7 million compared with revenue of $30.4 million for the same period in fiscal 2010. Six month net income was $3.4 million, or $0.33 per share, an increase of 12 percent from the net income of $3.0 million, or $0.30 per share, for the same period in fiscal 2010.Conference Call DetailsMKS will hold a conference call November 23, 2010 at 8:30 a.m. EST to discuss its quarterly performance. Interested parties may access the call by dialing 800-215-1640 or 1-416-620-2418. A digital recording of the call will be available for seven (7) days following the call and may be accessed by dialing 800-558-5253 or 416-626-4100 and by entering reservation #21442612. About MKSMKS Inc., the global application lifecycle management (ALM) technology leader, enables software engineering and IT organizations to seamlessly manage their worldwide software development activities. With its flagship product, MKS Integrity, MKS offers support for all software development activities through a single enterprise application, resulting in better global collaboration and higher productivity. MKS supports customers worldwide with offices across North America, Europe and Asia. For more information about MKS, visit our Web site at Copyright © 2010 MKS Inc. MKS and MKS Integrity are trademarks of MKS Inc. All other trademarks mentioned in this release are the property of their respective owners.This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect MKS's current views with respect to future events and are subject to such risks and uncertainties. Although MKS believes the expectations represented by such forward looking statements are reasonable, there can be no assurance that those expectations will prove to be correct. Many factors could cause our actual results to differ materially from the statements made including those factors detailed from time to time in filings made by MKS with Canadian securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. MKS does not intend and does not assume any obligation to update these forward-looking statements.US GAAPMKS Inc.Consolidated Balance Sheets(US dollars, thousands, unaudited)October 31 2010April 30 2010Assets:Current assets:Cash and cash equivalents$21,769$24,755Accounts receivable, net of allowances for doubtful accounts of $155 (April 30, 2010 – $124)10,35510,685Income taxes receivable556556Deferred income taxes2,5402,540Prepaid expenses and other assets1,6601,643Total current assets36,88040,179Fixed assets3,8433,632Intangible assets1015Goodwill2,4242,424Income taxes receivable2,4593,019Deferred income taxes4,2194,522Total assets$49,835$53,791Liabilities and shareholders' equity:Current liabilities:Accounts payable$1,585$2,028Accrued liabilities3,4214,163Deferred loss on forward contracts175488Income taxes payable976959Deferred revenue15,04817,221Total current liabilities21,20524,859Deferred income taxes1,0711,007Total long term liabilities1,0711,007Shareholders' equity:Share capital58,56557,926Accumulated other comprehensive loss(883)(113)Accumulated deficit(30,123)(29,888)Total shareholders' equity27,55927,925Total liabilities and shareholders' equity$49,835$53,791US GAAPMKS Inc.Consolidated Statements of Operations(US dollars, thousands, except per share data, unaudited)Three months endedSix months endedOctober 31 2010October 31 2009October 31 2010October 31 2009Revenue:License$5,567$3,921$10,099$9,545Maintenance8,0327,79715,59715,212Service3,8212,9597,0075,66017,42014,67732,70330,417Operating expenses:Cost of product and support1,4621,1412,8312,370Cost of service2,4161,8314,5233,562Sales and marketing5,0534,77010,6119,987Research and development3,4472,7496,7055,934General and administrative2,0021,9823,8113,906Foreign exchange (gain) loss(302)(184)(484)(225)Stock-based compensation13717526935114,21512,46428,26625,885Operating income3,2052,2134,4374,532Interest income, net4367Income before income taxes3,2092,2164,4434,539Income tax provision:Current532105796140Deferred2765002721,381Income tax provision8086051,0681,521Net income$2,401$1,611$3,375$3,018Earnings per share:Basic$0.23$0.16$0.33$0.30Diluted$0.23$0.16$0.32$0.30Weighted average number of shares outstanding10,32110,08510,29110,060Diluted weighted average number of shares outstanding10,64510,21010,60010,164US GAAPMKS Inc.Consolidated Statements of Cash Flows(US dollars, thousands, unaudited)Three months endedSix months endedOctober 31 2010October 31 2009October 31 2010October 31 2009Cash flows provided by (used for) operating activities:Net income$2,401$1,611$3,375$3,018Adjustments to reconcile net income to net cash provided by (used for) operating activities:Depreciation of fixed assets319346694683Amortization of intangible assets221543Stock-based compensation137175269351Deferred income taxes2765002721,381Loss on disposal of fixed assets3293274Change in operating assets and liabilities:Accounts receivable232(1,206)330(183)Prepaid expenses and other assets321432(17)(156)Accounts payable454215(443)(103)Accrued liabilities72(7)(742)339Income taxes payable/receivable520(608)577(537)Deferred revenue(1,350)(1,810)(2,173)(1,644)Net cash provided by (used for) operating activities3,416(322)2,1793,266Cash flows (used for) investing activities:Purchase of fixed assets(351)(173)(898)(452)Net cash (used for) investing activities(351)(173)(898)(452)Cash flows provided by (used for) financing activities:Proceeds on issuance of common shares6091361,104641Common shares purchased for restricted share units granted(734)–(734)–Payment of dividends(1,812)(1,262)(3,610)(2,521)Net cash (used for) financing activities(1,937)(1,126)(3,240)(1,880)Effect of exchange rate changes on cash and cash equivalents(232)901(1,027)977Change in cash and cash equivalents balances896(720)(2,986)1,911Cash and cash equivalents, beginning of period20,87319,72924,75517,098Cash and cash equivalents, end of period$21,769$19,009$21,769$19,009FOR FURTHER INFORMATION PLEASE CONTACT: Douglas SawatzkyMKS Inc.Chief Financial