MKS INSTRUMENTS INC

Previous wording

Among the important factors that could cause actual events to differ materially from those in the forward-looking statements that we make are the level and terms of our substantial indebtedness and our ability to service such debt; our entry into the chemicals technology business through our acquisition of Atotech Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”) which may expose us to significant additional liabilities; the risk that we are unable to integrate the Atotech Acquisition successfully or realize the anticipated synergies, cost savings and other benefits of the Atotech Acquisition; legal, reputational, financial and contractual risks resulting from the ransomware event we identified in February 2023, and other risks related to cybersecurity, data privacy and intellectual property; competition from larger, more advanced or more established companies in our markets; the ability to successfully grow our business, including through growth of the Atotech business and growth of the Electro Scientific Industries, Inc. business, which we acquired in February 2019, and financial risks associated with those and potential future acquisitions, including goodwill and intangible asset impairments; manufacturing and sourcing risks, including those associated with limited and sole source suppliers and the impact and duration of supply chain disruptions, component shortages, and price increases; changes in global demand; the impact of a pandemic or other widespread health crisis; risks associated with doing business internationally, including geopolitical conflicts, such as the conflict in the Middle East, trade compliance, regulatory restrictions on our products, components or markets, particularly the semiconductor market, and unfavorable currency exchange and tax rate fluctuations, which risks become more significant as we grow our business internationally and in China specifically; conditions affecting the markets in which we operate, including fluctuations in capital spending in the semiconductor, electronics manufacturing and automotive industries, and fluctuations in sales to our major customers; disruptions or delays from third-party service providers upon which our operations may rely; the ability to anticipate and meet customer demand; the challenges, risks and costs involved with integrating or transitioning global operations of the companies we have acquired; risks associated with the attraction and retention of key personnel; potential fluctuations in quarterly results; dependence on new product development; rapid technological and market change; acquisition strategy; volatility of stock price; risks associated with chemical manufacturing and environmental regulation compliance; risks related to defective products; financial and legal risk management; and the other important factors described under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with t…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Among the important factors that could cause actual events to differ materially from those in the forward-looking statements that we make are the level and terms of our substantial indebtedness and our ability to service such debt; our entry into the chemicals technology business through our acquisition of Atotech Limited (“Atotech”) in August 2022 (the “Atotech Acquisition”) which may expose us to significant additional liabilities; the risk that we are unable to integrate Atotech successfully or realize the anticipated synergies, cost savings and other benefits of the Atotech Acquisition; legal, reputational, financial and contractual risks resulting from the ransomware event we identified in February 2023, and other risks related to cybersecurity, data privacy and intellectual property; competition from larger, more advanced or more established companies in our markets; the ability to successfully grow our business, including through growth of the Atotech business and growth of the Electro Scientific Industries, Inc. business, which we acquired in February 2019, and financial risks associated with those and potential future acquisitions, including goodwill and intangible asset impairments; manufacturing and sourcing risks, including those associated with limited and sole source suppliers and the impact and duration of supply chain disruptions, component shortages, and price increases; changes in global demand; the impact of a pandemic or other widespread health crisis; risks associated with doing business internationally, including geopolitical conflicts, such as the conflict in the Middle East, trade compliance, regulatory restrictions on our products, components or markets, particularly the semiconductor market, and unfavorable currency exchange and tax rate fluctuations, which risks become more significant as we grow our business internationally and in China specifically; conditions affecting the markets in which we operate, including fluctuations in capital spending in the semiconductor, electronics manufacturing and automotive industries, and fluctuations in sales to our major customers; disruptions or delays from third-party service providers upon which our operations may rely; the ability to anticipate and meet customer demand; the challenges, risks and costs involved with integrating or transitioning global operations of the companies we have acquired; risks associated with the attraction and retention of key personnel; potential fluctuations in quarterly results; dependence on new product development; rapid technological and market change; acquisition strategy; volatility of stock price; risks associated with chemical manufacturing and environmental regulation compliance; risks related to defective products; financial and legal risk management; and the other important factors described under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securiti…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The Management’s Discussion and Analysis of Financial Condition and Results of Operations describes principal factors affecting the results of operations, financial condition, cash flows and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our condensed consolidated financial statements, and is intended to better allow investors to view the Company from management’s perspective. This section focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of our future operating results or our future financial condition. This section provides an analysis of our financial results for the three months ended June 30, 2024 compared to the three months ended March 31, 2024, and the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

The Management’s Discussion and Analysis of Financial Condition and Results of Operations describes principal factors affecting the results of operations, financial condition, cash flows and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our condensed consolidated financial statements, and is intended to better allow investors to view the Company from management’s perspective. This section focuses on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of our future operating results or our future financial condition. This section provides an analysis of our financial results for the three months ended September 30, 2024 compared to the three months ended June 30, 2024, and the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. 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.

Previous wording

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.

Current wording

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 and services for innovative and high-technology applications in a wide variety of end markets.

Previous wording

MKS is a critical solutions provider for semiconductor manufacturing. Our products are used in major semiconductor processing steps, such as deposition, etching, cleaning, lithography, metrology, and inspection. The semiconductor industry continually faces new challenges, as products become smaller, more powerful and highly mobile. Ultra-thin layers, smaller critical dimensions, new materials, 3D structures, and the ongoing need for higher yield and productivity drive the need for tighter process measurement and control, all of which MKS supports. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment (“WFE”) ecosystem and address over 85% of the market. We have characterized our broad and unique offering as Surround the Wafer® to reflect the technology enablement we provide across almost every major process in semiconductor manufacturing today.

Current wording

MKS is a critical solutions provider for semiconductor manufacturing. Our products are used in major semiconductor processing steps, such as deposition, etching, cleaning, lithography, metrology, and inspection. The semiconductor industry continually faces new challenges, as products become smaller, more powerful and highly mobile. Ultra-thin layers, smaller critical dimensions, new materials, 3D structures, and the ongoing need for higher yield and productivity drive the need for tighter process measurement and control, all of which MKS supports. We believe we are the broadest critical subsystem provider in the wafer fabrication equipment (“WFE”) ecosystem and address over 85% of the market. We characterize our broad and unique offering as Surround the Wafer® to reflect the technology enablement we provide across almost every major process in semiconductor manufacturing today.

Previous wording

For the three months ended June 30, 2024, net revenues in our semiconductor market increased by $18 million, or 5%, compared to the prior quarter primarily due to strong in-quarter demand conversion within VSD.

Current wording

For the three months ended September 30, 2024, net revenues in our semiconductor market increased by $9 million, or 3%, compared to the prior quarter primarily due to strong in-quarter demand conversion within VSD.

Previous wording

For the six months ended June 30, 2024, net revenues in our semiconductor market decreased by $30 million, or 4%, compared to the same period in the prior year. This decrease was mainly due to continued softened demand for semiconductor capital equipment related to deposition and etching, partially offset by an increase in sales of our lithography, metrology and inspection products.

Current wording

For the nine months ended September 30, 2024, net revenues in our semiconductor market decreased by $19 million, or 2%, compared to the same period in the prior year. This decrease was mainly due to continued softened demand for semiconductor capital equipment related to deposition and etching, partially offset by an increase in sales of our lithography, metrology and inspection products.

Previous wording

PCBs and package substrates, and critical to wafer level packaging (“WLP”) applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs.

Current wording

MKS is a foundational solutions provider for the electronics and packaging market. Our portfolio includes photonics components, laser drilling systems, electronics chemistries and plating equipment that are critical for the manufacturing of PCBs and package substrates, and critical to wafer level packaging (“WLP”) applications. Similar to the semiconductor industry, the PCB, package substrate and WLP industries demand smaller features, greater density, and better performance. In addition, the electronics and packaging market also includes sales of our vacuum and photonics solutions for display manufacturing applications. We characterize our complementary offering of laser systems and chemistry solutions as Optimize the Interconnect®, to reflect the unique technology enablement we provide at the Interconnect level within PCBs, package substrates and WLPs.

Previous wording

For the three months ended June 30, 2024, net revenues in our electronics and packaging market increased by $21 million, or 10%, compared to the prior quarter primarily due to an increase in chemistry sales within MSD. This sequential increase was also due to seasonality related to the Lunar New Year in the three months ended March 31, 2024.

Current wording

For the three months ended September 30, 2024, net revenues in our electronics and packaging market increased by $2 million, or 1%, compared to the prior quarter primarily due to an increase in chemistry sales within MSD.

Previous wording

For the six months ended June 30, 2024, net revenues in our electronics and packaging market decreased by $10 million, or 2%, compared to the same period in the prior year. This decrease was primarily due to lower revenue within MSD mainly as a result of lower palladium prices that are passed through to our customers, which were partially offset by volume growth in chemistry sales.

Current wording

For the nine months ended September 30, 2024, net revenues in our electronics and packaging market decreased by $22 million, or 3%, compared to the same period in the prior year. This decrease was primarily due to lower revenue within MSD mainly as a result of lower palladium prices that are passed through to our customers, which were partially offset by volume growth in chemistry sales.

Previous wording

For the three months ended June 30, 2024, net revenues in our specialty industrial market decreased by $20 million, or 7%, compared to the prior quarter mainly due to lower revenue in our general industrial and defense markets within VSD and PSD.

Current wording

For the three months ended September 30, 2024, net revenues in our specialty industrial market decreased by $2 million, or 1%, compared to the prior quarter mainly due to lower revenue in our material processing and defense markets within PSD.

Previous wording

A significant portion of our net revenues is from sales to customers in international markets. For the six months ended June 30, 2024 and 2023, international net revenues accounted for approximately 76% and 75%, respectively, of our total net revenues. A significant portion of our international net revenues was generated from sales to customers in China, South Korea, Japan, Taiwan and Singapore. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.

Current wording

A significant portion of our net revenues is from sales to customers in international markets. For the nine months ended September 30, 2024 and 2023, international net revenues accounted for approximately 77% and 75%, respectively, of our total net revenues. A significant portion of our international net revenues was generated from sales to customers in China, South Korea, Japan, Taiwan and Singapore. We expect international net revenues will continue to account for a significant percentage of total net revenues for the foreseeable future.

Previous wording

Long-lived assets located outside of the United States accounted for approximately 57% and 58% of our total long-lived assets as of June 30, 2024 and December 31, 2023. Long-lived assets include property, plant and equipment, net, right-of-use assets, net and certain other assets.

Current wording

Long-lived assets located outside of the United States accounted for approximately 61% and 58% of our total long-lived assets as of September 30, 2024 and December 31, 2023. Long-lived assets include property, plant and equipment, net, right-of-use assets, net and certain other assets.

Previous wording

The following table sets forth, for the periods indicated, the percentage of total net revenues of certain line items included in our condensed consolidated statements of operations and comprehensive (loss) income data:

Current wording

The following table sets forth, for the periods indicated, the percentage of total net revenues of certain line items included in our condensed consolidated statements of operations and comprehensive income (loss) data:

Previous wording

For the three months ended June 30, 2024, net product revenues increased $16 million compared to the prior quarter. This increase was primarily due to higher chemistry sales at MSD.

Current wording

For the three months ended September 30, 2024, net product revenues increased $6 million compared to the prior quarter primarily due to higher volume of sales at VSD.

Previous wording

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. For the three months ended June 30, 2024, net service revenues increased $3 million compared to the prior quarter.

Current wording

Net service revenues consisted mainly of fees for services related to the maintenance and repair of our products, sales of spare parts, and installation and training. For the three months ended September 30, 2024, net service revenues increased $3 million compared to the prior quarter mainly in our semiconductor market.

Previous wording

For the three months ended June 30, 2024, net revenues from VSD increased $3 million compared to the prior quarter. For the six months ended June 30, 2024, net revenues from VSD decreased $70 million compared to the same period in the prior year, mainly due to a decrease in revenues from customers in the semiconductor market as a result of continued softened demand for semiconductor capital equipment in the deposition and etching tool markets.

Current wording

For the three months ended September 30, 2024, net revenues from VSD increased $10 million compared to the prior quarter mainly due to volume increases in the semiconductor market. For the nine months ended September 30, 2024, net revenues from VSD decreased $80 million compared to the same period in the prior year mainly due to a decrease in revenues from customers in the semiconductor market as a result of continued softened demand for semiconductor capital equipment in the deposition and etching tool markets.

Previous wording

For the three months ended June 30, 2024, net revenues from PSD were flat compared to the prior quarter. For the six months ended June 30, 2024, net revenues from PSD increased $50 million compared to the same period in the prior year mainly in the semiconductor and specialty industrial markets. The increase in semiconductor revenue is mainly related to an increase in sales of our lithography, metrology and inspection products. The increase in specialty industrial market revenue is mainly related to increases in sales to data communications and research and defense customers.

Current wording

For the three months ended September 30, 2024, net revenues from PSD decreased $3 million compared to the prior quarter. For the nine months ended September 30, 2024, net revenues from PSD increased $35 million compared to the same period in the prior year, primarily as a result of an increase in sales of our lithography, metrology and inspection products in our semiconductor market, and an increase in sales of our data communications and research and defense products in our specialty industrial market.

Previous wording

For the three months ended June 30, 2024, net revenues from MSD increased $16 million compared to the prior quarter, primarily due to an increase in chemistry sales due to seasonality as a result of the Lunar New Year in the prior quarter. For the six months ended June 30, 2024, revenues from MSD decreased $22 million compared to the same period in the prior year, primarily due to lower equipment revenue as customers postponed certain investment decisions, and a small decrease in chemistry sales, primarily due to lower palladium prices that are passed on to our customers, offset by increases in chemistry volumes.

Current wording

For the three months ended September 30, 2024, net revenues from MSD increased $2 million compared to the prior quarter. For the nine months ended September 30, 2024, revenues from MSD decreased $33 million compared to the same period in the prior year primarily due to lower equipment revenue as customers postponed certain investment decisions, and a small decrease in chemistry sales, primarily due to lower palladium prices, which are passed on to our customers, offset by an increase in chemistry volumes.

Previous wording

Gross margin for our products decreased for the three months ended June 30, 2024 compared to the prior quarter, mainly as a result of higher warranty costs and higher tariff and duty costs.

Current wording

Gross margin for our products increased for the three months ended September 30, 2024 compared to the prior quarter, mainly as a result of lower warranty and scrap costs as well as better absorption on higher revenue volumes.

Previous wording

Gross margin for our products increased for the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to favorable product mix, higher factory utilization and lower material costs, partially offset by higher warranty costs.

Current wording

Gross margin for our products increased for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to favorable product mix, higher factory utilization and lower excess and obsolete inventory charges, partially offset by higher warranty costs and lower revenue volumes.

Previous wording

Gross margin for our services decreased for the three months ended June 30, 2024 compared to the prior quarter, mainly as a result of higher excess and obsolete inventory charges for service parts.

Current wording

Gross margin for our services increased for the three months ended September 30, 2024 compared to the prior quarter mainly as a result of favorable product mix partially offset by higher excess and obsolete inventory charges and warranty costs for service parts.

Previous wording

Gross margin for our services increased for the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to favorable product mix, higher revenue volumes, and lower direct labor and overhead costs.

Current wording

Gross margin for our services increased for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to favorable product mix, better absorption on higher revenue volumes and lower direct labor and overhead costs.

Previous wording

Gross margin for VSD was flat for the three months ended June 30, 2024, compared to the prior quarter. Gross margin for VSD increased for the six months ended June 30, 2024, compared to the same period in the prior year, primarily due to higher factory utilization and lower material costs partially offset by lower revenue volumes, unfavorable product mix and higher warranty costs.

Current wording

Gross margin for VSD increased for the three months ended September 30, 2024 compared to the prior quarter primarily due to lower material costs, favorable product mix and higher revenue volumes, partially offset by higher variable compensation costs. Gross margin for VSD increased for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to higher factory utilization and lower material costs, partially offset by lower revenue volumes, unfavorable product mix and higher warranty costs.

Previous wording

Gross margin for PSD decreased for the three months ended June 30, 2024, compared to the prior quarter, primarily due to unfavorable product mix, unfavorable factory utilization, higher warranty cost and higher excess and obsolete inventory charges. Gross margin for PSD increased for the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to higher revenue volumes, lower freight and duty costs and lower excess and obsolete inventory charges, partially offset by higher physical inventory and material variances.

Current wording

Gross margin for PSD increased for the three months ended September 30, 2024 compared to the prior quarter primarily due to favorable product mix and lower material costs, partially offset by unfavorable factory utilization. Gross margin for PSD increased for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to higher revenue volumes, lower freight and duty costs and lower excess and obsolete inventory charges, partially offset by unfavorable product mix and lower factory utilization.

Previous wording

Gross margin for MSD increased for the three months ended June 30, 2024, compared to the prior quarter, primarily due to favorable product mix and lower palladium prices, partially offset by higher warranty costs. Gross margin for MSD increased for the six months ended June 30, 2024, compared to the same period in the prior year, primarily due to lower palladium prices, favorable product mix and lower excess and obsolete inventory charges, partially offset by higher warranty cost.

Current wording

Gross margin for MSD increased for the three months ended September 30, 2024 compared to the prior quarter primarily due to favorable product mix and lower warranty costs, partially offset by higher excess and obsolete charges. Gross margin for MSD increased for the nine months ended September 30, 2024 compared to the same period in the prior year primarily due to lower palladium prices and favorable product mix, partially offset by higher warranty costs.

Previous wording

For the three months ended June 30, 2024, research and development expenses decreased $4 million compared to the prior quarter, primarily due to a decrease of $5 million in compensation-related costs, including salaries, fringe and bonus expenses. Research and development expenses decreased by $11 million for the six months ended June 30, 2024 compared to the same period in the prior year, mainly due to decreases of $7 million in compensation-related costs, including salaries, fringe and bonus expenses, $2 million in project material costs and $2 million in test equipment costs.

Current wording

For the three months ended September 30, 2024, research and development expenses increased $4 million compared to the prior quarter, primarily due to an increase of $4 million in compensation-related costs, including salaries, fringe and variable compensation expenses. Research and development expenses decreased $12 million for the nine months ended September 30, 2024 compared to the same period in the prior year, mainly due to decreases of $7 million in compensation-related costs, including salaries, fringe and variable compensation expenses, $3 million in test equipment and $1 million in project material costs.

Previous wording

We continue to make product advancements designed to meet our customers’ evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accurate components and devices within the handset and tablet market, the transition to 5G for both devices and infrastructure, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers’ product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.

Current wording

We continue to make product advancements designed to meet our customers’ evolving needs. We have developed, and continue to develop, new products designed to address industry trends, such as the rising demand for more complex hardware architecture related to increasing investments in artificial intelligence, the shrinking of integrated circuit critical dimensions and technology inflections, and, in the flat panel display and solar markets, the transition to larger substrate sizes, which require more advanced processing and process control technology, the continuing drive toward more complex and accurate components and devices within the handset and tablet market, the transition to 5G for both devices and infrastructure, the growth in units and via counts in the high density interconnect PCB drilling market, and the transition from internal combustion to electric vehicles. In addition, we have developed, and continue to develop, products that support the migration to new classes of materials, ultra-thin layers, and 3D structures that are used in small geometry manufacturing. In our chemistry and equipment plating businesses, a majority of our research and development investment supports existing customers’ product improvement needs and their short-term research and development goals, which enables us to pioneer new high-value solutions while limiting commercial risk. Research and development expenses consist primarily of salaries and related expenses for personnel engaged in research and development, fees paid to consultants, material costs for prototypes and other expenses related to the design, development, testing and enhancement of our products.

Previous wording

For the three months ended June 30, 2024, selling, general and administrative expenses decreased $9 million, compared to the prior quarter, primarily due to a decrease of $11 million in compensation-related costs including stock compensation and fringe costs.

Current wording

For the three months ended September 30, 2024, selling, general and administrative expenses increased $6 million, compared to the prior quarter, primarily due to an increase of $6 million in compensation-related costs mainly related to variable compensation.

Previous wording

For the six months ended June 30, 2024, selling, general and administrative expenses decreased $17 million, compared to the same period in the prior year, mainly as a result of decreases of $17 million in compensation-related costs and $10 million in net costs incurred as a result of the ransomware event in February 2023, partially offset by increases of $5 million in information technology investments and $3 million in consulting and professional fees.

Current wording

For the nine months ended September 30, 2024, selling, general and administrative expenses decreased $16 million compared to the same period in the prior year primarily as a result of decreases of $21 million in compensation-related costs, mainly related to salaries, fringe and variable compensation and $13 million in net costs incurred in the 2023 period as a result of the ransomware event in February 2023, partially offset by increases of $9 million in information technology investments, $6 million in software maintenance and $2 million in consulting and professional fees.

Previous wording

Acquisition and integration costs incurred during the three and six months ended June 30, 2024 and 2023 were related to consulting and professional fees related to the Atotech Acquisition.

Current wording

Acquisition and integration costs incurred during the three and nine months ended September 30, 2024 and 2023 were related to consulting and professional fees related to the Atotech Acquisition.

Previous wording

Restructuring charges during the three and six months ended June 30, 2024 and three months ended March 31, 2024, primarily related to severance costs as a result of a global cost saving initiative implemented in the fourth quarter of 2023. Restructuring charges during the six months ended June 30, 2023 primarily related to severance costs as a result of global cost saving initiatives implemented in each of the first and second quarters of 2023.

Current wording

Restructuring and other charges during the three and nine months ended September 30, 2024 and three months ended June 30, 2024, primarily related to severance costs as a result of a global cost-saving initiative implemented in the fourth quarter of 2023. Restructuring and other charges during the nine months ended September 30, 2023 primarily related to severance costs as a result of a global cost-saving initiative implemented in each of the first and second quarters of 2023.

Previous wording

During the three months ended March 31, 2024 and six months ended June 30, 2024, we recorded fees and expenses related to borrowing additional USD Tranche B and additional Euro Tranche B, each as defined and described further below under “Credit Facilities,” pursuant to the Second Amendment to Credit Agreement, dated as of January 22, 2024, 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 “Second Amendment”).

Current wording

During the three months ended September 30, 2024, we recorded fees and expenses related to the Fourth Amendment to Credit Agreement, dated as of July 23, 2024, 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 “Fourth Amendment”). During the nine months ended September 30, 2024, we recorded fees and expenses related to the Fourth Amendment and the Second Amendment to Credit Agreement, dated as of January 22, 2024, 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 “Second Amendment”).

Previous wording

For the three months ended June 30, 2024, amortization of intangible assets decreased by $1 million, compared to the prior quarter. For the six months ended June 30, 2024, amortization of intangible assets decreased by $34 million, compared to the same period in the prior year, primarily due to backlog related to MSD being fully amortized in the three months ended December 31, 2023, and the write-off of completed technology at our equipment solutions business (“ESB”) reporting unit of PSD in the second quarter of 2023.

Current wording

For the three months ended September 30, 2024, amortization of intangible assets was flat compared to the prior quarter. For the nine months ended September 30, 2024, amortization of intangible assets decreased by $41 million compared to the same period in the prior year primarily due to the backlog intangible asset related to MSD being fully amortized in the three months ended December 31, 2023, and the write-off of completed technology at our equipment solutions business (“ESB”) reporting unit of PSD in the second quarter of 2023.

Previous wording

During the three months ended June 30, 2023, as a result of softer industry demand, particularly in the personal computer and smartphone markets, we concluded there was a triggering event at our electronics (“EL”) and general metal finishing (“GMF”) reporting units, which together constitute MSD, and the ESB reporting unit of PSD.

Current wording

During the nine months ended September 30, 2023, as a result of softer industry demand, particularly in the personal computer and smartphone markets, we concluded there was a triggering event in the three months ended June 30, 2023 at our electronics (“EL”) and general metal finishing (“GMF”) reporting units, which together constitute MSD, and the ESB reporting unit of PSD.

Previous wording

For the EL, GMF and ESB reporting units, we performed a quantitative assessment of goodwill using a combination of market approach and the income approach. 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 our management. There are inherent uncertainties and management judgment required in these determinations.

Current wording

For the EL, GMF and ESB reporting units, we performed a quantitative assessment of goodwill using a combination of market approach and the income approach. Fair value estimates are based on a complex set of judgments about future events and uncertainties and rely heavily on estimates and assumptions that have been deemed reasonable by our management. There are inherent uncertainties and management judgment required in these determinations.

Previous wording

We have concluded there were no triggering events across our reporting units through the six months ended June 30, 2024.

Current wording

We have concluded there were no triggering events across our reporting units through the nine months ended September 30, 2024.

Previous wording

On July 23, 2024, we entered into the Fourth Amendment to the Credit Agreement (the “Repricing Amendment”). Pursuant to the Repricing Amendment we (i) refinanced the existing USD Tranche B loan and Euro Tranche B loan with a new $2.6 billion USD Tranche B loan and a new €800 million 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, (iii) decreased the applicable margin for the Euro Tranche B from 3.00% to 2.75% and (iv) provided that a 1.00% prepayment premium may be required if we prepay any loans under the Term Loan Facility in connection with a repricing transaction prior to January 23, 2025. In connection with the execution of the Repricing Amendment, we paid customary fees and expenses to JPMorgan Chase Bank, N.A. On July 23, 2024, immediately prior to the effectiveness of the Repricing Amendment, we made a voluntary prepayment of $110 million aggregate principal amount of the Term Loan Facility, consisting of $69 million principal amount of the USD Tranche B loan and €38 million principal amount of the Euro Tranche B loan.

Current wording

For the three months ended September 30, 2024, interest expense, net decreased $16 million compared to the prior quarter primarily as a result of our entering into the Fourth Amendment, which decreased the applicable margin for both the USD Tranche B loan and the EUR Tranche B loan (each as defined and described further below under “Credit Facilities”) by 0.25%. In addition, in July 2024, we made a voluntary prepayment of $110 million aggregate principal amount of the Term Loan Facility (as defined and described further below under “Credit Facilities”) consisting of $69 million principal amount of the USD Tranche B loan and €38 million principal amount of the Euro Tranche B loan (the “July 2024 Prepayment”).

Previous wording

For the three months ended June 30, 2024, interest expense, net decreased $7 million, compared to the prior quarter, primarily related to the issuance of $1.4 billion of Convertible Notes, as defined and described further below under “Convertible Notes,” at a coupon rate of 1.25%, in May 2024. Of the proceeds, $1.2 billion was used to pay down our loans under the Term Loan Facility, as defined and described further below under “Credit Facilities,” at an interest rate of approximately 7.8%. For the six months ended June 30, 2024, interest expense, net decreased by $11 million compared to the same period in the prior year. In addition to the issuance of the Convertible Notes and subsequent pay down of our loans under the Term Loan Facility, interest expense, net was lower as a result of the voluntary prepayments of $100 million in October 2023, $50 million in February 2024 and $50 million in April 2024 on loans under the Term Loan Facility.

Current wording

1.25% and used $1.2 billion of the proceeds to pay down our loans under the Term Loan Facility, which had an interest rate of approximately 7.8%. In addition to the foregoing, interest expense, net for the nine months ended September 30, 2024, was lower as compared to the same period in the prior year as a result of the voluntary prepayments of $100 million in October 2023, $50 million in February 2024 and $50 million in April 2024 on loans under the Term Loan Facility.

Previous wording

For the three and six months ended June 30, 2024, in connection with the issuance in May 2024 of the Convertible Notes, as defined and described further below under “Credit Facilities,” we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discount costs associated with our loans under the Term Loan Facility.

Current wording

For the three months ended September 30, 2024, in connection with the July 2024 Prepayment and the Fourth Amendment, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discounts associated with our loans under the Term Loan Facility. For the three months ended June 30, 2024, in connection with the issuance of the Convertible Notes in May 2024, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing and original issue discount costs associated with our loans under the Term Loan Facility.

Previous wording

For the three months ended March 31, 2024 and the six months ended June 30, 2024, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing costs associated with the extinguishment of our senior secured tranche A term loans using proceeds from borrowing additional USD Tranche B and additional Euro Tranche B pursuant to the Second Amendment.

Current wording

For the nine months ended September 30, 2024, in addition to the loss on extinguishment of debt related to the Fourth Amendment and the July 2024 Prepayment, and the issuance of the Convertible Notes in May 2024, we recorded a loss on extinguishment of debt as a result of the acceleration of deferred financing costs associated with the extinguishment of our senior secured tranche A term loan using proceeds from borrowing additional USD Tranche B and additional Euro Tranche B loans pursuant to the Second Amendment.