MKS (MKSI) Risk Analysis

We previously identified a material weakness in our internal control over financial reporting that was remediated as of December 31, 2023. We may in the future identify additional internal control deficiencies that could rise to the level of a material weakness or uncover other errors in financial reporting. If we fail to remediate any future material weaknesses or maintain effective internal control over financial reporting, our ability to accurately record, process, and report financial information and, consequently, our ability to prepare financial statements within required time periods could be adversely affected. Failure to maintain effective internal controls could result in a failure to comply with SEC rules and regulations, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation, investigations or enforcement actions, negatively affect investor confidence in our financial statements, and adversely impact our stock price and ability to access capital markets. The defense of any such claims, investigations or enforcement actions could divert our attention and resources and could cause us to incur significant legal and other expenses even if the matters are resolved in our favor.

As of February 4, 2026, the total principal balance of our USD Tranche B was $914 million, and the total principal balance of our Euro Tranche B was €587 million. As of February 4, 2026, our Revolving Facility provided us with a senior secured revolving credit facility of up to $1.0 billion. We have not borrowed against our Revolving Facility as of February 4, 2026. Additionally, on February 4, 2026, we completed a private offering of €1.0 billion aggregate principal amount of the 2034 Notes. All amounts outstanding under the Term Loan Facility and the Revolving Facility bear interest at a variable interest rate. Although we hedge some of the variable interest rate exposure, if interest rates increase, debt service requirements on our variable rate debt will increase. Further interest rate increases, if they occur and we do not hedge such variable rates, will create higher debt service requirements, which would adversely affect our cash flows. In addition, changes in our credit ratings could affect the cost and availability of future borrowings and, accordingly, our cost of capital. The ratings of our indebtedness reflect each nationally recognized statistical rating organization's opinion of our financial strength, operating performance and ability to meet our debt obligations. We cannot make any assurances that we will achieve or maintain a particular rating. Our Term Loan Facility and Revolving Facility contain several negative covenants that, among other things and subject to certain exceptions, restrict our ability and/or our subsidiaries' ability to: - Incur additional indebtedness;- Pay certain dividends on our capital stock or redeem, repurchase or retire certain capital stock or certain other indebtedness;- Make certain investments, loans and acquisitions;- Engage in certain transactions with our affiliates;- Sell assets, including capital stock of our subsidiaries;- Materially alter the business we conduct;- Consolidate or merge;- Incur liens; and - Engage in sale-leaseback transactions. In addition, our 2034 Notes contain negative covenants that, among other things and subject to certain exceptions, restrict our ability and/or our subsidiaries' ability to: - Consolidate or merge; and - Incur liens. In addition, our Revolving Facility requires that we meet a financial covenant based on a consolidated leverage ratio test in certain circumstances. Under our Revolving Facility, whenever the aggregate amount of loans outstanding under the Revolving Facility (net of (a) all letters of credit (whether cash collateralized or not) and (b) unrestricted cash of us and our restricted subsidiaries) exceeds 35% of the aggregate commitments under the Revolving Facility, our total net leverage ratio cannot exceed 6.00 to 1.00. Our ability to comply with these provisions may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These restrictions on our ability to engage in or benefit from these actions may also limit our flexibility in planning for, or reacting to, changes in and opportunities for our business, such as limiting our ability to engage in mergers and acquisitions. This could place us at a competitive disadvantage. If the matters described in our other risk factors result in a material adverse effect on our business, financial condition or operating results, we may be unable to comply with the terms of the Credit Facilities or experience an event of default. Our Term Loan Facility and Revolving Facility contain customary events of default, including: - Failure to make required payments;- Failure to comply with certain agreements or covenants;- Materially breaching any representation or warranty;- Failure to pay, or otherwise causing the acceleration of, certain other indebtedness;- Certain events of bankruptcy and insolvency;- Failure to pay certain judgments; and - A change in control of us. Our 2034 Notes contain customary events of default, including: - Failure to make required payments;- Failure to comply with certain agreements or covenants;- Failure to pay, or otherwise causing the acceleration of, certain other indebtedness;- Certain events of bankruptcy and insolvency; and - Failure to pay certain judgments. The amount of cash available to us for repayment of amounts owed under the Credit Facilities and the 2034 Notes will depend on our usage of our existing cash balances and our operating performance and ability to generate cash flows from operations, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. We cannot provide any assurances that we will generate sufficient cash flows from operations to service our debt obligations. Any failure to repay these obligations as they become due would result in an event of default under the Credit Facilities and the 2034 Notes. If an event of default occurs under the Credit Facilities, the lenders may end their obligation to make loans to us under the Credit Facilities and may declare any outstanding indebtedness under the Credit Facilities immediately due and payable. In addition, if an event of default occurs under the 2034 Notes, the trustee and holders thereof may declare any outstanding indebtedness under the 2034 Notes immediately due and payable. In such cases, we would need to obtain additional financing or significantly deplete our available cash, or both, to repay this indebtedness. Any additional financing may not be available on reasonable terms or at all, and significant depletion of our available cash would harm our ability to fund our operations or execute our broader corporate objectives. If we were unable to repay outstanding indebtedness following an event of default, then in addition to other available rights and remedies, the lenders could initiate foreclosure proceedings on substantially all of our assets. Any such foreclosure proceedings or other rights and remedies successfully implemented by the lenders in an event of default would have a material adverse effect on our business, financial condition and operating results. Further, because a change in control of us constitutes an event of default under the Credit Facilities, this may be a deterrent to some potential acquirers, as it would likely require an acquirer to repay any outstanding borrowings under the Credit Facilities.

We have substantial consolidated indebtedness. As of February 4, 2026, we had approximately $1.6 billion of principal indebtedness outstanding under a senior secured term loan facility (the "Term Loan Facility") comprised of two tranches: a $914 million loan (the "USD Tranche B") and a €587 million loan (the "Euro Tranche B"). As of February 4, 2026, we also had $1.0 billion of available borrowing capacity under a senior secured revolving credit facility (the "Revolving Facility" and together with the Term Loan Facility, the "Credit Facilities"). On May 16, 2024, we completed a private offering of $1.4 billion aggregate principal amount of convertible senior notes due 2030 (the "Convertible Notes"), and used approximately $1.2 billion of the proceeds to partially repay borrowings under the USD Tranche B. On February 4, 2026, we completed a private offering of €1.0 billion aggregate principal amount of senior notes due 2034 (the "2034 Notes"), and used the net proceeds thereof, together with cash on hand, to partially repay approximately $1.3 billion of borrowings under the USD Tranche B. This level of indebtedness could have the effect, among other things, of reducing our flexibility to respond to changing business, industry and economic conditions, limiting our ability to obtain financing in the future and increasing interest expense. We have also incurred and will continue to incur various costs and expenses associated with our indebtedness. The amount of cash required to pay interest on our increased indebtedness levels, and the demands on our cash resources that come from that debt, are significant. Our level of indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels. If our financial performance does not meet our expectations, then our ability to service our indebtedness may be adversely impacted. With respect to the Convertible Notes, the accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results. Furthermore, in the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, we would be required to settle any converted principal in cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we would be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. If a change of control triggering event (as defined in the indenture with respect to the 2034 Notes) occurs prior to the maturity of the 2034 Notes, holders of the 2034 Notes will have the right, at their option, to require us to repurchase all or a portion of their 2034 Notes. In addition, if a fundamental change occurs prior to the maturity date of the Convertible Notes, holders of the Convertible Notes will have the right, at their option, to require us to repurchase all or a portion of their Notes. In addition, if a make-whole fundamental change occurs prior to the maturity date of the Convertible Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change. Furthermore, the indentures governing the Convertible Notes and the 2034 Notes prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Convertible Notes, the 2034 Notes and the indentures, as applicable. These and other provisions in the indentures could deter or prevent a third party from acquiring us even when the acquisition may be favorable to investors. Despite our current level of indebtedness, we and our subsidiaries may still be able to incur more indebtedness. Although our debt agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to certain qualifications and exceptions, and thus, additional indebtedness may be incurred in compliance with these restrictions. This could further exacerbate the risks we describe. Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.