Business Wire | Jul 23, 2020 06:00AM EDT

Entegris Reports Results for Second Quarter of 2020

Jul. 23, 2020

BILLERICA, Mass.--(BUSINESS WIRE)--Jul. 23, 2020--Entegris, Inc. (NASDAQ: ENTG), today reported its financial results for the Company's second quarter ended June 27, 2020.

Second-quarter sales were $448.4 million, an increase of 18% from the same quarter last year. GAAP second-quarter net income was $68.0 million, or $0.50 per diluted share, which included $13.2 million of amortization of intangible assets and $2.0 million of severance and restructuring costs. Non-GAAP net income was $81.6 million and non-GAAP earnings per diluted share was $0.60.

Bertrand Loy, president and chief executive officer, said: "I am very pleased with our second quarter results, especially in light of the operational risks and business uncertainty we faced coming into the quarter related to the pandemic. This stronger than expected performance was particularly driven by accelerated demand of our leading-edge solutions."

Mr. Loy added: "While risks related to the ongoing impact of the pandemic still exist, we are optimistic about our prospects for the rest of 2020. We expect to continue to significantly outperform the market, driven by additional product wins in advanced technology nodes. We feel confident that our disciplined execution and strong liquidity will allow us to navigate this period of uncertainty, while continuing to invest in the future."

Quarterly Financial Results Summary(in thousands, except percentages and per share data)

GAAP Results June 27, June 29, March 28, 2020 2019 2020

Net sales $448,405 $378,874 $412,327

Operating income $94,712 $54,909 $80,744

Operating margin - as a % of net sales 21.1 % 14.5 % 19.6 %

Net income $68,036 $123,997 $61,006

Diluted earnings per common share $0.50 $0.91 $0.45

Non-GAAP Results

Non-GAAP adjusted operating income $110,835 $76,793 $99,638

Non-GAAP adjusted operating margin - as a % 24.7 % 20.3 % 24.2 %of net sales

Non-GAAP net income $81,581 $53,432 $75,571

Diluted non-GAAP earnings per common share $0.60 $0.39 $0.55

Third-Quarter Outlook

For the third quarter ending September 26, 2020, the Company expects sales of $450 million to $475 million, net income of $70 million to $78 million and diluted earnings per common share between $0.51 and $0.57. On a non-GAAP basis, diluted earnings per common share is expected to range from $0.60 to $0.66, which reflects net income on a non-GAAP basis in the range of $82 million to $90 million.

Segment Results

The Company reports its results in the following segments:

Specialty Chemicals and Engineered Materials (SCEM): SCEM provides high-performance and high-purity process chemistries, gases and materials, and safe and efficient delivery systems to support semiconductor and other advanced manufacturing processes.

Microcontamination Control (MC): MC offers solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.

Advanced Materials Handling (AMH): AMH develops solutions to monitor, protect, transport, and deliver critical liquid chemistries, wafers, and substrates for a broad set of applications in the semiconductor industry and other high-technology industries.

Entegris' 2020 Investor and Analyst Day

Entegris will be hosting an Investor and Analyst Day on November 17, 2020 in New York City (or virtually if necessary). More information on this event will be made available in the near future. If you have any questions please reach out to Bill Seymour, V.P. Investor Relations.

Second-Quarter Results Conference Call Details

Entegris will hold a conference call to discuss its results for the second quarter on Thursday, July 23, 2020, at 9:00 a.m. Eastern Time. Participants should dial 888-254-3590 or +1 323-994-2093, referencing confirmation code 4374647. Participants are asked to dial in 5 to 10 minutes prior to the start of the call. For a replay of the call, please Click Here using passcode 4374647.

The call can also be accessed live and on-demand from the Entegris website. Point your web browser to https://investor.entegris.com/events-and-presentations and follow the link to the webcast. The on-demand playback will be available for six weeks after the conclusion of the teleconference.

Management's slide presentation concerning the results for the second quarter, which may be referred to during the call, will be posted on the investor relations section of www.entegris.com Thursday morning before the call.

ABOUT ENTEGRIS

Entegris is a world-class supplier of advanced materials and process solutions for the semiconductor and other high-tech industries. Entegris is ISO 9001 certified and has manufacturing, customer service and/or research facilities in the United States, Canada, China, France, Germany, Israel, Japan, Malaysia, Singapore, South Korea and Taiwan. Additional information can be found at www.entegris.com.

Non-GAAP Information

The Company's condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP). Adjusted EBITDA, Adjusted Gross Profit, Adjusted Segment Profit, and Adjusted Operating Income, together with related measures thereof, and non-GAAP net income, non-GAAP adjusted operating margin and diluted non-GAAP earnings per common share, are considered "Non-GAAP financial measures" under the rules and regulations of the Securities and Exchange Commission. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision-making, as a means to evaluate period-to-period comparisons, as well as comparisons to the Company's competitors' operating results. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain items that may not be indicative of the Company's recurring business operating results, such as amortization, depreciation and discrete cash charges that may vary significantly from period to period. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing and understanding the Company's results and performance and when planning, forecasting, and analyzing future periods. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by the Company's institutional investors and the analyst community to help them analyze the Company's business. The reconciliations of GAAP Gross Profit to Adjusted Gross Profit, GAAP Segment Profit to Adjusted Operating Income, GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA, GAAP Net Income and Diluted Earnings per Common Share to Non-GAAP Net Income and Diluted Non-GAAP Earnings per Common Share and GAAP Outlook to Non-GAAP Outlook are included elsewhere in this release.

Forward-Looking Statements

This press release contains forward-looking statements. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should," "may," "will," "would" or the negative thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include statements related to future period guidance; future sales, net income, net income per diluted share, non-GAAP EPS, non-GAAP net income, expenses and other financial metrics; the Company's performance relative to its markets, including the drivers of such performance; the impact, financial or otherwise, of any organizational changes; market and technology trends, including the expected impact of the Covid-19 pandemic; the development of new products and the success of their introductions; the Company's capital allocation strategy, which may be modified at any time for any reason, including share repurchases, dividends, debt repayments and potential acquisitions; the impact of the acquisitions the Company has made and commercial partnerships the Company has established; the Company's ability to execute on its strategies; and other matters. These statements involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. These risks and uncertainties include, but are not limited to, risks related to the Covid-19 pandemic on the global economy and financial markets, as well as on the Company, our customers and suppliers, which may impact our sales, gross margin, customer demand and our ability to supply our products to our customers; weakening of global and/or regional economic conditions, generally or specifically in the semiconductor industry, which could decrease the demand for the Company's products and solutions; the Company's ability to meet rapid demand shifts; the Company's ability to continue technological innovation and introduce new products to meet customers' rapidly changing requirements; the Company's concentrated customer base; the Company's ability to identify, effect and integrate acquisitions, joint ventures or other transactions; the Company's ability to effectively implement any organizational changes; the Company's ability to protect and enforce intellectual property rights; operational, political and legal risks of the Company's international operations; the Company's dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; raw material shortages, supply constraints and price increases; changes in government regulations of the countries in which the Company operates; fluctuation of currency exchange rates; fluctuations in the market price of the Company's stock; the level of, and obligations associated with, the Company's indebtedness; and other risk factors and additional information described in the Company's filings with the Securities and Exchange Commission, including under the heading "Risks Factors" in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 7, 2020, and in the Company's other periodic filings. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three months ended

June 27, June 29, March 28, 2020 2019 2020

Net sales $448,405 $378,874 $412,327

Cost of sales 241,033 212,600 226,849

Gross profit 207,372 166,274 185,478

Selling, general and administrative 66,872 64,150 58,891expenses

Engineering, research and development 32,572 30,624 29,632expenses

Amortization of intangible assets 13,216 16,591 16,211

Operating income 94,712 54,909 80,744

Interest expense, net 12,792 9,692 10,238

Other (income) expense, net (477) (122,015) 878

Income before income tax expense 82,397 167,232 69,628

Income tax expense 14,361 43,235 8,622

Net income $68,036 $123,997 $61,006





Basic earnings per common share: $0.51 $0.92 $0.45

Diluted earnings per common share: $0.50 $0.91 $0.45



Weighted average shares outstanding:

Basic 134,700 135,378 134,745

Diluted 136,007 136,581 136,369

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Six months ended

June 27, 2020 June 29, 2019

Net sales $860,732 $769,921

Cost of sales 467,882 426,254

Gross profit 392,850 343,667

Selling, general and administrative expenses 125,763 146,404

Engineering, research and development expenses 62,204 59,615

Amortization of intangible assets 29,427 35,248

Operating income 175,456 102,400

Interest expense, net 23,030 19,351

Other expense (income), net 401 (122,263)

Income before income tax expense 152,025 205,312

Income tax expense 22,983 48,657

Net income $129,042 $156,655





Basic earnings per common share: $0.96 $1.16

Diluted earnings per common share: $0.95 $1.15



Weighted average shares outstanding:

Basic 134,722 135,338

Diluted 136,188 136,637

Entegris, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 27, December 31, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $532,667 $351,911

Trade accounts and notes receivable, net 275,557 234,409

Inventories, net 332,885 287,098

Deferred tax charges and refundable income 20,291 24,552taxes

Other current assets 27,447 34,427

Total current assets 1,188,847 932,397

Property, plant and equipment, net 475,202 479,544

Other assets:

Right-of-use assets 47,911 50,160

Goodwill 725,678 695,044

Intangible assets, net 342,258 333,952

Deferred tax assets and other noncurrent tax 11,772 11,245assets

Other 12,372 13,744

Total assets $2,804,040 $2,516,086

LIABILITIES AND EQUITY

Current liabilities

Long-term debt, current maturities $- $4,000

Accounts payable 80,359 84,207

Accrued liabilities 133,117 150,118

Income tax payable 24,479 26,108

Total current liabilities 237,955 264,433

Long-term debt, excluding current maturities 1,183,992 932,484

Long-term lease liability 41,704 43,827

Other liabilities 108,600 109,453

Shareholders' equity 1,231,789 1,165,889

Total liabilities and equity $2,804,040 $2,516,086

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended Six months ended

June 27, June 29, June 27, June 29, 2020 2019 2020 2019

Operating activities:

Net income $68,036 $123,997 $129,042 $156,655

Adjustments to reconcile net incometo net cash provided by operating activities:

Depreciation 20,639 18,596 41,287 35,317

Amortization 13,216 16,591 29,427 35,248

Stock-based compensation expense 5,655 4,936 10,649 9,589

Other 7,332 446 12,895 6,140

Changes in operating assets andliabilities, net of effects of acquisitions:

Trade accounts and notes receivable 1,908 14,545 (42,087) 5,436

Inventories (37,157) 5,840 (55,362) 3,709

Accounts payable and accrued 43,663 (7,688) 5,643 (52,707)liabilities

Income taxes payable, refundableincome taxes and noncurrent taxes 4,637 58,264 4,412 15,391payable

Other 2,092 (4,626) 5,518 13,585

Net cash provided by operating 130,021 230,901 141,424 228,363activities

Investing activities:

Acquisition of property and (24,288) (25,636) (46,873) (60,101)equipment

Acquisition of business, net of cash (15) 522 (75,645) (49,267)acquired

Other 206 - 211 197

Net cash used in investing (24,097) (25,114) (122,307) (109,171)activities

Financing activities:

Proceeds from short-term borrowings 400,000 - 617,000 -and long-term debt

Payments of long-term debt (293,000) (1,000) (368,000) (2,000)

Payments for dividends (10,805) (9,494) (21,652) (18,964)

Issuance of common stock 1,198 - 1,749 917

Taxes paid related to net share (1,280) (574) (12,720) (8,301)settlement of equity awards

Repurchase and retirement of common - (15,000) (29,564) (50,321)stock

Deferred acquisition payments - - (16,125) -

Other (3,965) (247) (6,855) (497)

Net cash provided by (used in) 92,148 (26,315) 163,833 (79,166)financing activities

Effect of exchange rate changes on (482) (450) (2,194) (706)cash and cash equivalents

Increase in cash and cash 197,590 179,022 180,756 39,320equivalents

Cash and cash equivalents at 335,077 342,360 351,911 482,062beginning of period

Cash and cash equivalents at end of $532,667 $521,382 $532,667 $521,382period

Entegris, Inc. and Subsidiaries

Segment Information

(In thousands)

(Unaudited)

Three months ended Six months ended

Net sales June 27, June 29, March June 27, June 29, 2020 2019 28, 2020 2020 2019

Specialty Chemicals and $146,213 $127,552 $144,214 $290,427 $252,022Engineered Materials

Microcontamination Control 183,758 150,185 159,261 343,019 307,891

Advanced Materials 126,434 107,515 116,137 242,571 223,579Handling

Inter-segment elimination (8,000) (6,378) (7,285) (15,285) (13,571)

Total net sales $448,405 $378,874 $412,327 $860,732 $769,921

Three months ended Six months ended

Segment profit June 27, June 29, March June 27, June 29, 2020 2019 28, 2020 2020 2019

Specialty Chemicals and $32,938 $24,000 $32,670 $65,608 $48,431Engineered Materials

Microcontamination Control 62,137 43,126 50,167 112,304 90,449

Advanced Materials 22,809 15,043 20,632 43,441 37,410Handling

Total segment profit 117,884 82,169 103,469 221,353 176,290

Amortization of 13,216 16,591 16,211 29,427 35,248intangibles

Unallocated expenses 9,956 10,669 6,514 16,470 38,642

Total operating income $94,712 $54,909 $80,744 $175,456 $102,400

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit

(In thousands)

(Unaudited)

Three months ended Six months ended

June 27, June 29, March June 27, June 29, 2020 2019 28, 2020 2020 2019

Net sales $448,405 $378,874 $412,327 $860,732 $769,921

Gross profit-GAAP $207,372 $166,274 $185,478 $392,850 $343,667

Adjustments to gross profit:

Integration costs (1,557) - - (1,557) -

Severance and 465 - - 465 358restructuring costs

Charge for fair valuemark-up of acquired - 695 361 361 2,850inventory sold

Adjusted gross profit $206,280 $166,969 $185,839 $392,119 $346,875



Gross margin - as a % of 46.2 % 43.9 % 45.0 % 45.6 % 44.6 %net sales

Adjusted gross margin - 46.0 % 44.1 % 45.1 % 45.6 % 45.1 %as a % of net sales

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Segment Profit to Adjusted Operating Income

(In thousands)

(Unaudited)

Three months ended Six months ended

June 27, June March June 27, June 29,Segment profit-GAAP 2020 29, 28, 2020 2020 2019 2019

Specialty Chemicals andEngineered Materials $32,938 $24,000 $32,670 $65,608 $48,431(SCEM)

Microcontamination Control 62,137 43,126 50,167 112,304 90,449(MC)

Advanced Materials 22,809 15,043 20,632 43,441 37,410Handling (AMH)

Total segment profit 117,884 82,169 103,469 221,353 176,290

Amortization of intangible 13,216 16,591 16,211 29,427 35,248assets

Unallocated expenses 9,956 10,669 6,514 16,470 38,642

Total operating income $94,712 $54,909 $80,744 $175,456 $102,400

Three months ended Six months ended

June 27, June March June 27, June 29,Adjusted segment profit 2020 29, 28, 2020 2020 2019 2019

SCEM segment profit $32,938 $24,000 $32,670 $65,608 $48,431

Integration costs (1,557) - - (1,557) -

Severance and 455 - 174 629 519restructuring costs

Charge for fair valuewrite-up of acquired - 695 235 235 815inventory sold

SCEM adjusted segment $31,836 $24,695 $33,079 $64,915 $49,765profit



MC segment profit $62,137 $43,126 $50,167 $112,304 $90,449

Severance and 494 - 190 684 724restructuring costs

Charge for fair valuewrite-up of acquired - - 126 126 2,035inventory sold

MC adjusted segment profit $62,631 $43,126 $50,483 $113,114 $93,208



AMH segment profit $22,809 $15,043 $20,632 $43,441 $37,410

Severance and 814 - 135 949 578restructuring costs

AMH adjusted segment $23,623 $15,043 $20,767 $44,390 $37,988profit



Unallocated general and $9,956 $10,669 $6,514 $16,470 $38,642administrative expenses

Unallocated deal and (2,415) (2,428) (1,479) (3,894) (24,484)integration costs

Unallocated severance and (286) (2,170) (344) (630) (2,170)restructuring costs

Adjusted unallocatedgeneral and administrative $7,255 $6,071 $4,691 $11,946 $11,988expenses



Total adjusted segment $118,090 $82,864 $104,329 $222,419 $180,961profit

Adjusted amortization of - - - - -intangible assets

Adjusted unallocatedgeneral and administrative 7,255 6,071 4,691 11,946 11,988expenses

Total adjusted operating $110,835 $76,793 $99,638 $210,473 $168,973income

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted Operating Income and AdjustedEBITDA

(In thousands)

(Unaudited)

Three months ended Six months ended

June 27, June 29, March June 27, June 29, 2020 2019 28, 2020 2020 2019

Net sales $448,405 $378,874 $412,327 $860,732 $769,921

Net income $68,036 $123,997 $61,006 $129,042 $156,655

Net income - as a % of 15.2 % 32.7 % 14.8 % 15.0 % 20.3 %net sales

Adjustments to net income:

Income tax expense 14,361 43,235 8,622 22,983 48,657

Interest expense, net 12,792 9,692 10,238 23,030 19,351

Other (income) (477) (122,015) 878 401 (122,263)expense, net

GAAP - Operating 94,712 54,909 80,744 175,456 102,400income

Operating margin - as 21.1 % 14.5 % 19.6 % 20.4 % 13.3 %a % of net sales

Charge for fair valuewrite-up of acquired - 695 361 361 2,850inventory sold

Deal and transaction 503 1,164 1,431 1,934 20,300costs

Integration costs 355 1,264 48 403 4,184

Severance and 2,049 2,170 843 2,892 3,991restructuring costs

Amortization of 13,216 16,591 16,211 29,427 35,248intangible assets

Adjusted operating 110,835 76,793 99,638 210,473 168,973income

Adjusted operatingmargin - as a % of net 24.7 % 20.3 % 24.2 % 24.5 % 21.9 %sales

Depreciation 20,639 18,596 20,648 41,287 35,317

Adjusted EBITDA $131,474 $95,389 $120,286 $251,760 $204,290

Adjusted EBITDA - as a 29.3 % 25.2 % 29.2 % 29.2 % 26.5 %% of net sales

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Net Income and Diluted Earnings per Common Share toNon-GAAP Net Income and Diluted Non-GAAP Earnings per Common Share

(In thousands, except per share data)

(Unaudited)

Three months ended Six months ended

June June 29, March June 27, June 29, 27, 2019 28, 2020 2019 2020 2020

GAAP net income $68,036 $123,997 $61,006 $129,042 $156,655

Adjustments to net income:

Charge for fair valuewrite-up of inventory - 695 361 361 2,850acquired

Deal and transaction 503 1,164 1,431 1,934 20,711costs

Integration costs 355 1,264 48 403 4,184

Severance and 2,049 2,170 843 2,892 3,991restructuring costs

Loss on debtextinguishment and 1,470 - - 1,470 -modification

Versum termination fee, - (122,000) - - (122,000)net

Amortization of 13,216 16,591 16,211 29,427 35,248intangible assets

Tax effect of legal - 9,398 - - 9,398entity restructuring

Tax effect of adjustmentsto net income and (4,048) 20,153 (4,329) (8,377) 10,289discrete items^1

Non-GAAP net income $81,581 $53,432 $75,571 $157,152 $121,326



Diluted earnings per $0.50 $0.91 $0.45 $0.95 $1.15common share

Effect of adjustments to $0.10 $(0.52) $0.11 $0.21 $(0.26)net income

Diluted non-GAAP earnings $0.60 $0.39 $0.55 $1.15 $0.89per common share

1The tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years.

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Outlook to Non-GAAP Outlook

(In millions, except per share data)

(Unaudited)

Third-Quarter Outlook

Reconciliation GAAP net income to non-GAAP net income September 26, 2020

GAAP net income $70 - $78

Adjustments to net income:

Restructuring and integration costs 3

Amortization of intangible assets 12

Income tax effect (3)

Non-GAAP net income $82 - $90

Third-Quarter Outlook

Reconciliation GAAP diluted earnings per share to non-GAAP September 26,diluted earnings per share 2020

Diluted earnings per common share $0.51 - $0.57

Adjustments to diluted earnings per common share:

Restructuring and integration costs 0.03

Amortization of intangible assets 0.09

Income tax effect (0.03)

Diluted non-GAAP earnings per common share $0.60 to $0.66

View source version on businesswire.com: https://www.businesswire.com/news/home/20200723005222/en/

CONTACT: Bill Seymour VP of Investor Relations T + 1 952 556 1844 bill.seymour@entegris.com