Entegris Reports Strong Third-Quarter Results

- Record third-quarter revenue of $345.6 million grew 16 percent from prior year

- GAAP earnings per diluted share of $0.28 and non-GAAP earnings per diluted share of $0.40 grew 87 percent and 67 percent, respectively, from prior year

- Year-to-date revenue of $992.0 million increased 14 percent

- Year-to-date GAAP earnings per diluted share of $0.79 and non-GAAP earnings per diluted share of $1.02 grew 58 percent and 48 percent, respectively

News provided by

Entegris, Inc.

Oct 26, 2017, 06:00 ET

BILLERICA, Mass., Oct. 26, 2017 /PRNewswire/ -- Entegris, Inc. (NasdaqGS: ENTG), a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, today reported its financial results for the Company's third quarter ended September 30, 2017.

Third-quarter sales were $345.6 million, an increase of 16.5% from the same quarter last year and a 5.0% increase sequentially.  Third-quarter net income was $40.9 million, or $0.28 per diluted share, which included amortization of intangible assets of $11.1 million, as well as asset impairment charges of $10.0 million and severance expense of $2.1 million primarily related to the realignment of the Advanced Materials Handling business.  Non-GAAP net income was $57.0 million, or $0.40 per diluted share.

For the first nine months of fiscal 2017, sales of $992.0 million increased 14.4% from the same period a year ago. Net income for the first nine months of 2017 was $113.4 million, or $0.79 per share, which included amortization of intangible assets of $33.0 million, as well as asset impairment charges and severance expense of $15.9 million.  Non-GAAP net income for the first nine months of 2017 was $146.6 million, or $1.02 per diluted share, which increased from $98.6 million, or $0.69 per diluted share, for the same period a year ago.

Bertrand Loy, president and chief executive officer, said:  "Our performance remained very strong in the third quarter and we are on track to exceed many of the objectives we set for ourselves for 2017 in terms of revenue growth and bottom line expansion.  These results are a validation of the strategies and investments we have made to build a unique portfolio of specialty materials, filtration, and advanced materials handling technologies. These capabilities are becoming even more critical to solving complex process challenges facing the semiconductor industry as it creates devices to power new applications driven by artificial intelligence and the Internet of Things."

Mr. Loy added:  "We generated record adjusted EBITDA of $96 million, or 28% of revenue. This strong cash generation is enabling us to invest in our growth, pay down our debt, make modest share repurchases and initiate a quarterly dividend, while maintaining flexibility for future acquisitions."

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

GAAP Results

Q3-2017

Q3-2016

Q2-2017

Net sales

$345,591

$296,692

$329,002

Operating income

$60,655

$34,672

$59,090

Operating margin

17.6%

11.7%

18.0%

Net income

$40,902

$21,947

$39,991

Diluted earnings per share (EPS)

$0.28

$0.15

$0.28

Non-GAAP Results

Non-GAAP adjusted operating income

$81,077

$53,877

$73,826

Adjusted operating margin

23.5%

18.2%

22.4%

Non-GAAP net income

$56,989

$34,647

$48,906

Non-GAAP EPS

$0.40

$0.24

$0.34

Fourth-Quarter Outlook

For the fourth quarter ending December 31, 2017, the Company expects sales of $335 million to $345 million, net income of $43 million to $50 million, and net income per diluted share between $0.30 and $0.35.  On a non-GAAP basis, EPS is expected to range from $0.35 to $0.40 per diluted share, which reflects net income on a non-GAAP basis in the range of $50 million to $57 million, which is adjusted for expected amortization expense of approximately $11 million or $0.05 per share.

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, as well as safe and efficient delivery systems to support semiconductor and other advanced manufacturing processes.

Microcontamination Control (MC): MC solutions 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 and substrates for a broad set of applications in the semiconductor industry and other high-technology industries.

Third-Quarter Results Conference Call Details

Entegris will hold a conference call to discuss its results for the third quarter on Thursday, October 26, 2017, at 9:00 a.m. Eastern Time.  Participants should dial 1-866-548-4713 or 1-323-794-2093, referencing confirmation code 1147643.  Participants are asked to dial in 5 to 10 minutes prior to the start of the call.  To access a telephonic replay of the call, please Click Here and reference confirmation code 1147643. The replay will be available starting at 12:30 p.m. ET on Thursday, October 26 until Saturday, December 9.  A live and on-demand webcast of the call can also be accessed from the investor relations section of Entegris' website at www.entegris.com.

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

ABOUT ENTEGRIS
Entegris is a leader in specialty chemicals and advanced materials solutions for the microelectronics industry and other high-tech industries.  Entegris is ISO 9001 certified and has manufacturing, customer service and/or research facilities in the United States, 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 EPS, 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 our competitors' operating results. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring business operating results, such as amortization, depreciation and discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing and understanding our results and performance and when planning, forecasting, and analyzing future periods.  We believe 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 our institutional investors and the analyst community to help them analyze our business.  The reconciliations of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA, GAAP Gross Profit to Adjusted Gross Profit, GAAP Segment Profit to Adjusted Operating Income, and GAAP to Non-GAAP Earnings per Share are included elsewhere in this release.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The words "believe," "expect," "anticipate," "intends," "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; our performance relative to our markets; market and technology trends; the development of new products and the success of their introductions; Company's capital allocation strategy, which may be modified at any time for any reason, including share repurchases, dividends, debt repayments and potential acquisitions; our ability to execute on our strategies; and other matters. These statements involve risks and uncertainties, and actual results may differ.  These risks and uncertainties include, but are not limited to, weakening of global and/or regional economic conditions, generally or specifically in the semiconductor industry, which could decrease the demand for our products and solutions; our ability to meet rapid demand shifts; our ability to continue technological innovation and introduce new products to meet our customers' rapidly changing requirements; our concentrated customer base; our ability to identify, effect and integrate acquisitions, joint ventures or other transactions; our ability to protect and enforce intellectual property rights; operational, political and legal risks of our international operations; our dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; raw material shortages and price increases; changes in government regulations of the countries in which we operate; fluctuation of currency exchange rates; fluctuations in the market price of Entegris' stock; the level of, and obligations associated with, our indebtedness; and other risk factors and additional information described in our filings with the Securities and Exchange Commission, including under the heading "Risks Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on February 17, 2017, and in our 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


September 30, 2017

October 1, 2016

July 1, 2017

Net sales

$345,591

$296,692

$329,002

Cost of sales

190,184

173,712

178,699

Gross profit

155,407

122,980

150,303

Selling, general and administrative expenses

57,699

51,614

52,985

Engineering, research and development
expenses

26,002

25,720

27,221

Amortization of intangible assets

11,051

10,974

11,007

Operating income

60,655

34,672

59,090

Interest expense, net

7,599

9,345

8,103

Other expense (income), net

2,906

(565)

(46)

Income before income tax expense

50,150

25,892

51,033

Income tax expense

9,248

3,945

11,042

Net income

$40,902

$21,947

$39,991








Basic net income per common share:

$0.29

$0.16

$0.28

Diluted net income per common share:

$0.28

$0.15

$0.28




Weighted average shares outstanding:



Basic

141,684

141,324

141,696

Diluted

143,594

142,473

143,508

Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)



Nine months ended


September 30, 2017

October 1, 2016

Net sales

$991,970

$866,768

Cost of sales

546,664

489,877

Gross profit

445,306

376,891

Selling, general and administrative expenses

161,176

153,167

Engineering, research and development expenses

80,462

79,768

Amortization of intangible assets

33,003

33,325

Operating income

170,665

110,631

Interest expense, net

24,095

27,545

Other expense (income), net

3,762

(2,294)

Income before income tax expense

142,808

85,380

Income tax expense

29,401

14,331

Net income

$113,407

$71,049






Basic net income per common share:

$0.80

$0.50

Diluted net income per common share:

$0.79

$0.50




Weighted average shares outstanding:


Basic

141,627

141,019

Diluted

143,472

141,856

Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)




September 30, 2017

December 31, 2016

ASSETS

Cash and cash equivalents

$435,197

$406,389

Accounts receivable, net

183,417

165,675

Inventories

193,302

183,529

Deferred tax charges and refundable income
taxes

15,720

20,140

Other current assets

20,865

24,398

      Total current assets

848,501

800,131



Property, plant and equipment, net

346,660

321,562



Goodwill

355,855

345,269

Intangible assets

190,754

217,548

Deferred tax assets

9,247

8,022

Other assets

6,732

7,000

      Total assets

$1,757,749

$1,699,532



LIABILITIES AND SHAREHOLDERS' EQUITY

Long-term debt, current maturities

$100,000

$100,000

Accounts payable

60,328

61,617

Accrued liabilities

95,161

83,530

Income tax payable

14,390

16,424

      Total current liabilities

269,879

261,571



Long-term debt, excluding current maturities

411,465

484,677

Other liabilities

58,040

54,066

Shareholders' equity

1,018,365

899,218

      Total liabilities and shareholders' equity

$1,757,749

$1,699,532

Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)




Three months ended

Nine months ended

September 30,
2017

October 1, 2016

September 30,
2017

October 1, 2016

Operating activities:



Net  income

$40,902

$21,947

$113,407

$71,049

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



Depreciation

14,785

13,795

43,173

41,320

Amortization

11,051

10,974

33,003

33,325

Stock-based compensation expense

3,548

3,697

11,457

10,063

Provision for deferred income taxes

(2,953)

597

254

(334)

Other

13,898

10,463

24,028

19,667

Changes in operating assets and liabilities:



Trade accounts and notes receivable

(12,313)

13,847

(15,345)

(22,252)

Inventories

(1,047)

(5,907)

(14,884)

(17,296)

Accounts payable and accrued liabilities

20,911

12,962

7,598

26,517

Income taxes payable and refundable income
taxes

(1,293)

(11,771)

1,664

(11,364)

Other

1,552

1,334

3,277

(219)

Net cash provided by operating activities

89,041

71,938

207,632

150,476

Investing activities:



Acquisition of business net of cash acquired

—

—

(20,000)

—

Acquisition of property and equipment

(25,447)

(13,124)

(67,939)

(45,268)

Other

863

138

1,074

(1,520)

Net cash used in investing activities

(24,584)

(12,986)

(86,865)

(46,788)

Financing activities:



Payments on long-term debt

(25,000)

(25,000)

(75,000)

(50,000)

Issuance of common stock

677

512

3,582

2,892

Taxes paid related to net share settlement of
equity awards

(168)

(1,113)

(5,407)

(3,316)

Repurchase and retirement of common stock

(10,000)

—

(18,000)

(3,573)

Other

—

402

(1,270)

493

Net cash used in financing activities

(34,491)

(25,199)

(96,095)

(53,504)

Effect of exchange rate changes on cash

(404)

4,281

4,136

11,768

Increase in cash and cash equivalents

29,562

38,034

28,808

61,952

Cash and cash equivalents at beginning of period

405,635

373,743

406,389

349,825

Cash and cash equivalents at end of period

$435,197

$411,777

$435,197

$411,777

Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)




Three months ended

Nine months ended

Net sales

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Specialty Chemicals and Engineered
Materials

$124,522

$104,494

$121,174

$360,131

$317,383

Microcontamination Control

116,113

94,738

104,407

320,575

263,941

Advanced Materials Handling

104,956

97,460

103,421

311,264

285,444

     Total net sales

$345,591

$296,692

$329,002

$991,970

$866,768







Three months ended

Nine months ended

Segment profit

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Specialty Chemicals and Engineered
Materials

$34,647

$18,811

$34,174

$96,961

$70,141

Microcontamination Control

43,984

31,617

36,484

116,049

78,323

Advanced Materials Handling

16,882

15,378

19,573

54,731

56,808

Total segment profit

95,513

65,806

90,231

267,741

205,272

Amortization of intangibles

11,051

10,974

11,007

33,003

33,325

Unallocated expenses

23,807

20,160

20,134

64,073

61,316

    Total operating income

$60,655

$34,672

$59,090

$170,665

$110,631

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(In thousands)
(Unaudited)




Three months ended

Nine months ended

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Net sales

$345,591

$296,692

$329,002

$991,970

$866,768

Gross profit-GAAP

$155,407

$122,980

$150,303

$445,306

$376,891

Adjustments to gross profit:




Severance related to organizational
realignment

740

431

740

431

Impairment of equipment

3,364

5,826

1,966

5,330

5,826

Adjusted gross profit

$159,511

$129,237

$152,269

$451,376

$383,148






Gross margin - as a % of net sales

45.0%

41.5%

45.7%

44.9%

43.5%






Adjusted gross margin - as a % of net sales

46.2%

43.6%

46.3%

45.5%

44.2%

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Segment Profit to Adjusted Operating Income
(In thousands)
(Unaudited)




Three months ended

Nine months ended

Segment profit-GAAP

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Specialty Chemicals and Engineered Materials

$34,647

$18,811

$34,174

$96,961

$70,141

Microcontamination Control

43,984

31,617

36,484

116,049

78,323

Advanced Materials Handling

16,882

15,378

19,573

54,731

56,808

Total segment profit

95,513

65,806

90,231

267,741

205,272

Amortization of intangible assets

11,051

10,974

11,007

33,003

33,325

Unallocated expenses

23,807

20,160

20,134

64,073

61,316

    Total operating income

$60,655

$34,672

$59,090

$170,665

$110,631






Segment profit margin-GAAP




Specialty Chemicals and Engineered Materials

27.8%

18.0%

28.2%

26.9%

22.1%

Microcontamination Control

37.9%

33.4%

34.9%

36.2%

29.7%

Advanced Materials Handling

16.1%

15.8%

18.9%

17.6%

19.9%







Three months ended

Nine months ended

Adjusted segment profit

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Specialty Chemicals and Engineered Materials 1

$34,661

$19,510

$34,174

$96,975

$70,840

Microcontamination Control 2

44,180

32,354

37,927

117,688

79,060

Advanced Materials Handling 3

22,103

22,173

21,859

62,238

63,603

Total adjusted segment profit

100,944

74,037

93,960

276,901

213,503

Amortization of intangible assets4

—

—

—

—

—

Unallocated expenses5

19,867

20,160

20,134

60,133

61,316

    Total adjusted operating income

$81,077

$53,877

$73,826

$216,768

$152,187






Adjusted segment profit margin




Specialty Chemicals and Engineered Materials

27.8%

18.7%

28.2%

26.9%

22.3%

Microcontamination Control

38.0%

34.2%

36.3%

36.7%

30.0%

Advanced Materials Handling

21.1%

22.8%

21.1%

20.0%

22.3%






















1 Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months and nine months ended October 1, 2016 excludes charges for severance related to organizational realignment of $699. Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months and nine months ended September 30, 2017 excludes charges for severance related to organizational realignment of $14.

2 Adjusted segment profit for Microcontamination Control excludes charges for impairment of equipment and severance related to organizational realignment of $196, $737, and $1,443 for the three months ended September 30, 2017, October 1, 2016, and July 1, 2017, respectively. Adjusted segment profit for Microcontamination Control excludes impairment of equipment and charges for severance related to organizational realignment of $1,639 and $737 for the nine months ended September 30, 2017 and October 1, 2016, respectively.

3 Adjusted segment profit for Advanced Material Handling excludes charges for impairment of equipment and severance related to organizational realignment of $5,221, $6,795 and $2,286 for the three months ended September 30, 2017, October 1, 2016, and July 1, 2017, respectively. Adjusted segment profit for Advanced Material Handling excludes charges for impairment of equipment and severance related to organizational realignment of $7,507 and $6,795 for the nine months ended September 30, 2017 and October 1, 2016, respectively.

4 Adjusted amortization of intangible assets excludes amortization expense of $11,051, $10,974, and $11,007 for the three months ended September 30, 2017, October 1, 2016, and July 1, 2017, respectively, and $33,003 and $33,325 for the nine months ended September 30, 2017 and October 1, 2016, respectively.

5 Adjusted unallocated expenses excludes charges for impairment of intangibles and severance related to organizational realignment of $3,940 for the three months and nine months ended September 30, 2017.

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands)
(Unaudited)




Three months ended

Nine months ended

September 30,
2017

October 1, 2016

July 1, 2017

September 30,
2017

October 1, 2016

Net sales

$345,591

$296,692

$329,002

$991,970

$866,768

Net income

$40,902

$21,947

$39,991

$113,407

$71,049

Adjustments to net income:




Income tax expense

9,248

3,945

11,042

29,401

14,331

Interest expense, net

7,599

9,345

8,103

24,095

27,545

Other expense (income), net

2,906

(565)

(46)

3,762

(2,294)

GAAP - Operating income

60,655

34,672

59,090

170,665

110,631

Severance related to organizational
realignment

2,141

2,405

559

2,700

2,405

Impairment of equipment and
intangibles 1

7,230

5,826

3,170

10,400

5,826

Amortization of intangible assets

11,051

10,974

11,007

33,003

33,325

Adjusted operating income

81,077

53,877

73,826

216,768

152,187

Depreciation

14,785

13,795

14,411

43,173

41,320

Adjusted EBITDA

$95,862

$67,672

$88,237

$259,941

$193,507






Adjusted operating margin

23.5%

18.2%

22.4%

21.9%

17.6%

Adjusted EBITDA - as a % of net sales

27.7%

22.8%

26.8%

26.2%

22.3%


1 Includes product line impairment charges of $3,364, $5,826 and $1,966 classified as cost of sales for the three months ended September 30, 2017, October 1, 2016 and July 1, 2017, respectively. Includes product line impairment charges of $5,330 and $5,826 classified as cost of sales for the nine months ended September 30, 2017 and October 1, 2016, respectively.

Includes Jetalon intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three and nine months ended September 30, 2017.

Includes product line impairment charge of $320 classified as selling general and administrative expense for both the three months ended July 1, 2017 and the nine months ended September 30, 2017.

Includes product line impairment charge of $884 classified as engineering, research and development expense for both the three months ended July 1, 2017 and the nine months ended September 30, 2017.

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Non-GAAP Earnings per Share
(In thousands, except per share data)
(Unaudited)




Three months ended

Nine months ended

September 30,
2017

October 1,
2016

July 1, 2017

September 30,
2017

October 1,
2016

GAAP net income

$40,902

$21,947

$39,991

$113,407

$71,049

Adjustments to net income:




Severance related to organizational
realignment

2,141

2,405

559

2,700

2,405

Impairment of equipment and
intangibles 1

10,030

5,826

3,170

13,200

5,826

Gain on sale of equity investment

—

—

—

—

(156)

Amortization of intangible assets

11,051

10,974

11,007

33,003

33,325

Tax effect of adjustments to net income
and discrete items

(7,135)

(6,505)

(5,821)

(15,661)

(13,895)

Non-GAAP net income

$56,989

$34,647

$48,906

$146,649

$98,554






Diluted earnings per common share

$0.28

$0.15

$0.28

$0.79

$0.50

Effect of adjustments to net income

$0.11

$0.09

$0.06

$0.23

$0.19

Diluted non-GAAP earnings per
common share

$0.40

$0.24

$0.34

$1.02

$0.69




















1 Includes product line impairment charges of $3,364, $5,826 and $1,966 classified as cost of sales for the three months ended September 30, 2017, October 1, 2016 and July 1, 2017, respectively. Includes product line impairment charges of $5,330 and $5,826 classified as cost of sales for the nine months ended September 30, 2017 and October 1, 2016, respectively.

Includes Jetalon intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three and nine months ended September 30, 2017.

Includes product line impairment charge of $320 classified as selling general and administrative expense for both the three months ended July 1, 2017 and the nine months ended September 30, 2017.

Includes product line impairment charge of $884 classified as engineering, research and development expense for both the three months ended July 1, 2017 and the nine months ended September 30, 2017.

Includes product line impairment charge of $2,800 classified as other expense for both the three and nine months ended September 30, 2017.

Contact:
Steven Cantor
VP of Corporate Relations
T + 978 436 6500
[email protected]

SOURCE Entegris, Inc.