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Entegris Reports Results for Second Quarter of 2020

·20-min read
  • Second-quarter revenue of $448.4 million, increased 18% from prior year

  • Second-quarter GAAP diluted EPS of $0.50, decreased 45%

  • Second-quarter Non-GAAP diluted EPS of $0.60, increased 54%

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, 2020

June 29, 2019

March 28, 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 % of net sales

24.7

%

20.3

%

24.2

%

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, 2020

June 29, 2019

March 28, 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 expenses

66,872

64,150

58,891

Engineering, research and development expenses

32,572

30,624

29,632

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, 2020

December 31, 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 taxes

20,291

24,552

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 assets

11,772

11,245

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, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Operating activities:

Net income

$68,036

$123,997

$129,042

$156,655

Adjustments to reconcile net income to 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 and liabilities, 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 liabilities

43,663

(7,688)

5,643

(52,707)

Income taxes payable, refundable income taxes and noncurrent taxes payable

4,637

58,264

4,412

15,391

Other

2,092

(4,626)

5,518

13,585

Net cash provided by operating activities

130,021

230,901

141,424

228,363

Investing activities:

Acquisition of property and equipment

(24,288)

(25,636)

(46,873)

(60,101)

Acquisition of business, net of cash acquired

(15)

522

(75,645)

(49,267)

Other

206

211

197

Net cash used in investing activities

(24,097)

(25,114)

(122,307)

(109,171)

Financing activities:

Proceeds from short-term borrowings and long-term debt

400,000

617,000

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 settlement of equity awards

(1,280)

(574)

(12,720)

(8,301)

Repurchase and retirement of common stock

(15,000)

(29,564)

(50,321)

Deferred acquisition payments

(16,125)

Other

(3,965)

(247)

(6,855)

(497)

Net cash provided by (used in) financing activities

92,148

(26,315)

163,833

(79,166)

Effect of exchange rate changes on cash and cash equivalents

(482)

(450)

(2,194)

(706)

Increase in cash and cash equivalents

197,590

179,022

180,756

39,320

Cash and cash equivalents at beginning of period

335,077

342,360

351,911

482,062

Cash and cash equivalents at end of period

$532,667

$521,382

$532,667

$521,382

Entegris, Inc. and Subsidiaries

Segment Information

(In thousands)

(Unaudited)

Three months ended

Six months ended

Net sales

June 27, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 2019

Specialty Chemicals and Engineered Materials

$146,213

$127,552

$144,214

$290,427

$252,022

Microcontamination Control

183,758

150,185

159,261

343,019

307,891

Advanced Materials Handling

126,434

107,515

116,137

242,571

223,579

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, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 2019

Specialty Chemicals and Engineered Materials

$32,938

$24,000

$32,670

$65,608

$48,431

Microcontamination Control

62,137

43,126

50,167

112,304

90,449

Advanced Materials Handling

22,809

15,043

20,632

43,441

37,410

Total segment profit

117,884

82,169

103,469

221,353

176,290

Amortization of intangibles

13,216

16,591

16,211

29,427

35,248

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, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 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 restructuring costs

465

465

358

Charge for fair value mark-up of acquired inventory sold

695

361

361

2,850

Adjusted gross profit

$206,280

$166,969

$185,839

$392,119

$346,875

Gross margin - as a % of net sales

46.2

%

43.9

%

45.0

%

45.6

%

44.6

%

Adjusted gross margin - as a % of net sales

46.0

%

44.1

%

45.1

%

45.6

%

45.1

%

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Segment Profit to Adjusted Operating Income

(In thousands)

(Unaudited)

Three months ended

Six months ended

Segment profit-GAAP

June 27, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 2019

Specialty Chemicals and Engineered Materials (SCEM)

$32,938

$24,000

$32,670

$65,608

$48,431

Microcontamination Control (MC)

62,137

43,126

50,167

112,304

90,449

Advanced Materials Handling (AMH)

22,809

15,043

20,632

43,441

37,410

Total segment profit

117,884

82,169

103,469

221,353

176,290

Amortization of intangible assets

13,216

16,591

16,211

29,427

35,248

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

Adjusted segment profit

June 27, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 2019

SCEM segment profit

$32,938

$24,000

$32,670

$65,608

$48,431

Integration costs

(1,557)

(1,557)

Severance and restructuring costs

455

174

629

519

Charge for fair value write-up of acquired inventory sold

695

235

235

815

SCEM adjusted segment profit

$31,836

$24,695

$33,079

$64,915

$49,765

MC segment profit

$62,137

$43,126

$50,167

$112,304

$90,449

Severance and restructuring costs

494

190

684

724

Charge for fair value write-up of acquired inventory sold

126

126

2,035

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 restructuring costs

814

135

949

578

AMH adjusted segment profit

$23,623

$15,043

$20,767

$44,390

$37,988

Unallocated general and administrative expenses

$9,956

$10,669

$6,514

$16,470

$38,642

Unallocated deal and integration costs

(2,415)

(2,428)

(1,479)

(3,894)

(24,484)

Unallocated severance and restructuring costs

(286)

(2,170)

(344)

(630)

(2,170)

Adjusted unallocated general and administrative expenses

$7,255

$6,071

$4,691

$11,946

$11,988

Total adjusted segment profit

$118,090

$82,864

$104,329

$222,419

$180,961

Adjusted amortization of intangible assets

Adjusted unallocated general and administrative expenses

7,255

6,071

4,691

11,946

11,988

Total adjusted operating income

$110,835

$76,793

$99,638

$210,473

$168,973

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA

(In thousands)

(Unaudited)

Three months ended

Six months ended

June 27, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 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 net sales

15.2

%

32.7

%

14.8

%

15.0

%

20.3

%

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) expense, net

(477)

(122,015)

878

401

(122,263)

GAAP - Operating income

94,712

54,909

80,744

175,456

102,400

Operating margin - as a % of net sales

21.1

%

14.5

%

19.6

%

20.4

%

13.3

%

Charge for fair value write-up of acquired inventory sold

695

361

361

2,850

Deal and transaction costs

503

1,164

1,431

1,934

20,300

Integration costs

355

1,264

48

403

4,184

Severance and restructuring costs

2,049

2,170

843

2,892

3,991

Amortization of intangible assets

13,216

16,591

16,211

29,427

35,248

Adjusted operating income

110,835

76,793

99,638

210,473

168,973

Adjusted operating margin - as a % of net sales

24.7

%

20.3

%

24.2

%

24.5

%

21.9

%

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 % of net sales

29.3

%

25.2

%

29.2

%

29.2

%

26.5

%

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Net Income and Diluted Earnings per Common Share to Non-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 27, 2020

June 29, 2019

March 28, 2020

June 27, 2020

June 29, 2019

GAAP net income

$68,036

$123,997

$61,006

$129,042

$156,655

Adjustments to net income:

Charge for fair value write-up of inventory acquired

695

361

361

2,850

Deal and transaction costs

503

1,164

1,431

1,934

20,711

Integration costs

355

1,264

48

403

4,184

Severance and restructuring costs

2,049

2,170

843

2,892

3,991

Loss on debt extinguishment and modification

1,470

1,470

Versum termination fee, net

(122,000)

(122,000)

Amortization of intangible assets

13,216

16,591

16,211

29,427

35,248

Tax effect of legal entity restructuring

9,398

9,398

Tax effect of adjustments to net income and discrete items1

(4,048)

20,153

(4,329)

(8,377)

10,289

Non-GAAP net income

$81,581

$53,432

$75,571

$157,152

$121,326

Diluted earnings per common share

$0.50

$0.91

$0.45

$0.95

$1.15

Effect of adjustments to net income

$0.10

$(0.52)

$0.11

$0.21

$(0.26)

Diluted non-GAAP earnings per common share

$0.60

$0.39

$0.55

$1.15

$0.89

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 diluted earnings per share

September 26, 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/

Contacts

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