<< Back
Press Release

Entegris Reports Solid Results in Third Quarter of 2018

  • Record third-quarter revenue of $398.6 million grew 15% from prior year
  • GAAP net income per diluted share of $0.34 increased 21% from a year ago
  • Non-GAAP net income per diluted share of $0.46 increased 15% from a year ago

BILLERICA, Mass.--(BUSINESS WIRE)--Oct. 25, 2018-- 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 29, 2018.

Third-quarter sales were $398.6 million, an increase of 15% from the same quarter last year and a 4% increase sequentially. Third-quarter net income was $48.1 million, or $0.34 per diluted share, which included $21.4 million of amortization of intangible assets, a $3.3 million charge for fair value write-up of acquired inventory sold, a $2.6 million net tax effect related to the Tax Cuts and Jobs Act, $0.8 million of integration costs and transaction expenses associated with the purchase of SAES Pure Gas and $0.5 million of a loss on the sale of a cleaning services business based in France. Non-GAAP net income of $65.6 million, or $0.46 per diluted share, both increased 15%, compared to the third quarter of 2017.

For the first nine months of fiscal 2018, sales of $1.1 billion increased 16% from the same period a year ago. For the first nine months of 2018, net income was $160.0 million, or $1.12 per share, which included $45.1 million of amortization of intangible assets, a $0.4 million net tax effect related to the Tax Cuts and Jobs Act, $7.1 million of integration costs and transaction expenses associated with the purchase of SAES Pure Gas, a $3.5 million charge for fair value write-up of acquired inventory sold, and $0.5 million of a loss on the sale of a cleaning services business based in France. Non-GAAP net income for the first nine months of 2018 of $203.5 million, or $1.42 per diluted share, both increased 39% compared to the first nine months of 2017.

Bertrand Loy, president and chief executive officer, said: "In the third quarter we demonstrated the value and resilience of our broad unit driven business platform, as we achieved record sales and delivered solid performance in a mixed environment. Our recent acquisition of SAES Pure Gas is performing well and its sales have exceeded our expectations during the quarter, reflecting key secular demand drivers for higher process purity."

Mr. Loy added: "Our unique capability to address the industry's increasing materials complexity and purity challenges is driving our long-term growth prospects and our ability to outperform the market. For the full year 2018 we expect to leverage our sales growth of approximately 15 percent into growth of our non-GAAP earnings per share of approximately 30 percent."

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

GAAP Results     Q3-2018     Q3-2017     Q2-2018
Net sales     $398,597     $345,591     $383,059
Operating income     $67,975     $60,655     $74,933
Operating margin     17.1%     17.6 %     19.6%
Net income     $48,060     $40,902     $54,349
Diluted earnings per share (EPS)     $0.34     $0.28     $0.38
Non-GAAP Results
Non-GAAP adjusted operating income     $93,893     $81,077     $93,473
Non-GAAP adjusted operating margin     23.6%     23.5 %     24.4%
Non-GAAP net income     $65,621     $56,989     $69,835
Non-GAAP EPS     $0.46     $0.40     $0.49

Fourth-Quarter Outlook

For the fourth quarter ending December 31, 2018, the Company expects sales of $380 million to $400 million, net income of $43 million to $53 million and net income per diluted share between $0.30 and $0.37. On a non-GAAP basis, EPS is expected to range from $0.41 to $0.48 per diluted share, which reflects net income on a non-GAAP basis in the range of $59 million to $69 million, which is adjusted for expected amortization and integration expenses of approximately $21 million, or $0.11 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 25, 2018, at 9:00 a.m. Eastern Time. Participants should dial 888-204-4368 or +1 323-794-2423, referencing confirmation code 1918715. 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 1918715. The replay will be available starting at 12:00 p.m. ET on Thursday, October 25 through December 8, 2018 at 12:00 p.m. ET.

The call can also be accessed live and on-demand from the Entegris website. Point your web browser to http://investor.entegris.com/events.cfm 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 third 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 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 (Loss) to Adjusted Operating Income and Adjusted EBITDA, and GAAP Net Income (Loss) 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; the effect of the Tax Cuts and Jobs Act on our capital allocation strategy; the impact of the acquisitions we have made and commercial partnerships we have established; 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, 2017, filed on February 15, 2018, 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 29, 2018     September 30, 2017     June 30, 2018
Net sales $398,597     $345,591     $383,059
Cost of sales 216,881     190,184     200,681
Gross profit 181,716 155,407 182,378
Selling, general and administrative expenses 62,358 57,699 65,200
Engineering, research and development expenses 29,964 26,002 30,231
Amortization of intangible assets 21,419     11,051     12,014
Operating income 67,975 60,655 74,933
Interest expense, net 7,678 7,599 6,925
Other expense, net 810     2,906     3,877
Income before income tax expense 59,487 50,150 64,131
Income tax expense 11,427     9,248     9,782
Net income $48,060     $40,902     $54,349
 
 
Basic net income per common share: $0.34 $0.29 $0.38
Diluted net income per common share: $0.34 $0.28 $0.38
Cash dividends declared per common share: $0.07 $0.07
 
Weighted average shares outstanding:
Basic 141,556 141,684 141,701
Diluted 143,033 143,594 143,238
 
   

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 
Nine months ended
September 29, 2018     September 30, 2017
Net sales $1,148,855     $991,970
Cost of sales 608,764     546,664
Gross profit 540,091 445,306
Selling, general and administrative expenses 185,827 161,176
Engineering, research and development expenses 87,781 80,462
Amortization of intangible assets 45,102     33,003
Operating income 221,381 170,665
Interest expense, net 21,829 24,095

Other expense, net

4,826     3,762
Income before income tax expense 194,726 142,808
Income tax expense 34,755     29,401
Net income $159,971     $113,407
 
 
Basic net income per common share: $1.13 $0.80
Diluted net income per common share: $1.12 $0.79
Cash dividends declared per common share: $0.21
 
Weighted average shares outstanding:
Basic 141,613 141,627
Diluted 143,308 143,472
 
   

Entegris, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

   
September 29, 2018     December 31, 2017
ASSETS
Cash and cash equivalents $294,893 $625,408
Accounts receivable, net 212,729 183,434
Inventories 264,090 198,089
Deferred tax charges and refundable income taxes 25,191 18,012
Other current assets 24,043     32,665
Total current assets 820,946 1,057,608
 
Property, plant and equipment, net 393,706 359,523
 
Goodwill 542,235 359,688
Intangible assets 323,379 182,430
Deferred tax assets 11,735 9,103
Other assets 11,455     7,820
Total assets $2,103,456     $1,976,172
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Long-term debt, current maturities $100,000
Accounts payable 74,590 68,762
Accrued liabilities 116,285 99,374
Income tax payable 20,137     22,835
Total current liabilities 211,012 290,971
 
Long-term debt, excluding current maturities 650,625 574,380
Other liabilities 158,148 117,803
Shareholders’ equity 1,083,671     993,018
Total liabilities and shareholders’ equity $2,103,456     $1,976,172
 
       

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
Three months ended     Nine months ended

September 29,
2018

   

September 30,
2017

   

September 29,
2018

   

September 30,
2017

Operating activities:        
Net income $48,060 $40,902 $159,971 $113,407
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 16,537 14,785 48,236 43,173
Amortization 21,419 11,051 45,102 33,003
Stock-based compensation expense 4,170 3,548 12,727 11,457
Provision for deferred income taxes 691 (2,953) (1,066) 254
Other 5,944 13,898 10,584 24,028
Changes in operating assets and liabilities:
Trade accounts and notes receivable (11,400) (12,313) (8,713) (15,345)
Inventories (6,316) (1,047) (28,788) (14,884)
Accounts payable and accrued liabilities 5,526 20,911 (9,440) 7,598
Income taxes payable and refundable income taxes (1,678) (1,293) (9,193) 1,664
Other     1,190     1,552     1,829     3,277
Net cash provided by operating activities     84,143     89,041     221,249     207,632
Investing activities:
Acquisition of property and equipment (27,900) (25,447) (75,337) (67,939)
Acquisition of businesses, net of cash acquired (43) (380,268) (20,000)
Other     3,109     863     5,014     1,074
Net cash used in investing activities     (24,834)     (24,584)     (450,591)     (86,865)
Financing activities:
Payments on long-term debt (25,000) (27,000) (75,000)
Issuance of common stock 2 677 3,029 3,582
Taxes paid related to net share settlement of equity awards (139) (168) (14,552) (5,407)
Repurchase and retirement of common stock (10,000) (10,000) (30,000) (18,000)
Dividend payments (9,899) (29,701)
Other     (250)           1,254     (1,270)
Net cash used in financing activities     (20,286)     (34,491)     (96,970)     (96,095)
Effect of exchange rate changes on cash     (1,236)     (404)     (4,203)     4,136
Increase (Decrease) in cash and cash equivalents 37,787 29,562 (330,515) 28,808
Cash and cash equivalents at beginning of period     257,106     405,635     625,408     406,389
Cash and cash equivalents at end of period     $294,893     $435,197     $294,893     $435,197
 
       

Entegris, Inc. and Subsidiaries

Segment Information

(In thousands)

(Unaudited)

 
Three months ended     Nine months ended
Net sales     September 29, 2018     September 30, 2017     June 30, 2018     September 29, 2018     September 30, 2017
Specialty Chemicals and Engineered Materials $131,234     $124,522     $134,336 $396,313     $360,131
Microcontamination Control 151,345 116,113 124,681 394,663 320,575
Advanced Materials Handling 116,018     104,956     124,042     357,879     311,264
Total net sales $398,597     $345,591     $383,059     $1,148,855     $991,970
    Three months ended     Nine months ended
Segment profit1     September 29, 2018     September 30, 2017     June 30, 2018     September 29, 2018     September 30, 2017
Specialty Chemicals and Engineered Materials $31,860     $29,539     $37,316     $100,738     $81,727
Microcontamination Control 44,530 39,302 39,054 125,575 102,085
Advanced Materials Handling 19,494     12,483     23,114     65,750     41,612
Total segment profit 95,884 81,324 99,484 292,063 225,424
Amortization of intangibles 21,419 11,051 12,014 45,102 33,003
Unallocated expenses 6,490     9,618     12,537     25,580     21,756
Total operating income $67,975     $60,655     $74,933     $221,381     $170,665
 

1Beginning in the first quarter of 2018, the Company has changed its definition of segment profit to include an allocation of certain general and administrative costs for the Company’s human resources, finance and information technology functions previously unallocated by the Company. Prior quarter information was recast to reflect the change in the Company's definition of segment profit.

 

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit

(In thousands)

(Unaudited)

 
    Three months ended       Nine months ended
     

September 29,
2018

   

September 30,
2017

    June 30, 2018

September
29, 2018

   

September
30, 2017

Net sales     $398,597     $345,591     $383,059 $1,148,855 $991,970
Gross profit-GAAP $181,716     $155,407     $182,378 $540,091 $445,306
Adjustments to gross profit:
Severance related to organizational realignment 740 740
Charge for fair value mark-up of acquired inventory sold 3,281 208 3,489
Impairment of equipment     3,364         5,330
Adjusted gross profit $184,997     $159,511     $182,586 $543,580     $451,376
 
Gross margin - as a % of net sales 45.6% 45.0% 47.6% 47.0% 44.9%
Adjusted gross margin - as a % of net sales     46.4%     46.2%     47.7% 47.3%     45.5%
 
       

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 29,
2018

   

September 30,
2017

    June 30, 2018    

September 29,
2018

   

September 30,
2017

Specialty Chemicals and Engineered Materials $31,860     $29,539     $37,316 $100,738     $81,727
Microcontamination Control 44,530 39,302 39,054 125,575 102,085
Advanced Materials Handling 19,494     12,483     23,114     65,750     41,612
Total segment profit 95,884 81,324 99,484 292,063 225,424
Amortization of intangible assets 21,419 11,051 12,014 45,102 33,003
Unallocated expenses 6,490     9,618     12,537     25,580     21,756
Total operating income $67,975     $60,655     $74,933     $221,381     $170,665
 
       
Three months ended     Nine months ended
Adjusted segment profit    

September 29,
2018

   

September 30,
2017

    June 30, 2018    

September 29,
2018

   

September 30,
2017

Specialty Chemicals and Engineered Materials1 $31,860     $29,553     $37,316 $100,738     $81,741
Microcontamination Control 2 47,811 39,498 39,262 129,064 103,724
Advanced Materials Handling 3 19,960     17,704     23,114     66,216     49,119
Total adjusted segment profit 99,631 86,755 99,692 296,018 234,584
Amortization of intangible assets4
Unallocated expenses5 5,738     5,678     6,219     18,510     17,816
Total adjusted operating income $93,893     $81,077     $93,473     $277,508     $216,768
 

1Adjusted 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.
2Adjusted segment profit for Microcontamination Control for the three months ended September 29, 2018 and June 30, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,281 and $208, respectively. Adjusted segment profit for Microcontamination Control for the nine months ended September 29, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,489. Adjusted segment profit for Microcontamination Control excludes charges for impairment of equipment and severance related to organizational realignment of $196 and $1,639 for the three and nine months ended September 30, 2017, respectively.
3 Adjusted segment profit for Advanced Material Handling excludes loss on sale of subsidiary of $466 for the three and nine months ended September 29, 2018, respectively. Adjusted segment profit for Advanced Material Handling excludes charges for impairment of equipment and severance related to organizational realignment of $5,221 and $7,507 for the three and nine months ended September 30, 2017, respectively.
4 Adjusted amortization of intangible assets excludes amortization expense of $21,419, $11,051 and $12,014 for the three months ended September 29, 2018, September 30, 2017, and June 30, 2018, respectively and $45,102 and $33,003 for the nine months ended September 29, 2018 and September 30, 2017, respectively.
5 Adjusted unallocated expenses for the three months ended September 29, 2018 exclude integration expenses of $752. Adjusted unallocated expenses for the three months ended June 30, 2018 exclude deal costs and integration expenses of $5,121 and $1,197, respectively.
Adjusted unallocated expenses for the nine months ended September 29, 2018 exclude deal costs and integration expenses of $5,121 and $1,949, respectively. Adjusted unallocated expenses excludes charges for impairment of intangibles and severance related to organizational realignment of $3,940 for the three and nine months ended September 30, 2017, respectively.

         

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 29,
2018

   

September 30,
2017

    June 30, 2018

September
29, 2018

   

September
30, 2017

Net sales $398,597     $345,591     $383,059 $1,148,855     $991,970
Net income $48,060     $40,902     $54,349 $159,971     $113,407
Adjustments to net income:
Income tax expense 11,427 9,248 9,782 34,755 29,401
Interest expense, net 7,678 7,599 6,925 21,829 24,095
Other expense, net 810     2,906     3,877 4,826     3,762
GAAP - Operating income 67,975 60,655 74,933 221,381 170,665
Charge for fair value write-up of acquired inventory sold 3,281 208 3,489
Deal Costs 5,121 5,121
Integration Costs 752 1,197 1,949
Severance 2,141 2,700
Impairment of equipment and intangibles1 7,230 10,400
Loss on sale of subsidiary 466 466
Amortization of intangible assets 21,419     11,051     12,014 45,102     33,003
Adjusted operating income 93,893 81,077 93,473 277,508 216,768
Depreciation 16,537     14,785     15,802 48,236     43,173
Adjusted EBITDA $110,430     $95,862     $109,275 $325,744     $259,941
 
Adjusted operating margin 23.6% 23.5% 24.4% 24.2% 21.9%
Adjusted EBITDA - as a % of net sales     27.7%     27.7%     28.5% 28.4%     26.2%
 

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

Includes product line impairment charge of $884 classified as engineering, research and development expense for 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 29,
2018

   

September 30,
2017

    June 30, 2018

September
29, 2018

   

September
30, 2017

GAAP net income $48,060     $40,902     $54,349 $159,971     $113,407
Adjustments to net income:
Charge for fair value write-up of acquired inventory sold 3,281 208 3,489
Deal Costs 5,121 5,121
Integration Costs 752 1,197 1,949
Severance 2,141 2,700
Impairment of equipment and intangibles1 10,030 13,200
Loss on sale of subsidiary 466 466
Amortization of intangible assets 21,419 11,051 12,014 45,102 33,003
Tax effect of adjustments to net income and discrete items2 (5,797) (7,135) (3,702) (12,209) (15,661)
Tax effect of Tax Cuts and Jobs Act (2,560)         $648 (418)    
Non-GAAP net income $65,621     $56,989     $69,835 $203,471     $146,649
 
Diluted earnings per common share $0.34 $0.28 $0.38 $1.12 $0.79
Effect of adjustments to net income $0.12 $0.11 $0.11 $0.30 $0.23
Diluted non-GAAP earnings per common share     $0.46     $0.40     $0.49 $1.42     $1.02
 

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

Includes product line impairment charge of $884 classified as engineering, research and development expense for 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.

2The tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years.

Source: Entegris, Inc.

Entegris, Inc.
Bill Seymour, +1 978-436-6500
VP of Investor Relations
irelations@entegris.com

Delayed at least 20 minutes.
Provided by eSignal.