UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 8-K
________________________________________
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 6, 2018
_______________________________________
Entegris, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
001-32598 | 41-1941551 | |
(Commission File Number) | (I.R.S. Employer Identification No.) | |
129 Concord Road, Billerica, MA | 01821 | |
(Address of principal executive offices) | (Zip Code) | |
(978) 436-6500
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
_______________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On February 6, 2018, Entegris, Inc. issued a press release to announce results for the fourth quarter of 2017 and the year ended December 31, 2017 and will hold a conference call to discuss such results. A copy of this press release and the supplemental slides to which management will refer during the conference call are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
In accordance with General Instructions B.2 of Form 8-K, the information in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. The information set forth herein will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ENTEGRIS, INC.
Dated: February 6, 2018 By: /s/ Gregory B. Graves
Name: Gregory B. Graves
Title: Executive Vice President and Chief Financial Officer
EXHIBIT INDEX
Exhibit 99.1
FOR RELEASE AT 7AM ET
ENTEGRIS’ STRONG FOURTH-QUARTER CAPS RECORD YEAR
• | Record fourth-quarter revenue of $350.6 million grew 14 percent from prior year |
• | GAAP loss per diluted share of $0.20 reflected the one-time impacts of U.S. tax reform; and non-GAAP earnings per diluted share of $0.42 grew 75 percent from prior year |
• | Fiscal 2017 revenue of $1.34 billion increased 14 percent |
• | Fiscal 2017 GAAP earnings per diluted share were $0.59; and non-GAAP earnings per diluted share reached $1.44 |
BILLERICA, Mass., February 6, 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 fourth quarter and fiscal year ended December 31, 2017.
The Company reported sales of $1.3 billion for fiscal 2017, an increase of 14 percent from the prior year. Net income for the year was $85.1 million, or $0.59 per diluted share, which included amortization of intangible assets of $44.0 million, asset impairment charges of $13.2 million, $2.7 million of severance expenses, $20.7 million related to the refinancing of senior notes, and $66.7 million related to the effects of the Tax Cuts and Jobs Act. In the prior year, net income was $97.1 million, or $0.68 per diluted share, which included amortization of intangible assets of $44.3 million, asset impairment charges of $5.8 million, and $2.4 million of severance expenses. Non-GAAP net income for fiscal 2017 was $206.3 million, or $1.44 per diluted share, which increased from $132.8 million, or $0.94 per diluted share, in the prior year.
Fourth-quarter sales were $350.6 million, an increase of 14 percent from the same quarter last year and 1 percent higher sequentially. Fourth-quarter net loss was $28.3 million, or $0.20 per diluted share, which included amortization of intangible assets of $11.0 million, $20.7 million related to the refinancing of senior notes, and $66.7 million related to the effects of the Tax Cuts and Jobs Act. Non-GAAP net income was $59.7 million, or $0.42 per diluted share, which compared to $34.3 million, or $0.24 per diluted share, in the same quarter a year ago. In the fourth quarter of 2017, the Company generated cash from operations less capital expenditures, or free cash flow, of $60.1 million.
Bertrand Loy, president and chief executive officer, said: “The fourth quarter marked our fifth consecutive record quarter, capping the most successful year in Entegris’ 51-year history. We grew fiscal 2017 sales 14 percent to $1.3 billion, achieving growth across all three divisions, driven by demand for our solutions in advanced memory, logic, and mainstream semiconductor production. We were very pleased with the quality of execution by the Entegris teams around the world. We delivered on our commitment to grow our bottom line at twice the rate of our top line, increasing our adjusted EBITDA by 35 percent to a record high of $357 million, or 26.6 percent of sales for the year. This strong cash flow is allowing us to create significant value through a balanced capital allocation strategy consisting of internal growth investments, strategic acquisitions, and returning available cash to shareholders through dividends and share repurchases.
ENTEGRIS, INC. 129 Concord Road, Building 2 T + 1 978 436 6500
entegris.com Billerica, MA 01821 USA F + 1 978 436 6745
Mr. Loy added: "As we look ahead, we have great conviction that the semiconductor industry is in the midst of a multi-year period of growth driven by broadening demand related to artificial intelligence, automotive, industrial, and other new applications. Our value proposition, which is built on a broad array of solutions, is enabling us to expand our served markets and will allow us to continue to outpace our markets."
Quarterly Financial Results Summary
(in thousands, except per share data)
GAAP Results | Q4-2017 | Q4-2016 | Q3-2017 | |||
Net sales | $350,562 | $308,502 | $345,591 | |||
Operating income | $71,152 | $44,905 | $60,655 | |||
Operating margin | 20.3 | % | 14.6 | % | 17.6 | % |
Net (loss) income | $(28,341) | $26,098 | $40,902 | |||
Diluted (loss) earnings per share (EPS) | $(0.20) | $0.18 | $0.28 | |||
Non-GAAP Results | ||||||
Non-GAAP adjusted operating income | $82,172 | $55,843 | $81,077 | |||
Adjusted operating margin | 23.4 | % | 18.1 | % | 23.5 | % |
Non-GAAP net income | $59,694 | $34,294 | $56,989 | |||
Non-GAAP EPS | $0.42 | $0.24 | $0.40 | |||
First-Quarter Outlook
For the first quarter ending March 31, 2018, the Company expects sales of $355 million to $365 million, net income of $49 million to $56 million, and net income per diluted share between $0.34 and $0.39. On a non-GAAP basis, EPS is expected to range from $0.39 to $0.44 per diluted share, which reflects net income on a non-GAAP basis in the range of $56 million to $63 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.
Fourth-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the fourth quarter on Tuesday, February 6, 2018, at 9:00 a.m. Eastern Time. Participants should dial 1-800-281-7973 or 1-323-794-2093, referencing confirmation code 4357050. 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 4357050. The replay will be available starting at 12:00 p.m. ET on Tuesday, February 6 until Thursday, March 22 at 12:00 p.m. 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.
Entegris, Inc. - page 2 of 13
Management’s slide presentation concerning the results for the fourth quarter and fiscal year, which may be referred to during the call, will be posted on the investor relations section of www.entegris.com Tuesday 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; 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
Entegris, Inc. - page 3 of 13
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. - page 4 of 13
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended | |||||||
December 31, 2017 | December 31, 2016 | September 30, 2017 | |||||
Net sales | $350,562 | $308,502 | $345,591 | ||||
Cost of sales | 186,883 | 176,702 | 190,184 | ||||
Gross profit | 163,679 | 131,800 | 155,407 | ||||
Selling, general and administrative expenses | 55,018 | 48,734 | 57,699 | ||||
Engineering, research and development expenses | 26,489 | 27,223 | 26,002 | ||||
Amortization of intangible assets | 11,020 | 10,938 | 11,051 | ||||
Operating income | 71,152 | 44,905 | 60,655 | ||||
Interest expense, net | 7,533 | 8,983 | 7,599 | ||||
Other expense, net | 21,696 | 1,303 | 2,906 | ||||
Income before income tax expense | 41,923 | 34,619 | 50,150 | ||||
Income tax expense | 70,264 | 8,521 | 9,248 | ||||
Net (loss) income | $(28,341) | $26,098 | $40,902 | ||||
Basic net (loss) income per common share: | $(0.20) | $0.18 | $0.29 | ||||
Diluted net (loss) income per common share: | $(0.20) | $0.18 | $0.28 | ||||
Weighted average shares outstanding: | |||||||
Basic | 141,329 | 141,315 | 141,684 | ||||
Diluted | 141,329 | 142,631 | 143,594 | ||||
Entegris, Inc. - page 5 of 13
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Twelve months ended | |||||
December 31, 2017 | December 31, 2016 | ||||
Net sales | $1,342,532 | $1,175,270 | |||
Cost of sales | 733,547 | 666,579 | |||
Gross profit | 608,985 | 508,691 | |||
Selling, general and administrative expenses | 216,194 | 201,901 | |||
Engineering, research and development expenses | 106,951 | 106,991 | |||
Amortization of intangible assets | 44,023 | 44,263 | |||
Operating income | 241,817 | 155,536 | |||
Interest expense, net | 31,628 | 36,528 | |||
Other expense (income), net | 25,458 | (991 | ) | ||
Income before income tax expense | 184,731 | 119,999 | |||
Income tax expense | 99,665 | 22,852 | |||
Net income | $85,066 | $97,147 | |||
Basic net income per common share: | $0.60 | $0.69 | |||
Diluted net income per common share: | $0.59 | $0.68 | |||
Weighted average shares outstanding: | |||||
Basic | 141,553 | 141,093 | |||
Diluted | 143,518 | 142,050 | |||
Entegris, Inc. - page 6 of 13
Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $625,408 | $406,389 | ||||||
Accounts receivable, net | 183,434 | 165,675 | ||||||
Inventories | 198,089 | 183,529 | ||||||
Deferred tax charges and refundable income taxes | 18,012 | 20,140 | ||||||
Other current assets | 32,665 | 24,398 | ||||||
Total current assets | 1,057,608 | 800,131 | ||||||
Property, plant and equipment, net | 359,523 | 321,562 | ||||||
Goodwill | 359,688 | 345,269 | ||||||
Intangible assets | 182,430 | 217,548 | ||||||
Deferred tax assets - non-current | 9,103 | 8,022 | ||||||
Other assets | 7,820 | 7,000 | ||||||
Total assets | $1,976,172 | $1,699,532 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Long-term debt, current maturities | $100,000 | $100,000 | ||||||
Accounts payable | 68,762 | 61,617 | ||||||
Accrued liabilities | 99,374 | 83,530 | ||||||
Income tax payable | 22,835 | 16,424 | ||||||
Total current liabilities | 290,971 | 261,571 | ||||||
Long-term debt, excluding current maturities | 574,380 | 484,677 | ||||||
Other liabilities | 117,803 | 54,066 | ||||||
Shareholders’ equity | 993,018 | 899,218 | ||||||
Total liabilities and shareholders’ equity | $1,976,172 | $1,699,532 | ||||||
Entegris, Inc. - page 7 of 13
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended | Twelve months ended | |||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||
Operating activities: | ||||||||
Net (loss) income | $(28,341) | $26,098 | $85,066 | $97,147 | ||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation | 15,035 | 14,303 | 58,208 | 55,623 | ||||
Amortization | 11,020 | 10,938 | 44,023 | 44,263 | ||||
Stock-based compensation expense | 3,849 | 3,373 | 15,306 | 13,436 | ||||
Provision for deferred income taxes | 1,841 | (15,770 | ) | 2,095 | (16,284 | ) | ||
Loss on extinguishment of debt | 20,687 | — | 20,687 | — | ||||
Other | 4,267 | 3,326 | 28,295 | 22,993 | ||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts and notes receivable | (56 | ) | (3,046 | ) | (15,401 | ) | (25,298 | ) |
Inventories | (5,330 | ) | (2,575 | ) | (20,214 | ) | (19,871 | ) |
Accounts payable and accrued liabilities | 8,377 | 4,777 | 15,975 | 31,294 | ||||
Income taxes payable and refundable income taxes | 62,385 | 14,592 | 64,049 | 3,408 | ||||
Other | (7,993 | ) | 1,063 | (4,716 | ) | 844 | ||
Net cash provided by operating activities | 85,741 | 57,079 | 293,373 | 207,555 | ||||
Investing activities: | ||||||||
Acquisition of property and equipment | (25,658 | ) | (19,992 | ) | (93,597 | ) | (65,260 | ) |
Acquisition of business | — | — | (20,000 | ) | — | |||
Other | 68 | 94 | 1,142 | (1,426 | ) | |||
Net cash used in investing activities | (25,590 | ) | (19,898 | ) | (112,455 | ) | (66,686 | ) |
Financing activities: | ||||||||
Payments on long-term debt | (385,000 | ) | (25,000 | ) | (460,000 | ) | (75,000 | ) |
Proceeds from long-term borrowings | 550,000 | — | 550,000 | — | ||||
Payments for debt extinguishment costs | (16,200 | ) | — | (16,200 | ) | — | ||
Issuance of common stock | 1,984 | 1,952 | 5,566 | 4,844 | ||||
Taxes paid related to net share settlement of equity awards | (480 | ) | (702 | ) | (5,887 | ) | (4,018 | ) |
Repurchase and retirement of common stock | (10,000 | ) | (4,000 | ) | (28,000 | ) | (7,573 | ) |
Dividend payments | (9,896 | ) | — | (9,896 | ) | — | ||
Other | (7,062 | ) | (493 | ) | (8,332 | ) | — | |
Net cash provided by (used in) financing activities | 123,346 | (28,243 | ) | 27,251 | (81,747 | ) | ||
Effect of exchange rate changes on cash | 6,714 | (14,326 | ) | 10,850 | (2,558 | ) | ||
Increase (decrease) in cash and cash equivalents | 190,211 | (5,388 | ) | 219,019 | 56,564 | |||
Cash and cash equivalents at beginning of period | 435,197 | 411,777 | 406,389 | 349,825 | ||||
Cash and cash equivalents at end of period | $625,408 | $406,389 | $625,408 | $406,389 | ||||
Entegris, Inc. - page 8 of 13
Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)
Three months ended | Twelve months ended | |||||||||
Net sales | December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | |||||
Specialty Chemicals and Engineered Materials | $125,339 | $110,945 | $124,522 | $485,470 | $428,328 | |||||
Microcontamination Control | 115,650 | 98,717 | 116,113 | 436,225 | 362,658 | |||||
Advanced Materials Handling | 109,573 | 98,840 | 104,956 | 420,837 | 384,284 | |||||
Total net sales | $350,562 | $308,502 | $345,591 | $1,342,532 | $1,175,270 | |||||
Three months ended | Twelve months ended | |||||||||
Segment profit | December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | |||||
Specialty Chemicals and Engineered Materials | $35,898 | $25,919 | $34,647 | $132,859 | $96,060 | |||||
Microcontamination Control | 44,666 | 31,719 | 43,984 | 160,715 | 110,042 | |||||
Advanced Materials Handling | 23,240 | 16,644 | 16,882 | 77,971 | 73,452 | |||||
Total segment profit | 103,804 | 74,282 | 95,513 | 371,545 | 279,554 | |||||
Amortization of intangibles | 11,020 | 10,938 | 11,051 | 44,023 | 44,263 | |||||
Unallocated expenses | 21,632 | 18,439 | 23,807 | 85,705 | 79,755 | |||||
Total operating income | $71,152 | $44,905 | $60,655 | $241,817 | $155,536 | |||||
Entegris, Inc. - page 9 of 13
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(In thousands)
(Unaudited)
Three months ended | Twelve months ended | |||||||||
December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | ||||||
Net sales | $350,562 | $308,502 | $345,591 | $1,342,532 | $1,175,270 | |||||
Gross profit-GAAP | $163,679 | $131,800 | $155,407 | $608,985 | $508,691 | |||||
Adjustments to gross profit: | ||||||||||
Severance related to organizational realignment | — | — | 740 | 740 | 431 | |||||
Impairment of equipment | — | — | 3,364 | 5,330 | 5,826 | |||||
Adjusted gross profit | $163,679 | $131,800 | $159,511 | $615,055 | $514,948 | |||||
Gross margin - as a % of net sales | 46.7 | % | 42.7 | % | 45.0 | % | 45.4 | % | 43.3 | % |
Adjusted gross margin - as a % of net sales | 46.7 | % | 42.7 | % | 46.2 | % | 45.8 | % | 43.8 | % |
Entegris, Inc. - page 10 of 13
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Segment Profit to Adjusted Operating Income
(In thousands)
(Unaudited)
Three months ended | Twelve months ended | |||||||||
Segment profit-GAAP | December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | |||||
Specialty Chemicals and Engineered Materials | $35,898 | $25,919 | $34,647 | $132,859 | $96,060 | |||||
Microcontamination Control | 44,666 | 31,719 | 43,984 | 160,715 | 110,042 | |||||
Advanced Materials Handling | 23,240 | 16,644 | 16,882 | 77,971 | 73,452 | |||||
Total segment profit | 103,804 | 74,282 | 95,513 | 371,545 | 279,554 | |||||
Amortization of intangible assets | 11,020 | 10,938 | 11,051 | 44,023 | 44,263 | |||||
Unallocated expenses | 21,632 | 18,439 | 23,807 | 85,705 | 79,755 | |||||
Total operating income | $71,152 | $44,905 | $60,655 | $241,817 | $155,536 | |||||
Segment profit margin-GAAP | ||||||||||
Specialty Chemicals and Engineered Materials | 28.6 | % | 23.4 | % | 27.8 | % | 27.4 | % | 22.4 | % |
Microcontamination Control | 38.6 | % | 32.1 | % | 37.9 | % | 36.8 | % | 30.3 | % |
Advanced Materials Handling | 21.2 | % | 16.8 | % | 16.1 | % | 18.5 | % | 19.1 | % |
Three months ended | Twelve months ended | |||||||||
Adjusted segment profit | December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | |||||
Specialty Chemicals and Engineered Materials 1 | $35,898 | $25,919 | $34,661 | $132,873 | $96,759 | |||||
Microcontamination Control 2 | 44,666 | 31,719 | 44,180 | 162,354 | 110,779 | |||||
Advanced Materials Handling 3 | 23,240 | 16,644 | 22,103 | 85,478 | 80,247 | |||||
Total adjusted segment profit | 103,804 | 74,282 | 100,944 | 380,705 | 287,785 | |||||
Amortization of intangible assets4 | — | — | — | — | — | |||||
Unallocated expenses5 | 21,632 | 18,439 | 19,867 | 81,765 | 79,755 | |||||
Total adjusted operating income | $82,172 | $55,843 | $81,077 | $298,940 | $208,030 | |||||
Adjusted segment profit margin | ||||||||||
Specialty Chemicals and Engineered Materials | 28.6 | % | 23.4 | % | 27.8 | % | 27.4 | % | 22.6 | % |
Microcontamination Control | 38.6 | % | 32.1 | % | 38.0 | % | 37.2 | % | 30.5 | % |
Advanced Materials Handling | 21.2 | % | 16.8 | % | 21.1 | % | 20.3 | % | 20.9 | % |
1 Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months ended September 30, 2017, and the twelve months ended December 31, 2017 and December 31, 2016 excludes charges for severance related to organizational realignment of $14, $14 and $699, respectively.
2 Adjusted segment profit for Microcontamination Control excludes charges for impairment of equipment and severance related to organizational realignment of $196 for the three months ended September 30, 2017. 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 twelve months ended December 31, 2017 and 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 for the three months ended September 30, 2017. 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 twelve months ended December 31, 2017 and 2016, respectively.
4 Adjusted amortization of intangible assets excludes amortization expense of $11,020, $10,938, and $11,051 for the three months ended December 31, 2017, December 31, 2016, and September 30, 2017, respectively, and $44,023 and $44,263 for the twelve months ended December 31, 2017 and December 31, 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 ended September 30, 2017 and the twelve months ended December 31, 2017.
Entegris, Inc. - page 11 of 13
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands)
(Unaudited)
Three months ended | Twelve months ended | |||||||||
December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | ||||||
Net sales | $350,562 | $308,502 | $345,591 | $1,342,532 | $1,175,270 | |||||
Net (loss) income | $(28,341) | $26,098 | $40,902 | $85,066 | $97,147 | |||||
Adjustments to net (loss) income: | ||||||||||
Income tax expense | 70,264 | 8,521 | 9,248 | 99,665 | 22,852 | |||||
Interest expense, net | 7,533 | 8,983 | 7,599 | 31,628 | 36,528 | |||||
Other expense (income), net | 21,696 | 1,303 | 2,906 | 25,458 | (991) | |||||
GAAP - Operating income | 71,152 | 44,905 | 60,655 | 241,817 | 155,536 | |||||
Severance | — | — | 2,141 | 2,700 | 2,405 | |||||
Impairment of equipment and intangibles 1 | — | — | 7,230 | 10,400 | 5,826 | |||||
Amortization of intangible assets | 11,020 | 10,938 | 11,051 | 44,023 | 44,263 | |||||
Adjusted operating income | 82,172 | 55,843 | 81,077 | 298,940 | 208,030 | |||||
Depreciation | 15,035 | 14,303 | 14,785 | 58,208 | 55,623 | |||||
Adjusted EBITDA | $97,207 | $70,146 | $95,862 | $357,148 | $263,653 | |||||
Adjusted operating margin | 23.4 | % | 18.1 | % | 23.5 | % | 22.3 | % | 17.7 | % |
Adjusted EBITDA - as a % of net sales | 27.7 | % | 22.7 | % | 27.7 | % | 26.6 | % | 22.4 | % |
1 Includes product line impairment charges of $3,364 classified as cost of sales for the three months ended September 30, 2017. Includes product line impairment charges of $5,330 and $5,826 classified as cost of sales for the twelve months ended December 31, 2017 and 2016, respectively.
Includes intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
Includes product line impairment charge of $320 classified as selling general and administrative expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $884 classified as engineering, research and development expense for the twelve months ended December 31, 2017.
Entegris, Inc. - page 12 of 13
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Earnings per Share
(In thousands, except per share data)
(Unaudited)
Three months ended | Twelve months ended | |||||||||
December 31, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2017 | December 31, 2016 | ||||||
GAAP net (loss) income | $(28,341) | $26,098 | $40,902 | $85,066 | $97,147 | |||||
Adjustments to net (loss) income: | ||||||||||
Severance | — | — | 2,141 | 2,700 | 2,405 | |||||
Impairment of equipment and intangibles 1 | — | — | 10,030 | 13,200 | 5,826 | |||||
Loss on debt extinguishment | 20,687 | — | — | 20,687 | — | |||||
Net gain on sale of investments | — | — | — | — | (156 | ) | ||||
Amortization of intangible assets | 11,020 | 10,938 | 11,051 | 44,023 | 44,263 | |||||
Tax effect of adjustments to net income and discrete items | (10,385 | ) | (2,742 | ) | (7,135 | ) | (26,046 | ) | (16,637 | ) |
Tax effect of Tax Cuts and Jobs Act | 66,713 | — | — | 66,713 | — | |||||
Non-GAAP net income | $59,694 | $34,294 | $56,989 | $206,343 | $132,848 | |||||
Diluted (loss) earnings per common share | $(0.20) | $0.18 | $0.28 | $0.59 | $0.68 | |||||
Effect of adjustments to net income | $0.61 | $0.06 | $0.11 | $0.85 | $0.25 | |||||
Diluted non-GAAP earnings per common share | $0.42 | $0.24 | $0.40 | $1.44 | $0.94 | |||||
1 Includes product line impairment charges of $3,364 classified as cost of sales for the three months ended September 30, 2017. Includes product line impairment charges of $5,330 and $5,826 classified as cost of sales for the twelve months ended December 31, 2017 and 2016, respectively.
Includes intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
Includes product line impairment charge of $320 classified as selling general and administrative expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $884 classified as engineering, research and development expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $2,800 classified as other expense for the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
### END ###
Entegris, Inc. - page 13 of 13
FEBRUARY 6, 2018
Earnings Summary
Fourth Quarter and Fiscal Year 2017
EXHIBIT 99.2
2
SAFE HARBOR
This document contains, and management may make, 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, including the duration and drivers of any growth 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, 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.
This presentation contains references to “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Operating Income,” “Adjusted Operating Income
Margin” and “Non-GAAP Earnings per Share” that are not presented in accordance GAAP. The non-GAAP financial measures should not be considered in
isolation or as a substitute for GAAP financial measures but should instead be read in conjunction with the GAAP financial measures. Further information
with respect to and reconciliations of such measures to the most directly comparable GAAP financial measure can be found attached to this
presentation.
3
4Q17 HIGHLIGHTS
◦ 4Q17 sales grew 14% from a year ago and 1% sequentially, reflecting growth across the portfolio and the fifth
consecutive record quarter:
◦ Specialty Chemicals and Engineered Materials sales grew 13% from a year ago, achieving it 4th consecutive
quarter of record sales and reflecting strength in advanced deposition, specialty materials, and specialty gases
◦ Microcontamination Control sales grew 17% from a year ago, reflecting strength in liquid filtration and
purification, as well gas filtration solutions
◦ Advanced Materials Handling sales grew 11% from a year ago, reflecting growth in fluid handling and wafer
shipper solutions
◦ 4Q17 GAAP Loss Per Share was $0.20 reflecting the one-time effects of tax reform; non-GAAP EPS of $0.42 grew 75%
from the prior year;
◦ Generated record quarterly adjusted EBITDA of $97 million, or approx. 28% of revenue, and free cash flow of $60
million;
◦ In November, the Company raised $550 million of senior notes at 4.625% interest; the Company used the proceeds
to retire its existing $360 million/6% senior notes;
◦ Subsequent to the quarter, in January the Company acquired Particle Sizing Systems, LLC, a provider of particle sizing
instrumentation for liquid applications in both semiconductor and life science industries, for $37 million in cash; The
acquisition is expected to be accretive to 2018 earnings.
4
FY2017 HIGHLIGHTS
◦ Fiscal 2017 sales grew 14% from a year ago, reflecting record performances for all three divisions:
◦ Specialty Chemicals and Engineered Materials sales grew 13%
◦ Microcontamination Control sales grew 20%
◦ Advanced Materials Handling sales grew 10%
◦ Exceeded our financial commitment for 2017 to grow our bottom-line at twice the rate of our top line on a Non-
GAAP basis;
◦ Achieved GAAP net income of $85.1 million, or GAAP EPS of $0.59, which included amortization of $44.0 million,
asset impairment charges of $13.2 million, $2.7 million of severance expenses, $20.7 million related to the
refinancing of senior notes, and $66.7 million related to the effects of the Tax Cuts and Jobs Act;
◦ Non-GAAP net income of $206.3 million, or $1.44 per share, grew 53% from the prior year;
◦ Increased EBITDA by 35% to $357.1 million, or 27% of revenue, and recorded free cash flow of $200.0 million;
◦ Expanded our capital allocation strategy to include a quarterly dividend and ongoing share repurchases; Paid down
$100 million of our term loan and ended the year with a net leverage ratio of .1x.
$ in millions, except per share data 4Q17 4Q17 Guidance 3Q17 4Q16
4Q17 over
4Q16
4Q17 over
3Q17
Net Revenue $350.6 $335 to $345 $345.6 $308.5 13.6% 1.4%
Gross Margin 46.7% 45.0% 42.7%
Operating Expenses $92.5 $90 to $92 $94.8 $86.9 6.4% (2.4%)
Operating Income $71.2 $60.7 $44.9 58.6% 17.3%
Operating Margin 20.3% 17.6% 14.6%
Tax Rate 167.6% 18.4% 24.6%
Net (Loss) Income ($28.3) $43 to $50 $40.9 $26.1 (208.4%) (169.2%)
(Loss) earnings per diluted share ($0.20) $0.30 to $0.35 $0.28 $0.18 (211.1%) (171.4%)
5
SUMMARY – CONSOLIDATED STATEMENT OF OPERATIONS (GAAP)
$ in millions, except per share data Q417 4Q17 Guidance 3Q17 4Q16
4Q17 over
4Q16
4Q17 over
3Q17
Net Revenue $350.6 $335 to $345 $345.6 $308.5 13.6% 1.4%
Adjusted Gross Margin2 46.7% 46.2% 42.7%
Non-GAAP Operating Expenses3 $81.5 $79 to $81 $78.4 $76.0 3.2% 0%
Adjusted Operating Income $82.2 $81.1 $55.8 46.1% 0.5%
Adjusted Operating Margin 23.4% 23.5% 18.1%
Non-GAAP Tax Rate4 18.9% 22.3% 24.7%
Non-GAAP Net Income5 $59.7 $50 to $57 $57.0 $34.3 74.1% 4.7%
Non-GAAP EPS $0.42 $0.35 to $0.40 $0.40 $0.24 75.0% 5.0%
6
1. See GAAP to Non-GAAP reconciliation tables in the appendix of this presentation.
2. Adjusted gross margin excludes certain impairment of equipment and severance charges.
3. Non-GAAP Operating Expenses exclude amortization expense, severance charges and impairment of equipment and intangibles.
4. Non-GAAP Tax Rate reflects the tax effect of non-GAAP adjustments and discrete tax items to GAAP taxes.
5. Non-GAAP Net Income excludes amortization expense, severance charges, loss on debt extinguishment and impairment of assets.
SUMMARY – CONSOLIDATED STATEMENT OF OPERATIONS (NON-GAAP)1
$ in millions, except per share data
Fiscal Year
Ended
December 31,
2017
Fiscal Year
Ended
December 31,
2016 Year-over-Year
Net Revenue $1,342.5 $1,175.3 14.2%
Gross Margin 45.4% 43.3%
Operating Expenses $367.2 $353.2 4.0%
Operating Income $241.8 $155.5 55.5%
Operating Margin 18.0% 13.2 %
Tax Rate 54.0% 19.0%
Net Income $85.1 $97.1 (12.4%)
EPS $0.59 $0.68 (13.2%)
7
SUMMARY – CONSOLIDATED STATEMENT OF OPERATIONS (GAAP)
$ in millions, except per share data
Fiscal Year Ended
December 31, 2017
Fiscal Year Ended
December 31, 2016 Year-over-Year
Net Revenue $1,342.5 $1,175.3 14.2%
Adjusted Gross Margin2 45.8% 43.8%
Non-GAAP Operating Expenses3 $316.1 $306.9 3.0%
Adjusted Operating Income $298.9 $208.0 43.7%
Adjusted Operating Margin 22.3% 17.7%
Non-GAAP Tax Rate4 22.2% 22.9%
Non-GAAP Net Income5 $206.3 $132.8 55.3%
Non-GAAP EPS $1.44 $0.94 53.2%
8
SUMMARY – CONSOLIDATED STATEMENT OF OPERATIONS (NON-GAAP)1 – YEAR TO DATE
1. See GAAP to Non-GAAP reconciliation tables in the appendix of this presentation.
2. Adjusted gross margin excludes certain impairment of equipment and severance charges.
3. Non-GAAP Operating Expenses exclude amortization expense, severance charges and impairment of equipment and intangibles.
4. Non-GAAP Tax Rate reflects the tax effect of non-GAAP adjustments and discrete tax items to GAAP taxes.
5. Non-GAAP Net Income excludes amortization expense, severance charges, loss on debt extinguishment and impairment of assets.
9
1. Represents diluted earnings (loss) per share. See Reconciliation of GAAP Net Income to Non-GAAP Earnings per Share in the appendix of this presentation.
EARNINGS (LOSS) PER SHARE1
$0.18
($0.20)
$0.24
$0.42
-$0.30
-$0.20
-$0.10
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
4Q16 4Q17
EPS: 4Q17 vs. 4Q16
GAAP Non-GAAP
$0.68
$0.59
$0.94
$1.44
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
FY16 FY17
FY2017 vs. FY2016
GAAP Non-GAAP
RESULTS BY SEGMENT1
10
1. Adjusted segment operating margin excludes amortization of intangibles and unallocated expenses.
2. Segment profit for SCEM for 3Q17 includes a charge for severance of $14K.
3. Segment profit for MC for Q317 includes a charge for severance of $196K. Segment profit for MC for 2Q17 includes charges for impairment of equipment and severance of $884K and $559K,
respectively.
4. Segment profit for AMH for 2Q17 includes charges for impairment of equipment of $2,286K. Segment profit for AMH for 3Q17 includes charges for impairment of equipment and severance totaling
$5,221K.
0%
10%
20%
30%
40%
$0
$20
$40
$60
$80
$100
$120
4Q16 1Q17 2Q17 3Q17 4Q17
Specialty Chemicals and
Engineered Materials
Segment2
Sales Adj. Op. margin
0%
10%
20%
30%
40%
$0
$20
$40
$60
$80
$100
$120
4Q16 1Q17 2Q17 3Q17 4Q17
Microcontamination
Control Segment3
Sales Adj. Op. margin
0%
10%
20%
30%
40%
$0
$20
$40
$60
$80
$100
$120
4Q16 1Q17 2Q17 3Q17 4Q17
Advanced Materials
Handling Segment4
Sales Adj. Op. margin
$ in millions
REVENUE BY GEOGRAPHY: STRONG GROWTH IN SOUTH KOREA AND CHINA
11
N. America
Southeast
Asia
Taiwan
FY2017 Revenue by Geography
Revenue = $1,342.5 million
$169.5M
$120.5M Europe
Japan
China
South Korea
6%
14%
26%
9%
49%
13%
-1%
Southeast Asia
Europe
China
Japan
South Korea
N. America
Taiwan
-5% 5% 15% 25% 35% 45% 55%
FY2017 vs. FY2016 Growth Rate
$110.8M
$148.9M
$286.3M $289.6M
$216.9M
$ in millions 4Q17 3Q17 4Q16
$ Amount % Total $ Amount % Total $ Amount % Total
Cash & Cash Equivalents $625.4 31.6% $435.2 24.8% $406.4 23.9%
Accounts Receivable, net $183.4 9.3% $183.4 10.4% $165.7 9.7%
Inventories $198.1 10.0% $193.3 11.0% $183.5 10.8%
Net PP&E $359.5 18.2% $346.7 19.7% $321.6 18.9%
Total Assets $1,976.2 $1,757.7 $1,699.5
Current Liabilities1 $291.0 14.7% $269.9 15.4% $261.6 15.4%
Long-term debt, excluding
current maturities
$574.4 29.1% $411.5 23.4% $484.7 28.5%
Total Liabilities $983.2 49.8% $739.4 42.1% $800.3 47.1%
Total Shareholders’ Equity $993.0 50.2% $1,018.4 57.9% $899.2 52.9%
AR – DSOs 47.7 48.4 49.0
Inventory Turns 3.8 3.9 3.8
12
1. Current Liabilities in 4Q17, 3Q17 and 4Q16 includes $100 million of current maturities of long term debt, respectively.
SUMMARY – BALANCE SHEET ITEMS
13
1. See Reconciliation of GAAP Income to Adjusted Operating Income and Adjusted EBITDA in the appendix of this presentation.
ADJUSTED EBITDA MARGIN1
$264
$357
22.4%
26.6%
0
50
100
150
200
250
300
350
2016 2017
Adjusted Annual EBITDA
Adj. EBITDA in $M Adj. EBITDA as % of Sales
$70
$76
$97
22.7%
23.9%
26.8%
27.7% 27.7%
0
40
80
4Q16 1Q17 2Q17 3Q17 4Q17
Adjusted EBITDA and EBITDA Margin
Adj. EBITDA in $M Adj. EBITDA as % of Sales
$88
$96
$ in millions 4Q17 3Q17 4Q16
Beginning Cash Balance $435.2 $405.6 $411.8
Cash from operating activities $85.7 $89.0 $57.1
Capital expenditures ($25.7) ($25.4) ($20.0)
Proceeds from long-term debt 550.0 - -
Payments on long-term debt ($385.0) ($25.0) ($25.0)
Payments for debt extinguishment costs ($16.2) - -
Repurchase and retirement of common stock ($10.0) ($10.0) ($4.0)
Dividend payments ($9.9) - -
Other investing activities $0.1 $0.9 $0.1
Other financing activities ($5.5) $0.5 $0.8
Effect of exchange rates $6.7 ($0.4) ($14.3)
Ending Cash Balance $625.4 $435.2 $406.4
Free Cash Flow1 $60.1 $63.6 $37.1
Adjusted EBITDA $97.2 $95.9 $70.1
CASH FLOWS
14
1. Free cash flow equals cash from operations less capital expenditures.
OUTLOOK
15
1. Non-GAAP operating expenses exclude amortization. In 1Q18, amortization is estimated to be approximately $11 million, or $0.05 per share.
$ in millions, except per share data 1Q18 Guidance 4Q17 Actual 1Q17 Actual
Net Revenue $355 to $365 $350.6 $317.4
Operating Expenses $94 to $96 $92.5 $88.7
Net Income (Loss) $49 to $56 ($28.3) $32.5
Earnings (Loss) Per Diluted Share $0.34 to $0.39 ($0.20) $0.23
$ in millions, except per share data 1Q18 Guidance 4Q17 Actual 1Q17 Actual
Net Revenue $355 to $365 $350.6 $317.4
Non-GAAP Operating Expenses1 $83 to $85 $81.5 $77.7
Non-GAAP Net Income $56 to $63 $59.7 $40.8
Non-GAAP EPS $0.39 to $0.44 $0.42 $0.28
Non-GAAP
GAAP
Entegris®, the Entegris Rings Design™ and Pure Advantage™ are trademarks of Entegris, Inc. ©2016 Entegris, Inc. All rights reserved.
16
NON-GAAP RECONCILIATION TABLE
RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT
17
Three months ended Twelve months ended
December 31,
2017
December 31,
2016
September 30,
2017
December 31,
2017
December 31,
2016
Net Sales $350,562 $308,502 $345,591 $1,342,532 $1,175,270
Gross profit-GAAP $163,679 $131,800 $155,407 $608,985 $508,691
Adjustments to gross profit:
Severance related to organizational realignment - - 740 740 431
Impairment of equipment - - 3,364 5,330 5,826
Adjusted gross profit $163,679 $131,800 $159,511 $615,055 $514,948
Gross margin - as a % of net sales 46.7% 42.7% 45.0% 45.4% 43.3%
Adjusted gross margin - as a % of net sales 46.7% 42.7% 46.2% 45.8% 43.8%
$ in thousands
NON-GAAP RECONCILIATION TABLE
RECONCILIATION OF GAAP SEGMENT PROFIT TO ADJUSTED OPERATING INCOME
18
Three months ended Twelve months ended
Segment profit-GAAP December 31, 2017 December 31, 2016 September 30, 2017 December 31, 2017 December 31, 2016
Specialty Chemicals and Engineered Materials $35,898 $25,919 $34,647 $132,859 $96,060
Microcontamination Control 44,666 31,719 43,984 160,715 110,042
Advanced Materials Handling 23,240 16,644 16,882 77,971 73,452
Total segment profit 103,804 74,282 95,513 371,545 279,554
Amortization of intangible assets 11,020 10,938 11,051 44,023 44,263
Unallocated expenses 21,632 18,439 23,807 85,705 79,755
Total operating income $71,152 $44,905 $60,655 $241,817 $155,536
$ in thousands
Three months ended Twelve months ended
Adjusted segment profit December 31, 2017 December 31, 2016 September 30, 2017 December 31, 2017 December 31, 2016
Specialty Chemicals and Engineered Materials1 $35,898 $25,919 $34,661 $132,873 $96,759
Microcontamination Control2 44,666 31,719 44,180 162,354 110,779
Advanced Materials Handling3 23,240 16,644 22,103 85,478 80,247
Total segment profit 103,804 74,282 100,944 380,705 287,785
Amortization of intangible assets4 - - - - -
Unallocated expenses5 21,632 18,439 19,867 81,765 79,755
Total adjusted operating income $82,172 $55,843 $81,077 $298,940 $208,030
1. Adjusted segment profit for SCEM for the three months ended September 30, 2017 and the twelve months ended December 31, 2017 excludes charges for severance related to organizational realignment of $14K. Adjusted segment profit for Specialty
Chemicals and Engineered Materials for the twelve months ended December 31, 2016 excludes charges for severance related to organizational realignment of $699K.
2. Adjusted segment profit for MC excludes charges for impairment of equipment and severance related to organizational realignment of $196K for the three months ended September 30, 2017. Adjusted segment profit for MC excludes impairment of
equipment and charges for severance related to organizational realignment of $1,639K and $737K for the twelve months ended December 31, 2017 and 2016, respectively.
3. Adjusted segment profit for AMH excludes charges for impairment of equipment and severance related to organizational realignment of $5,221K for the three months ended September 30, 2017. Adjusted segment profit for AMH excludes charges for
impairment of equipment and severance related to organizational realignment of $7,507 and $6,795 for the twelve months ended December 31, 2017 and 2016, respectively.
4. Adjusted amortization of intangible assets excludes amortization expense of $11,020K, $10,938K, and $11,051K for the three months ended December 31, 2017, December 31, 2016 and September 30, 2017, respectively, and $44,023K and $44,263K for
the twelve months ended December 31, 2017 and 2016, respectively.
5. Adjusted unallocated expenses excludes charges for impairment of intangibles and severance related to organizational realignment of $3,940K for the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
NON-GAAP RECONCILIATION TABLE
RECONCILIATION OF GAAP TO ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA
19
Three months ended Twelve months ended
December 31, 2017 December 31, 2016 September 30, 2017 December 31, 2017 December 31, 2016
Net sales $350,562 $308,502 $345,591 $1,342,532 $1,175,270
Net (loss) income ($28,341) $26,098 $40,902 $85,066 $97,147
Adjustments to net (loss) income:
Income tax expense 70,264 8,521 9,248 99,665 22,852
Interest expense, net 7,533 8,983 7,599 31,628 36,528
Other expense (income), net 21,696 1,303 2,906 25,458 (991)
GAAP - Operating income 71,152 44,905 60,655 241,817 155,536
Severance - - 2,141 2,700 2,405
Impairment of equipment and
intangibles1 - - 7,230 10,400 5,826
Amortization of intangible assets 11,020 10,938 11,051 44,023 44,263
Adjusted operating income 82,172 55,843 81,077 298,940 208,030
Depreciation 15,035 14,303 14,785 58,208 55,623
Adjusted EBITDA $97,207 $70,146 $95,862 $357,148 $263,653
Adjusted operating margin 23.4% 18.1% 23.5% 22.3% 17.7%
Adjusted EBITDA - as a % of net sales 27.7% 22.7% 27.7% 26.6% 22.4%
$ in thousands
1. Includes product line impairment charges of $3,364K classified as cost of sales for the three months ended September 30, 2017. Includes product line impairment charges of $5,330K and $5,826K classified as cost of sales
for the twelve months ended December 31, 2017 and 2016, respectively.
Includes intangible impairment charge of $3,866K classified as selling general and administrative expense for both the three months ended September 30, 2017 and twelve months ended December 31, 2017.
Includes product line impairment charge of $320K classified as selling general and administrative expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $884K classified as engineering, research and development expense for the twelve months ended December 31, 2017.
NON-GAAP RECONCILIATION TABLE
RECONCILIATION OF GAAP TO NON-GAAP (LOSS) EARNINGS PER SHARE
20
Three months ended Twelve months ended
December 31,
2017
December 31,
2016
September 30,
2017
December 31,
2017
December 31,
2016
GAAP net (loss) income ($28,341) $26,098 $40,902 $85,066 $97,147
Adjustments to net (loss) income:
Severance - - 2,141 2,700 2,405
Impairment of equipment and intangibles1 - - 10,030 13,200 5,826
Loss on debt extinguishment 20,687 - - 20,687 -
Gain on sale of equity investment - - - - (156)
Amortization of intangible assets 11,020 10,938 11,051 44,023 44,263
Tax effect of adjustments to net income and discrete items (10,385) (2,742) (7,135) (26,046) (16,637)
Tax effect of Tax Cuts and Jobs Act 66,713 - - 66,713 -
Non-GAAP net income $59,694 $34,294 $56,989 $206,343 $132,848
Diluted (loss) earnings per common share ($0.20) $0.18 $0.28 $0.59 $0.68
Effect of adjustments to net (loss) income $0.61 $0.06 $0.11 $0.85 $0.25
Diluted non-GAAP earnings per common share $0.42 $0.24 $0.40 $1.44 $0.94
$ in thousands, except per share data
1. Includes product line impairment charges of $3,364K classified as cost of sales for the three months ended September 30, 2017. Includes product line impairment charges of $5,330K and $5,826K classified as cost of
sales for the twelve months ended December 31, 2017 and 2016, respectively.
Includes intangible impairment charge of $3,866K classified as selling general and administrative expense for both the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
Includes product line impairment charge of $320K classified as selling general and administrative expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $884K classified as engineering, research and development expense for the twelve months ended December 31, 2017.
Includes product line impairment charge of $2,800K classified as other expense for both the three months ended September 30, 2017 and the twelve months ended December 31, 2017.
21
GAAP SEGMENT TREND DATA
Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417
Sales
SCEM 99,897$ 110,569$ 105,285$ 103,127$ 101,107$ 111,782$ 104,494$ 110,945$ 114,435$ 121,174$ 124,522$ 125,339$
MC 75,947 79,293 78,485 82,092 77,619 91,584 94,738 98,717 100,055 104,407 116,113 115,650
AMH 87,529 90,847 86,483 81,567 88,298 99,686 97,460 98,840 102,887 103,421 104,956 109,573
Total Sa les 263,373$ 280,709$ 270,253$ 266,786$ 267,024$ 303,052$ 296,692$ 308,502$ 317,377$ 329,002$ 345,591$ 350,562$
Segment Profit
SCEM 22,010$ 30,826$ 23,316$ 24,218$ 22,416$ 28,914$ 18,811$ 25,919$ 28,140$ 34,174$ 34,647$ 35,898$
MC 19,874 20,605 21,926 20,671 18,140 28,566 31,617 31,719 35,581 36,484 43,984 44,666
AMH 19,679 20,860 15,786 10,094 18,911 22,519 15,378 16,644 18,276 19,573 16,882 23,240
Total Segment Profi t 61,563$ 72,291$ 61,028$ 54,983$ 59,467$ 79,999$ 65,806$ 74,282$ 81,997$ 90,231$ 95,513$ 103,804$
Segment Profit Margin
SCEM 22.0% 27.9% 22.1% 23.5% 22.2% 25.9% 18.0% 23.4% 24.6% 28.2% 27.8% 28.6%
MC 26.2% 26.0% 27.9% 25.2% 23.4% 31.2% 33.4% 32.1% 35.6% 34.9% 37.9% 38.6%
AMH 22.5% 23.0% 18.3% 12.4% 21.4% 22.6% 15.8% 16.8% 17.8% 18.9% 16.1% 21.2%
$ in thousands
NON-GAAP SEGMENT TREND DATA
22
1. Adjusted segment profit for SCEM for Q316 excludes charges for severance of $699K. Adjusted segment profit for SCEM for Q317 excludes charges for severance of $14K.
2. Adjusted segment profit for MC for Q316 excludes charges for severance of $737K. Adjusted segment profit for MC for 2Q17 excludes charges for impairment of equipment and severance of $884K and $559K,
respectively. Adjusted segment profit for MC for Q317 excludes charges for severance of $196K.
3. Adjusted segment profit for AMH for Q316 excludes charges for impairment of equipment and severance related to organizational realignment of $5,826K and $969K, respectively. Adjusted segment profit for AMH for
2Q17 excludes charges for impairment of equipment of $2,286K. Adjusted segment profit for AMH for Q317 excludes charges for impairment of equipment and severance related to organizational realignment of $3,364K
and $1,857K, respectively.
Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417
Sales
SCEM 99,897$ 110,569$ 105,285$ 103,127$ 101,107$ 111,782$ 104,494$ 110,945$ 114,435$ 121,174$ 124,522$ 125,339$
MC 75,947 79,293 78,485 82,092 77,619 91,584 94,738 98,717 100,055 104,407 116,113 115,650
AMH 87,529 90,847 86,483 81,567 88,298 99,686 97,460 98,840 102,887 103,421 104,956 109,573
Total Sa les 263,373$ 280,709$ 270,253$ 266,786$ 267,024$ 303,052$ 296,692$ 308,502$ 317,377$ 329,002$ 345,591$ 350,562$
Adjusted Segment Profit
SCEM
1
22,010$ 30,826$ 23,316$ 24,218$ 22,416$ 28,914$ 19,510$ 25,919$ 28,140$ 34,174$ 34,661$ 35,898$
MC2 19,874 20,605 21,926 20,671 18,140 28,566 32,354 31,719 35,581 37,927 44,180 44,666
AMH3 19,679 20,860 15,786 10,094 18,911 22,519 22,173 16,644 18,276 21,859 22,103 23,240
Total Adj. Segment Profi t 61,563$ 72,291$ 61,028$ 54,983$ 59,467$ 79,999$ 74,037$ 74,282$ 81,997$ 93,960$ 100,944$ 103,804$
Adjusted Segment Profit Margin
SCEM 22.0% 27.9% 22.1% 23.5% 22.2% 25.9% 18.7% 23.4% 24.6% 28.2% 27.8% 28.6%
MC 26.2% 26.0% 27.9% 25.2% 23.4% 31.2% 34.2% 32.1% 35.6% 36.3% 38.0% 38.6%
AMH 22.5% 23.0% 18.3% 12.4% 21.4% 22.6% 22.8% 16.8% 17.8% 21.1% 21.1% 21.2%
$ in thousands