Feb 2, 2017

Entegris Reports Strong Fourth-Quarter and Fiscal 2016 Results

BILLERICA, Mass., Feb. 02, 2017 (GLOBE NEWSWIRE) -- Entegris, Inc. (Nasdaq: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, 2016.

The Company reported sales of $1.2 billion for the 2016 fiscal year, an increase of 9 percent from the prior year.  Net income for fiscal 2016 was $97.1 million, or $0.68 per share, which included amortization of intangible assets of $44.3 million, asset impairment charges of $5.8 million related to certain production equipment and $2.4 million of severance expenses related to an organizational realignment.  In the prior year, net income was $80.3 million, or $0.57 per share, which included amortization of intangible assets of $47.3 million and acquisition integration expenses of $12.7 million.  Non-GAAP net income for fiscal 2016 was $132.8 million, or $0.94 per diluted share, which increased from $120.6 million, or $0.85 per diluted share, in the prior year.

Fourth-quarter sales were $308.5 million, an increase of 16 percent from the same quarter last year and a 4 percent increase sequentially.  Fourth-quarter net income was $26.1 million, or $0.18 per diluted share, which included amortization of intangible assets of $10.9 million.  Non-GAAP net income was $34.3 million, or $0.24 per diluted share.  In the fourth quarter, the Company generated cash from operations less capital expenditures, or free cash flow, of $37.1 million.

Bertrand Loy, president and chief executive officer, said: "The strong results in the fourth quarter capped a record year in which we grew revenue 9 percent organically, well in excess of our markets. This performance demonstrates that our investments in R&D and innovation over the past few years are paying off, allowing us to expand our served markets and grow our market share. In 2016, we also achieved record non-GAAP earnings per share of $0.94 and generated an adjusted EBITDA of $264 million, an increase of 13 percent from the prior year.  This is an all-time high and essentially twice the level we generated prior to the ATMI acquisition in 2014."

"In the fourth quarter, we achieved sales growth above our expectations driven in part by a rebound in our specialty gas products and record demand of our microfiltration, wafer handling, and advanced deposition solutions."

Mr. Loy added: "We believe the industry is in the midst of a multi-year period of wafer growth driven by the ramp of new technologies and expanding end-market demand for semiconductors.  New materials are becoming increasingly important to deliver better semiconductor performance and we believe our broad portfolio of solutions puts us in an excellent position to holistically address our customers' needs for materials performance, purity and stability throughout their supply chains and manufacturing processes."

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

GAAP ResultsQ4-2016Q4-2015Q3-2016
Net sales$308,502$266,786$296,692
Operating income$44,905$20,116$34,672
Operating margin 14.6% 7.5% 11.7%
Net income$26,098$17,573$21,947
Diluted earnings per share (EPS)$0.18$0.12$0.15
Non-GAAP Results
Non-GAAP adjusted operating income$55,843$37,141$53,877
Adjusted operating margin 18.1% 13.9% 18.2%
Non-GAAP net income$34,294$28,822$34,647
Non-GAAP EPS$0.24$0.20$0.24

First-Quarter Outlook

For the first quarter ending April 1, 2017, the Company expects sales of $295 million to $310 million, net income of $25 million to $31 million, and net income per diluted share between $0.18 and $0.22.  On a non-GAAP basis, EPS is expected to range from $0.23 to $0.27 per diluted share, which reflects net income on a non-GAAP basis in the range of $32 million to $38 million, which is adjusted for expected amortization expense of approximately $11 million or $0.05 per share.

Segment Results

The Company has changed its financial segment reporting, reflecting an organizational realignment intended to better leverage its unique portfolio of capabilities to create value for its customers by developing mission-critical solutions to maximize manufacturing yields and enable higher performance of devices.  The Company's business is reported in the following segments:

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

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.

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 and fiscal year on Thursday, February 2, 2017, at 10:00 a.m. Eastern Time.  Participants should dial 1-888-600-4869 or 1-913-312-0936, referencing confirmation code 4935351.  Participants are asked to dial in 5 to 10 minutes prior to the start of the call.  To access a telephonic replay of the call, please Click Here. The replay will be available starting at 1:00 p.m. ET on Thursday, February 2 until Saturday, March 18.  A live and on-demand webcast of the call can also be accessed from the investor relations section of Entegris' website at www.entegris.com.

Management's slide presentation concerning the results for the 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 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. These financial measures are provided as a supplement to financial measures provided in accordance with GAAP. We provide non-GAAP financial measures in order to further assess and measure operating performance. Management believes the non-GAAP measures provide meaningful supplemental information regarding our baseline performance before certain gains, losses or other charges that may not be indicative of our business or future outlook. We believe these non-GAAP measures will aid investors' overall understanding of our results by providing a higher degree of transparency for certain expenses and providing a level of disclosure that will help investors understand how we plan and measure 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
Certain information contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on current management expectations only as of the date of this press release, and involve substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements.  Statements that include such words as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will," "should" or the negative thereof and similar expressions as they relate to Entegris or our management are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.  These risks include, but are not limited to, fluctuations in the market price of Entegris' stock, Entegris' future operating results, other acquisition and investment opportunities available to Entegris, general business and market conditions and other factors.  Additional information concerning these and other risk factors may be found in previous financial press releases issued by Entegris and Entegris' periodic public filings with the Securities and Exchange Commission, including discussions appearing under the headings "Risks Relating to our Business and Industry," "Risks Relating to Our Indebtedness," "Manufacturing Risks," "International Risks," and "Risks Related to Owning Our Common Stock" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the U.S Securities and Exchange Commission on February 29, 2016, as well as other matters and important factors disclosed previously and from time to time in the filings of Entegris with the U.S. Securities and Exchange Commission.  Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we undertake no obligation to update publicly any forward-looking statements contained herein.


Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 Three months ended
 December 31, 2016December 31, 2015October 1, 2016
Net sales$308,502 $266,786 $296,692 
Cost of sales 176,702  157,488  173,712 
Gross profit 131,800  109,298  122,980 
Selling, general and administrative expenses 48,734  51,024  51,614 
Engineering, research and development expenses 27,223  26,717  25,720 
Amortization of intangible assets 10,938  11,441  10,974 
Operating income 44,905  20,116  34,672 
Interest expense, net 8,983  9,694  9,345 
Other expense (income), net 1,303  (3,889) (565)
Income before income tax expense (benefit) and equity in net loss of affiliates 34,619  14,311  25,892 
Income tax expense (benefit) 8,521  (4,731) 3,945 
Equity in net loss of affiliates   1,469   
Net income$26,098 $17,573 $21,947 
    
   
Basic net income per common share:$0.18 $0.13 $0.16 
Diluted net income per common share:$0.18 $0.12 $0.15 
    
Weighted average shares outstanding:   
Basic 141,315  140,567  141,324 
Diluted 142,631  141,433  142,473 
 


Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 Twelve months ended
 December 31, 2016December 31, 2015
Net sales$1,175,270 $1,081,121 
Cost of sales 666,579  610,890 
Gross profit 508,691  470,231 
Selling, general and administrative expenses 201,901  198,914 
Engineering, research and development expenses 106,991  105,900 
Amortization of intangible assets 44,263  47,349 
Operating income 155,536  118,068 
Interest expense, net 36,528  38,238 
Other income, net (991) (12,355)
Income before income tax expense and equity in net loss of affiliates 119,999  92,185 
Income tax expense 22,852  10,202 
Equity in net loss of affiliates   1,687 
Net income$97,147 $80,296 
   
  
Basic net income per common share:$0.69 $0.57 
Diluted net income per common share:$0.68 $0.57 
   
Weighted average shares outstanding:  
Basic 141,093  140,353 
Diluted 142,050  141,121 
 


Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 December 31, 2016 December 31, 2015
ASSETS   
Cash and cash equivalents$406,389  $349,825 
Short-term investments    2,181 
Accounts receivable, net 165,675   141,409 
Inventories 183,529   173,176 
Deferred tax assets, deferred tax charges and refundable  income taxes 20,140   18,943 
Other current assets 24,398   23,253 
Total current assets 800,131   708,787 
    
Property, plant and equipment, net 321,562   321,301 
    
Goodwill 345,269   342,111 
Intangible assets 217,548   258,942 
Deferred tax assets - non-current 8,022   7,771 
Other assets 7,000   7,785 
Total assets$1,699,532  $1,646,697 
    
LIABILITIES AND SHAREHOLDERS' EQUITY  
Long-term debt, current maturities$100,000  $50,000 
Accounts payable 61,617   36,916 
Accrued liabilities 83,530   75,859 
Income tax payable and deferred tax liabilities 16,424   12,775 
Total current liabilities 261,571   175,550 
    
Long-term debt, excluding current maturities 484,677   606,044 
Other liabilities 54,066   62,220 
Shareholders' equity 899,218   802,883 
Total liabilities and shareholders' equity$1,699,532  $1,646,697 
 


Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 Three months endedTwelve months ended
 December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Operating activities:    
Net income$26,098 $17,573 $97,147 $80,296 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 14,303  14,225  55,623  54,305 
Amortization 10,938  11,441  44,263  47,349 
Stock-based compensation expense 3,373  2,913  13,436  11,033 
Provision for deferred income taxes (15,770) (15,907) (16,104) (13,313)
Other 3,326  (1,999) 22,993  (14,101)
Changes in operating assets and liabilities:    
Trade accounts and notes receivable (3,046) 43,232  (25,298) 5,212 
Inventories (2,575) 12,880  (19,871) (26,670)
Accounts payable and accrued liabilities 4,777  (41,262) 31,294  (28,686)
Income taxes payable and refundable income taxes 14,592  8,602  3,228  4,955 
Other 1,063  520  844  538 
Net cash provided by operating activities 57,079  52,218  207,555  120,918 
Investing activities:    
Acquisition of property and equipment (19,992) (16,281) (65,260) (71,977)
Proceeds from sale and maturities of investments 94  5,581  1,726  7,692 
Other   300  (3,152) 647 
Net cash used in investing activities (19,898) (10,400) (66,686) (63,638)
Financing activities:    
Payments on long-term debt (25,000)   (75,000) (100,000)
Issuance of common stock 1,952  1,656  4,844  4,264 
Taxes paid related to net share settlement of equity awards (702) (50) (4,018) (2,508)
Other (4,493) 4,792  (7,573) 5,457 
Net cash (used in) provided by financing activities (28,243) 6,398  (81,747) (92,787)
Effect of exchange rate changes on cash (14,326) 548  (2,558) (4,367)
(Decrease) increase in cash and cash equivalents (5,388) 48,764  56,564  (39,874)
Cash and cash equivalents at beginning of period 411,777  301,061  349,825  389,699 
Cash and cash equivalents at end of period$406,389 $349,825 $406,389 $349,825 
 


Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)
 
 Three months endedTwelve months ended
Net salesDecember 31,
2016
December 31,
2015
October 1,
2016
December 31,
2016
December 31,
2015
Specialty Chemicals and Engineered Materials$110,945 $103,127 $104,494 $428,328 $418,878 
Advanced Materials Handling 98,840  81,567  97,460  384,284  346,426 
Microcontamination Control 98,717  82,092  94,738  362,658  315,817 
Total net sales$308,502 $266,786 $296,692 $1,175,270 $1,081,121 


 Three months endedTwelve months ended
Segment profitDecember 31,
2016
December 31,
2015
October 1,
2016
December 31,
2016
December 31,
2015
Specialty Chemicals and Engineered Materials$25,919 $24,218 $18,811 $96,060 $100,370 
Advanced Materials Handling 16,644  10,094  15,378  73,452  66,419 
Microcontamination Control 31,719  20,671  31,617  110,042  83,076 
Total segment profit 74,282  54,983  65,806  279,554  249,865 
Amortization of intangibles 10,938  11,441  10,974  44,263  47,349 
Unallocated expenses 18,439  23,426  20,160  79,755  84,448 
Total operating income$44,905 $20,116 $34,672 $155,536 $118,068 
                


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,
2016
December 31,
2015
October 1,
2016
 December 31,
2016
December 31,
2015
Net sales$308,502 $266,786 $296,692  $1,175,270 $1,081,121 
Net income$26,098 $17,573 $21,947  $97,147 $80,296 
Adjustments to net income:      
Equity in net loss of affiliates   1,469       1,687 
Income tax expense (benefit) 8,521  (4,731) 3,945   22,852  10,202 
Interest expense, net 8,983  9,694  9,345   36,528  38,238 
Other expense (income), net 1,303  (3,889) (565)  (991) (12,355)
GAAP - Operating income 44,905  20,116  34,672   155,536  118,068 
Severance related to organizational realignment     2,405   2,405   
Impairment of equipment     5,826   5,826   
Integration costs  5,584       12,667 
Amortization of intangible assets 10,938  11,441  10,974   44,263  47,349 
Adjusted operating income 55,843  37,141  53,877   208,030  178,084 
Depreciation 14,303  14,225  13,795   55,623  54,305 
Adjusted EBITDA$70,146 $51,366 $67,672  $263,653 $232,389 
       
Adjusted operating margin 18.1% 13.9% 18.2%  17.7% 16.5%
Adjusted EBITDA - as a % of net sales 22.7% 19.3% 22.8%  22.4% 21.5%
                 


Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(In thousands)
(Unaudited)
 
 Three months ended Twelve months ended
 December 31,
2016
December 31,
2015
October 1,
2016
 December 31,
2016
December 31,
2015
Net sales$308,502 $266,786 $296,692  $1,175,270 $1,081,121 
Gross profit-GAAP$131,800 $109,298 $122,980  $508,691 $470,231 
Adjustments to gross profit:      
Severance related to organizational realignment     431   431   
Impairment of equipment     5,826   5,826   
Adjusted gross profit$131,800 $109,298 $129,237  $514,948 $470,231 
       
Gross margin - as a % of net sales 42.7% 41.0% 41.5%  43.3% 43.5%
Adjusted gross margin - as a % of net sales 42.7% 41.0% 43.6%  43.8% 43.5%
                 


Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Segment Profit to Adjusted Operating Income
(In thousands)
(Unaudited)
 
 Three months endedTwelve months ended
Segment profit-GAAPDecember 31,
2016
December 31,
2015
October 1,
2016
December 31,
2016
December 31,
2015
Specialty Chemicals and Engineered Materials$25,919 $24,218 $18,811 $96,060 $100,370 
Advanced Materials Handling 16,644  10,094  15,378  73,452  66,419 
Microcontamination Control 31,719  20,671  31,617  110,042  83,076 
Total segment profit 74,282  54,983  65,806  279,554  249,865 
Amortization of intangible assets 10,938  11,441  10,974  44,263  47,349 
Unallocated expenses 18,439  23,426  20,160  79,755  84,448 
Total operating income$44,905 $20,116 $34,672 $155,536 $118,068 


 Three months endedTwelve months ended
Adjusted segment profitDecember 31,
2016
December 31,
2015
October 1,
2016
December 31,
2016
December 31,
2015
Specialty Chemicals and Engineered Materials 1$25,919 $24,218 $19,510 $96,759 $100,370 
Advanced Materials Handling 2 16,644  10,094  22,173  80,247  66,419 
Microcontamination Control 3 31,719  20,671  32,354  110,779  83,076 
Total adjusted segment profit 74,282  54,983  74,037  287,785  249,865 
Amortization of intangible assets4          
Unallocated expenses5 18,439  17,842  20,160  79,755  71,781 
Total adjusted operating income$55,843 $37,141 $53,877 $208,030 $178,084 

1 Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months ended October 1, 2016 and twelve months ended December 31, 2016 excludes charges for severance related to organizational realignment of $699.
2 Adjusted segment profit for Advanced Material Handling for the three months ended October 1, 2016 and twelve months ended December 31, 2016 excludes charges for impairment of equipment and severance related to organizational realignment of $5,826 and $969, respectively.
3 Adjusted segment profit for Microcontamination Control for the three months ended October 1, 2016 and twelve months ended December 31, 2016 excludes charges for severance related to organizational realignment of $737.
4 Adjusted amortization of intangible assets excludes amortization expense of $10,938, $11,441, and $10,974 for the three months ended December 31, 2016 and 2015, and October 1, 2016, respectively and $44,263 and $47,349 for the twelve months ended December 31, 2016 and 2015, respectively.
5 Adjusted unallocated expenses exclude integration costs of $5,584 for the three months ended December 31, 2015 and $12,667 for the twelve months ended December 31, 2015.


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 Twelve months ended
 December 31,
2016
December 31,
2015
October 1,
2016
 December 31,
2016
December 31,
2015
GAAP net income$26,098 $17,573 $21,947  $97,147 $80,296 
Adjustments to net income:      
Severance related to organizational realignment     2,405   2,405   
Impairment of equipment     5,826   5,826   
Integration costs   5,584       12,667 
Net gain on sale of investments   (2,016)    (156) (1,449)
Amortization of intangible assets 10,938  11,441  10,974   44,263  47,349 
Tax effect of adjustments to net income  and discrete items (2,742) (3,760) (6,505)  (16,637) (18,248)
Non-GAAP net income$34,294 $28,822 $34,647  $132,848 $120,615 
       
Diluted earnings per common share$0.18 $0.12 $0.15  $0.68 $0.57 
Effect of adjustments to net income$0.06 $0.08 $0.09  $0.25 $0.29 
Diluted non-GAAP earnings per common share$0.24 $0.20 $0.24  $0.94 $0.85 


Contact:
Steven Cantor
VP of Corporate Relations
T +1 978-436-6500
irelations@entegris.com