Oct 22, 2015

Entegris Reports Third-Quarter Results


BILLERICA, Mass., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Entegris, Inc. (NasdaqGS:ENTG), a leading provider of yield-enhancing materials and solutions for advanced manufacturing processes, today reported its financial results for the Company's third quarter ended September 26, 2015.

The Company's third-quarter sales of $270.3 million declined 4 percent sequentially and were 1 percent lower than sales of $273.1 million in the same quarter a year ago. Third-quarter net income of $23.4 million, or $0.17 per diluted share, included amortization of intangible assets of $11.7 million and integration-related costs of $2.1 million associated with the April 30, 2014 acquisition of ATMI, Inc.  Non-GAAP net income was $32.4 million, or $0.23 per diluted share. 

For the first nine months of fiscal 2015, sales of $814.3 million increased 1 percent from the same period a year ago on a pro forma basis despite the negative impact of foreign currency.  Net income for the first nine months of fiscal 2015 was $62.7 million, or $0.44 per diluted share, which included amortization of intangible assets of $35.9 million and integration-related costs of $7.1 million.  Non-GAAP net income for the first nine months of fiscal 2015 was $91.8 million, or $0.65 per diluted share.

Bertrand Loy, president and chief executive officer, said: "During the third quarter we experienced soft industry conditions as some customers reduced their IC production and capex levels in line with lower market demand.  In light of the challenging environment, we performed well and achieved our target operating model.  We paid down an additional $25 million of debt in the quarter, fulfilling our commitment at the time of the ATMI acquisition to repay $150 million of debt by the end of 2015."


Quarterly Financial Results Summary

(in millions, except per share data)

GAAP ResultsQ3-2015Q3-2014Q2-2015
Net sales$270,253 $273,054 $280,709 
Operating income (loss) 31,066  5,368  39,347 
Operating margin 11.5% 2.0% 14.0%
Net income (loss)$23,403 $(1,068)$24,448 
Earnings (loss) per share (EPS)$0.17 $(0.01)$0.17 
Non-GAAP Results
Non-GAAP adjusted operating income$44,814 $49,886 $53,671 
Adjusted operating margin 16.6% 18.3% 19.1%
Non-GAAP net income$32,444 $28,823 $33,903 
Non-GAAP EPS$0.23 $0.21 $0.24 


Fourth-Quarter Outlook

For the fiscal fourth quarter ending December 31, 2015, the Company expects sales of $250 million to $265 million, net income of $13 million to $19 million, and net income per diluted share of $0.09 to $0.13 per share.  On a non-GAAP basis, EPS is expected to range from $0.15 to $0.19 per diluted share, which reflects net income on a non-GAAP basis in the range of $21 million to $27 million, which is adjusted for expected amortization expense of approximately $11.7 million and integration expense of $0.7 million totaling approximately $12.4 million or $0.06 per share.

Segment Results

The Company reports its results in two business segments: Critical Materials Handling (CMH) and Electronic Materials (EM).  Summary results by segment are contained in this press release.
CMH provides a broad range of products that filter, handle, dispense, and protect critical materials used in the semiconductor manufacturing process and in other high-technology manufacturing.  CMH's products and subsystems include high-purity materials packaging, fluid-handling and dispensing systems, liquid filters, as well as microenvironments that protect critical substrates such as wafers during shipping and manufacturing.  CMH also provides specialized graphite components and specialty coatings for use in high-temperature applications.

EM provides high-performance materials and specialty gas management solutions that enable high-yield, cost-effective semiconductor manufacturing.  EM's products consist of specialized chemistries and performance materials, gas microcontamination control solutions, and sub-atmospheric pressure gas delivery systems for the efficient handling of hazardous gases to semiconductor process equipment.

Third-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the third quarter today, Thursday, October 22, 2015, at 10:00 a.m. Eastern Time.  Participants should dial 785-424-1667 or toll-free 877-876-9176, referencing confirmation code 8512199.  Participants are asked to dial in 5 to 10 minutes prior to the start of the call.  A replay of the call will be available starting October 22, 2015 at 1:00 p.m. (ET) until Friday, December 4, 2015.  The replay can be accessed by using passcode 8512199 after dialing 719-457-0820 or 888-203-1112. 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.

ABOUT ENTEGRIS
Entegris is a leading provider of yield-enhancing materials and solutions for advanced manufacturing processes in the semiconductor and other high-technology industries.  On April 30, 2014, Entegris acquired Danbury, CT-based ATMI, Inc.  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 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 SEC. These financial measures are provided as a complement to financial measures provided in accordance with GAAP. We provide non-GAAP financial measures in order to better assess and measure operating performance. Management believes the non-GAAP measures better portray 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 to non-GAAP Statements of Operations, GAAP to Adjusted Operating Income and Adjusted EBITDA, and GAAP to Non-GAAP Earnings per Share are included elsewhere in this release.

In addition we have included pro forma segment net sales and segment profit for the Critical Materials Handling and Electronic Materials business segments for the nine months ended September 27, 2014.  Our pro forma presentation includes transactions (i) recorded by ATMI, Inc. prior to its merger with the Company and (ii) as if those business segments were configured during those prior periods to include the businesses included in those segments during the nine months ended September 27, 2014.  We have provided this non-GAAP pro forma information to provide investors with comparative historical context for the performance of these business segments during the nine months ended September 27, 2014.  Footnotes to the Historical Non-GAAP Pro Forma Segment Information table provided elsewhere in this release reconcile this information to the corresponding GAAP information.

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, Entegris' ability to successfully integrate the ATMI business and achieve anticipated synergies, 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," "Additional Risks Related to Our Business," "Risks Relating to Our Indebtedness," "Manufacturing Risks," "International Risks," and "Risks Related to Owning Our Securities" in Item 1A of our Annual Report on Form 10—K for the fiscal year ended December 31, 2014, filed with the U.S Securities and Exchange Commission on February 26, 2015, 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
  September 26,
2015
September 27,
2014
June 27, 2015
Net sales$270,253 $273,054 $280,709 
Cost of sales 153,943  174,311  152,622 
 Gross profit 116,310  98,743  128,087 
Selling, general and administrative expenses 46,730  55,820  50,270 
Engineering, research and development expenses 26,841  24,427  26,542 
Amortization of intangible assets 11,673  13,128  11,928 
 Operating income 31,066  5,368  39,347 
Interest expense, net 9,201  10,096  9,715 
Other (income) expense, net (5,624) 110  (1,109)
 Income (loss) before income tax expense (benefit) and equity in net loss of affiliate 27,489  (4,838) 30,741 
Income tax expense (benefit) 4,018  (3,810) 6,245 
Equity in net loss of affiliates  68  40  48 
 Net income (loss)$23,403 $(1,068)$24,448 
     
   
Basic net income (loss) per common share:$0.17 $(0.01)$0.17 
Diluted net income (loss) per common share:$0.17 $(0.01)$0.17 
    
Weighted average shares outstanding:   
 Basic 140,555  139,480  140,307 
 Diluted 141,317  139,480  140,993 



 Entegris, Inc. and Subsidiaries
 Condensed Consolidated Statements of Operations
 (In thousands, except per share data)
 (Unaudited)
  
  Nine months ended
  September  26,
2015
September 27,
2014
Net sales$814,335 $690,436 
Cost of sales 453,402  431,673 
 Gross profit 360,933  258,763 
Selling, general and administrative expenses 147,890  172,954 
Engineering, research and development expenses 79,183  61,698 
Amortization of intangible assets 35,908  24,854 
Contingent consideration fair value adjustment -  (1,282)
 Operating income   97,952  539 
Interest expense, net 28,544  22,247 
Other (income) expense, net (8,466) 1,639 
 Income (loss) before income tax expense (benefit) and equity in net loss of affiliate 77,874  (23,347)
Income tax expense (benefit) 14,933  (22,012)
Equity in net loss of affiliates 218  90 
 Net income (loss)$62,723 $(1,425)
    
  
Basic net income (loss) per common share:$0.45 $(0.01)
Diluted net income (loss) per common share:$0.44 $(0.01)
    
Weighted average shares outstanding: 140,282  139,215 
 Basic 141,016  139,215 
 Diluted  




Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
   September 26, 2015 December 31, 2014
ASSETS     
Cash and cash equivalents$301,061  $389,699 
Short-term investments  2,178   4,601 
Accounts receivable, net  184,297   153,961 
Inventories  188,439   163,125 
Deferred tax assets, deferred tax charges and refundable  income taxes 27,877   30,556 
Other current assets 20,392   23,713 
  Total current assets 724,244   765,655 
      
Property, plant and equipment, net 315,695   313,569 
      
Goodwill 341,305   340,743 
Intangible assets, net 269,895   308,554 
Deferred tax assets — non-current 5,183   5,068 
Other  22,126   28,502 
  Total assets $1,678,448  $1,762,091 
      
LIABILITIES AND SHAREHOLDERS' EQUITY  
Long-term debt, current maturities $50,000  $100,000 
Accounts payable  53,823   57,417 
Accrued liabilities  96,292   91,551 
Income tax payable and deferred tax liabilities  8,950   13,552 
  Total current liabilities 209,065   262,520 
      
Long-term debt, excluding current maturities  617,130   666,796 
Other liabilities and deferred tax liabilities 82,118   84,334 
Shareholders' equity  770,135   748,441 
  Total liabilities and shareholders' equity$1,678,448  $1,762,091 


Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 Three months endedNine months ended
 September 26,
2015
September 27,
2014
September 26,
2015
September 27,
2014
 
Operating activities:     
Net income (loss)$23,403 $(1,068)$62,723 $(1,425) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
Depreciation 13,356  14,130  40,080  33,005  
Amortization 11,673  13,128  35,908  24,854  
Share-based compensation expense 2,975  2,358  8,120  6,513  
Charge for fair value mark-up of acquired inventory sold -  24,293  -  48,586  
Provision for deferred income taxes (441) (3,315) 2,594  (28,782) 
Other 2,071  2,129  7,569  7,036  
Changes in operating assets and liabilities:     
Trade accounts and notes receivable (9,426) 2,970  (38,020) (21,299) 
Inventories (11,050) (1,075) (39,550) (8,078) 
Accounts payable and accrued liabilities 21,702  15,330  12,576  27,929  
Income taxes payable and refundable income taxes (3,283) (4,653) (3,647) (3,153) 
Other (18,394) 3,524  (19,653) 6,034  
Net cash provided by operating activities 32,586  67,751  68,700  91,220  
Investing activities:     
Acquisition of property and equipment (21,466) (15,068) (55,696) (44,013) 
Acquisition of business, net of cash acquired -  (450) -  (809,390) 
Proceeds from sale of and maturities of short-term investments 504  2,977  2,111  8,888  
Other 29  162  347  (6,957) 
Net cash used in investing activities (20,933) (12,379) (53,238) (851,472) 
Financing activities:     
Payments on long-term debt (25,000) (25,000) (100,000) (62,500) 
Proceeds from long-term debt -  -  -  855,200  
Payments for debt issue costs -  -  -  (20,747) 
Issuance of common stock 1,634  1,202  2,608  1,705  
Taxes paid related to net share settlement of equity awards (55) (259) (2,458) (2,290) 
Other 313  (64) 665  763  
Net cash (used in) provided by  financing activities (23,108) (24,121) (99,185) 772,131  
Effect of exchange rate changes on cash  (1,226) (7,741) (4,915) (5,812) 
(Decrease) increase in cash and cash equivalents (12,681) 23,510  (88,638) 6,067  
Cash and cash equivalents at beginning of period 313,742  366,983  389,699  384,426  
Cash and cash equivalents at end of period$301,061 $390,493 $301,061 $390,493  




Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)
 
 Three months endedNine months ended
Net salesSeptember 
26, 2015
September
27, 2014
June 27,
2015
September 
26, 2015
September
27, 2014
Critical Materials Handling$166,043 $165,368 $174,253 $507,764 $487,757 
Electronic Materials 104,210  107,686  106,456  306,571  202,679 
  Total net sales$270,253 $273,054 $280,709 $814,335 $690,436 


 Three months endedNine months ended
Segment profitSeptember 
26, 2015
September
27, 2014
June 27,
2015
September 
26, 2015
September
27, 2014
Critical Materials Handling$37,109 $35,520 $43,732 $122,182 $107,115 
Electronic Materials 23,919  33,316  28,559  72,700  59,728 
Total segment profit 61,028  68,836  72,291  194,882  166,843 
Charge for fair value mark-up of acquired inventory -  24,293  -  -  48,586 
Amortization of intangibles 11,673  13,128  11,928  35,908  24,854 
Contingent consideration fair value adjustment -  -  -  -  (1,282)
Unallocated expenses 18,289  26,047  21,016  61,022  94,146 
  Total operating income$31,066 $5,368 $39,347 $97,952 $539 



Entegris, Inc. and Subsidiaries
Historical Non-GAAP Pro Forma Segment Information
(In thousands)
(Unaudited)
 
 Three Months Ended Nine Months Ended
Segment Net Sales (a)September 26, 2015
As Reported
September 27, 2014
As Reported
 September 26, 2015
As Reported
September 27, 2014
Pro Forma(1)
Critical Materials Handling$166,043 $165,368  $507,764 $500,946 
Electronic Materials 104,210  107,686   306,571  303,755 
Total segment net sales$270,253 $273,054  $814,335 $804,701 
      
Segment profit (b)     
Critical Materials Handling$37,109 $35,520  $122,182 $111,149 
Electronic Materials 23,919  33,316   72,700  86,167 
Total segment profit$61,028 $68,836  $194,882 $197,316 


(1)
The above pro forma results include the addition of ATMI, Inc.'s net sales and segment profit amounts recorded prior to the consummation of the merger with the Company on April 30, 2014 to the Company's reported GAAP net sales and segment profit amounts related to businesses that were transferred to the above business segments after the effectiveness of the merger and are provided as a complement to, and should be read in conjunction with, the Condensed Consolidated Statements of Operations to better facilitate the assessment and measurement of the Company's operating performance.

The above GAAP to Non-GAAP Pro Forma Segment Information is reconciled to the Company's GAAP figures for the quarters ended September 27, 2014 as follows:

(a) The above pro forma segment sales include amounts for the nine months ended September 27, 2014, representing the Company's previously reported sales plus the sales of ATMI, Inc. reported prior to the consummation of the merger with the Company on April 30, 2014 as such sales are not included in the Company's financial statements.  CMH sales made by ATMI Inc. prior to the merger were $13.2 million for the nine months ended September 27, 2014.  EM sales made by ATMI Inc. prior to the merger were $101.1 million for the nine months ended September 27, 2014.

(b) The above pro forma segment profit figures include amounts for the quarter ended September 27, 2014, representing the Company's previously reported segment profit figures plus the segment profit of ATMI, Inc. reported prior to the consummation of the merger with the Company on April 30, 2014, as such segment profits are not included in the Company's financial statements.  CMH segment profits made by ATMI Inc. prior to the merger were $4.0 million for the nine months ended September 27, 2014.  EM segment profits made by ATMI Inc. prior to the merger were $26.4 million for the nine months ended September 27, 2014.

(c) Segment profit is defined as net sales less direct segment operating expenses, excluding certain unallocated expenses, consisting mainly of general and administrative costs for the Company's human resources, finance and information technology functions as well as interest expense, amortization of intangible assets, charges for the fair value write-up of acquired inventory sold and contingent consideration fair value adjustments.


 Entegris, Inc. and Subsidiaries
 GAAP to Non-GAAP Reconciliation of Statement of Operations
  (In thousands, except per share data)
 (Unaudited)
  
  Three months ended
 September 26, 2015
 Nine months ended
 September 26, 2015
  U.S.
GAAP
AdjustmentsNon-
GAAP
 U.S.
GAAP
AdjustmentsNon-
GAAP
Net sales$270,253 $- $270,253  $814,335 $- $814,335 
Cost of sales 153,943  -  153,943   453,402  -  453,402 
 Gross profit 116,310  -  116,310   360,933  -  360,933 
Selling, general and administrative expenses (a) 46,730  (2,075) 44,655   147,890  (7,083) 140,807 
Engineering, research and development expenses 26,841  -  26,841   79,183  -  79,183 
Amortization of intangible assets (b) 11,673  (11,673) -   35,908  (35,908) - 
 Operating income 31,066  (13,748) 44,814   97,952  (42,991) 140,943 
Interest expense, net 9,201  -  9,201   28,544  -  28,544 
Other income, net (c) (5,624) 50  (5,574)  (8,466) (567) (9,033)
 Income before income tax expense and equity in net loss of affiliate 27,489  (13,698) 41,187   77,874  (43,558) 121,432 
Income tax expense (d)  4,018  4,657  8,675   14,933  14,488  29,421 
Equity in net loss of affiliates 68  -  68   218  -  218 
 Net income$23,403 $9,041 $32,444  $62,723 $29,070 $91,793 
         
Basic income per common share:$0.17 $0.06 $0.23  $0.45 $0.21 $0.65 
Diluted income per common share:$0.17 $0.06 $0.23  $0.44 $0.21 $0.65 
         
Weighted average shares outstanding:       
 Basic 140,555  140,555  140,555   140,282  140,282  140,282 
 Diluted 141,317  141,317  141,317   141,016  141,016  141,016 


The above GAAP to Non-GAAP Reconciliation of Statement of Operations is provided as a complement to and should be read in conjunction with the Condensed Consolidated Statements of Operations.  The above GAAP to Non-GAAP Reconciliation of Statement of Operations is provided to facilitate a better assessment and measurement of the Company's operating performance.

(a) Non-GAAP selling, general and administrative expense for the three and nine months ended September 26, 2015 is adjusted for $2.1 million and $7.1 million, respectively, for  integration costs related to the ATMI, Inc. acquisition.

(b) Non-GAAP amortization expense for the three and nine months ended September 26, 2015 is adjusted for $11.7 million and $35.9 million, respectively, for amortization expense related to the ATMI and prior acquisitions.

(c) Non-GAAP other income, net for the three and nine months ended September 26, 2015 is adjusted for ($0.1) million and $0.6 million, respectively, for net (gain) loss on impairment or sale of investment.

(d) Non-GAAP income tax expense for the three and nine months ended September 26, 2015 is adjusted for $4.7 million and $14.5 million related to the adjustments noted above.


Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands, except per share data)
(Unaudited)
 
 Three months ended Nine months ended
 September 
26, 2015
September
27, 2014
June 27,
2015
 September
  26, 2015
September
27, 2014
Net sales$270,253 $273,054 $280,709  $814,335 $690,436 
Net income (loss)$23,403 $(1,068)$24,448  $62,723 $(1,425)
Adjustments to net income (loss):      
Equity in net loss of affiliates 68  40  48   218  90 
Income tax expense (benefit) 4,018  (3,810) 6,245   14,933  (22,012)
Interest expense, net 9,201  10,096  9,715   28,544  22,247 
Other (income) expense, net (5,624) 110  (1,109)  (8,466) 1,639 
GAAP — Operating income 31,066  5,368  39,347   97,952  539 
Charge for fair value mark-up of acquired inventory sold -  24,293  -   -  48,586 
Transaction-related costs -  (30) -   -  26,776 
Deal costs -  -  -   -  9,125 
Integration costs 2,075  7,127  2,396   7,083  10,624 
Contingent consideration fair value adjustment -  -  -   -  (1,282)
Amortization of intangible assets 11,673  13,128  11,928   35,908  24,854 
Adjusted operating income  44,814  49,886  53,671   140,943  119,222 
  Depreciation 13,356  14,130  13,405   40,080  33,005 
Adjusted EBITDA$58,170 $64,016 $67,076  $181,023 $152,227 
       
Adjusted operating margin 16.6% 18.3% 19.1%  17.3% 17.3%
Adjusted EBITDA — as a % of net sales 21.5% 23.4% 23.9%  22.2% 22.0%




Entegris, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Earnings per Share
(In thousands, except per share data)
(Unaudited)
 
 Three months ended Nine months ended
 September 
26, 2015
September
27, 2014
June 27,
2015
 September 
26, 2015
September
27, 2014
Net income (loss)$23,403 $(1,068)$24,448  $62,723 $(1,425)
Adjustments to net income (loss):      
Charge for fair value mark-up of acquired inventory sold -  24,293  -   -  48,586 
Transaction-related costs -  (30) -   -  26,776 
Deal costs -  -  -   -  13,288 
Integration costs 2,075  6,985  2,396   7,083  10,482 
Contingent consideration fair value adjustment -  -  -   -  (1,282)
Amortization of intangible assets 11,673  13,128  11,928   35,908  24,854 
Net (gain) loss on impairment or sale of equity investment (50) -  (56)  567  - 
Tax effect of adjustments of net income (loss) (4,657) (14,485) (4,813)  (14,488) (48,374)
Non-GAAP net income$32,444 $28,823 $33,903  $91,793 $72,905 
       
Diluted income (loss) per common share$0.17 $(0.01)$0.17  $0.44 $(0.01)
Effect of adjustments to net income (loss) 0.06  0.21  0.07   0.21  0.53 
Diluted non-GAAP income per common share$0.23 $0.21 $0.24  $0.65 $0.52 


Steven Cantor
VP of Corporate Relations
T +1 978 436 6750
irelations@entegris.com