Entegris Reports Third-Quarter Results

Oct 26, 2016 at 7:00 AM EDT

Entegris Reports Third-Quarter Results 68.2 KB

Quarterly revenue of $296.7 million
GAAP net income of $21.9 million, or $0.15 per diluted share
Non-GAAP net income of $34.6 million, or $0.24 per diluted share
Record operating cash flow of $71.9 million

BILLERICA, Mass., Oct. 26, 2016 (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 third quarter ended October 1, 2016.

The Company reported third-quarter sales of $296.7 million. Third-quarter net income was $21.9 million, or $0.15 per diluted share, which included amortization of intangible assets of $11.0 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. Non-GAAP net income was $34.6 million, or $0.24 per diluted share. In the third quarter, the Company generated cash from operations less capital expenditures, or free cash flow, of $59 million.

For the first nine months of fiscal 2016, sales of $866.8 million increased 6 percent from the same period a year ago. Net income for the first nine months of fiscal 2016 was $71.0 million, or $0.50 per share, which included amortization of intangible assets of $33.3 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 comparable period a year ago, net income was $62.7 million, or $0.44 per share, which included amortization of intangible assets of $35.9 million and acquisition integration expense of $7.1 million. Non-GAAP net income for the first nine months of fiscal 2016 was $98.6 million, or $0.69 per diluted share, which increased from $91.8 million, or $0.65 per diluted share, in the prior year.

Bertrand Loy, president and chief executive officer, said: "We are on track to achieve our multiyear objective to outpace our markets and to deliver both record sales and profits in 2016. Our strong quarter reflected record sales of liquid filtration products and solid performance across most of our businesses, as well as the favorable impact of the stronger yen."

Mr. Loy added: "In the third quarter, we generated record free cash flow of $59 million and repaid an additional $25 million of long-term debt. Looking ahead, we are excited about our growth prospects given the increasing opportunities for Entegris to leverage its unique breadth of capabilities to address the electronics industry's continual pursuit of higher performance and cleaner materials."

Quarterly Financial Results Summary

(in millions, except per share data)

GAAP Results	Q3-2016			Q3-2015			Q2-2016
Net sales	$	296,692		$	270,253		$	303,052
Operating income	$	34,672		$	31,066		$	46,400
Operating margin		11.7	%		11.5	%		15.3	%
Net income	$	21,947		$	23,403		$	32,890
Earnings per share (EPS)	$	0.15		$	0.17		$	0.23
Non-GAAP Results
Non-GAAP adjusted operating income	$	53,877		$	44,814		$	57,462
Adjusted operating margin		18.2	%		16.6	%		19.0	%
Non-GAAP net income	$	34,647		$	32,444		$	40,290
Non-GAAP EPS	$	0.24		$	0.23		$	0.28

Fourth-Quarter Outlook

For the fiscal fourth quarter ending December 31, 2016, the Company expects sales of $275 million to $290 million, net income of $20 million to $26 million, and net income per diluted share between $0.14 and $0.18. On a non-GAAP basis, EPS is expected to range from $0.19 to $0.23 per diluted share, which reflects net income on a non-GAAP basis in the range of $27 million to $33 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 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 on Wednesday, October 26, 2016, at 10:00 a.m. Eastern Time. Participants should dial 1-888-503-8169 or 1-719-457-2631, referencing confirmation code 5752767. 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 Wednesday, October 26 until Saturday, December 10. 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.

Please also refer to Management's slide presentation concerning third-quarter results which may be referred to during the call. This presentation will be posted on the investor relations section of www.entegris.com Wednesday 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 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, 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
		October 1, 2016			September 26, 2015			July 2, 2016
Net sales		$	296,692		$	270,253		$	303,052
Cost of sales			173,712			153,943			163,847
	Gross profit		122,980			116,310			139,205
Selling, general and administrative expenses			51,614			46,730			53,597
Engineering, research and development expenses			25,720			26,841			28,146
Amortization of intangible assets			10,974			11,673			11,062
	Operating income		34,672			31,066			46,400
Interest expense, net			9,345			9,201			9,051
Other income, net			(565	)		(5,624	)		(1,054	)
	Income before income tax expense and equity in net loss of affiliate		25,892			27,489			38,403
Income tax expense			3,945			4,018			5,513
Equity in net loss of affiliates			-			68			-
	Net income	$	21,947		$	23,403		$	32,890


Basic net income per common share:		$	0.16		$	0.17		$	0.23
Diluted net income per common share:		$	0.15		$	0.17		$	0.23

Weighted average shares outstanding:
	Basic		141,324			140,555			140,953
	Diluted		142,473			141,317			141,723

	Entegris, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)

		Nine months ended
		October 1, 2016			September 26, 2015
Net sales		$	866,768		$	814,335
Cost of sales			489,877			453,402
	Gross profit		376,891			360,933
Selling, general and administrative expenses			153,167			147,890
Engineering, research and development expenses			79,768			79,183
Amortization of intangible assets			33,325			35,908
	Operating income		110,631			97,952
Interest expense, net			27,545			28,544
Other income, net			(2,294	)		(8,466	)
	Income before income tax expense and equity in net loss of affiliate		85,380			77,874
Income tax expense			14,331			14,933
Equity in net loss of affiliates			-			218
	Net income	$	71,049		$	62,723


Basic net income per common share:		$	0.50		$	0.45
Diluted net income per common share:		$	0.50		$	0.44

Weighted average shares outstanding:
	Basic		141,019			140,282
	Diluted		141,856			141,016

Entegris, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands) (Unaudited)

	October 1, 2016		December 31, 2015
ASSETS
Cash and cash equivalents	$	411,777	$	349,825
Short-term investments		-		2,181
Accounts receivable, net		167,559		141,409
Inventories		186,021		173,176
Deferred tax charges and refundable income taxes		18,000		18,943
Other current assets		17,675		23,253
Total current assets		801,032		708,787

Property, plant and equipment, net		315,512		321,301

Goodwill		349,980		342,111
Intangible assets, net		230,987		258,942
Deferred tax assets — non-current		8,690		7,771
Other		7,391		7,785
Total assets	$	1,713,592	$	1,646,697

LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt, current maturities	$	100,000	$	50,000
Accounts payable		54,001		36,916
Accrued liabilities		82,963		75,859
Income tax payable and deferred tax liabilities		713		12,775
Total current liabilities		237,677		175,550

Long-term debt, excluding current maturities		508,775		606,044
Other liabilities and deferred tax liabilities		69,937		62,220
Shareholders' equity		897,203		802,883
Total liabilities and shareholders' equity	$	1,713,592	$	1,646,697

Entegris, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

	Three months ended						Nine months ended
	October 1, 2016			September 26, 2015			October 1, 2016			September 26, 2015
Operating activities:
Net income	$	21,947		$	23,403		$	71,049		$	62,723
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		13,795			13,356			41,320			40,080
Amortization		10,974			11,673			33,325			35,908
Share-based compensation expense		3,697			2,975			10,063			8,120
Other		11,060			(4,407	)		19,333			(9,508	)
Changes in operating assets and liabilities:
Trade accounts and notes receivable		13,847			(9,426	)		(22,252	)		(38,020	)
Inventories		(5,907	)		(11,050	)		(17,296	)		(39,550	)
Accounts payable and accrued liabilities		12,962			21,702			26,517			12,576
Income taxes payable and refundable income taxes		(11,771	)		(3,283	)		(11,364	)		(3,647	)
Other		1,334			(12,357	)		(219	)		18
Net cash provided by operating activities		71,938			32,586			150,476			68,700
Investing activities:
Acquisition of property and equipment		(13,124	)		(21,466	)		(45,268	)		(55,696	)
Other		138			533			(1,520	)		2,458
Net cash used in investing activities		(12,986	)		(20,933	)		(46,788	)		(53,238	)
Financing activities:
Payments on long-term debt		(25,000	)		(25,000	)		(50,000	)		(100,000	)
Issuance of common stock		512			1,634			2,892			2,608
Repurchase and retirement of common stock		-			-			(3,573	)		-
Taxes paid related to net share settlement of equity awards		(1,113	)		(55	)		(3,316	)		(2,458	)
Other		402			313			493			665
Net cash used in financing activities		(25,199	)		(23,108	)		(53,504	)		(99,185	)
Effect of exchange rate changes on cash		4,281			(1,226	)		11,768			(4,915	)
Increase (decrease) in cash and cash equivalents		38,034			(12,681	)		61,952			(88,638	)
Cash and cash equivalents at beginning of period		373,743			313,742			349,825			389,699
Cash and cash equivalents at end of period	$	411,777		$	301,061		$	411,777		$	301,061

Entegris, Inc. and Subsidiaries Segment Information (In thousands) (Unaudited)

	Three months ended						Nine months ended
Net sales	October 1, 2016		September 26, 2015		July 2, 2016		October 1, 2016		September 26, 2015
Critical Materials Handling	$	192,744	$	166,043	$	194,880	$	553,853	$	507,764
Electronic Materials		103,948		104,210		108,172		312,915		306,571
Total net sales	$	296,692	$	270,253	$	303,052	$	866,768	$	814,335

	Three months ended						Nine months ended
Segment profit⁽¹⁾	October 1, 2016		September 26, 2015		July 2, 2016		October 1, 2016		September 26, 2015
Critical Materials Handling	$	45,352	$	37,109	$	52,524		135,768	$	122,182
Electronic Materials		20,454		23,919		27,475		69,504		72,700
Total segment profit		65,806		61,028		79,999		205,272		194,882
Amortization of intangibles		10,974		11,673		11,062		33,325		35,908
Unallocated expenses		20,160		18,289		22,537		61,316		61,022
Total operating income	$	34,672	$	31,066	$	46,400	$	110,631	$	97,952

¹ Segment profit for Critical Materials Handling for the three and nine months ended October 1, 2016 includes charges for impairment of equipment and severance related to organizational realignment of $5,826 and $1,692, respectively. Segment profit for Electronic Materials for the three and nine months ended October 1, 2016 each include a charge for severance related to organizational realignment of $713.

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
	October 1, 2016			September 26, 2015			July 2, 2016			October 1, 2016			September 26, 2015
Net sales	$	296,692		$	270,253		$	303,052		$	866,768		$	814,335
Net income	$	21,947		$	23,403		$	32,890		$	71,049		$	62,723

Adjustments to net income:

Equity in net loss of affiliates		-			68			-			-			218
Income tax expense		3,945			4,018			5,513			14,331			14,933
Interest expense, net		9,345			9,201			9,051			27,545			28,544
Other income, net		(565	)		(5,624	)		(1,054	)		(2,294	)		(8,466	)
GAAP — Operating income		34,672			31,066			46,400			110,631			97,952
Severance related to organizational realignment		2,405			-			-			2,405			-
Impairment of equipment		5,826			-			-			5,826			-
Integration costs		-			2,075			-			-			7,083
Amortization of intangible assets		10,974			11,673			11,062			33,325			35,908
Adjusted operating income		53,877			44,814			57,462			152,187			140,943
Depreciation		13,795			13,356			13,825			41,320			40,080
Adjusted EBITDA	$	67,672		$	58,170		$	71,287		$	193,507		$	181,023

Adjusted operating margin		18.2	%		16.6	%		19.0	%		17.6	%		17.3	%
Adjusted EBITDA — as a % of net sales		22.8	%		21.5	%		23.5	%		22.3	%		22.2	%

Entegris, Inc. and Subsidiaries Reconciliation of GAAP Gross Profit to Adjusted Gross Profit (In thousands) (Unaudited)

	Three months ended									Nine months ended
	October 1, 2016			September 26, 2015			July 2, 2016			October 1, 2016			September 26, 2015
Net sales	$	296,692		$	270,253		$	303,052		$	866,768		$	814,335
Gross profit-GAAP	$	122,980		$	116,310		$	139,205		$	376,891		$	360,933

Adjustments to gross profit:
Severance related to organizational realignment		431			-			-			431			-
Impairment of equipment		5,826			-			-			5,826			-
Adjusted gross profit	$	129,237		$	116,310		$	139,205		$	383,148		$	360,933

Gross margin — as a % of net sales		41.5	%		43.0	%		45.9	%		43.5	%		44.3	%
Adjusted gross margin — as a % of net sales		43.6	%		43.0	%		45.9	%		44.2	%		44.3	%

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
	October 1, 2016			September 26, 2015			July 2, 2016			October 1, 2016			September 26, 2015
Net income	$	21,947		$	23,403		$	32,890		$	71,049		$	62,723

Adjustments to net income:
Severance related to organizational realignment		2,405			-			-			2,405			-
Impairment of equipment		5,826			-			-			5,826			-
Integration costs		-			2,075			-			-			7,083
(Gain) loss on impairment or sale of equity investment		-			(50	)		(38	)		(156	)		567
Amortization of intangible assets		10,974			11,673			11,062			33,325			35,908
Tax effect of adjustments of net income		(6,505	)		(4,657	)		(3,624	)		(13,895	)		(14,488	)
Non-GAAP net income	$	34,647		$	32,444		$	40,290		$	98,554		$	91,793

Diluted income per common share	$	0.15		$	0.17		$	0.23		$	0.50		$	0.44
Effect of adjustments to net income		0.09			0.06			0.05			0.19			0.21
Diluted non-GAAP income per common share	$	0.24		$	0.23		$	0.28		$	0.69		$	0.65

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

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Entegris Reports Third-Quarter Results