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) October 24, 2019
_______________________________________
Entegris, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
(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:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 24, 2019, Entegris, Inc. issued a press release to announce results for third quarter of 2019 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
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
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: October 24, 2019 | By: | /s/ Gregory B. Graves |
Name: | Gregory B. Graves | |
Title: | Executive Vice President and Chief Financial Officer | |
 | PRESS RELEASE Bill Seymour VP of Investor Relations T + 1 952 556 1844 bill.seymour@entegris.com | |||
Exhibit 99.1
FOR RELEASE AT 6:00 AM EST
ENTEGRIS REPORTS RESULTS FOR THIRD QUARTER OF 2019
•Third-quarter revenue of $394.1 million, decreased 1% from prior year
•GAAP net income per diluted share of $0.30, decreased 12% from prior year
•Non-GAAP net income per diluted share of $0.50, increased 9% from prior year
•Acquired Hangzhou Anow Microfiltration in September
BILLERICA, Mass., October 24, 2019 - Entegris, Inc. (NasdaqGS: ENTG), a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, today reported its financial results for the Company’s third quarter ended September 28, 2019.
Third-quarter sales were $394.1 million, a decrease of 1% from the same quarter last year. GAAP third-quarter net income was $40.8 million, or $0.30 per diluted share, which included $15.2 million of amortization of intangible assets, $8.5 million of restructuring costs, $2.4 million of integration costs, $4.9 million in deal costs mainly associated with the MPD and Anow acquisitions and a $4.5 million charge for fair value write-up of acquired inventory sold. Non-GAAP net income was $68.2 million and non-GAAP net income per diluted share was $0.50.
Bertrand Loy, President and Chief Executive Officer, said: "In the third quarter, we delivered solid results that showcased the resilience of our unit-driven business model and the strong execution of our teams. While end markets continue to be uneven, we experienced accelerated demand for our advanced solutions in new technology nodes. Another highlight of the quarter was our acquisition of Hangzhou Anow, which broadens our filtration offerings and provides us with manufacturing capabilities in China.”
Mr. Loy added: “Going forward, greater materials intensity and greater materials purity will continue to be the two defining factors of the next generation of semiconductor performance. Entegris has never been better positioned and more relevant for our customers, to help them achieve the targeted levels of chip performance, yields and reliability. We feel confident in our positive business momentum going into the fourth quarter and we expect 2019 to be a record year for Entegris."
Quarterly Financial Results Summary
(in thousands, except per share data)
GAAP Results | Q3 2019 | Q3 2018 | Q2 2019 | |||
Net sales | $394,147 | $398,597 | $378,874 | |||
Operating income | $52,793 | $67,975 | $54,909 | |||
Operating margin | 13.4 | % | 17.1 | % | 14.5 | % |
Net income | $40,767 | $48,060 | $123,997 | |||
Diluted earnings per share (EPS) | $0.30 | $0.34 | $0.91 | |||
Non-GAAP Results | ||||||
Non-GAAP adjusted operating income | $88,220 | $93,893 | $76,793 | |||
Non-GAAP adjusted operating margin | 22.4 | % | 23.6 | % | 20.3 | % |
Non-GAAP net income | $68,179 | $65,621 | $53,432 | |||
Non-GAAP EPS | $0.50 | $0.46 | $0.39 | |||
Fourth-Quarter Outlook
For the fourth quarter ending December 31, 2019, the Company expects sales of $420 million to $435 million, net income of $51 million to $58 million and net income per diluted share between $0.38 and $0.43. On a non-GAAP
_________________________________________________________________________ | ||
ENTEGRIS, INC. | 129 Concord Road, Building 2 | T + 1 978 436 6500 |
entegris.com | Billerica, MA 01821 USA | F + 1 978 436 6745 |
basis, EPS is expected to range from $0.51 to $0.56 per diluted share, which reflects net income on a non-GAAP basis in the range of $69 million to $76 million.
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, wafers, and substrates for a broad set of applications in the semiconductor industry and other high-technology industries.
Change in Inter-Segment Reporting
In the first quarter of 2019, the Company changed its definition of segment profit to include inter-segment sales. The Company updated its recognition of inter-segment sales to recognize the revenue and profit associated with products and components produced in one segment and supplied to another, before being sold to the ultimate end customer. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at approximate market prices. Prior quarter information has been recast to reflect the change in the Company’s definition of segment profit.
Third-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the third quarter on Thursday, October 24, 2019, at 9:30 a.m. Eastern Time. Participants should dial 888-204-4368 or +1 323-794-2423, referencing confirmation code 9122198. 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 9122198. The replay will be available starting at 12:00 p.m. ET on Thursday, October 24 through December 7, 2019 at 12:00 p.m. ET.
The call can also be accessed live and on-demand from the Entegris website. Point your web browser to
http://investor.entegris.com/events.cfm and follow the link to the webcast. The on-demand playback will be available for six weeks after the conclusion of the teleconference.
Management’s slide presentation concerning the results for the third quarter, which may be referred to during the call, will be posted on the investor relations section of www.entegris.com Thursday morning before the call.
Entegris, Inc. | page 2 of 14
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, Canada, 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 net income 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 the Company’s competitors' operating results. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performance and liquidity by excluding certain items that may not be indicative of the Company’s recurring business operating results, such as amortization, depreciation and discrete cash charges that may vary significantly from period to period. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing and understanding the Company’s results and performance and when planning, forecasting, and analyzing future periods. The Company believes 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 the Company’s institutional investors and the analyst community to help them analyze the Company’s business. The reconciliations of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA, GAAP Net Income and Earnings per Share to Non-GAAP Net Income and Earnings per Share, GAAP Gross Profit to Adjusted Gross Profit and GAAP Segment Profit to Adjusted Operating Income 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,” “intend,” “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; the Company’s performance relative to its markets; the impact, financial or otherwise, of any organizational changes; market and technology trends; the development of new products and the success of their introductions; the 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 the Company’s capital allocation strategy; the impact of the acquisitions the Company has made and commercial partnerships the Company has established; the Company’s ability to execute on its strategies; and other matters. These statements involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. 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 the Company’s products and solutions; the Company’s ability to meet rapid demand shifts; the Company’s ability to continue technological innovation and introduce new products to meet customers' rapidly changing requirements; the Company’s concentrated customer base; the Company’s ability to identify, effect and integrate acquisitions, joint ventures or other transactions; the Company’s ability to effectively implement any organizational changes; the Company’s ability to protect and enforce intellectual property rights; operational, political and legal risks of the Company’s international operations; the Company’s dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; raw material shortages, supply constraints and price increases; changes in government regulations of the countries in which the Company operates; fluctuation of currency exchange rates; fluctuations in the market price of the Company’s stock; the level of, and obligations associated with, the Company’s indebtedness; and other risk factors and additional information described in the Company’s filings with the Securities and Exchange Commission, including under the heading “Risks Factors" in
Entegris, Inc. | page 3 of 14
Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 11, 2019, and in the Company’s 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 14
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended | ||||||||||
September 28, 2019 | September 29, 2018 | June 29, 2019 | ||||||||
Net sales | $ | 394,147 | $ | 398,597 | $ | 378,874 | ||||
Cost of sales | 223,797 | 216,881 | 212,600 | |||||||
Gross profit | 170,350 | 181,716 | 166,274 | |||||||
Selling, general and administrative expenses | 71,232 | 62,358 | 64,150 | |||||||
Engineering, research and development expenses | 31,173 | 29,964 | 30,624 | |||||||
Amortization of intangible assets | 15,152 | 21,419 | 16,591 | |||||||
Operating income | 52,793 | 67,975 | 54,909 | |||||||
Interest expense, net | 10,216 | 7,678 | 9,692 | |||||||
Other expense (income), net | 934 | 810 | (122,015 | ) | ||||||
Income before income tax expense | 41,643 | 59,487 | 167,232 | |||||||
Income tax expense | 876 | 11,427 | 43,235 | |||||||
Net income | $ | 40,767 | $ | 48,060 | $ | 123,997 | ||||
Basic net income per common share: | $ | 0.30 | $ | 0.34 | $ | 0.92 | ||||
Diluted net income per common share: | $ | 0.30 | $ | 0.34 | $ | 0.91 | ||||
Weighted average shares outstanding: | ||||||||||
Basic | 135,092 | 141,556 | 135,378 | |||||||
Diluted | 136,530 | 143,033 | 136,581 | |||||||
Entegris, Inc. | page 5 of 14
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Nine months ended | |||||||
September 28, 2019 | September 29, 2018 | ||||||
Net sales | $ | 1,164,068 | $ | 1,148,855 | |||
Cost of sales | 650,051 | 608,764 | |||||
Gross profit | 514,017 | 540,091 | |||||
Selling, general and administrative expenses | 217,636 | 185,827 | |||||
Engineering, research and development expenses | 90,788 | 87,781 | |||||
Amortization of intangible assets | 50,400 | 45,102 | |||||
Operating income | 155,193 | 221,381 | |||||
Interest expense, net | 29,567 | 21,829 | |||||
Other (income) expense, net | (121,329 | ) | 4,826 | ||||
Income before income tax expense | 246,955 | 194,726 | |||||
Income tax expense | 49,533 | 34,755 | |||||
Net income | $ | 197,422 | $ | 159,971 | |||
Basic net income per common share: | $ | 1.46 | $ | 1.13 | |||
Diluted net income per common share: | $ | 1.45 | $ | 1.12 | |||
Weighted average shares outstanding: | |||||||
Basic | 135,256 | 141,613 | |||||
Diluted | 136,601 | 143,308 | |||||
Entegris, Inc. | page 6 of 14
Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 28, 2019 | December 31, 2018 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 282,748 | $ | 482,062 | ||
Trade accounts and notes receivable, net | 261,306 | 222,055 | ||||
Inventories, net | 290,270 | 268,140 | ||||
Deferred tax charges and refundable income taxes | 21,825 | 17,393 | ||||
Other current assets | 28,091 | 39,688 | ||||
Total current assets | 884,240 | 1,029,338 | ||||
Property, plant and equipment, net | 470,005 | 419,529 | ||||
Right-of-use assets | 48,684 | — | ||||
Goodwill | 659,840 | 550,202 | ||||
Intangible assets | 367,558 | 295,687 | ||||
Deferred tax assets and other noncurrent tax assets | 23,191 | 10,162 | ||||
Other | 14,166 | 12,723 | ||||
Total assets | $ | 2,467,684 | $ | 2,317,641 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Long-term debt, current maturities | 4,000 | 4,000 | ||||
Accounts payable | 73,071 | 93,055 | ||||
Accrued liabilities | 133,174 | 141,020 | ||||
Income tax payable | 2,835 | 31,593 | ||||
Total current liabilities | 213,080 | 269,668 | ||||
Long-term debt, excluding current maturities | 934,080 | 934,863 | ||||
Long-term lease liability | 44,375 | — | ||||
Other liabilities | 156,232 | 101,085 | ||||
Shareholders’ equity | 1,119,917 | 1,012,025 | ||||
Total liabilities and shareholders’ equity | $ | 2,467,684 | $ | 2,317,641 | ||
Entegris, Inc. | page 7 of 14
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended | Nine months ended | |||||||||||
September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||
Operating activities: | ||||||||||||
Net income | $ | 40,767 | $ | 48,060 | $ | 197,422 | $ | 159,971 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 19,306 | 16,537 | 54,623 | 48,236 | ||||||||
Amortization | 15,152 | 21,419 | 50,400 | 45,102 | ||||||||
Stock-based compensation expense | 5,326 | 4,170 | 14,915 | 12,727 | ||||||||
Other | 5,988 | 6,635 | 12,128 | 9,518 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Trade accounts and notes receivable | (35,841 | ) | (11,400 | ) | (30,405 | ) | (8,713 | ) | ||||
Inventories | (9,398 | ) | (6,316 | ) | (5,689 | ) | (28,788 | ) | ||||
Accounts payable and accrued liabilities | 20,796 | 5,526 | (31,911 | ) | (9,440 | ) | ||||||
Income taxes payable and refundable income taxes | (35,965 | ) | (1,678 | ) | (20,574 | ) | (9,193 | ) | ||||
Other | (840 | ) | 1,190 | 12,745 | 1,829 | |||||||
Net cash provided by operating activities | 25,291 | 84,143 | 253,654 | 221,249 | ||||||||
Investing activities: | ||||||||||||
Acquisition of property and equipment | (26,322 | ) | (27,900 | ) | (86,423 | ) | (75,337 | ) | ||||
Acquisition of businesses, net of cash acquired | (217,106 | ) | (43 | ) | (266,373 | ) | (380,268 | ) | ||||
Other | 2,618 | 3,109 | 2,815 | 5,014 | ||||||||
Net cash used in investing activities | (240,810 | ) | (24,834 | ) | (349,981 | ) | (450,591 | ) | ||||
Financing activities: | ||||||||||||
Payments on long-term debt | — | — | (2,000 | ) | (27,000 | ) | ||||||
Issuance of common stock | 3,434 | 2 | 4,351 | 3,029 | ||||||||
Taxes paid related to net share settlement of equity awards | (276 | ) | (139 | ) | (8,577 | ) | (14,552 | ) | ||||
Repurchase and retirement of common stock | (15,000 | ) | (10,000 | ) | (65,321 | ) | (30,000 | ) | ||||
Dividend payments | (10,815 | ) | (9,899 | ) | (29,779 | ) | (29,701 | ) | ||||
Other | (5 | ) | (250 | ) | (502 | ) | 1,254 | |||||
Net cash used in financing activities | (22,662 | ) | (20,286 | ) | (101,828 | ) | (96,970 | ) | ||||
Effect of exchange rate changes on cash | (453 | ) | (1,236 | ) | (1,159 | ) | (4,203 | ) | ||||
(Decrease) increase in cash and cash equivalents | (238,634 | ) | 37,787 | (199,314 | ) | (330,515 | ) | |||||
Cash and cash equivalents at beginning of period | 521,382 | 257,106 | 482,062 | 625,408 | ||||||||
Cash and cash equivalents at end of period | $ | 282,748 | $ | 294,893 | $ | 282,748 | $ | 294,893 | ||||
Entegris, Inc. | page 8 of 14
Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)
Note: In the first quarter of 2019, the Company changed its definition of segment profit to include inter-segment sales. The Company updated its recognition of inter-segment sales to recognize the revenue and profit associated with products and components produced in one segment and supplied to another, before being sold to the ultimate end customer. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at approximate market prices. Inter-segment sales are presented as an elimination below. Prior quarter information has been recast to reflect the change in the Company’s definition of segment profit.
Three months ended | Nine months ended | |||||||||||||||
Net sales | September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | |||||||||||
Specialty Chemicals and Engineered Materials | $ | 127,750 | $ | 131,234 | $ | 127,552 | $ | 379,772 | $ | 396,313 | ||||||
Microcontamination Control | 155,979 | 151,478 | 150,185 | 463,870 | 395,338 | |||||||||||
Advanced Materials Handling | 117,256 | 123,227 | 107,515 | 340,835 | 377,877 | |||||||||||
Inter-segment elimination | (6,838 | ) | (7,342 | ) | (6,378 | ) | (20,409 | ) | (20,673 | ) | ||||||
Total net sales | $ | 394,147 | $ | 398,597 | $ | 378,874 | $ | 1,164,068 | $ | 1,148,855 | ||||||
Three months ended | Nine months ended | |||||||||||||||
Segment profit | September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | |||||||||||
Specialty Chemicals and Engineered Materials | $ | 17,074 | $ | 31,210 | $ | 24,000 | $ | 65,505 | $ | 98,859 | ||||||
Microcontamination Control | 46,792 | 42,448 | 43,126 | 137,241 | 119,973 | |||||||||||
Advanced Materials Handling | 17,077 | 22,226 | 15,043 | 54,487 | 73,231 | |||||||||||
Total segment profit | 80,943 | 95,884 | 82,169 | 257,233 | 292,063 | |||||||||||
Amortization of intangible assets | 15,152 | 21,419 | 16,591 | 50,400 | 45,102 | |||||||||||
Unallocated expenses | 12,998 | 6,490 | 10,669 | 51,640 | 25,580 | |||||||||||
Total operating income | $ | 52,793 | $ | 67,975 | $ | 54,909 | $ | 155,193 | $ | 221,381 | ||||||
Entegris, Inc. | page 9 of 14
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(In thousands)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | ||||||||||||
Net sales | $ | 394,147 | $ | 398,597 | $ | 378,874 | $ | 1,164,068 | $ | 1,148,855 | ||||||
Gross profit-GAAP | $ | 170,350 | $ | 181,716 | $ | 166,274 | $ | 514,017 | $ | 540,091 | ||||||
Adjustments to gross profit: | ||||||||||||||||
Severance and restructuring costs | 990 | — | — | 1,348 | — | |||||||||||
Charge for fair value mark-up of acquired inventory sold | 4,483 | 3,281 | 695 | 7,333 | 3,489 | |||||||||||
Adjusted gross profit | $ | 175,823 | $ | 184,997 | $ | 166,969 | $ | 522,698 | $ | 543,580 | ||||||
Gross margin - as a % of net sales | 43.2 | % | 45.6 | % | 43.9 | % | 44.2 | % | 47.0 | % | ||||||
Adjusted gross margin - as a % of net sales | 44.6 | % | 46.4 | % | 44.1 | % | 44.9 | % | 47.3 | % | ||||||
Entegris, Inc. | page 10 of 14
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Segment Profit to Adjusted Operating Income
(In thousands)
(Unaudited)
Note: In the first quarter of 2019, the Company changed its definition of segment profit to include inter-segment sales. The Company updated its recognition of inter-segment sales to recognize the revenue and profit associated with products and components produced in one segment and supplied to another, before being sold to the ultimate end customer. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at approximate market prices. Prior quarter information has been recast to reflect the change in the Company’s definition of segment profit.
Three months ended | Nine months ended | |||||||||||||||
Segment profit-GAAP | September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | |||||||||||
Specialty Chemicals and Engineered Materials | $ | 17,074 | $ | 31,210 | $ | 24,000 | $ | 65,505 | $ | 98,859 | ||||||
Microcontamination Control | 46,792 | 42,448 | 43,126 | 137,241 | 119,973 | |||||||||||
Advanced Materials Handling | 17,077 | 22,226 | 15,043 | 54,487 | 73,231 | |||||||||||
Total segment profit | 80,943 | 95,884 | 82,169 | 257,233 | 292,063 | |||||||||||
Amortization of intangible assets | 15,152 | 21,419 | 16,591 | 50,400 | 45,102 | |||||||||||
Unallocated expenses | 12,998 | 6,490 | 10,669 | 51,640 | 25,580 | |||||||||||
Total operating income | $ | 52,793 | $ | 67,975 | $ | 54,909 | $ | 155,193 | $ | 221,381 | ||||||
Three months ended | Nine months ended | |||||||||||||||
Adjusted segment profit | September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | |||||||||||
Specialty Chemicals and Engineered Materials1 | $ | 23,700 | $ | 31,210 | $ | 24,695 | $ | 73,465 | $ | 98,859 | ||||||
Microcontamination Control 2 | 49,769 | 45,729 | 43,126 | 142,977 | 123,462 | |||||||||||
Advanced Materials Handling 3 | 20,212 | 22,692 | 15,043 | 58,200 | 73,697 | |||||||||||
Total adjusted segment profit | 93,681 | 99,631 | 82,864 | 274,642 | 296,018 | |||||||||||
Adjusted amortization of intangible assets4 | — | — | — | — | — | |||||||||||
Adjusted unallocated expenses5 | 5,461 | 5,738 | 6,071 | 17,449 | 18,510 | |||||||||||
Total adjusted operating income | $ | 88,220 | $ | 93,893 | $ | 76,793 | $ | 257,193 | $ | 277,508 | ||||||
1 Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months ended September 28, 2019 and June 29, 2019, and for the nine months ended September 28, 2019 excludes charges for fair value mark-up of acquired inventory sold of $4,483, $695 and $5,298, respectively. Adjusted segment profit for the three and nine months ended September 28, 2019 also excludes charges for severance and restructuring of $2,143 and $2,662, respectively.
2 Adjusted segment profit for Microcontamination Control for the three and nine months ended September 28, 2019 excludes charges for severance and restructuring of $2,977 and $3,701, respectively. Adjusted segment profit for the three months ended September 29, 2018 and the nine months ended September 28, 2019 and September 29, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,281, $2,035 and $3,489, respectively.
3Adjusted segment profit for Advanced Materials Handling for the three and nine months ended September 28, 2019 excludes charges for severance and restructuring of $3,135 and $3,713, respectively. Adjusted segment profit for the three and nine months ended September 29, 2018 excludes loss on the sale of subsidiary of $466.
4 Adjusted amortization of intangible assets excludes amortization expense of $15,152, $21,419 and $16,591 for the three months ended September 28, 2019, September 29, 2018 and June 29, 2019, respectively, and $50,400 and $45,102 for the nine months ended September 28, 2019 and September 29, 2018, respectively.
5 Adjusted unallocated expenses for the three months ended September 28, 2019, September 29, 2018, and June 29, 2019 and the nine months ended September 28, 2019 and September 29, 2018 excludes deal and integration expenses of $7,289, $752, $2,428, $31,773, and $7,070, respectively. Adjusted unallocated expenses for the three months ended September 28, 2019, and June 29, 2019 and the nine months ended September 28, 2019 excludes charges for severance and restructuring of $248, $2,170, and $2,418, respectively.
Entegris, Inc. | page 11 of 14
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | ||||||||||||
Net sales | $ | 394,147 | $ | 398,597 | $ | 378,874 | $ | 1,164,068 | $ | 1,148,855 | ||||||
Net income | $ | 40,767 | $ | 48,060 | $ | 123,997 | $ | 197,422 | $ | 159,971 | ||||||
Adjustments to net income: | ||||||||||||||||
Income tax expense | 876 | 11,427 | 43,235 | 49,533 | 34,755 | |||||||||||
Interest expense, net | 10,216 | 7,678 | 9,692 | 29,567 | 21,829 | |||||||||||
Other expense (income), net | 934 | 810 | (122,015 | ) | (121,329 | ) | 4,826 | |||||||||
GAAP - Operating income | 52,793 | 67,975 | 54,909 | 155,193 | 221,381 | |||||||||||
Charge for fair value write-up of acquired inventory sold | 4,483 | 3,281 | 695 | 7,333 | 3,489 | |||||||||||
Deal costs | 4,891 | — | 1,164 | 25,191 | 5,121 | |||||||||||
Integration costs | 2,398 | 752 | 1,264 | 6,582 | 1,949 | |||||||||||
Severance and restructuring costs | 8,503 | — | 2,170 | 12,494 | — | |||||||||||
Loss on sale of subsidiary | — | 466 | — | — | 466 | |||||||||||
Amortization of intangible assets | 15,152 | 21,419 | 16,591 | 50,400 | 45,102 | |||||||||||
Adjusted operating income | 88,220 | 93,893 | 76,793 | 257,193 | 277,508 | |||||||||||
Depreciation | 19,306 | 16,537 | 18,596 | 54,623 | 48,236 | |||||||||||
Adjusted EBITDA | $ | 107,526 | $ | 110,430 | $ | 95,389 | $ | 311,816 | $ | 325,744 | ||||||
Net income - as a % of net sales | 10.3 | % | 12.1 | % | 32.7 | % | 17.0 | % | 13.9 | % | ||||||
Adjusted operating margin | 22.4 | % | 23.6 | % | 20.3 | % | 22.1 | % | 24.2 | % | ||||||
Adjusted EBITDA - as a % of net sales | 27.3 | % | 27.7 | % | 25.2 | % | 26.8 | % | 28.4 | % | ||||||
Entegris, Inc. | page 12 of 14
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income and Earnings per Share to Non-GAAP Net Income and Earnings per Share
(In thousands, except per share data)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
September 28, 2019 | September 29, 2018 | June 29, 2019 | September 28, 2019 | September 29, 2018 | ||||||||||||
GAAP net income | $ | 40,767 | $ | 48,060 | $ | 123,997 | $ | 197,422 | $ | 159,971 | ||||||
Adjustments to net income: | ||||||||||||||||
Charge for fair value write-up of acquired inventory sold | 4,483 | 3,281 | 695 | 7,333 | 3,489 | |||||||||||
Deal costs | 4,891 | — | 1,164 | 25,602 | 5,121 | |||||||||||
Integration costs | 2,398 | 752 | 1,264 | 6,582 | 1,949 | |||||||||||
Severance and restructuring costs | 8,503 | — | 2,170 | 12,494 | — | |||||||||||
Versum termination fee, net | — | — | (122,000 | ) | (122,000 | ) | — | |||||||||
Loss on sale of subsidiary | — | 466 | — | — | 466 | |||||||||||
Amortization of intangible assets | 15,152 | 21,419 | 16,591 | 50,400 | 45,102 | |||||||||||
Tax effect of legal entity restructuring | — | — | 9,398 | 9,398 | — | |||||||||||
Tax effect of adjustments to net income and discrete items1 | (8,015 | ) | (5,797 | ) | 20,153 | 2,274 | (12,209 | ) | ||||||||
Tax effect of Tax Cuts and Jobs Act | — | (2,560 | ) | — | — | (418 | ) | |||||||||
Non-GAAP net income | $ | 68,179 | $ | 65,621 | $ | 53,432 | $ | 189,505 | $ | 203,471 | ||||||
Diluted earnings per common share | $ | 0.30 | $ | 0.34 | $ | 0.91 | $ | 1.45 | $ | 1.12 | ||||||
Effect of adjustments to net income | $ | 0.20 | $ | 0.12 | $ | (0.52 | ) | $ | (0.06 | ) | $ | 0.30 | ||||
Diluted non-GAAP earnings per common share | $ | 0.50 | $ | 0.46 | $ | 0.39 | $ | 1.39 | $ | 1.42 | ||||||
1The tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years.
Entegris, Inc. | page 13 of 14
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Outlook to Non-GAAP Outlook
(In millions, except per share data)
(Unaudited)
Fourth-Quarter Outlook | ||
Reconciliation GAAP net income to non-GAAP net income | December 31, 2019 | |
GAAP net income | $51 - $58 | |
Adjustments to net income: | ||
Charge for fair value write-up of acquired inventory sold | 5 | |
Restructuring and integration costs | 2 | |
Amortization of intangible assets | 17 | |
Income tax effect | (6 | ) |
Non-GAAP net income | $69 - $76 | |
Fourth-Quarter Outlook | ||
Reconciliation GAAP diluted earnings per share to non-GAAP diluted earnings per share | December 31, 2019 | |
Diluted earnings per common share | $0.38 - $0.43 | |
Adjustments to diluted earnings per common share: | ||
Charge for fair value write-up of acquired inventory sold | 0.03 | |
Restructuring and integration costs | 0.01 | |
Amortization of intangible assets | 0.13 | |
Income tax effect | (0.04 | ) |
Diluted non-GAAP earnings per common share | $0.51 to $0.56 | |
### END ###
Entegris, Inc. | page 14 of 14
Exhibit 99.2 Earnings Summary Third Quarter 2019 October 24, 2019
SAFE HARBOR This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “intend,” “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; the Company’s performance relative to its markets; the impact, financial or otherwise, of any organizational changes; market and technology trends; the development of new products and the success of their introductions; the 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 the Company’s capital allocation strategy; the impact of the acquisitions the Company has made and commercial partnerships the Company has established; the Company’s ability to execute on its strategies; and other matters. These statements involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. 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 the Company’s products and solutions; the Company’s ability to meet rapid demand shifts; the Company’s ability to continue technological innovation and introduce new products to meet customers' rapidly changing requirements; the Company’s concentrated customer base; the Company’s ability to identify, effect and integrate acquisitions, joint ventures or other transactions; the Company’s ability to effectively implement any organizational changes; the Company’s ability to protect and enforce intellectual property rights; operational, political and legal risks of the Company’s international operations; the Company’s dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; raw material shortages, supply constraints and price increases; changes in government regulations of the countries in which the Company operates; fluctuation of currency exchange rates; fluctuations in the market price of the Company’s stock; the level of, and obligations associated with, the Company’s indebtedness; and other risk factors and additional information described in the Company’s filings with the Securities and Exchange Commission, including under the heading “Risks Factors" in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed on February 11, 2019, and in the Company’s 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 Gross Profit,” “Adjusted Operating 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. 2
3Q19 SUMMARY o Third-quarter revenue of $394.1 million, decreased 1% from prior year o GAAP net income per diluted share of $0.30, decreased 12% from prior year o Non-GAAP net income per diluted share of $0.50, increased 9% from prior year o Acquired Hangzhou Anow Microfiltration in September 3
Summary – Consolidated Statement of Operations (GAAP) 3Q19 over 3Q19 over $ in millions, except per share data 3Q19 3Q19 Guidance 2Q19 3Q18 3Q18 2Q19 Net Revenue $394.1 $385 -$400 $378.9 $398.6 (1.1%) 4.0% Gross Margin 43.2% 43.9% 45.6% Operating Expenses $117.6 $115 - $117 $111.4 $113.7 3.4% 5.6% Operating Income $52.8 $54.9 $68.0 (22.4%) (3.8%) Operating Margin 13.4% 14.5% 17.1% Tax Rate 2.1% 25.9% 19.2% Net Income $40.8 $40 - $46 $124.0 $48.1 (15.2%) (67.1%) Earnings per diluted share $0.30 $0.29 - $0.34 $0.91 $0.34 (11.8%) (67.0%) 4
Summary – Consolidated Statement of Operations (Non-GAAP)1 3Q19 over 3Q19 over $ in millions, except per share data 3Q19 3Q19 Guidance 2Q19 3Q18 3Q18 2Q19 Net Revenue $394.1 $385 - $400 $378.9 $398.6 (1.1%) 4.0% Adjusted Gross Margin2 44.6% 44.1% 46.4% Non-GAAP Operating $87.6 $92 - $94 $90.2 $91.1 (3.8%) (2.9%) Expenses3 Adjusted Operating Income $88.2 $76.8 $93.9 (6.1%) 14.8% Adjusted Operating Margin 22.4% 20.3% 23.6% Non-GAAP Tax Rate4 11.5% 20.4% 23.2% Non-GAAP Net Income5 $68.2 $57 - $64 $53.4 $65.6 4.0% 27.7% Non-GAAP EPS $0.50 $0.42 - $0.47 $0.39 $0.46 8.7% 28.2% 1. See GAAP to Non-GAAP reconciliation tables in the appendix of this presentation. 2. Adjusted Gross Margin excludes charge for fair value write-up of acquired inventory sold and severance and restructuring costs. 3. Non-GAAP Operating Expenses exclude amortization expense, deal costs, integration costs, loss on sale of subsidiary, and severance and restructuring costs. 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, the tax effect of non-GAAP adjustments and discrete tax items to GAAP taxes. 5
RESULTS BY SEGMENT1 Specialty Chemicals Microcontamination Advanced and Engineered Control Segment3 Materials Handling 2 Materials Segment 4 $ in millions Segment $160 40% $160 40% $160 40% $140 $140 $140 $120 30% $120 30% $120 30% $100 $100 $100 $80 20% $80 20% $80 20% $60 $60 $60 $40 10% $40 10% $40 10% $20 $20 $20 $0 0% $0 0% 3Q18 4Q18 1Q19 2Q19 3Q19 $0 0% 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 Sales Adj. Op. margin Sales Adj. Op. margin Sales Adj. Op. margin 1. In 1Q19 the Company changed its definition of segment profit to include inter-segment sales. Prior period information has been recast to reflect the change. Adjusted segment operating margin excludes amortization of intangibles and unallocated expenses. 2. Segment profit for SCEM includes a charge for fair value write-up of inventory of $120K, $695K and $4,483K for 1Q19, 2Q19 and 3Q19, respectively and severance charges of $519K and $2,143K in 1Q19 and 3Q19, respectively. 3. Segment profit for MC includes a charge for fair value write-up of inventory of $3,281K, $3,379K, and $2,035K for 3Q18, 4Q18 and 1Q19, respectively. Segment profit for MC includes severance charges of $724K and $2,977K for 1Q19 and 3Q19, respectively. 4. Segment profit for AMH for 3Q18 includes charges for loss on sale of subsidiary of $466K. Segment profit for AMH includes severance and restructuring charges of $460K, $578K and $3,135 for 4Q18, 1Q19, and 3Q19, respectively. 6
REVENUE BY GEOGRAPHY: Strong growth in Taiwan and N. America YTD19 Revenue by Geography YTD19 vs. YTD18 Growth Rate Revenue = $ million Taiwan 5% Taiwan N. America 10% N. America $222.2M $280.3M South Korea 1% Southeast Japan -6% Asia $74.2M $98.9M Europe China 3% $190.0M Europe -5% $148.1M Japan Southeast Asia -15% South Korea $150.4M China -20% -10% 0% 10% 20% 7
Summary – Balance Sheet Items $ in millions 3Q19 2Q19 3Q18 $ Amount % Total $ Amount % Total $ Amount % Total Cash & Cash Equivalents $282.7 11.5% $521.4 21.5% $294.9 14.0% Accounts Receivable, net $261.3 10.6% $218.7 9.0% $212.7 10.1% Inventories $290.3 11.8% $261.9 10.8% $264.1 12.6% Net PP&E $470.0 19.0% $445.3 18.4% $393.7 18.7% Total Assets $2,467.7 $2,424.7 $2,103.5 Current Liabilities1 $213.1 8.6% $215.1 8.9% $211.0 10.0% Long-term debt, excluding $934.1 37.9% $933.7 38.5% $650.6 30.9% current maturities Total Liabilities $1,347.8 54.6% $1,322.2 54.5% $1,019.8 48.5% Total Shareholders’ Equity $1,119.9 45.4% $1,102.5 45.5% $1,083.7 51.5% AR – DSOs 60.5 52.7 48.7 Inventory Turns 3.2 3.2 3.3 1. Current Liabilities in 3Q19 and 2Q19 includes $4 million of current maturities of long term debt. 8
ADJUSTED EBITDA MARGIN1 Adjusted EBITDA and EBITDA Margin 28.9% 27.7% 27.7% 27.7% 28.5% 27.5% 27.8% 26.8% 27.3% $109 $106 $110 25.2% 23.9% $110 $109 $108 $96 $97 $95 80 $88 $76 40 0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Adj. EBITDA in $M Adj. EBITDA as % of Sales 1. See Reconciliation of GAAP Income to Adjusted Operating Income and Adjusted EBITDA in the appendix of this presentation. 9
Cash Flows $ in millions 3Q19 2Q19 3Q18 Beginning Cash Balance $521.4 $342.4 $257.1 Cash provided by operating activities $25.3 $230.9 $84.1 Capital expenditures ($26.3) ($25.6) ($27.9) Acquisition of business ($217.1) $0.5 - Payments on long-term debt - ($1.0) - Repurchase and retirement of common stock ($15.0) ($15.0) ($10.0) Dividend payments ($10.8) ($9.5) ($9.9) Other investing activities $2.6 - $3.1 Other financing activities $3.1 ($0.8) ($0.4) Effect of exchange rates ($0.5) ($0.5) ($1.2) Ending Cash Balance $282.7 $521.4 $294.9 Free Cash Flow1 ($1.0) $205.3 $56.2 Adjusted EBITDA $107.5 $95.4 $110.4 1. Free cash flow equals cash from operations less capital expenditures. 10
Outlook GAAP $ in millions, except per share data 4Q19 Guidance 3Q19 Actual 3Q18 Actual Net Revenue $420 -$435 $394.1 $398.6 Operating Expenses $109 - $111 $117.6 $113.7 Net Income $51 - $58 $40.8 $48.1 Earnings (Per Diluted Share) $0.38 - $0.43 $0.30 $0.34 Non-GAAP $ in millions, except per share data 4Q19 Guidance 3Q19 Actual 3Q18 Actual Net Revenue $420 -$435 $394.1 $398.6 Non-GAAP Operating Expenses $90 - $92 $87.6 $91.1 Non-GAAP Net Income1 $69 - $76 $68.2 $65.6 Non-GAAP EPS $0.51 - $0.56 $0.50 $0.46 1. See GAAP to Non-GAAP reconciliation tables in the appendix of this presentation. 11
Entegris®, the Entegris Rings Design™ and Pure Advantage™ are trademarks of Entegris, Inc. ©2016 Entegris, Inc. All rights reserved.
NON-GAAP RECONCILIATION TABLE RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT Three months ended Nine months ended September 28, September 29, September 28, September 29, 2019 2018 June 29, 2019 2019 2018 Net Sales $394,147 $398,597 $378,874 $1,164,068 $1,148,855 Gross profit-GAAP $170,350 $181,716 $166,274 $514,017 $540,091 Adjustments to gross profit: Severance and restructuring costs 990 - - 1,348 - Charge for fair value mark-up of acquired inventory sold 4,483 3,281 695 7,333 3,489 Adjusted gross profit $175,823 $184,997 $166,969 $522,698 $543,580 Gross margin - as a % of net sales 43.2% 45.6% 43.9% 44.2% 47.0% Adjusted gross margin - as a % of net sales 44.6% 46.4% 44.1% 44.9% 47.3% 13
NON-GAAP RECONCILIATION TABLE RECONCILIATION OF GAAP SEGMENT PROFIT TO ADJUSTED OPERATING INCOME in thousands Three months ended Nine months ended September 28, September 29, September 28, September 29, Segment profit-GAAP1 2019 2018 June 29, 2019 2019 2018 Specialty Chemicals and Engineered Materials $17,074 $31,210 $24,000 $65,505 $98,859 Microcontamination Control 46,792 42,448 43,126 137,241 119,973 Advanced Materials Handling 17,077 22,226 15,043 54,487 73,231 Total segment profit 80,943 95,884 82,169 257,233 292,063 Amortization of intangible assets 15,152 21,419 16,591 50,400 45,102 Unallocated expenses 12,998 6,490 10,669 51,640 25,580 Total operating income $52,793 $67,975 $54,909 $155,193 $221,381 Three months ended Nine months ended September 28, September 29, September 28, September 29, Adjusted segment profit 2019 2018 June 29, 2019 2019 2018 Specialty Chemicals and Engineered Materials $23,700 $31,210 $24,695 $73,465 $98,859 Microcontamination Control2 49,769 45,729 43,126 142,977 123,462 Advanced Materials Handling3 20,212 22,692 15,043 58,200 73,697 Total adjusted segment profit 93,681 99,631 82,864 274,642 296,018 Adjusted amortization of intangible assets4 - - - - - Adjusted unallocated expenses5 5,461 5,738 6,071 17,449 18,510 Total adjusted operating income $88,220 $93,893 $76,793 $257,193 $277,508 1. In 1Q19 the Company changed its definition of segment profit to include inter-segment sales. Prior period information has been recast to reflect the change. 2. Adjusted segment profit for Specialty Chemicals and Engineered Materials for the three months ended September 28, 2019 and June 29, 2019, and for the nine months ended September 28, 2019 excludes charges for fair value mark-up of acquired inventory sold of $4,483, $695 and $5,298, respectively. Adjusted segment profit for the three and nine months ended September 28, 2019 also excludes charges for severance and restructuring of $2,143 and $2,662, respectively. 3 .Adjusted segment profit for Microcontamination Control for the three and nine months ended September 28, 2019 excludes charges for severance and restructuring of $2,977 and $3,701, respectively. Adjusted segment profit for the three months ended September 29, 2018 and the nine months ended September 28, 2019 and September 29, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,281, $2,035 and $3,489, respectively. 4. Adjusted segment profit for Advanced Materials Handling for the three and nine months ended September 28, 2019 excludes charges for severance and restructuring of $3,135 and $3,713, respectively. Adjusted segment profit for the three and nine months ended September 29, 2018 excludes loss on the sale of subsidiary of $466. 5. Adjusted amortization of intangible assets excludes amortization expense of $15,152, $21,419 and $16,591 for the three months ended September 28, 2019, September 29, 2018 and June 29, 2019, respectively, and $50,400 and $45,102 for the nine months ended September 28, 2019 and September 29, 2018, respectively. 6. Adjusted unallocated expenses for the three months ended September 28, 2019, September 29, 2018, and June 29, 2019 and the nine months ended September 28, 2019 and September 29, 2018 excludes deal and integration expenses of $7,289, $752, $2,428, $31,773, and $7,070, respectively. Adjusted unallocated expenses for the three months ended September 28, 2019, and June 29, 2019 and the nine months ended September 28, 2019 excludes charges for severance and 14 restructuring of $248, $2,170, and $2,418, respectively.
NON-GAAP RECONCILIATION TABLE RECONCILIATION OF GAAP TO ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA Three months ended Nine months ended September 28, September 29, September 28, September 29, $ in thousands 2019 2018 June 29, 2019 2019 2018 Net sales $394,147 $398,597 $378,874 $1,164,068 $1,148,855 Net income $40,767 $48,060 $123,997 $197,422 $159,971 Adjustments to net income: Income tax expense 876 11,427 43,235 49,533 34,755 Interest expense, net 10,216 7,678 9,692 29,567 21,892 Other expense (income), net 934 810 (122,015) (121,328) 4,826 GAAP - Operating income 52,793 67,975 54,909 155,193 221,381 Charge for fair value write-up of acquired inventory sold 4,483 3,281 695 7,333 3,489 Deal Costs 4,891 - 1,164 25,191 5,121 Integration Costs 2,398 752 1,264 6,582 1,949 Severance and restructuring costs 8,503 - 2,170 12,494 - Loss on sale of subsidiary - 466 - - 466 Amortization of intangible assets 15,152 21,419 16,591 50,400 45,102 Adjusted operating income 88,220 93,893 76,793 257,193 277,508 Depreciation 19,306 16,537 18,596 54,623 48,236 Adjusted EBITDA $107,526 $110,430 $95,389 $311,816 $325,744 Net income – as a % of net sales 10.3% 12.1% 32.7% 17.0% 13.9% Adjusted operating margin 22.4% 23.6% 20.3% 22.1% 24.2% Adjusted EBITDA - as a % of net sales 27.3% 27.7% 25.2% 26.8% 28.4% 15
NON-GAAP RECONCILIATION TABLE RECONCILIATION OF GAAP NET INCOME AND EARNINGS PER SHARE TO NON-GAAP NET INCOME AND EARNINGS PER SHARE Three months ended Nine months ended September 28, September 29, September 28, September 29, $ in thousands, except per share data 2019 2018 June 29, 2019 2019 2018 GAAP net income $40,767 $48,060 $123,997 $197,422 $159,971 Adjustments to net income: Charge for fair value write-up of acquired inventory sold 4,483 3,281 695 7,333 3,489 Deal Costs 4,891 - 1,164 25,602 5,121 Integration Costs 2,398 752 1,264 6,582 1,949 Severance and restructuring costs 8,503 - 2,170 12,494 - Versum termination fee, net - - (122,000) (122,000) - Loss on sale of subsidiary - 466 - - 466 Amortization of intangible assets 15,152 21,419 16,591 50,400 45,102 Tax effect of legal entity restructuring - - 9,398 9,398 - Tax effect of adjustments to net income and discrete items1 (8,015) (5,797) 20,153 2,274 (12,209) Tax effect of Tax Cuts and Jobs Act - (2,560) - - (418) Non-GAAP net income $68,179 $65,621 $53,432 $189,505 $203,471 Diluted earnings per common share $0.30 $0.34 $0.91 $1.45 $1.12 Effect of adjustments to net income $0.20 $0.12 ($0.52) ($0.06) $0.30 Diluted non-GAAP earnings per common share $0.50 $0.46 $0.39 $1.39 $1.42 16
NON-GAAP RECONCILIATION TABLE RECONCILIATION OF GAAP OUTLOOK TO NON-GAAP OUTLOOK (In millions, except per share data) Fourth-Quarter Outlook Reconciliation GAAP net income to non-GAAP net income December 31, 2019 GAAP net income $51 - $58 Adjustments to net income: Charge for fair value write-up of acquired inventory sold 5 Restructuring and integration costs 2 Amortization of intangible assets 17 Income tax effect (6) Non-GAAP net income $69 - $76 Fourth-Quarter Outlook Reconciliation GAAP diluted earnings per share to non-GAAP diluted earnings per share December 31, 2019 Diluted earnings per common share $0.38 - $0.43 Adjustments to diluted earnings per common share: Charge for fair value write-up of acquired inventory sold 0.03 Restructuring and integration costs 0.01 Amortization of intangible assets 0.13 Income tax effect (0.04) Diluted non-GAAP earnings per common share $0.51 to $0.56 17
GAAP Segment Trend Data1 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219 Q319 $ in thousands Sales SCEM $ 114,435 $ 121,174 $ 124,522 $ 125,339 $ 130,743 $ 134,336 $ 131,234 $ 133,928 $ 124,470 $ 127,552 $ 127,750 MC 100,195 104,587 116,229 115,801 118,923 124,937 151,478 158,500 157,706 150,185 155,979 AMH 108,371 109,658 111,278 115,436 124,078 130,572 123,227 115,527 116,064 107,515 117,256 Inter-segment elimination (5,624) (6,417) (6,438) (6,014) (6,545) (6,786) (7,342) (6,313) (7,193) (6,378) (6,838) Total Sales $ 317,377 $ 329,002 $ 345,591 $ 350,562 $ 367,199 $ 383,059 $ 398,597 $ 401,642 $ 391,047 $ 378,874 $ 394,147 Segment Profit SCEM $ 22,563 $ 28,493 $ 28,981 $ 29,534 $ 30,921 $ 36,728 $ 31,210 $ 28,221 $ 24,431 $ 24,000 $ 17,074 MC 29,380 29,944 37,429 37,686 40,311 37,214 42,448 46,879 47,323 43,126 46,792 AMH 16,132 17,588 14,914 20,409 25,463 25,542 22,226 19,096 22,367 15,043 17,077 Total Segment Profit $ 68,075 $ 76,025 $ 81,324 $ 87,629 $ 96,695 $ 99,484 $ 95,884 $ 94,196 $ 94,121 $ 82,169 $ 80,943 1. In 1Q19 the Company changed its definition of segment profit to include inter-segment sales. Prior period information has been recast to reflect the change. 18
NON-GAAP Segment Trend Data1 $ in thousands Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219 Q319 Sales SCEM $ 114,435 $ 121,174 $ 124,522 $ 125,339 $ 130,743 $ 134,336 $ 131,234 $ 133,928 $ 124,470 $ 127,552 $ 127,750 MC 100,195 104,587 116,229 115,801 118,923 124,937 151,478 158,500 157,706 150,185 155,979 AMH 108,371 109,658 111,278 115,436 124,078 130,572 123,227 115,527 116,064 107,515 117,256 Inter-segment elimination (5,624) (6,417) (6,438) (6,014) (6,545) (6,786) (7,342) (6,313) (7,193) (6,378) (6,838) Total Sales $ 317,377 $ 329,002 $ 345,591 $ 350,562 $ 367,199 $ 383,059 $ 398,597 $ 401,642 $ 391,047 $ 378,874 $ 394,147 Adjusted Segment Profit SCEM2 $ 22,563 $ 28,493 $ 28,995 $ 29,534 $ 30,921 $ 36,728 $ 31,210 $ 28,221 $ 25,070 $ 24,695 $ 23,700 3 MC 29,380 31,387 37,625 37,686 40,311 37,422 45,729 50,258 50,082 43,126 49,769 4 AMH 16,132 19,874 20,135 20,409 25,463 25,542 22,692 19,556 22,945 15,043 20,212 Total Adj. Segment Profit $ 68,075 $ 79,754 $ 86,755 $ 87,629 $ 96,695 $ 99,692 $ 99,631 $ 98,035 $ 98,097 $ 82,864 $ 93,681 Adjusted Segment Profit Margin SCEM 19.7% 23.5% 23.3% 23.6% 23.7% 27.3% 23.8% 21.1% 20.1% 19.4% 18.6% MC 29.3% 30.0% 32.4% 32.5% 33.9% 30.0% 30.2% 31.7% 31.8% 28.7% 31.9% AMH 14.9% 18.1% 18.1% 17.7% 20.5% 19.6% 18.4% 16.9% 19.8% 14.0% 17.2% 1. In 1Q19 the Company changed its definition of segment profit to include inter-segment sales. Prior period information has been recast to reflect the change. Segment profit excludes amortization of intangibles and unallocated expenses. 2. Adjusted segment profit for SCEM for 3Q17, 1Q19,and 3Q19 excludes charges for severance and restructuring of $14, $519 and $2,143. Adjusted segment profit for SCEM for 1Q19, 2Q19 and 3Q19 excludes fair value mark-up of inventory and severance charges of $120, $695 and $4,483, respectively. 3. Adjusted segment profit for MC for 2Q17 excludes charges for impairment of equipment and severance of $884 and $559, respectively. Adjusted segment profit for MC for 3Q17, 1Q19 and 3Q19 excludes charges for severance of $196, $724, and $2,977, respectively. Adjusted segment profit for MC for 2Q18, 3Q18, 4Q18 and 1Q19 excludes charges for fair value mark-up of acquired inventory sold of $208, $3,281, $3,379, and $2,035 respectively. 4. Adjusted segment profit for AMH for 2Q17 excludes charges for impairment of equipment of $2,286. Adjusted segment profit for AMH for 3Q17 excludes impairment of equipment and severance and restructuring of $3,364 and $1,857 respectively. Adjusted segment profit for AMH for 3Q18 excludes loss on sale of subsidiary of $466. Adjusted segment profit for 19 AMH for 4Q18, 1Q19, and 3Q19 excludes severance and restructuring of $460, $578, and $3,135, respectively.