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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________
FORM 10-Q
______________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-32598
https://cdn.kscope.io/2073f7b4104829b9769bb3b8579b3521-entg-20220402_g1.jpg
_______________________________________
Entegris, Inc.
(Exact name of registrant as specified in its charter)
 _________________________________________
Delaware 41-1941551
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
129 Concord Road,Billerica,Massachusetts 01821
(Address of principal executive offices) (Zip Code)
(978) 436-6500
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
 _______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareENTGThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ýAccelerated filer 
Non-accelerated filer ¨Smaller reporting company 
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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ý
As of April 22, 2022, there were 135,883,084 shares of the registrant’s common stock outstanding.



Table of Contents
ENTEGRIS, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED APRIL 2, 2022
DescriptionPage
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Cautionary Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements.” 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 may include statements about the impacts of the COVID-19 pandemic and the conflict in Ukraine on the Company’s operations and markets, including supply chain issues related thereto; future period guidance or projections; the Company’s performance relative to its markets, including the drivers of such performance; market and technology trends, including the duration and drivers of any growth trends and the impact of the COVID-19 pandemic on such trends; the development of new products and the success of their introductions; the focus of the Company’s engineering, research and development projects; the Company’s ability to execute on its business strategies, including with respect to Company’s expansion of its manufacturing presence in Taiwan; 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 impact of the acquisitions the Company has made and commercial partnerships the Company has established; future capital and other expenditures, including estimates thereof; the Company’s expected tax rate; the impact, financial or otherwise, of any organizational changes; the impact of accounting pronouncements; quantitative and qualitative disclosures about market risk; and other matters. These forward-looking statements are based on current management expectations and assumptions only as of the date of this Quarterly Report, are not guarantees of future performance and involve substantial risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These risks and uncertainties include, but are not limited to, risks related to the COVID-19 pandemic on the global economy and financial markets, as well as on the Company, its customers and suppliers, which may impact its sales, gross margin, customer demand and its ability to supply its products to its customers; raw material shortages, supply and labor constraints and price increases or pricing pressures; 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 ongoing conflict between Russia and Ukraine and the global response to it; 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; substantial competition; the Company’s concentrated customer base; the Company’s ability to identify, complete 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
2

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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; changes in government regulations of the countries in which the Company operates, including the imposition of tariffs, export controls and other trade laws and restrictions and changes to foreign and national security policy, especially as they relate to China; 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, 2021, filed on February 4, 2022, and in the Company’s other periodic filings. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, the Company undertakes no obligation to update publicly any forward-looking statements or information contained herein, which speak as of their respective dates.
3

Table of Contents
PART 1.    FINANCIAL INFORMATION
Item 1. Financial Statements

ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) 
(In thousands, except share and per share data)April 2, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$352,732 $402,565 
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,486 and $2,349
372,759 347,413 
Inventories, net545,607 475,213 
Deferred tax charges and refundable income taxes34,755 35,312 
Other current assets63,482 52,867 
Total current assets1,369,335 1,313,370 
Property, plant and equipment, net of accumulated depreciation of $674,237 and $653,104
698,574 654,098 
Other assets:
Right-of-use assets69,713 66,563 
Goodwill793,861 793,702 
Intangible assets, net of accumulated amortization of $507,465 and $494,601
322,289 335,113 
Deferred tax assets and other noncurrent tax assets17,820 17,671 
Other11,848 11,379 
Total assets$3,283,440 $3,191,896 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$133,956 $130,734 
Accrued payroll and related benefits55,562 108,818 
Other accrued liabilities117,469 90,313 
Income taxes payable64,674 49,136 
Total current liabilities371,661 379,001 
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $7,651 and $7,973
937,349 937,027 
Pension benefit obligations and other liabilities37,964 37,816 
Deferred tax liabilities and other noncurrent tax liabilities54,038 64,170 
Long-term lease liability62,110 60,101 
Commitments and contingent liabilities  
Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of April 2, 2022 and December 31, 2021
  
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of April 2, 2022: 136,085,484 and 135,883,084, respectively; issued and outstanding shares as of December 31, 2021: 135,719,366 and 135,516,966, respectively
1,361 1,357 
Treasury stock, at cost: 202,400 shares held as of April 2, 2022 and December 31, 2021
(7,112)(7,112)
Additional paid-in capital876,388 879,845 
Retained earnings 991,821 879,776 
Accumulated other comprehensive loss(42,140)(40,085)
Total equity1,820,318 1,713,781 
Total liabilities and equity$3,283,440 $3,191,896 
See the accompanying notes to condensed consolidated financial statements.
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ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three months ended
(In thousands, except per share data)April 2, 2022April 3, 2021
Net sales$649,646 $512,844 
Cost of sales339,826 277,858 
Gross profit309,820 234,986 
Selling, general and administrative expenses87,108 71,389 
Engineering, research and development expenses46,715 37,748 
Amortization of intangible assets12,651 11,871 
Operating income163,346 113,978 
Interest expense12,876 11,652 
Interest income(12)(71)
Other expense, net4,902 4,330 
Income before income tax expense 145,580 98,067 
Income tax expense19,875 13,391 
Net income $125,705 $84,676 
Basic earnings per common share$0.93 $0.63 
Diluted earnings per common share$0.92 $0.62 
Weighted shares outstanding:
Basic135,670135,068
Diluted136,552136,502
See the accompanying notes to condensed consolidated financial statements.

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Table of Contents
ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Net income$125,705 $84,676 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments(2,128)(3,716)
Pension liability adjustments73 39 
Other comprehensive loss(2,055)(3,677)
Comprehensive income $123,650 $80,999 
See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)Common
shares
outstanding
Common
stock
Treasury sharesTreasury stockAdditional
paid-in
capital
Retained earnings Foreign currency translation adjustmentsDefined benefit pension adjustmentsTotal
Balance at December 31, 2020135,149 $1,351 202 $(7,112)$844,850 $577,833 $(36,588)$(840)$1,379,494 
Shares issued under stock plans392 4 —  (13,470)   (13,466)
Share-based compensation expense—  —  7,138    7,138 
Repurchase and retirement of common stock(145)(1)—  (904)(14,095)  (15,000)
Dividends declared ($0.08 per share)
—  —  8 (10,840)  (10,832)
Pension liability adjustment—  —     39 39 
Foreign currency translation—  —    (3,716) (3,716)
Net income—  —   84,676   84,676 
Balance at April 3, 2021135,396 $1,354 202 $(7,112)$837,622 $637,574 $(40,304)$(801)$1,428,333 


(In thousands)Common
shares
outstanding
Common
stock
Treasury sharesTreasury stockAdditional
paid-in
capital
Retained earnings Foreign currency translation adjustmentsDefined benefit pension adjustmentsTotal
Balance at December 31, 2021135,719 $1,357 202 $(7,112)$879,845 $879,776 $(38,863)$(1,222)$1,713,781 
Shares issued under stock plans366 4 —  (12,742)   (12,738)
Share-based compensation expense—  —  9,285    9,285 
Dividends declared ($0.10 per share)
—  —   (13,660)  (13,660)
Pension liability adjustment—  —     73 73 
Foreign currency translation—  —    (2,128) (2,128)
Net income—  —   125,705   125,705 
Balance at April 2, 2022136,085 $1,361 202 $(7,112)$876,388 $991,821 $(40,991)$(1,149)$1,820,318 

See the accompanying notes to condensed consolidated financial statements.
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ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Operating activities:
Net income $125,705 $84,676 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation23,905 22,095 
Amortization12,651 11,871 
Share-based compensation expense9,285 7,138 
Provision for deferred income taxes(11,230)1,581 
Charge for excess and obsolete inventory5,811 3,249 
Other5,614 3,336 
Changes in operating assets and liabilities:
Trade accounts and notes receivable(31,171)(21,564)
Inventories(77,476)(39,337)
Accounts payable and accrued liabilities(22,323)(28,591)
Other current assets2,629 9,400 
Income taxes payable and refundable income taxes16,760 (3,588)
Other3,628 2,849 
Net cash provided by operating activities63,788 53,115 
Investing activities:
Acquisition of property, plant and equipment(84,405)(43,330)
Other1,123 72 
Net cash used in investing activities(83,282)(43,258)
Financing activities:
Proceeds from revolving credit facility79,000  
Payments of revolving credit facility(79,000) 
Payments for dividends(13,895)(10,908)
Issuance of common stock3,379 1,572 
Repurchase and retirement of common stock (15,000)
Taxes paid related to net share settlement of equity awards(16,117)(15,038)
Other(962)(1)
Net cash used in financing activities(27,595)(39,375)
Effect of exchange rate changes on cash and cash equivalents(2,744)(2,855)
Decrease in cash and cash equivalents(49,833)(32,373)
Cash and cash equivalents at beginning of period402,565 580,893 
Cash and cash equivalents at end of period$352,732 $548,520 
See the accompanying notes to condensed consolidated financial statements.
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ENTEGRIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Supplemental Cash Flow InformationThree months ended
(unaudited)
(In thousands)April 2, 2022April 3, 2021
Non-cash transactions:
Equipment purchases in accounts payable18,629 8,249 
Increase in dividends payable235 76 
Schedule of interest and income taxes paid:
Interest paid1,002 13,515 
Income taxes paid, net of refunds received12,867 14,959 
See the accompanying notes to condensed consolidated financial statements.
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ENTEGRIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations Entegris, Inc. (“Entegris”, “the Company”, “us”, “we”, or “our”) is a leading supplier of advanced materials and process solutions for the semiconductor and other high-technology industries.
Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Intercompany profits, transactions and balances have been eliminated in consolidation.
Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liability, income taxes and related accounts, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and contain all adjustments considered necessary, and are of a normal recurring nature, to present fairly the financial position as of April 2, 2022 and December 31, 2021, and the results of operations and comprehensive income for the three months ended April 2, 2022 and April 3, 2021, the equity statements as of and for the three months ended April 2, 2022 and April 3, 2021, and cash flows for the three months ended April 2, 2022 and April 3, 2021.
The condensed consolidated financial statements and accompanying notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company’s annual consolidated financial statements and notes. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis and consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2021. The results of operations for the three months ended April 2, 2022 are not necessarily indicative of the results to be expected for the full year.
Fair Value of Financial Instruments The carrying value of cash equivalents, accounts receivable, accounts payable, accrued payroll and related benefits, and other accrued liabilities approximates fair value due to the short maturity of those items. The fair value of long-term debt, including current maturities, was $896.8 million at April 2, 2022, compared to the carrying amount of long-term debt, including current maturities, of $937.3 million at April 2, 2022.
Recently Adopted Accounting Pronouncements The Company currently has no material recently adopted accounting pronouncements.
Recently Issued Accounting Pronouncements The Company currently has no material recent accounting pronouncements yet to be adopted.


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2. REVENUES
The following table provides information about current contract liabilities from contracts with customers. The contract liabilities are included in other accrued liabilities balance in the consolidated balance sheet.
(In thousands)April 2, 2022April 3, 2021
Balance at beginning of period$23,050 $13,852 
Revenue recognized that was included in the contract liability balance at the beginning of the period(11,426)(9,713)
Increases due to cash received, excluding amounts recognized as revenue during the period15,987 14,938 
Balance at end of period$27,611 $19,077 

3. ACQUISITIONS
Pending Acquisition - CMC Materials
On December 14, 2021, Entegris and CMC Materials, Inc. (“CMC Materials”) entered into a definitive Agreement and Plan of Merger pursuant to which Entegris will acquire CMC Materials in a cash and stock transaction with an enterprise value of approximately $6.5 billion. The transaction is expected to be financed with a combination of equity issued to CMC Materials, new debt and cash on hand. In connection with the Agreement and Plan of Merger, Entegris has obtained debt financing commitments from Morgan Stanley Senior Funding, Inc. and certain other financial institutions for (i) a senior unsecured bridge term loan facility in an aggregate principal amount of up to $895.0 million and (ii) a senior secured first lien term loan B facility in an aggregate principal amount of up to $2.495 billion. On April 14, 2022, Entegris also issued, via a wholly-owned escrow subsidiary, $1.6 billion aggregate principal amount of new 4.750% Senior Secured Notes due 2029. The transaction is expected to close in the second half of 2022, subject to the satisfaction of customary closing conditions, including the receipt of antitrust clearance or approval in China, Japan and Singapore and other customary closing conditions.
Precision Microchemicals
On November 30, 2021, the Company completed its acquisition of the Precision Microchemicals business from BASF SE. The Precision Microchemicals business reports into the Specialty Chemicals and Engineered Materials segment of the Company. The acquisition was accounted for under the acquisition method of accounting, and the Precision Microchemicals business results of operations are included in the Company’s consolidated financial statements as of and since November 30, 2021. The acquisition does not constitute a material business combination.
The purchase price for the Precision Microchemical business includes cash consideration of $89.7 million (net of cash acquired), which was funded from the Company’s existing cash on hand.
The purchase price of the Precision Microchemical business exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $42.8 million. Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to the Company, which resulted in a purchase price in excess of the fair value of identifiable net assets. This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.
The fair value of acquired identifiable intangible assets was determined using Level 3 inputs for the “income approach” on an individual asset basis. The key assumptions used in the calculation of the discounted cash flows include future revenue growth rates, future gross margin, future selling, general and administrative expense, royalty rates, and discount rates. The valuations and the underlying assumptions have been deemed reasonable by the Company’s management. There are inherent uncertainties and management judgment required in these determinations.
During the quarter ended April 2, 2022, the Company finalized its fair value determination of the assets acquired and the liabilities assumed. The following table summarizes the final allocation of the purchase price to the fair values assigned to the
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assets acquired and liabilities assumed at the date of the acquisition:
(In thousands):November 30, 2021As of April 2, 2022
Inventories, net$967 $967 
Other current assets19 19 
Identifiable intangible assets44,910 44,910 
Right-of-use assets1,912 1,912 
Property, plant and equipment1,002 1,002 
Other noncurrent assets18 18 
Accounts payable and accrued liabilities(43)(30)
Short-term lease liability(170)(170)
Long-term lease liability(1,742)(1,742)
Net assets acquired46,873 46,886 
Goodwill42,819 42,824 
Total purchase price, net of cash acquired$89,692 $89,710 
The Company recognized the following finite-lived intangible assets as part of the acquisition of the Precision Microchemicals business:
(In thousands)AmountWeighted
average life in
years
Developed technology$9,600 9.0
Trademarks and trade names3,400 15.0
Customer relationships31,800 15.5
Other110 
$44,910 14.1
4. INVENTORIES
Inventories consist of the following:
 
(In thousands)April 2, 2022December 31, 2021
Raw materials$236,645 $191,986 
Work-in-process47,965 40,257 
Finished goods260,997 242,970 
Total inventories, net$545,607 $475,213 

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5. GOODWILL AND INTANGIBLE ASSETS
Goodwill activity for each of the Company’s reportable segments that carry goodwill, Specialty Chemicals and Engineered Materials (“SCEM”), Microcontamination Control (“MC”) and Advanced Materials Handling (“AMH”), for each period was as follows:
(In thousands)Specialty Chemicals and Engineered MaterialsMicrocontamination ControlAdvanced Materials HandlingTotal
December 31, 2021$470,875 $248,725 $74,102 $793,702 
Purchase accounting adjustments5   5 
Foreign currency translation(27)181  154 
April 2, 2022$470,853 $248,906 $74,102 $793,861 
Identifiable intangible assets at April 2, 2022 and December 31, 2021 consist of the following:
April 2, 2022
(In thousands)Gross carrying
amount
Accumulated
amortization
Net carrying
value
Developed technology$294,216 $235,827 $58,389 
Trademarks and trade names33,558 20,838 12,720 
Customer relationships481,693 236,317 245,376 
Other20,287 14,483 5,804 
$829,754 $507,465 $322,289 
December 31, 2021
(In thousands)Gross carrying
amount
Accumulated
amortization
Net carrying
value
Developed technology$293,982 $232,722 $61,260 
Trademarks and trade names33,553 20,340 13,213 
Customer relationships481,674 227,350 254,324 
Other20,505 14,189 6,316 
$829,714 $494,601 $335,113 
Future amortization expense during the remainder of 2022, each of the succeeding four years and thereafter relating to intangible assets currently recorded in the Company’s condensed consolidated balance sheets is estimated to be the following at April 2, 2022:
(In thousands)Remaining 20222023202420252026ThereafterTotal
Future amortization expense$38,262 50,280 37,490 31,129 28,901 136,227 $322,289 

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6. DEBT
Long-term debt as of April 2, 2022 and December 31, 2021 consists of the following:
(In thousands)April 2, 2022December 31, 2021
Senior unsecured notes due 2029$400,000 $400,000 
Senior unsecured notes due 2028400,000 400,000 
Senior secured term loan facility due 2025145,000 145,000 
945,000 945,000 
Unamortized discount and debt issuance costs7,651 7,973 
Total long-term debt$937,349 $937,027 
Annual maturities of long-term debt, excluding unamortized discount and issuance costs, due as of April 2, 2022 are as follows:
(In thousands)20222023202420252026ThereafterTotal
Contractual debt obligation maturities*$   145,000  800,000 $945,000 
*Subject to Excess Cash Flow payments to the lenders.
Pending Acquisition
In connection with the pending acquisition of CMC Materials, on March 2, 2022, the Company entered into an amended and restated commitment letter, which amended and restated the commitment letter with Morgan Stanley Senior Funding, Inc. and certain other financial institutions (collectively, the “Financing Sources”), dated as of December 14, 2021, among Entegris and the Financing Sources (as amended and restated, the “Commitment Letter”). Pursuant to the Commitment Letter, the Financing Sources (a) committed to provide Entegris (i) a senior secured first lien term loan B facility in an aggregate principal amount of up to $4.0 billion (the “Term Loan B Facility”), and (ii) a senior unsecured bridge term loan facility in an aggregate principal amount of up to $895.0 million (the “Bridge Facility” and together with the Term Loan B Facility, the “Facilities”) and (b) to the extent that such Financing Sources are revolving lenders under Entegris’ existing credit agreement, (i) consented to the acquisition and certain amendments to the terms of the Company’s senior secured revolving credit facility (the “Revolving Facility”) and (ii) committed to provide to Entegris additional revolving credit commitments in an aggregate principal amount of $175.0 million (the Revolving Facility as amended, the “Amended Revolving Facility”). Commitments under the Bridge Facility will be reduced by, among other things, the aggregate gross cash proceeds in excess of $300.0 million resulting from any issuance or sale by Entegris of (x) senior unsecured notes pursuant to a public offering or a Rule 144A offering or other private placement or certain other debt securities or indebtedness for borrowed money, which are collectively referred to as the notes, and (y) equity securities (including common stock and any securities convertible or exchangeable into or exercisable for equity securities or other equity-linked securities) of Entegris. On March 2, 2022, the Company launched syndication of the Term Loan B Facility and completed syndication of $2.495 billion of the commitments under the Term Loan B Facility with pricing at Secured Overnight Financing Rate (“SOFR”) plus 3.00%. The Term Loan B Facility will be borrowed at, and the documentation with respect thereto will be executed on, the closing date of the pending acquisition of CMC Materials.
On March 30, 2022, the Company entered into an amendment to the Commitment Letter pursuant to which the Company was permitted to reduce the total commitments from the Financing Sources under the Term Loan B Facility instead of under the Bridge Facility upon issuance of the 2029 Secured Notes (as defined below). On April 13, 2022, the Company entered into a second amendment to the Commitment Letter pursuant to which the Company was permitted to exclude $95.0 million from the proceeds of any secured notes from reducing the commitments under the Bridge Facility.
On April 14, 2022, Entegris also issued, via a wholly-owned escrow subsidiary, $1.6 billion aggregate principal amount of new 4.750% Senior Secured Notes due 2029 (the “2029 Secured Notes”) and in connection therewith, reduced the commitments under the Term Loan B Facility to $2.495 billion.
The Company began incurring ticking fees associated with the Term Loan B Facility on March 2, 2022 and expects to continue to incur ticking fees through the closing date of the acquisition of CMC Materials. The ticking fees will be paid in cash to the term loan lenders on the closing date of the acquisition. During the quarter ended April 2, 2022, the Company incurred $4.7 million in ticking fees which were recorded to interest expense in the Condensed Consolidated Statement of Operations.

7. EARNINGS PER COMMON SHARE
Basic earnings per common share (“EPS”) is calculated based on the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per common share is calculated based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the
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applicable period. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per common share:
 
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Basic—weighted common shares outstanding135,670 135,068 
Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock882 1,434 
Diluted—weighted common shares and common shares equivalent outstanding136,552 136,502 
The Company excluded the following shares underlying stock-based awards from the calculations of diluted EPS because their inclusion would have been anti-dilutive for the three months ended April 2, 2022 and April 3, 2021:
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Shares excluded from calculations of diluted EPS140 140 
8. OTHER EXPENSE, NET
Other expense, net for the three months ended April 2, 2022 and April 3, 2021 consists of the following:
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Loss on foreign currency transactions$4,577 $4,263 
Other, net325 67 
Other expense, net$4,902 $4,330 
9. SEGMENT REPORTING
The Company’s financial segment reporting reflects an organizational alignment intended to leverage the Company’s unique breadth of capabilities to create mission-critical microcontamination control products, specialty chemicals and advanced materials handling solutions that maximize manufacturing yields, reduce manufacturing costs and enable higher device performance for its customers. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers, and strategic and technology roadmaps. The Company leverages its expertise from these three segments to create new and increasingly integrated solutions for its customers. The Company’s business is reported in the following segments:
Specialty Chemicals and Engineered Materials: SCEM provides high-performance and high-purity process chemistries, gases and materials and safe and efficient delivery systems to support semiconductor and other advanced manufacturing processes.
Microcontamination Control: MC offers solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.
Advanced Materials Handling: AMH develops solutions to monitor, protect, transport and deliver critical liquid chemistries, wafers, and other substrates for a broad set of applications in the semiconductor, life sciences and other high-technology industries.
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Summarized financial information for the Company’s reportable segments is shown in the following tables.
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Net sales
SCEM$196,421 $166,541 
MC266,637 207,099 
AMH198,113 148,541 
Inter-segment elimination(11,525)(9,337)
Total net sales$649,646 $512,844 
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Segment profit
SCEM$48,851 $34,556 
MC98,618 70,566 
AMH46,690 32,095 
Total segment profit$194,159 $137,217 
The following table reconciles total segment profit to income before income tax expense:
 Three months ended
(In thousands)April 2, 2022April 3, 2021
Total segment profit$194,159 $137,217 
Less:
Amortization of intangible assets12,651 11,871 
Unallocated general and administrative expenses18,162 11,368 
Operating income163,346 113,978 
Interest expense12,876 11,652 
Interest income(12)(71)
Other expense, net4,902 4,330 
Income before income tax expense $145,580 $98,067 
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In the following tables, revenue is disaggregated by customers’ country or region based on the ship to location of the customer for the three months ended April 2, 2022 and April 3, 2021, respectively.
Three months ended April 2, 2022
(In thousands)SCEM MCAMHInter-segment Total
North America$57,304 $35,355 $64,341 $(11,525)$145,475 
Taiwan32,504 78,043 33,718  144,265 
China26,524 40,521 26,828  93,873 
South Korea24,454 33,692 30,009  88,155 
Japan23,299 47,659 12,864  83,822 
Europe13,689 18,374 22,246  54,309 
Southeast Asia18,647 12,993 8,107  39,747 
$196,421 $266,637 $198,113 $(11,525)$649,646 
Three months ended April 3, 2021
(In thousands)SCEM MCAMHInter-segmentTotal
North America$49,064 $34,592 $45,465 $(9,337)$119,784 
Taiwan28,679 44,830 27,806  101,315 
China20,662 41,689 20,577  82,928 
South Korea25,170 28,011 18,905  72,086 
Japan22,480 36,723 12,005  71,208 
Europe11,777 11,117 16,494  39,388 
Southeast Asia8,709 10,137 7,289  26,135 
$166,541 $207,099 $148,541 $(9,337)$512,844 

10. SUBSEQUENT EVENT
On April 14, 2022, Entegris Escrow Corporation (the “Issuer”), a Delaware corporation and wholly-owned subsidiary of Entegris, completed a private offering of $1.6 billion aggregate principal amount of 4.75% Senior Secured Notes due 2029. The Company expects net proceeds from the offering of approximately $1.57 billion, after deducting estimated commissions and offering fees and expenses.
The Company intends to use the net proceeds from the offering of the 2029 Secured Notes, together with the borrowings under the Bridge Facility (or other sources of indebtedness which reduce the commitments under the Bridge Facility) and the Term Loan B Facility and cash on hand, to (a) finance a portion of the cash consideration for the pending acquisition of CMC Materials, (b) pay the fees and expenses related to the acquisition, the 2029 Secured Notes offering, the New Term Loan Facility, the Bridge Facility and the Amended Revolving Facility, (c) repay certain existing indebtedness of CMC Materials and Entegris and (d) in the case of the Term Loan B Facility, finance working capital and general corporate purposes of Entegris. In the event that the acquisition does not close, the Issuer will be required to redeem the 2029 Secured Notes at a price equal to 100% of the aggregate principal amount of the 2029 Secured Notes plus accrued and unpaid interest, if any, up to, but not including, the redemption date. The gross proceeds of the offering, together with certain additional amounts, have been deposited into a separate escrow account until the consummation of the acquisition.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’s condensed consolidated financial condition and results of operations should be read along with the condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The information, except for historical information, contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. You should review the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 as well as in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q. The Company assumes no obligation to publicly release the results of any revision or updates to these forward-looking statements to reflect future events or unanticipated occurrences.
Overview
This overview is not a complete discussion of the Company’s financial condition, changes in financial condition or results of operations; it is intended merely to facilitate an understanding of the most salient aspects of the Company’s financial condition and operating performance and to provide a context for the detailed discussion and analysis that follows. The discussion and analysis must be read in its entirety in order to fully understand the Company’s financial condition and results of operations.
The Company is a leading supplier of advanced materials and process solutions for the semiconductor and other high-technology industries. Our mission is to help our customers improve their productivity, performance and technology by providing solutions for the most advanced manufacturing environments. We leverage our unique breadth of capabilities to create mission-critical microcontamination control products, specialty chemicals and advanced materials handling solutions that maximize manufacturing yields, reduce manufacturing costs and enable higher device performance for our customers.
Our customized materials solutions enable the highest levels of performance essential to the manufacture of semiconductors. As our customers introduce more complex architectures and search for new materials with better electrical and structural properties to improve the performance of their devices, they rely on Entegris as a trusted partner to address these challenges. We understand these challenges and have solutions to address them, such as our advanced deposition materials, implant gases, formulated cleaning chemistries and selective etch chemistries. Our customers also require greater end-to-end materials purity and integrity in their manufacturing processes that, when combined with smaller dimensions and more complex architectures, can be challenging to achieve. To enable the use of new metals and the further miniaturization of chips, and to maximize yield and increase long-term device reliability, we provide products such as our advanced liquid and gas filtration and purification products that help to selectively remove new classes of contaminants throughout the semiconductor supply chain. In addition, to ensure purity levels are maintained across the entire supply chain, from bulk manufacturing, to transportation to and delivery through a fabrication plant, to application onto the wafer, we provide high-purity packaging and materials handling products.
Our business is organized and operated in three operating segments, which align with the key elements of the advanced semiconductor manufacturing ecosystem. The Specialty Chemicals and Engineered Materials segment, or SCEM, provides high-performance and high-purity process chemistries, gases and materials, and safe and efficient delivery systems, to support semiconductor and other advanced manufacturing processes. The Microcontamination Control segment, or MC, offers solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries. The Advanced Materials Handling segment, or AMH, develops solutions to monitor, protect, transport and deliver critical liquid chemistries, wafers and other substrates for a broad set of applications in the semiconductor, life sciences and other high-technology industries. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers and strategic and technology roadmaps. With the technology, capabilities and complementary product portfolios from these segments, we believe we are uniquely positioned to collaborate across divisions to create new, co-optimized and increasingly integrated solutions for our customers. For example, our SCEM segment offers a highly selective nitride etch chemistry, our MC segment provides a liquid filter that is specifically matched to that formulation and our AMH segment ensures the integrity of the product as it is moved to and through the fab environment. See note 9 to the condensed consolidated financial statements for additional information on the Company’s three segments.
The Company’s fiscal year is the calendar period ending each December 31. The Company’s fiscal quarters consist of 13-week or 14-week periods that end on a Saturday. The Company’s fiscal quarters in 2022 end April 2, 2022, July 2, 2022, October 1, 2022 and December 31, 2022.
Key operating factors Key factors that management believes have the largest impact on the overall results of operations of the Company include:
Level of sales Since a significant portion of the Company’s product costs (except for raw materials, purchased components and direct labor) are largely fixed in the short-to-medium term, an increase or decrease in sales affects gross profits and overall profitability significantly. Also, increases or decreases in sales and operating profitability affect certain costs such as incentive compensation and commissions, which are highly variable in nature. The
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Company’s sales are subject to the effects of industry cyclicality, technological change, substantial competition, pricing pressures and foreign currency fluctuations.
Variable margin on sales The Company’s variable margin on sales is determined by selling prices and the costs of manufacturing and raw materials. This is affected by a number of factors, which include the Company’s sales mix, purchase prices of raw materials (especially polymers, membranes, stainless steel and purchased components), domestic and international competition, direct labor costs and the efficiency of the Company’s production operations, among others.
Fixed cost structure The Company’s operations include a number of large fixed or semi-fixed cost components, which include salaries, indirect labor and benefits, facility costs, lease expenses and depreciation and amortization. It is not possible to vary these costs easily in the short-term as volumes fluctuate. Accordingly, increases or decreases in sales volume can have a large effect on the usage and productivity of these cost components, resulting in a large impact on the Company’s profitability.
Impact of COVID-19 on our Business
The COVID-19 pandemic continues to impact the global economy and cause significant macroeconomic uncertainty. Infection rates vary across the countries in which we operate. Governmental authorities have continued to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, masking recommendations and mandates, vaccine recommendations and mandates, limits on gatherings, quarantines, shelter-in-place orders and business shutdowns. For example, in response to an outbreak of infection in Shanghai, beginning in March 2022 governmental authorities in China implemented a lockdown order in that city, significantly slowing economic and business activity in that region. We have taken proactive, aggressive action to protect the health and safety of our employees, customers, partners and suppliers, consistent with the latest and evolving governmental guidelines. We expect to continue to implement appropriate measures until the COVID-19 pandemic is adequately contained. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers.
While certain of our operations from time-to-time have been temporarily affected by government-mandated restrictions, to date we have not experienced significant adverse impacts to our global operations as a result of the COVID-19 pandemic. Broader impacts of the pandemic have included a more dynamic supply chain and global logistics environment, and we have experienced instances of raw material constraints, higher freight costs and delivery delays in both inbound shipments of raw materials and outgoing shipments of finished products to customers. While we continue to focus on mitigating risks to our operations and supply chain in the current industry environment, we expect some of the foregoing challenges to linger. From a demand perspective, we continued to see strong demand for our leading-edge products, largely driven by accelerated digitalization, 5G applications and high-performance computing. As described above, the lockdown in Shanghai may cause demand for our products to be delayed or deferred.
At this time, given the dynamic nature of the situation, any impact on our financial condition, results of operations or cash flows in the future continues to be difficult to estimate and predict, as it depends on future events that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, the duration and continued spread of the pandemic, its severity, potential additional surges of infection, the emergence of more virulent or more dangerous variants, the actions taken to mitigate the virus or its impact, the development, distribution, efficacy and acceptance of vaccines worldwide, how quickly and to what extent normal economic and operating conditions can resume, the broader impact that the pandemic is having on the economy and our industry, and specific implications the pandemic may have on our suppliers and on global logistics. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding risks associated with the COVID-19 pandemic, including under the caption “The COVID-19 pandemic and ensuing governmental responses could materially adversely affect our financial condition and results of operations.”
Impact of Conflict Between Russia and Ukraine
The military conflict between Russia and Ukraine and the sanctions imposed by the United States and other governments in response to this conflict have caused significant volatility and disruptions to the global markets. While we source a few raw materials from Russia and Ukraine, to date our supply of these materials has not been significantly impacted by the conflict. We continue to monitor the situation closely and are proactively assessing and evaluating alternative sources to bolster our supply of these materials moving forward, in addition to working closely with our customers on any product re-qualification that may be required. Revenue relating to products manufactured from raw materials sourced from this region does not constitute a material portion of our business. Further, while sales to customers in Russia and Ukraine do not constitute a material portion of our business, there is uncertainty regarding the ultimate impact the conflict will have on the global economy, supply chains, logistics, fuel prices, raw material pricing and our business. Refer to Part II, Item 1A. “Risk Factors” for more information.
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Overall Summary of Financial Results
For the three months ended April 2, 2022, net sales increased 27% to $649.6 million, compared to $512.8 million for the three months ended April 3, 2021. Total net sales increased primarily as a result of strong growth across all three segments, as we benefited from robust industry growth and more wafers produced for leading-edge solutions, driving record demand for our products and solutions. Net sales for the three months ended April 2, 2022 included sales of $5.4 million from acquired businesses and unfavorable foreign currency translation effects of $9.7 million.
The Company experienced a 47.7% gross margin for the three months ended April 2, 2022, compared to 45.8% in the comparable year-ago period. The gross margin increase was driven by strong execution and higher volumes, offset in part by raw material, logistic costs and modest labor inflation.
As a result of the factors mentioned above, the Company reported net income of $125.7 million, or $0.92 per diluted share, for the quarter ended April 2, 2022, compared to net income of $84.7 million, or $0.62 per diluted share, a year ago.
On April 14, 2022, Entegris Escrow Corporation, a Delaware corporation and wholly-owned subsidiary of Entegris, completed a private offering of $1.6 billion aggregate principal amount of 4.75% Senior Secured Notes due 2029, or the 2029 Secured Notes. The Company expects net proceeds from the offering of approximately $1.57 billion, after deducting estimated commissions and offering fees and expenses, which will be used to finance a portion of the Company’s pending acquisition of CMC Materials.
Cash and cash equivalents were $352.7 million at April 2, 2022, compared with $402.6 million at December 31, 2021. The Company had outstanding long-term debt (excluding current maturities) of $937.3 million at April 2, 2022, compared to $937.0 million at December 31, 2021.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies affected most significantly by estimates, assumptions and judgments used in the preparation of the Company’s condensed consolidated financial statements are described in Item 7 of its Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 4, 2022. On an ongoing basis, the Company evaluates the critical accounting policies used to prepare its condensed consolidated financial statements, including, but not limited to, those related to business acquisitions. There have been no material changes in these critical accounting policies and estimates.
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Three Months Ended April 2, 2022 Compared to Three Months Ended April 3, 2021
The following table compares operating results for the three months ended April 2, 2022 and April 3, 2021, both in dollars and as a percentage of net sales, for each caption.
 Three months ended
(Dollars in thousands)April 2, 2022April 3, 2021
Net sales$649,646 100.0 %$512,844 100.0 %
Cost of sales339,826 52.3 277,858 54.2 
Gross profit309,820 47.7 234,986 45.8 
Selling, general and administrative expenses87,108 13.4 71,389 13.9 
Engineering, research and development expenses46,715 7.2 37,748 7.4 
Amortization of intangible assets12,651 1.9 11,871 2.3