Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Entegris Reports Results for Third Quarter of 2023


Entegris, Inc. (NASDAQ: ENTG), today reported its financial results for the Company's third quarter ended September 30, 2023. Third-quarter sales were $888.2 million, a decrease of 11% from the same quarter last year. Third-quarter GAAP net income was $33.2 million, or $0.22 income per diluted share, which included $15.9 million of goodwill impairment related to the sale of the Electronic Chemicals business, $51.2 million of amortization of intangible assets, $10.3 million of integration costs related to the acquisition of CMC Materials and $5.7 million of other net costs. Non-GAAP net income was $103.6 million for the third quarter and non-GAAP earnings per diluted share was $0.68.

Bertrand Loy, Entegris' president and chief executive officer, said: "The Entegris team delivered another quarter of solid results and execution, in what remains a challenging industry environment. Our revenue was down 1 percent sequentially, in line with expectations, and we continued to enjoy growth in product lines that are of increasing importance to our customers."

Mr. Loy added: "During the quarter, we made great progress on key commitments and initiatives. The CMC Materials integration is largely complete, we have divested three non-core businesses so far this year, and we are focused on improving our cash flow to rapidly pay down our outstanding debt. In addition, last week, we submitted an application for Chips Act funding for our new Colorado Springs facility, which will be critical to strengthen the U.S. domestic semiconductor ecosystem."

Mr. Loy added: "The semiconductor industry has likely reached a bottom in terms of utilization rates. However, the timing of the industry recovery continues to be uncertain. In this environment, we are effectively managing costs in the short-term, while making critical investments for the future. The long-term growth prospects for the semiconductor industry remain intact and the industry is entering a period of unprecedented technology change and device complexity. These trends are very favorable for Entegris, because our value proposition is unique and increasingly integral to our customers' roadmaps, especially in the areas of materials science, materials purity, and end-to-end solutions. This will ultimately translate into rapidly expanding content per wafer and superior growth for Entegris."

Quarterly Financial Results Summary

(in thousands, except percentages and per share data)

GAAP Results

September 30, 2023

October 1, 2022

July 1, 2023

Net sales

$888,239

$993,828

$901,000

Operating income

$117,061

$14,889

$267,614

Operating margin - as a % of net sales

13.2%

1.5%

29.7%

Net income (loss)

$33,212

($73,703)

$197,646

Diluted earnings (loss) per common share

$0.22

($0.50)

$1.31

Non-GAAP Results

Non-GAAP adjusted operating income

$195,715

$253,207

$200,917

Non-GAAP adjusted operating margin - as a % of net sales

22.0%

25.5%

22.3%

Non-GAAP net income

$103,588

$127,770

$99,605

Diluted non-GAAP earnings per common share

$0.68

$0.85

$0.66

Fourth-Quarter Outlook

The Company's guidance for the fourth quarter ending December 31, 2023, does not include the recently divested Electronic Chemicals business and only includes a minimal impact from the alliance agreement with Element Solutions, that was terminated earlier this year. Excluding the sales of these divested businesses for the third quarter 2023, fourth quarter 2023 sales are estimated to be down sequentially approximately 2% at the midpoint of the fourth quarter 2023 sales guidance range provided below.

For the fourth quarter ending December 31, 2023, the Company expects sales of $770 million to $790 million, GAAP net income of $37 million to $45 million and diluted earnings per common share between $0.25 and $0.30. On a non-GAAP basis, the Company expects diluted earnings per common share to range from $0.55 to $0.60, reflecting net income on a non-GAAP basis in the range of $83 million to $91 million. The Company also expects EBITDA of approximately 26% to 27% of sales, for the fourth quarter of 2023.

Segment Results

The Company operates in three segments (the Materials Solutions segment resulted from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials segments):

Materials Solutions (MS): MS provides advanced consumable materials, such as CMP slurries and pads, deposition materials, process chemistries and gases, formulated cleans, etchants and other specialty materials; that enable our customers' technical roadmaps, improve device performance, lower their total cost of ownership and enhance their yields.

Microcontamination Control (MC): MC offers advanced filtration solutions that improve customers' yield, device reliability and cost; by filtering and purifying critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.

Advanced Materials Handling (AMH): AMH develops solutions that improve customers' yields by protecting critical materials during manufacturing, transportation, and storage; including products that 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.

Third-Quarter Results Conference Call Details

Entegris will hold a conference call to discuss its results for the third quarter on Thursday, November 2, 2023, at 9:00 a.m. Eastern Time. Participants should dial 800-445-7795 or +1 785-424-1699, referencing confirmation ID: ENTGQ323. Participants are asked to dial in 10 minutes prior to the start of the call. For the live webcast and replay of the call, please Click Here.

Management's slide presentation concerning the results for the third quarter will be posted on the Investor Relations section of www.entegris.com in the morning before the call.

About Entegris
Entegris is a leading supplier of advanced materials and process solutions for the semiconductor and other high-tech industries. Entegris has approximately 9,000 employees throughout its global operations and is ISO 9001 certified. It 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). Proforma net sales, adjusted EBITDA, adjusted gross profit, adjusted segment profit, adjusted operating income, non-GAAP net income, non-GAAP adjusted operating margin and diluted non-GAAP earnings per common share, together with related measures thereof, 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 provides supplemental non-GAAP financial measures to better understand and manage its business and believes these measures provide investors and analysts additional and meaningful information for the assessment of the Company's ongoing results. Management also uses these non-GAAP measures to assist in the evaluation of the performance of its business segments and to make operating decisions. Management believes that the Company's non-GAAP measures help indicate the Company's baseline performance before certain gains, losses or other charges that may not be indicative of the Company's business or future outlook, and that non-GAAP measures offer a more consistent view of business performance. The Company believes the non-GAAP measures aid investors' overall understanding of the Company's results by providing a higher degree of transparency for such items and providing a level of disclosure that will help investors generally understand how management plans, measures and evaluates the Company's business performance. Management believes that the inclusion of non-GAAP measures provides greater consistency in its financial reporting and facilitates investors' understanding of the Company's historical operating trends by providing an additional basis for comparisons to prior periods. The reconciliations of GAAP gross profit to adjusted gross profit, GAAP segment profit to adjusted operating income, GAAP net income to adjusted operating income and adjusted EBITDA, GAAP net income and diluted earnings per common share to non-GAAP net income and diluted non-GAAP earnings per common share and GAAP outlook to non-GAAP outlook are included elsewhere in this release.

Cautionary Note on Forward-Looking Statements
This news release 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 supply chain matters; inflationary pressures; 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; 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 our business strategies, including with respect to the Company's expansion of its manufacturing presence in Taiwan and in Colorado Springs; 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 and divestitures the Company has made and commercial partnerships the Company has established, including the acquisition of CMC Materials, Inc. (now known as CMC Materials LLC) ("CMC Materials"); trends relating to the fluctuation of currency exchange rates; 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, 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 level of, and obligations associated with, the Company's indebtedness, including the debts incurred in connection with the acquisition of CMC Materials; risks related to the acquisition and integration of CMC Materials, including unanticipated difficulties or expenditures relating thereto, the ability to achieve the anticipated synergies and value-creation contemplated by the acquisition of CMC Materials and the diversion of management time on transaction-related matters; raw material shortages, supply and labor constraints, price increases, inflationary pressures and rising interest rates; operational, political and legal risks of the Company's international operations; the Company's dependence on sole source and limited source suppliers; 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, divestitures or other similar transactions; the Company's ability to effectively implement any organizational changes; the Company's ability to protect and enforce intellectual property rights; the impact of regional and global instabilities, hostilities and geopolitical uncertainty, including, but not limited to, the ongoing conflicts between Ukraine and Russia and between Israel and Hamas, as well as the global responses thereto; 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 national security and international trade policy, especially as they relate to China; fluctuation of currency exchange rates; fluctuations in the market price of the Company's stock; and other risk factors and additional information described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including under the heading "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on February 23, 2023, and in the Company's other SEC filings. Except as required under the federal securities laws and the rules and regulations of the SEC, the Company undertakes no obligation to update publicly any forward-looking statements or information contained herein, which speak as of their respective dates.

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Three months ended

 

 

September 30, 2023

October 1, 2022

July 1, 2023

Net sales

$888,239

$993,828

$901,000

Cost of sales

521,165

622,157

516,834

 

Gross profit

367,074

371,671

384,166

Selling, general and administrative expenses

116,051

226,446

145,596

Engineering, research and development expenses

66,810

64,990

71,030

Amortization of intangible assets

51,239

65,346

54,680

Goodwill impairment

15,913

?

?

Gain on termination of alliance agreement

?

?

(154,754)

 

Operating income

117,061

14,889

267,614

Interest expense, net

75,594

82,755

78,605

Other expense, net

10,243

12,852

7,724

 

Income (loss) before income tax benefit

31,224

(80,718)

181,285

Income tax benefit

(2,127)

(7,015)

(16,491)

Equity in net loss of affiliates

139

?

130

 

Net income (loss)

$33,212

($73,703)

$197,646

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

$0.22

($0.50)

$1.32

Diluted earnings (loss) per common share:

$0.22

($0.50)

$1.31

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

150,127

148,570

149,825

 

Diluted

151,229

148,570

150,837

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Nine months ended

 

 

September 30, 2023

October 1, 2022

Net sales

$2,711,635

$2,335,963

Cost of sales

1,558,710

1,344,075

 

Gross profit

1,152,925

991,888

Selling, general and administrative expenses

431,514

404,239

Engineering, research and development expenses

209,746

160,953

Amortization of intangible assets

163,493

90,491

Goodwill impairment

104,785

?

Gain on termination of alliance agreement

(154,754)

?

 

Operating income

398,141

336,205

Interest expense, net

239,020

126,962

Other expense, net

13,309

27,373

 

Income before income tax expense

145,812

181,870

Income tax expense

2,851

30,377

Equity in net loss of affiliates

269

?

 

Net income

$142,692

$151,493

 

 

 

 

 

 

Basic earnings per common share:

$0.95

$1.08

Diluted earnings per common share:

$0.95

$1.08

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

149,793

140,045

 

Diluted

150,816

140,892

Entegris, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

 

September 30, 2023

December 31, 2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

 

Cash, cash equivalents and restricted cash

$594,020

$563,439

Trade accounts and notes receivable, net

463,083

535,485

Inventories, net

 

662,169

812,815

Deferred tax charges and refundable income taxes

67,848

47,618

Assets held-for-sale

 

 

1,045,217

246,531

Other current assets

111,223

129,297

Total current assets

2,943,560

2,335,185

Property, plant and equipment, net

1,406,357

1,393,337

Other assets:

 

 

 

 

Right-of-use assets

83,548

94,940

Goodwill

3,954,036

4,408,331

Intangible assets, net

1,368,363

1,841,955

Deferred tax assets and other noncurrent tax assets

30,211

28,867

Other

 

38,541

36,242

Total assets

 

$9,824,616

$10,138,857

LIABILITIES AND EQUITY

 

Current liabilities

 

 

 

Short-term debt, including current portion of long-term debt

?

151,965

Accounts payable

 

139,637

172,488

Accrued liabilities

 

340,737

328,784

Liabilities held-for-sale

 

139,270

10,637

Income tax payable

 

63,515

98,057

Total current liabilities

683,159

761,931

Long-term debt, excluding current maturities

5,425,496

5,632,928

Long-term lease liability

 

71,347

80,716

Other liabilities

 

276,325

445,282

Shareholders' equity

 

3,368,289

3,218,000

Total liabilities and equity

$9,824,616

$10,138,857

Entegris, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three months ended

Nine months ended

 

September 30,

2023

October 1,

2022

September 30,

2023

October 1,

2022

Operating activities:

 

 

 

 

Net income

$33,212

($73,703)

$142,692

$151,493

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

39,631

45,203

130,125

93,489

Amortization

51,239

65,346

163,493

90,491

Share-based compensation expense

10,280

38,077

52,416

57,544

Loss on extinguishment of debt and modification

3,593

2,235

10,862

2,235

Impairment of Goodwill

15,913

?

104,785

?

Gain on termination of alliance agreement

?

?

(154,754)

?

Loss on sale of business and held for sale assets

?

?

28,579

?

Other

(10,243)

52,533

(27,533)

61,220

Changes in operating assets and liabilities, net of effects of acquisitions:

 

 

 

 

Trade accounts and notes receivable

(18,236)

22,931

(295)

(34,378)

Inventories

68,349

(55,394)

63,340

(180,335)

Accounts payable and accrued liabilities

27,940

56,162

4,345

83,307

Income taxes payable, refundable income taxes and noncurrent taxes payable

(21,204)

(12,089)

(36,774)

(15,637)

Other

(451)

4,231

(2,369)

10,801

Net cash provided by operating activities

200,023

145,532

478,912

320,230

Investing activities:

 

 

 

 

Acquisition of property and equipment

(78,139)

(126,739)

(328,182)

(318,836)

Acquisition of business, net of cash acquired

?

(4,474,925)

?

(4,474,925)

Proceeds from sale of business

?

?

134,286

?

Proceeds from termination of alliance agreement

?

?

169,251

?

Other

1,553

1

1,919

1,124

Net cash used in investing activities

(76,586)

(4,601,663)

(22,726)

(4,792,637)

Financing activities:

 

 

 

 

Proceeds from revolving credit facility, short-term debt and long-term debt

100,279

2,810,439

217,449

5,416,753

Payments of revolving credit facility, short-term debt and long-term debt

(175,279)

(223,000)

(603,950)

(416,000)

Payments for debt issuance costs

?

(88,910)

(3,475)

(99,489)

Payments for dividends

(15,052)

(14,929)

(45,202)

(42,413)

Issuance of common stock

866

1,787

37,633

10,764

Taxes paid related to net share settlement of equity awards

(1,894)

(6,430)

(11,540)

(22,747)

Other

(345)

(272)

(923)

(859)

Net cash (used in) provided by financing activities

(91,425)

2,478,685

(410,008)

4,846,009

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(5,009)

(11,118)

(15,597)

(21,500)

Increase (Decrease) in cash, cash equivalents and restricted cash

27,003

(1,988,564)

30,581

352,102

Cash, cash equivalents and restricted cash at beginning of period

567,017

2,743,231

563,439

402,565

Cash, cash equivalents and restricted cash at end of period

$594,020

$754,667

$594,020

$754,667

Entegris, Inc. and Subsidiaries

Segment Information

(In thousands)

(Unaudited)

 

 

Three months ended

 

Nine months ended

Net sales

September 30, 2023

October 1, 2022

July 1, 2023

 

September 30, 2023

October 1, 2022

Materials Solutions

$435,538

$518,046

$440,634

 

$1,324,502

$922,196

Microcontamination Control

286,217

280,550

283,614

 

839,128

821,320

Advanced Materials Handling

180,248

210,405

190,356

 

589,457

632,602

Inter-segment elimination

(13,764)

(15,173)

(13,604)

 

(41,452)

(40,155)

Total net sales

$888,239

$993,828

$901,000

 

$2,711,635

$2,335,963

 

Three months ended

 

Nine months ended

Segment profit

September 30, 2023

October 1, 2022

July 1, 2023

 

September 30, 2023

October 1, 2022

Materials Solutions

$56,955

$53,131

$215,738

 

$243,171

$147,700

Microcontamination Control

101,132

105,335

100,661

 

297,790

304,062

Advanced Materials Handling

31,642

42,077

35,830

 

115,637

135,693

Total segment profit

189,729

200,543

352,229

 

656,598

587,455

Amortization of intangibles

51,239

65,346

54,680

 

163,493

90,491

Unallocated expenses

21,429

120,308

29,935

 

94,964

160,759

Total operating income

$117,061

$14,889

$267,614

 

$398,141

$336,205

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit

(In thousands)

 

 

Three months ended

 

Nine months ended

 

September 30, 2023

October 1, 2022

July 1, 2023

 

September 30, 2023

October 1, 2022

Net Sales

$888,239

$993,828

$901,000

 

$2,711,635

$2,335,963

Gross profit-GAAP

$367,074

$371,671

$384,166

 

$1,152,925

$991,888

Adjustments to gross profit:

 

 

 

 

 

 

Restructuring costs 1

789

?

?

 

8,166

?

Charge for fair value mark-up of acquired inventory sold 2

?

61,932

?

 

?

61,932

Adjusted gross profit

$367,863

$433,603

$384,166

 

$1,161,091

$1,053,820

 

 

 

 

 

 

 

Gross margin - as a % of net sales

41.3 %

37.4 %

42.6 %

 

42.5 %

42.5 %

Adjusted gross margin - as a % of net sales

41.4 %

43.6 %

42.6 %

 

42.8 %

45.1 %

1 Restructuring charges resulting from cost saving initiatives.

2 Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to the CMC Materials acquisition.

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Segment Profit to Adjusted Operating Income

(In thousands)

(Unaudited)

 

 

Three months ended

 

Nine months ended

Adjusted segment profit

September 30, 2023

October 1, 2022

July 1, 2023

 

September 30, 2023

October 1, 2022

MS segment profit

$56,955

$53,131

$215,738

 

$243,171

$147,700

Restructuring costs 1

519

?

?

 

7,627

?

Loss from the sale of QED and held for sales assets of EC 2

?

?

14,936

 

28,578

?

Goodwill impairment 3

15,913

?

?

 

104,785

?

Gain on termination of alliance agreement4

?

?

(154,754)

 

(154,754)

?

Charge for fair value write-up of acquired inventory sold 5

?

61,932

?

 

?

61,932

MS adjusted segment profit

$73,387

$115,063

$75,920

 

$229,407

$209,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MC segment profit

$101,132

$105,335

$100,661

 

$297,790

$304,062

Restructuring costs 1

215

?

?

 

3,010

?

MC adjusted segment profit

$101,347

$105,335

$100,661

 

$300,800

$304,062

 

 

 

 

 

 

 

AMH segment profit

$31,642

$42,077

$35,830

 

$115,637

$135,693

Restructuring costs 1

467

?

?

 

1,721

?

AMH adjusted segment profit

$32,109

$42,077

$35,830

 

$117,358

$135,693

 

 

 

 

 

 

 

Unallocated general and administrative expenses

$21,429

$120,308

$29,935

 

$94,964

$160,759

Less: unallocated deal and integration costs

(10,301)

(111,040)

(18,441)

 

(48,717)

(129,869)

Less: unallocated restructuring costs 1

?

?

?

 

(86)

?

Adjusted unallocated general and administrative expenses

$11,128

$9,268

$11,494

 

$46,161

$30,890

 

 

 

 

 

 

 

Total adjusted segment profit

$206,843

$262,475

$212,411

 

$647,565

$649,387

Less: adjusted unallocated general and administrative expenses

11,128

9,268

11,494

 

46,161

30,890

Total adjusted operating income

$195,715

$253,207

$200,917

 

$601,404

$618,497

1 Restructuring charges resulting from cost saving initiatives.

2 Loss from the sale of QED and held for sales assets of EC.

3 Non-cash impairment charges associated with goodwill.

4 Gain on termination of alliance agreement with MacDermid Enthone.

5 Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to the CMC Materials acquisition.

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 30, 2023

October 1, 2022

July 1, 2023

 

September 30, 2023

October 1, 2022

Net sales

$888,239

$993,828

$901,000

 

$2,711,635

$2,335,963

Net income (loss)

$33,212

($73,703)

$197,646

 

$142,692

$151,493

Net income (loss) - as a % of net sales

3.7%

(7.4%)

21.9%

 

5.3%

6.5%

Adjustments to net income (loss):

 

 

 

 

 

 

Equity in net loss of affiliates

139

?

130

 

269

?

Income tax (benefit) expense

(2,127)

(7,015)

(16,491)

 

2,851

30,377

Interest expense, net

75,594

82,755

78,605

 

239,020

126,962

Other expense, net

10,243

12,852

7,724

 

13,309

27,373

GAAP - Operating income

117,061

14,889

267,614

 

398,141

336,205

Operating margin - as a % of net sales

13.2%

1.5%

29.7%

 

14.7%

14.4%

Goodwill impairment 1

15,913

?

?

 

104,785

?

Deal and transaction costs 2

?

31,867

?

 

3,001

39,285

Integration costs:

 

 

 

 

 

 

Professional fees 3

6,756

11,377

13,324

 

32,068

21,698

Severance costs 4

(454)

3,996

965

 

1,873

3,996

Retention costs 5

45

1,530

362

 

1,687

1,530

Other costs 6

3,953

3,859

3,789

 

10,087

4,949

Contractual and non-cash integration costs:

 

 

 

 

 

 

CMC Retention 7

?

14,477

?

 

?

14,477

Stock-based compensation alignment 8

?

21,584

?

 

?

21,584

Change in control costs 9

?

22,350

?

 

?

22,350

Restructuring costs 10

1,202

?

?

 

12,444

?

Loss on sale of business and held for sale assets 11

?

?

14,937

 

28,579

?

Charge for fair value write-up of acquired inventory sold 12

?

61,932

?

 

?

61,932

Gain on termination of alliance agreement 13

?

?

(154,754)

 

(154,754)

?

Amortization of intangible assets 14

51,239

65,346

54,680

 

163,493

90,491

Adjusted operating income

195,715

253,207

200,917

 

601,404

618,497

Adjusted operating margin - as a % of net sales

22.0%

25.5%

22.3%

 

22.2%

26.5%

Depreciation

39,631

45,203

43,719

 

130,125

93,489

Adjusted EBITDA

$235,346

$298,410

$244,636

 

$731,529

$711,986

Adjusted EBITDA - as a % of net sales

26.5%

30.0%

27.2%

 

27.0%

30.5%

1 Non-cash impairment charges associated with goodwill.

2 Deal and transaction costs associated with CMC Materials acquisition and completed and announced divestitures.

3 Represents professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers and other third-party service providers to assist us in integrating CMC Materials into our operations.

4 Represent severance charges related to the integration of the CMC Materials acquisition

5 Represents retention charges related directly to the CMC Materials acquisition and completed and announced divestitures, and are not part of our normal, recurring cash operating expenses. 

6 Represents other employee related costs and other costs incurred relating to the CMC Materials acquisition and the completed and announced divestitures.  These costs arise outside of the ordinary course of our continuing operations.

7Represents non-recurring costs associated with the CMC Materials retention program that was agreed upon and set forth in the definitive acquisition agreement.

8 Represents the non-cash incremental expense associated with adopting retirement vesting obligations on Entegris equity awards, similar to those of CMC Materials equity awards.

9 Relates to the change in control agreements that were in place with management of CMC Materials prior to the acquisition and the associated expense post-acquisition. 

10 Restructuring charges resulting from cost saving initiatives.

11 Loss from the sale of QED and held-for-sale assets of EC.

12 Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to the CMC Materials acquisition.

13 Gain on termination of the alliance agreement with MacDermid Enthone.

14 Non-cash amortization expense associated with intangibles acquired in acquisitions.

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Net Income and Diluted Earnings per Common Share to Non-GAAP Net Income and Diluted Non-GAAP Earnings per Common Share

(In thousands, except per share data)(Unaudited)

 

 

Three months ended

 

Nine months ended

 

September 30,

2023

October 1,

2022

July 1,

2023

 

September 30,

2023

October 1,

2022

GAAP net income (loss)

$33,212

($73,703)

$197,646

 

$142,692

$151,493

Adjustments to net income (loss):

 

 

 

 

 

 

Goodwill impairment 1

15,913

?

?

 

104,785

?

Deal and transaction costs 2

?

31,867

?

 

3,001

39,285

Integration costs:

 

 

 

 

 

 

Professional fees 3

6,756

11,377

13,324

 

32,068

21,698

Severance costs 4

(454)

3,996

965

 

1,873

3,996

Retention costs 5

45

1,530

362

 

1,687

1,530

Other costs 6

3,953

3,859

3,789

 

10,087

4,949

Contractual and non-cash integration costs:

?

 

?

 

?

?

CMC Retention 7

?

14,477

?

 

?

14,477

Stock-based compensation alignment 8

?

21,584

?

 

?

21,584

Change in control costs 9

?

22,350

?

 

?

22,350

Restructuring costs 10

1,202

?

?

 

12,444

?

Loss on extinguishment of debt and modification 11

4,532

2,235

4,481

 

12,893

2,235

Loss on sale of business and held for sale assets 12

?

?

14,937

 

28,579

?

Gain on termination of alliance agreement 13

?

?

(154,754)

 

(154,754)

?

Infineum termination fee, net 14

?

?

?

 

(10,877)

?

Charge for fair value write-up of acquired inventory sold 15

?

61,932

?

 

?

61,932

Interest expense, net 16

?

2,397

?

 

?

29,822

Amortization of intangible assets 17

51,239

65,346

54,680

 

163,493

90,491

Tax effect of adjustments to net income and discrete tax items18

(12,810)

(41,477)

(35,825)

 

(46,996)

(56,123)

Non-GAAP net income

$103,588

$127,770

$99,605

 

$300,975

$409,719

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

$0.22

($0.50)

$1.31

 

$0.95

$1.08

Effect of adjustments to net income

$0.46

$1.35

($0.65)

 

$1.05

$1.83

Diluted non-GAAP earnings per common share

$0.68

$0.85

$0.66

 

$2.00

$2.91

 

 

 

 

 

 

 

Diluted weighted averages shares outstanding

151,229

148,570

150,837

 

150,816

140,892

Effect of adjustment to diluted weighted average shares outstanding

?

1,099

?

 

?

?

Diluted non-GAAP weighted average shares outstanding

151,229

149,669

150,837

 

150,816

140,892

1 Non-cash impairment charges associated with goodwill.

2 Deal and transaction costs associated with the CMC Materials acquisition and completed and announced divestitures

Represents professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers and other third-party service providers to assist us in integrating CMC Materials into our operations. These fees arise outside of the ordinary course of our continuing operations.

4 Represent severance charges related to the integration of CMC Materials.

5 Represents retention charges related directly to the CMC Materials acquisition and completed and announced divestitures, and are not part of our normal, recurring cash operating expenses. 

6 Represents other employee-related costs and other costs incurred relating to the CMC Materials acquisition and completed and announced divestitures.  These costs arise outside of the ordinary course of our continuing operations.

7Represents non-recurring costs associated with the CMC retention program that was agreed upon and set forth in the definitive acquisition agreement.

8Represents the non-cash incremental expense associated with adopting retirement vesting obligations on Entegris equity awards, similar to those of CMC Materials equity awards.

9 Relates to the change in control agreements that were in place with management of CMC Materials prior to the acquisition and the associated expense post-acquisition. 

10 Restructuring charges resulting from cost saving initiatives.

11 Non-recurring loss on extinguishment of debt and modification of our Credit Amendment.

12 Loss from the sale of QED and held for sales assets of EC.

13 Gain on termination of the alliance agreement with MacDermid Enthone.

14 Non-recurring gain from the termination fee with Infineum. 

15Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to the CMC Materials acquisition.

16 Non-recurring interest costs related to the financing of the CMC Materials acquisition. 

17 Non-cash amortization expense associated with intangibles acquired in acquisitions.

18 The tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate for each respective year.

Entegris, Inc. and Subsidiaries

Reconciliation of GAAP Outlook to Non-GAAP Outlook

(In millions, except per share data)

(Unaudited)

 

 

Fourth-Quarter Outlook

Reconciliation GAAP Operating Margin to non-GAAP Operating Margin and Adjusted EBITDA Margin

December 31, 2023

Net sales

$770 - $790

GAAP - Operating income

$102 - $114

Operating margin - as a % of net sales

13% - 14%

Deal, transaction and integration costs

5

Amortization of intangible assets

51

Adjusted operating income

$158 - $170

Adjusted operating margin - as a % of net sales

21% - 22%

Depreciation

42

Adjusted EBITDA

$200 - $212

Adjusted EBITDA - as a % of net sales

26% - 27%

 

Fourth-Quarter Outlook

Reconciliation GAAP net income to non-GAAP net income

December 31, 2023

GAAP net income

$37 - $45

Adjustments to net income:

 

Deal, transaction and integration costs

5

Amortization of intangible assets

51

Income tax effect

(10)

Non-GAAP net income

$83 - $91

 

Fourth-Quarter Outlook

Reconciliation GAAP diluted earnings per share to non-GAAP diluted earnings per share

December 31, 2023

Diluted earnings per common share

$0.25 - $0.30

Adjustments to diluted earnings per common share:

 

Deal, transaction and integration costs

0.03

Amortization of intangible assets

0.34

Income tax effect

(0.07)

Diluted non-GAAP earnings per common share

$0.55 - $0.60

 


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