Entegris reports results for first quarter of 2020
Billerica, mass.--(business wire)--entegris, inc. (nasdaq: entg), today reported its financial results for the company’s first quarter ended march 28, 2020. first-quarter sales were $412.3 million, an increase of 5% from the same quarter last year. gaap first-quarter net income was $61.0 million, or $0.45 per diluted share, which included $16.2 million of amortization of intangible assets and $1.4 million in deal and transaction costs. non-gaap net income was $75.6 million and non-gaap net income per diluted share was $0.55. bertrand loy, president and chief executive officer, said: “during these unprecedented times, our first priority is to ensure the health and safety of our colleagues and families, while continuing to provide exceptional service to our customers. in light of the significant challenges from covid-19, i’m pleased with our first quarter results. despite major supply-chain shutdowns across many industries, our manufacturing operations were only modestly impacted by covid-19, as a direct result of the extraordinary efforts of our entegris teams and extended supply chain partners around the world.” mr. loy added: “while the demand for our products will likely be impacted by the ongoing effects of covid-19 on the global economy, we remain very optimistic about the long-term prospects of the industry and the criticality of our solutions. our team has very effectively managed challenging times in the past and will take the necessary steps to align our business to market conditions as they evolve. entegris is in a strong financial position and has sufficient liquidity to navigate through this environment.” quarterly financial results summary (in thousands, except percentages and per share data) gaap results march 28, 2020 march 30, 2019 december 31, 2019 net sales $412,327 $391,047 $426,998 operating income $80,744 $47,491 $84,085 operating margin 19.6% 12.1% 19.7% net income $61,006 $32,658 $57,438 diluted earnings per share (eps) $0.45 $0.24 $0.42 non-gaap results non-gaap adjusted operating income $99,638 $92,180 $104,647 non-gaap adjusted operating margin 24.2% 23.6% 24.5% non-gaap net income $75,571 $67,894 $74,582 non-gaap eps $0.55 $0.50 $0.55 second-quarter outlook for the second quarter ending june 27, 2020, the company expects sales of $410 million to $430 million, net income of $50 million to $59 million and net income per diluted share between $0.37 and $0.43. on a non-gaap basis, eps is expected to range from $0.45 to $0.51 per diluted share, which reflects net income on a non-gaap basis in the range of $61 million to $70 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. first-quarter results conference call details entegris will hold a conference call to discuss its results for the first quarter on tuesday, april 21, 2020, at 9:00 a.m. eastern time. participants should dial 888-254-3590 or +1 323-994-2093, referencing confirmation code 3810279. 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 3810279. 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 first quarter, which may be referred to during the call, will be posted on the investor relations section of www.entegris.com tuesday morning before the call. about entegris entegris is a world-class supplier of advanced materials and process solutions for the semiconductor 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, including the expected impact of the covid-19 pandemic; 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; risks related to the covid-19 pandemic on the global economy and financial markets, as well as on the company, our customers and suppliers, which may impact our sales, gross margin, customer demand and our ability to supply our products to our customers; 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, 2019, filed on february 7, 2020, 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. and subsidiaries condensed consolidated statements of operations (in thousands, except per share data) (unaudited) three months ended march 28, 2020 march 30, 2019 december 31, 2019 net sales $ 412,327 $ 391,047 $ 426,998 cost of sales 226,849 213,654 229,362 gross profit 185,478 177,393 197,636 selling, general and administrative expenses 58,891 82,254 67,171 engineering, research and development expenses 29,632 28,991 30,352 amortization of intangible assets 16,211 18,657 16,028 operating income 80,744 47,491 84,085 interest expense, net 10,238 9,659 12,743 other expense (income), net 878 (248 ) 248 income before income tax expense 69,628 38,080 71,094 income tax expense 8,622 5,422 13,656 net income $ 61,006 $ 32,658 $ 57,438 basic net income per common share: $ 0.45 $ 0.24 $ 0.43 diluted net income per common share: $ 0.45 $ 0.24 $ 0.42 weighted average shares outstanding: basic 134,745 135,299 134,778 diluted 136,369 136,692 136,470 entegris, inc. and subsidiaries condensed consolidated balance sheets (in thousands) (unaudited) march 28, 2020 december 31, 2019 assets current assets: cash and cash equivalents $ 335,077 $ 351,911 trade accounts and notes receivable, net 277,796 234,409 inventories, net 300,694 287,098 deferred tax charges and refundable income taxes 25,650 24,552 other current assets 27,089 34,427 total current assets 966,306 932,397 property, plant and equipment, net 474,841 479,544 other assets: right-of-use assets 50,058 50,160 goodwill 726,234 695,044 intangible assets, net 355,815 333,952 deferred tax assets and other noncurrent tax assets 11,563 11,245 other 13,748 13,744 total assets $ 2,598,565 $ 2,516,086 liabilities and equity current liabilities long-term debt, current maturities $ 4,000 $ 4,000 accounts payable 81,561 84,207 accrued liabilities 90,447 150,118 income tax payable 25,982 26,108 total current liabilities 201,990 264,433 long-term debt, excluding current maturities 1,074,888 932,484 long-term lease liability 43,549 43,827 other liabilities 106,811 109,453 shareholders’ equity 1,171,327 1,165,889 total liabilities and equity $ 2,598,565 $ 2,516,086 entegris, inc. and subsidiaries condensed consolidated statements of cash flows (in thousands) (unaudited) three months ended march 28, 2020 march 30, 2019 operating activities: net income $ 61,006 $ 32,658 adjustments to reconcile net income to net cash provided by operating activities: depreciation 20,648 16,721 amortization 16,211 18,657 stock-based compensation expense 4,994 4,653 other 5,563 5,694 changes in operating assets and liabilities, net of effects of acquisitions: trade accounts and notes receivable (43,995 ) (9,109 ) inventories (18,205 ) (2,131 ) accounts payable and accrued liabilities (38,020 ) (45,019 ) income taxes payable, refundable income taxes and noncurrent taxes payable (225 ) (42,873 ) other 3,426 18,211 net cash provided by (used in) operating activities 11,403 (2,538 ) investing activities: acquisition of property and equipment (22,585 ) (34,465 ) acquisition of business, net of cash (75,630 ) (49,789 ) other 5 197 net cash used in investing activities (98,210 ) (84,057 ) financing activities: proceeds from short-term borrowings and long-term debt 217,000 — payments on long-term debt (75,000 ) (1,000 ) dividend payments (10,847 ) (9,470 ) issuance of common stock 551 917 taxes paid related to net share settlement of equity awards (11,440 ) (7,727 ) repurchase and retirement of common stock (29,654 ) (35,321 ) deferred acquisition payments (16,125 ) — other (2,890 ) (250 ) net cash provided by (used in) financing activities 71,595 (52,851 ) effect of exchange rate changes on cash and cash equivalents (1,712 ) (256 ) (decrease) in cash and cash equivalents (16,924 ) (139,702 ) cash and cash equivalents at beginning of period 351,911 482,062 cash and cash equivalents at end of period $ 334,987 $ 342,360 entegris, inc. and subsidiaries segment information (in thousands) (unaudited) three months ended net sales march 28, 2020 march 30, 2019 december 31, 2019 specialty chemicals and engineered materials $ 144,214 $ 124,470 $ 146,747 microcontamination control 159,261 157,706 169,794 advanced materials handling 116,137 116,064 117,455 inter-segment elimination (7,285 ) (7,193 ) (6,998 ) total net sales $ 412,327 $ 391,047 $ 426,998 three months ended segment profit march 28, 2020 march 30, 2019 december 31, 2019 specialty chemicals and engineered materials $ 32,670 $ 24,431 $ 32,822 microcontamination control 50,167 47,323 57,157 advanced materials handling 20,632 22,367 20,686 total segment profit 103,469 94,121 110,665 amortization of intangibles 16,211 18,657 16,028 unallocated expenses 6,514 27,973 10,552 total operating income $ 80,744 $ 47,491 $ 84,085 entegris, inc. and subsidiaries reconciliation of gaap gross profit to adjusted gross profit (in thousands) (unaudited) three months ended march 28, 2020 march 30, 2019 december 31, 2019 net sales $ 412,327 $ 391,047 $ 426,998 gross profit-gaap $ 185,478 $ 177,393 $ 197,636 adjustments to gross profit: severance and restructuring costs — 358 (12) charge for fair value mark-up of acquired inventory sold 361 2,155 211 adjusted gross profit $ 185,839 $ 179,906 $ 197,835 gross margin - as a % of net sales 45.0 % 45.4 % 46.3 % adjusted gross margin - as a % of net sales 45.1 % 46.0 % 46.3 % entegris, inc. and subsidiaries reconciliation of gaap segment profit to adjusted operating income (in thousands) (unaudited) three months ended segment profit-gaap march 28, 2020 march 30, 2019 december 31, 2019 specialty chemicals and engineered materials (scem) $ 32,670 $ 24,431 $ 32,822 microcontamination control (mc) 50,167 47,323 57,157 advanced materials handling (amh) 20,632 22,367 20,686 total segment profit 103,469 94,121 110,665 amortization of intangible assets 16,211 18,657 16,028 unallocated expenses 6,514 27,973 10,552 total operating income $ 80,744 $ 47,491 $ 84,085 three months ended adjusted segment profit march 28, 2020 march 30, 2019 december 31, 2019 scem segment profit $ 32,670 $ 24,431 $ 32,822 severance and restructuring costs 174 519 184 charge for fair value write-up of acquired inventory sold 235 120 (476 ) scem adjusted segment profit $ 33,079 $ 25,070 $ 32,530 mc segment profit $ 50,167 $ 47,323 $ 57,157 severance and restructuring costs 190 724 195 charge for fair value write-up of acquired inventory sold 126 2,035 687 mc adjusted segment profit $ 50,483 $ 50,082 $ 58,039 amh segment profit $ 20,632 $ 22,367 $ 20,686 severance and restructuring costs 135 578 (379 ) amh adjusted segment profit $ 20,767 $ 22,945 $ 20,307 unallocated general and administrative expenses $ 6,514 $ 27,973 $ 10,552 unallocated deal and integration costs (1,479 ) (22,056 ) (4,323 ) unallocated severance and restructuring costs (344 ) — — adjusted unallocated general and administrative expenses $ 4,691 $ 5,917 $ 6,229 total adjusted segment profit $ 104,329 $ 98,097 $ 110,876 adjusted amortization of intangible assets — — — adjusted unallocated expenses 4,691 5,917 6,229 total adjusted operating income $ 99,638 $ 92,180 $ 104,647 entegris, inc. and subsidiaries reconciliation of gaap net income to adjusted operating income and adjusted ebitda (in thousands) (unaudited) three months ended march 28, 2020 march 30, 2019 december 31, 2019 net sales $ 412,327 $ 391,047 $ 426,998 net income $ 61,006 $ 32,658 $ 57,438 adjustments to net income: income tax expense 8,622 5,422 13,656 interest expense, net 10,238 9,659 12,743 other expense (income), net 878 (248 ) 248 gaap - operating income 80,744 47,491 84,085 charge for fair value write-up of acquired inventory sold 361 2,155 211 deal and transaction costs 1,431 19,136 973 integration costs 48 2,920 3,350 severance and restructuring costs 843 1,821 — amortization of intangible assets 16,211 18,657 16,028 adjusted operating income 99,638 92,180 104,647 depreciation 20,648 16,721 20,352 adjusted ebitda $ 120,286 $ 108,901 $ 124,999 net income - as a % of net sales 14.8 % 8.4 % 13.5 % adjusted operating margin 24.2 % 23.6 % 24.5 % adjusted ebitda - as a % of net sales 29.2 % 27.8 % 29.3 % 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 march 28, 2020 march 30, 2019 december 31, 2019 gaap net income $ 61,006 $ 32,658 $ 57,438 adjustments to net income: charge for fair value write-up of inventory acquired 361 2,155 211 deal and transaction costs 1,431 19,547 973 integration costs 48 2,920 3,350 severance and restructuring costs 843 1,821 — loss on debt extinguishment and modification — — 1,980 amortization of intangible assets 16,211 18,657 16,028 tax effect of adjustments to net income and discrete items1 (4,329 ) (9,864 ) (5,398 ) non-gaap net income $ 75,571 $ 67,894 $ 74,582 diluted earnings per common share $ 0.45 $ 0.24 $ 0.42 effect of adjustments to net income $ 0.11 $ 0.26 $ 0.13 diluted non-gaap earnings per common share $ 0.55 $ 0.50 $ 0.55 1the tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years. entegris, inc. and subsidiaries reconciliation of gaap outlook to non-gaap outlook (in millions, except per share data) (unaudited) second-quarter outlook reconciliation gaap net income to non-gaap net income june 27, 2020 gaap net income $50 - $59 adjustments to net income: restructuring and integration costs 2 amortization of intangible assets 12 income tax effect (3) non-gaap net income $61 - $70 second-quarter outlook reconciliation gaap diluted earnings per share to non-gaap diluted earnings per share june 27, 2020 diluted earnings per common share $0.37 - $0.43 adjustments to diluted earnings per common share: restructuring and integration costs 0.01 amortization of intangible assets 0.09 income tax effect (0.02) diluted non-gaap earnings per common share $0.45 to $0.51
