Entegris reports solid results in third quarter of 2018
Billerica, mass.--(business wire)--entegris, inc. (nasdaqgs: entg), a leader in specialty chemicals and advanced materials solutions for the microelectronics industry, today reported its financial results for the company’s third quarter ended september 29, 2018. third-quarter sales were $398.6 million, an increase of 15% from the same quarter last year and a 4% increase sequentially. third-quarter net income was $48.1 million, or $0.34 per diluted share, which included $21.4 million of amortization of intangible assets, a $3.3 million charge for fair value write-up of acquired inventory sold, a $2.6 million net tax effect related to the tax cuts and jobs act, $0.8 million of integration costs and transaction expenses associated with the purchase of saes pure gas and $0.5 million of a loss on the sale of a cleaning services business based in france. non-gaap net income of $65.6 million, or $0.46 per diluted share, both increased 15%, compared to the third quarter of 2017. for the first nine months of fiscal 2018, sales of $1.1 billion increased 16% from the same period a year ago. for the first nine months of 2018, net income was $160.0 million, or $1.12 per share, which included $45.1 million of amortization of intangible assets, a $0.4 million net tax effect related to the tax cuts and jobs act, $7.1 million of integration costs and transaction expenses associated with the purchase of saes pure gas, a $3.5 million charge for fair value write-up of acquired inventory sold, and $0.5 million of a loss on the sale of a cleaning services business based in france. non-gaap net income for the first nine months of 2018 of $203.5 million, or $1.42 per diluted share, both increased 39% compared to the first nine months of 2017. bertrand loy, president and chief executive officer, said: "in the third quarter we demonstrated the value and resilience of our broad unit driven business platform, as we achieved record sales and delivered solid performance in a mixed environment. our recent acquisition of saes pure gas is performing well and its sales have exceeded our expectations during the quarter, reflecting key secular demand drivers for higher process purity." mr. loy added: "our unique capability to address the industry's increasing materials complexity and purity challenges is driving our long-term growth prospects and our ability to outperform the market. for the full year 2018 we expect to leverage our sales growth of approximately 15 percent into growth of our non-gaap earnings per share of approximately 30 percent." quarterly financial results summary(in thousands, except per share data) fourth-quarter outlook for the fourth quarter ending december 31, 2018, the company expects sales of $380 million to $400 million, net income of $43 million to $53 million and net income per diluted share between $0.30 and $0.37. on a non-gaap basis, eps is expected to range from $0.41 to $0.48 per diluted share, which reflects net income on a non-gaap basis in the range of $59 million to $69 million, which is adjusted for expected amortization and integration expenses of approximately $21 million, or $0.11 per share. 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 and substrates for a broad set of applications in the semiconductor industry 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, october 25, 2018, at 9:00 a.m. eastern time. participants should dial 888-204-4368 or +1 323-794-2423, referencing confirmation code 1918715. 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 1918715. the replay will be available starting at 12:00 p.m. et on thursday, october 25 through december 8, 2018 at 12:00 p.m. et. the call can also be accessed live and on-demand from the entegris website. point your web browser to http://investor.entegris.com/events.cfm and follow the link to the webcast. the on-demand playback will be available for six weeks after the conclusion of the teleconference. management’s slide presentation concerning the results for the third quarter, which may be referred to during the call, will be posted on the investor relations section of www.entegris.com thursday morning before the call. about entegrisentegris is a leader in specialty chemicals and advanced materials solutions for the microelectronics industry and other high-tech industries. entegris is iso 9001 certified and has manufacturing, customer service and/or research facilities in the united states, china, france, germany, israel, japan, malaysia, singapore, south korea and taiwan. additional information can be found at www.entegris.com. non-gaap informationthe 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 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 our competitors' operating results. management believes that these non-gaap financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring business operating results, such as amortization, depreciation and discrete cash charges that are infrequent in nature. we believe that both management and investors benefit from referring to these non-gaap financial measures in assessing and understanding our results and performance and when planning, forecasting, and analyzing future periods. we believe 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 our institutional investors and the analyst community to help them analyze our business. the reconciliations of gaap net income (loss) to adjusted operating income and adjusted ebitda, and gaap net income (loss) to non-gaap earnings per share are included elsewhere in this release. forward-looking statementsthis press release contains forward-looking statements within the meaning of the private securities litigation reform act of 1995. the words “believe,” “expect,” “anticipate,” “intends,” “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; our performance relative to our markets; market and technology trends; the development of new products and the success of their introductions; 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 our capital allocation strategy; the impact of the acquisitions we have made and commercial partnerships we have established; our ability to execute on our strategies; and other matters. these statements involve risks and uncertainties, and actual results may differ. 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 our products and solutions; our ability to meet rapid demand shifts; our ability to continue technological innovation and introduce new products to meet our customers' rapidly changing requirements; our concentrated customer base; our ability to identify, effect and integrate acquisitions, joint ventures or other transactions; our ability to protect and enforce intellectual property rights; operational, political and legal risks of our international operations; our dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; raw material shortages and price increases; changes in government regulations of the countries in which we operate; fluctuation of currency exchange rates; fluctuations in the market price of entegris’ stock; the level of, and obligations associated with, our indebtedness; and other risk factors and additional information described in our filings with the securities and exchange commission, including under the heading “risks factors" in item 1a of our annual report on form 10-k for the fiscal year ended december 31, 2017, filed on february 15, 2018, and in our 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) entegris, inc. and subsidiaries condensed consolidated statements of operations (in thousands, except per share data) (unaudited) other expense, net entegris, inc. and subsidiaries condensed consolidated balance sheets (in thousands) (unaudited) entegris, inc. and subsidiaries condensed consolidated statements of cash flows (in thousands) (unaudited) september 29,2018 september 30,2017 september 29,2018 september 30,2017 entegris, inc. and subsidiaries segment information (in thousands) (unaudited) 1beginning in the first quarter of 2018, the company has changed its definition of segment profit to include an allocation of certain general and administrative costs for the company’s human resources, finance and information technology functions previously unallocated by the company. prior quarter information was recast to reflect the change in the company's definition of segment profit. entegris, inc. and subsidiaries reconciliation of gaap gross profit to adjusted gross profit (in thousands) (unaudited) september 29,2018 september 30,2017 september29, 2018 september30, 2017 entegris, inc. and subsidiaries reconciliation of gaap segment profit to adjusted operating income (in thousands) (unaudited) september 29,2018 september 30,2017 september 29,2018 september 30,2017 september 29,2018 september 30,2017 september 29,2018 september 30,2017 1adjusted segment profit for specialty chemicals and engineered materials for the three months and nine months ended september 30, 2017 excludes charges for severance related to organizational realignment of $14.2adjusted segment profit for microcontamination control for the three months ended september 29, 2018 and june 30, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,281 and $208, respectively. adjusted segment profit for microcontamination control for the nine months ended september 29, 2018 excludes charges for fair value mark-up of acquired inventory sold of $3,489. adjusted segment profit for microcontamination control excludes charges for impairment of equipment and severance related to organizational realignment of $196 and $1,639 for the three and nine months ended september 30, 2017, respectively.3 adjusted segment profit for advanced material handling excludes loss on sale of subsidiary of $466 for the three and nine months ended september 29, 2018, respectively. adjusted segment profit for advanced material handling excludes charges for impairment of equipment and severance related to organizational realignment of $5,221 and $7,507 for the three and nine months ended september 30, 2017, respectively.4 adjusted amortization of intangible assets excludes amortization expense of $21,419, $11,051 and $12,014 for the three months ended september 29, 2018, september 30, 2017, and june 30, 2018, respectively and $45,102 and $33,003 for the nine months ended september 29, 2018 and september 30, 2017, respectively.5 adjusted unallocated expenses for the three months ended september 29, 2018 exclude integration expenses of $752. adjusted unallocated expenses for the three months ended june 30, 2018 exclude deal costs and integration expenses of $5,121 and $1,197, respectively.adjusted unallocated expenses for the nine months ended september 29, 2018 exclude deal costs and integration expenses of $5,121 and $1,949, respectively. adjusted unallocated expenses excludes charges for impairment of intangibles and severance related to organizational realignment of $3,940 for the three and nine months ended september 30, 2017, respectively. entegris, inc. and subsidiaries reconciliation of gaap net income to adjusted operating income and adjusted ebitda (in thousands) (unaudited) september 29,2018 september 30,2017 september29, 2018 september30, 2017 1 includes product line impairment charges of $3,364 and $5,330 classified as cost of sales for the three and nine months ended september 30, 2017, respectively. includes jetalon intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three and nine months ended september 30, 2017. includes product line impairment charge of $320 classified as selling general and administrative expense for the nine months ended september 30, 2017. includes product line impairment charge of $884 classified as engineering, research and development expense for the nine months ended september 30, 2017. entegris, inc. and subsidiaries reconciliation of gaap net income to non-gaap earnings per share (in thousands, except per share data) (unaudited) september 29,2018 september 30,2017 september29, 2018 september30, 2017 1 includes product line impairment charges of $3,364 and $5,330 classified as cost of sales for the three and nine months ended september 30, 2017, respectively. includes jetalon intangible impairment charge of $3,866 classified as selling general and administrative expense for both the three and nine months ended september 30, 2017. includes product line impairment charge of $320 classified as selling general and administrative expense for the nine months ended september 30, 2017. includes product line impairment charge of $884 classified as engineering, research and development expense for the nine months ended september 30, 2017. includes product line impairment charge of $2,800 classified as other expense for both the three and nine months ended september 30, 2017. 2the tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate during the respective years.
