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Entegris Reports Third-Quarter Results

  • Quarterly revenue of $296.7 million
  • GAAP net income of $21.9 million, or $0.15 per diluted share
  • Non-GAAP net income of $34.6 million, or $0.24 per diluted share
  • Record operating cash flow of $71.9 million

BILLERICA, Mass., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Entegris, Inc. (Nasdaq: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 October 1, 2016.

The Company reported third-quarter sales of $296.7 million.  Third-quarter net income was $21.9 million, or $0.15 per diluted share, which included amortization of intangible assets of $11.0 million, asset impairment charges of $5.8 million related to certain production equipment and $2.4 million of severance expenses related to an organizational realignment.  Non-GAAP net income was $34.6 million, or $0.24 per diluted share.  In the third quarter, the Company generated cash from operations less capital expenditures, or free cash flow, of $59 million.

For the first nine months of fiscal 2016, sales of $866.8 million increased 6 percent from the same period a year ago.  Net income for the first nine months of fiscal 2016 was $71.0 million, or $0.50 per share, which included amortization of intangible assets of $33.3 million, asset impairment charges of $5.8 million related to certain production equipment and $2.4 million of severance expenses related to an organizational realignment.  In the comparable period a year ago, net income was $62.7 million, or $0.44 per share, which included amortization of intangible assets of $35.9 million and acquisition integration expense of $7.1 million.  Non-GAAP net income for the first nine months of fiscal 2016 was $98.6 million, or $0.69 per diluted share, which increased from $91.8 million, or $0.65 per diluted share, in the prior year.

Bertrand Loy, president and chief executive officer, said: “We are on track to achieve our multiyear objective to outpace our markets and to deliver both record sales and profits in 2016.  Our strong quarter reflected record sales of liquid filtration products and solid performance across most of our businesses, as well as the favorable impact of the stronger yen.”

Mr. Loy added:  “In the third quarter, we generated record free cash flow of $59 million and repaid an additional $25 million of long-term debt.  Looking ahead, we are excited about our growth prospects given the increasing opportunities for Entegris to leverage its unique breadth of capabilities to address the electronics industry’s continual pursuit of higher performance and cleaner materials.”

Quarterly Financial Results Summary

(in millions, except per share data)

GAAP Results Q3-2016 Q3-2015 Q2-2016
Net sales $ 296,692   $ 270,253   $ 303,052  
Operating income $ 34,672   $ 31,066   $ 46,400  
Operating margin   11.7 %   11.5 %   15.3 %
Net income $ 21,947   $ 23,403   $ 32,890  
Earnings per share (EPS) $ 0.15   $ 0.17   $ 0.23  
Non-GAAP Results
Non-GAAP adjusted operating income $ 53,877   $ 44,814   $ 57,462  
Adjusted operating margin   18.2 %   16.6 %   19.0 %
Non-GAAP net income $ 34,647   $ 32,444   $ 40,290  
Non-GAAP EPS $ 0.24   $ 0.23   $ 0.28  

Fourth-Quarter Outlook

For the fiscal fourth quarter ending December 31, 2016, the Company expects sales of $275 million to $290 million, net income of $20 million to $26 million, and net income per diluted share between $0.14 and $0.18.  On a non-GAAP basis, EPS is expected to range from $0.19 to $0.23 per diluted share, which reflects net income on a non-GAAP basis in the range of $27 million to $33 million, which is adjusted for expected amortization expense of approximately $11 million or $0.05 per share.

Segment Results

The Company reports its results in two business segments: Critical Materials Handling (CMH) and Electronic Materials (EM).  Summary results by segment are contained in this press release.

CMH provides a broad range of products that filter, handle, dispense, and protect critical materials used in the semiconductor manufacturing process and in other high-technology manufacturing.  CMH’s products and subsystems include high-purity materials packaging, fluid-handling and dispensing systems, liquid filters, as well as microenvironments that protect critical substrates such as wafers during shipping and manufacturing.  CMH also provides specialized graphite components and specialty coatings for use in high temperature applications.

EM provides high-performance materials and specialty gas management solutions that enable high yield, cost effective semiconductor manufacturing.  EM’s products consist of specialized chemistries and performance materials, gas microcontamination control solutions, and sub-atmospheric pressure gas delivery systems for the efficient handling of hazardous gases to semiconductor process equipment.

Third-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the third quarter on Wednesday, October 26, 2016, at 10:00 a.m. Eastern Time.  Participants should dial 1-888-503-8169 or 1-719-457-2631, referencing confirmation code 5752767.  Participants are asked to dial in 5 to 10 minutes prior to the start of the call.  To access a telephonic replay of the call, please Click Here. The replay will be available starting at 1:00 p.m. ET on Wednesday, October 26 until Saturday, December 10.  A live and on-demand webcast of the call can also be accessed from the investor relations section of Entegris’ website at www.entegris.com

Please also refer to Management’s slide presentation concerning third-quarter results which may be referred to during the call. This presentation will be posted on the investor relations section of www.entegris.com Wednesday morning before the call.

ABOUT ENTEGRIS
Entegris is a leader in specialty chemicals and advanced materials solutions for the microelectronics industry and other high-tech industries.  Entegris is ISO 9001 certified and has manufacturing, customer service and/or research facilities in the United States, 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 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. These financial measures are provided as a supplement to financial measures provided in accordance with GAAP. We provide non-GAAP financial measures in order to further assess and measure operating performance. Management believes the non-GAAP measures provide meaningful supplemental information regarding our baseline performance before certain gains, losses or other charges that may not be indicative of our business or future outlook. We believe these non-GAAP measures will aid investors’ overall understanding of our results by providing a higher degree of transparency for certain expenses and providing a level of disclosure that will help investors understand how we plan and measure our business. The reconciliations of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA, GAAP Gross Profit to Adjusted Gross Profit, and GAAP to Non-GAAP Earnings per Share are included elsewhere in this release.

Forward-Looking Statements
Certain information contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on current management expectations only as of the date of this press release, and involve substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements.  Statements that include such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “will,” “should” or the negative thereof and similar expressions as they relate to Entegris or our management are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.  These risks include, but are not limited to, fluctuations in the market price of Entegris’ stock, Entegris’ future operating results, other acquisition and investment opportunities available to Entegris, general business and market conditions and other factors.  Additional information concerning these and other risk factors may be found in previous financial press releases issued by Entegris and Entegris’ periodic public filings with the Securities and Exchange Commission, including discussions appearing under the headings “Risks Relating to our Business and Industry,” “Risks Relating to Our Indebtedness,” “Manufacturing Risks,” “International Risks,” and “Risks Related to Owning Our Common Stock” in Item 1A of our Annual Report on Form 10–K for the fiscal year ended December 31, 2015, filed with the U.S Securities and Exchange Commission on February 29, 2016, as well as other matters and important factors disclosed previously and from time to time in the filings of Entegris with the U.S. Securities and Exchange Commission.  Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we undertake no obligation to update publicly any forward-looking statements contained herein.

 

  Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
   
    Three months ended
    October 1, 2016 September 26, 2015 July 2,  2016
Net sales $ 296,692   $ 270,253   $ 303,052  
Cost of sales   173,712     153,943     163,847  
  Gross profit   122,980     116,310     139,205  
Selling, general and administrative expenses   51,614     46,730     53,597  
Engineering, research and development expenses   25,720     26,841     28,146  
Amortization of intangible assets   10,974     11,673     11,062  
  Operating income   34,672     31,066     46,400  
Interest expense, net   9,345     9,201     9,051  
Other income, net   (565 )   (5,624 )   (1,054 )
  Income before income tax expense and equity in net loss of affiliate   25,892     27,489     38,403  
Income tax expense   3,945     4,018     5,513  
Equity in net loss of affiliates    -     68     -  
  Net income $ 21,947   $ 23,403   $ 32,890  
         
     
Basic net income per common share: $ 0.16   $ 0.17   $ 0.23  
Diluted net income per common share: $ 0.15   $ 0.17   $ 0.23  
       
Weighted average shares outstanding:      
  Basic   141,324     140,555     140,953  
  Diluted   142,473     141,317     141,723  


  Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
   
    Nine months ended
    October 1, 2016 September 26, 2015
Net sales $ 866,768   $ 814,335  
Cost of sales   489,877     453,402  
  Gross profit   376,891     360,933  
Selling, general and administrative expenses   153,167     147,890  
Engineering, research and development expenses   79,768     79,183  
Amortization of intangible assets   33,325     35,908  
  Operating income    110,631     97,952  
Interest expense, net   27,545     28,544  
Other income, net   (2,294 )   (8,466 )
  Income before income tax expense and equity in net loss of affiliate   85,380     77,874  
Income tax expense   14,331     14,933  
Equity in net loss of affiliates   -     218  
  Net income $ 71,049   $ 62,723  
       
   
Basic net income per common share: $ 0.50   $ 0.45  
Diluted net income per common share: $ 0.50   $ 0.44  
       
Weighted average shares outstanding:    
  Basic   141,019     140,282  
  Diluted   141,856     141,016  

 

Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
      October 1, 2016   December 31, 2015  
ASSETS            
Cash and cash equivalents $ 411,777     $ 349,825    
Short-term investments     -       2,181    
Accounts receivable, net     167,559       141,409    
Inventories     186,021       173,176    
Deferred tax charges and refundable  income taxes   18,000       18,943    
Other current assets   17,675       23,253    
  Total current assets   801,032       708,787    
             
Property, plant and equipment, net   315,512       321,301    
             
Goodwill   349,980       342,111    
Intangible assets, net   230,987       258,942    
Deferred tax assets – non-current   8,690       7,771    
Other     7,391       7,785    
  Total assets   $ 1,713,592     $ 1,646,697    
             
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Long-term debt, current maturities   $ 100,000     $ 50,000    
Accounts payable     54,001       36,916    
Accrued liabilities     82,963       75,859    
Income tax payable and deferred tax liabilities     713       12,775    
  Total current liabilities   237,677       175,550    
             
Long-term debt, excluding current maturities       508,775        606,044    
Other liabilities and deferred tax liabilities   69,937       62,220    
Shareholders’ equity     897,203       802,883    
  Total liabilities and shareholders’ equity $ 1,713,592     $ 1,646,697    

 

Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
  Three months ended Nine months ended
  October 1, 2016 September 26, 2015 October 1, 2016 September 26, 2015  
Operating activities:          
Net income $ 21,947   $ 23,403   $ 71,049   $ 62,723    
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   13,795     13,356     41,320     40,080    
Amortization   10,974     11,673     33,325     35,908    
Share-based compensation expense   3,697     2,975     10,063     8,120    
Other   11,060     (4,407 )   19,333     (9,508 )  
Changes in operating assets and liabilities:          
Trade accounts and notes receivable   13,847     (9,426 )   (22,252 )   (38,020 )  
Inventories   (5,907 )   (11,050 )   (17,296 )   (39,550 )  
Accounts payable and accrued liabilities   12,962     21,702     26,517     12,576    
Income taxes payable and refundable income taxes   (11,771 )   (3,283 )   (11,364 )   (3,647 )  
Other   1,334     (12,357 )   (219 )   18    
Net cash provided by operating activities   71,938     32,586     150,476     68,700    
Investing activities:          
Acquisition of property and equipment   (13,124 )   (21,466 )   (45,268 )   (55,696 )  
Other   138     533     (1,520 )   2,458    
Net cash used in investing activities   (12,986 )   (20,933 )   (46,788 )   (53,238 )  
Financing activities:          
Payments on long-term debt   (25,000 )   (25,000 )   (50,000 )   (100,000 )  
Issuance of common stock   512     1,634     2,892     2,608    
Repurchase and retirement of common stock   -     -     (3,573 )   -    
Taxes paid related to net share settlement of equity awards   (1,113 )   (55 )   (3,316 )   (2,458 )  
Other   402     313     493     665    
Net cash used in financing activities   (25,199 )   (23,108 )   (53,504 )   (99,185 )  
Effect of exchange rate changes on cash   4,281     (1,226 )   11,768     (4,915 )  
Increase (decrease) in cash and cash equivalents   38,034     (12,681 )   61,952     (88,638 )  
Cash and cash equivalents at beginning of period   373,743     313,742     349,825     389,699    
Cash and cash equivalents at end of period $ 411,777   $ 301,061   $ 411,777   $ 301,061    

 

Entegris, Inc. and Subsidiaries
Segment Information
(In thousands)
(Unaudited)
 
  Three months ended Nine months ended
Net sales October 1, 2016 September 26, 2015 July 2, 2016 October 1, 2016 September 26, 2015
Critical Materials Handling $ 192,744   $ 166,043   $ 194,880   $ 553,853   $ 507,764  
Electronic Materials   103,948     104,210     108,172     312,915     306,571  
  Total net sales $ 296,692   $ 270,253   $ 303,052   $ 866,768   $ 814,335  


  Three months ended Nine months ended
Segment profit(1) October 1, 2016 September 26, 2015 July 2, 2016 October 1, 2016 September 26, 2015
Critical Materials Handling $ 45,352   $ 37,109   $ 52,524     135,768   $ 122,182  
Electronic Materials   20,454     23,919     27,475     69,504     72,700  
Total segment profit   65,806     61,028     79,999     205,272     194,882  
Amortization of intangibles   10,974     11,673     11,062     33,325     35,908  
Unallocated expenses   20,160     18,289     22,537     61,316     61,022  
  Total operating income $ 34,672   $ 31,066   $ 46,400   $ 110,631   $ 97,952  
 

1 Segment profit for Critical Materials Handling for the three and nine months ended October 1, 2016 includes charges for impairment of equipment and severance related to organizational realignment of $5,826 and $1,692, respectively. Segment profit for Electronic Materials for the three and nine months ended October 1, 2016 each include a charge for severance related to organizational realignment of $713.


Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA
(In thousands, except per share data)
(Unaudited)
 
  Three months ended   Nine months ended
  October 1, 2016 September 26, 2015 July 2, 2016   October 1, 2016 September 26, 2015
Net sales $ 296,692   $ 270,253   $ 303,052     $ 866,768   $ 814,335  
Net income $ 21,947   $ 23,403   $ 32,890     $ 71,049   $ 62,723  
             
Adjustments to net income:            
                                 
Equity in net loss of affiliates   -     68     -       -     218  
Income tax expense   3,945     4,018     5,513       14,331     14,933  
Interest expense, net   9,345     9,201     9,051       27,545     28,544  
Other income, net   (565 )   (5,624 )   (1,054 )     (2,294 )   (8,466 )
GAAP – Operating income   34,672     31,066     46,400       110,631     97,952  
Severance related to organizational realignment   2,405     -     -       2,405     -  
Impairment of equipment   5,826     -     -       5,826     -  
Integration costs   -     2,075     -       -     7,083  
Amortization of intangible assets   10,974     11,673     11,062       33,325     35,908  
Adjusted operating income    53,877     44,814     57,462       152,187     140,943  
Depreciation   13,795     13,356     13,825       41,320     40,080  
Adjusted EBITDA $ 67,672   $ 58,170   $ 71,287     $ 193,507   $ 181,023  
             
Adjusted operating margin   18.2 %   16.6 %   19.0 %     17.6 %   17.3 %
Adjusted EBITDA – as a % of net sales   22.8 %   21.5 %   23.5 %     22.3 %   22.2 %

 

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(In thousands)
(Unaudited)
 
  Three months ended   Nine months ended
  October 1, 2016 September 26, 2015 July 2, 2016   October 1, 2016 September 26, 2015
Net sales $ 296,692   $ 270,253   $ 303,052     $ 866,768   $ 814,335  
Gross profit-GAAP $ 122,980   $ 116,310   $ 139,205     $ 376,891   $ 360,933  
             
Adjustments to gross profit:            
Severance related to organizational realignment   431     -     -       431     -  
Impairment of equipment   5,826       -       -       5,826       -  
Adjusted gross profit $ 129,237   $ 116,310   $ 139,205     $ 383,148   $ 360,933  
             
Gross margin – as a % of net sales   41.5 %   43.0 %   45.9 %     43.5 %   44.3 %
Adjusted gross margin – as a % of net sales   43.6 %   43.0 %   45.9 %     44.2 %   44.3 %

 

Entegris, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Earnings per Share
(In thousands, except per share data)
(Unaudited)
 
  Three months ended   Nine months ended
  October 1, 2016 September 26, 2015 July 2, 2016   October 1, 2016 September 26, 2015
Net income $ 21,947   $ 23,403   $ 32,890     $ 71,049   $ 62,723  
                                 
Adjustments to net income:            
Severance related to organizational realignment   2,405     -     -       2,405     -  
Impairment of equipment   5,826     -     -       5,826     -  
Integration costs   -     2,075     -       -     7,083  
(Gain) loss on impairment or sale of equity investment   -     (50 )   (38 )     (156 )   567  
Amortization of intangible assets   10,974     11,673     11,062       33,325     35,908  
Tax effect of adjustments of net income   (6,505 )   (4,657 )   (3,624 )     (13,895 )   (14,488 )
Non-GAAP net income $ 34,647   $ 32,444   $ 40,290     $ 98,554   $ 91,793  
             
Diluted income per common share $ 0.15   $ 0.17   $ 0.23     $ 0.50   $ 0.44  
Effect of adjustments to net income   0.09     0.06     0.05       0.19     0.21  
Diluted non-GAAP income per common share $ 0.24   $ 0.23   $ 0.28     $ 0.69   $ 0.65  
                                 
Steven Cantor
VP of Corporate Relations
T +1 978 436 6750
irelations@entegris.com

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