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 first quarter ended
March 30, 2019.
First-quarter sales were $391.0 million, an increase of 6% from the same
quarter last year. First-quarter net income was $32.7 million, or $0.24
per diluted share, which included $19.6 million deal costs mainly
associated with the terminated Versum transaction, $18.7 million of
amortization of intangible assets, $2.9 million of integration costs, a
$2.2 million charge for fair value write-up of acquired inventory sold,
and $1.8 million of severance related to organizational realignment.
Non-GAAP net income of $67.9 million was approximately on the same level
as the first quarter of 2018. Non-GAAP earnings per diluted share of
$0.50 increased 6% compared to the first quarter of 2018.
Bertrand Loy, President and Chief Executive Officer, said: “In the first
quarter, we delivered solid results that demonstrated the strength of
our execution as well as the resilience of the Entegris platform. I’m
particularly pleased with this performance in light of the incremental
softness that impacted the industry in the quarter.”
Mr. Loy added: “Going forward, we feel very confident in our competitive
position, world-class technical capabilities, operational excellence and
overall growth prospects. Our solutions set is increasingly essential
for our customers to achieve higher yields and new levels of performance
and reliability. We expect 2019 to be another record year for Entegris,
in spite of the challenging industry environment.”
|
Quarterly Financial Results Summary
|
||||||
| GAAP Results |
Q1 2019 |
Q1 2018 |
Q4 2018 |
|||
| Net sales | $391,047 | $367,199 | $401,642 | |||
| Operating income | $47,491 | $78,473 | $71,308 | |||
| Operating margin | 12.1% | 21.4% | 17.8% | |||
| Net income | $32,658 | $57,562 | $80,784 | |||
| Diluted earnings per share (EPS) | $0.24 | $0.40 | $0.57 | |||
| Non-GAAP Results | ||||||
| Non-GAAP adjusted operating income | $92,180 | $90,142 | $93,485 | |||
| Non-GAAP adjusted operating margin | 23.6% | 24.5% | 23.3% | |||
| Non-GAAP net income | $67,894 | $68,015 | $66,300 | |||
| Non-GAAP EPS | $0.50 | $0.47 | $0.47 |
Second-Quarter Outlook
For the second quarter ending June 29, 2019, the Company expects sales
of $375 million to $390 million, net income of $137 million to $144
million and net income per diluted share between $1.00 and $1.05. On a
non-GAAP basis, EPS is expected to range from $0.40 to $0.45 per diluted
share, which reflects net income on a non-GAAP basis in the range of $55
million to $62 million, which is adjusted for expected amortization and
deal & integration expenses of approximately $36.6 million, or $0.21 per
share and the $140 million (or approximately $0.80 per share)
termination fee from the termination of the merger agreement with Versum
Materials.
Acquisition of Digital Specialty Chemicals
On March 8, 2019, the Company acquired Digital Specialty Chemicals, a
provider of advanced materials to the semiconductor, specialty chemical,
and pharmaceutical industries. Digital Specialty Chemicals is a market
leader in designing and synthesizing a new generation of films and
deposition materials. Digital Specialty Chemicals’ chemical synthesis
capabilities expands Entegris’ ability to serve its customers and
complements its own existing capabilities. Digital Specialty Chemicals
will be a part of the Specialty Chemicals and Engineered Materials
(SCEM) segment.
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.
Change in Inter-Segment Reporting
In the first quarter of 2019, the Company has changed its definition of
segment profit to include inter-segment sales. The Company updated its
recognition of inter-segment sales to recognize the revenue and profit
associated with products and components produced in one segment and
supplied to another, before being sold to the ultimate end customer. The
Company accounts for inter-segment sales and transfers as if the sales
or transfers were to third parties, that is, at approximate market
prices. Prior quarter information was recast to reflect the change in
the Company’s definition of segment profit.
First-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the
first quarter on Thursday, April 25, 2019, at 9:00 a.m. Eastern Time.
Participants should dial 888-394-8218 or +1 323-794-2588, referencing
confirmation code 4237087. 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 4237087. The replay will be available starting
at 12:00 p.m. ET on Thursday, April 25 through June 8, 2019 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 first
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 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,
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 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 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,” “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, 2018, filed
on February 11, 2019, 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 |
|||||||||||||
| Three months ended | |||||||||||||
| March 30, 2019 | March 31, 2018 | December 31, 2018 | |||||||||||
| Net sales | $ | 391,047 | $ | 367,199 | $ | 401,642 | |||||||
| Cost of sales | 213,654 | 191,202 | 221,902 | ||||||||||
| Gross profit | 177,393 | 175,997 | 179,740 | ||||||||||
| Selling, general and administrative expenses | 82,254 | 58,269 | 60,707 | ||||||||||
| Engineering, research and development expenses | 28,991 | 27,586 | 30,675 | ||||||||||
| Amortization of intangible assets | 18,657 | 11,669 | 17,050 | ||||||||||
| Operating income | 47,491 | 78,473 | 71,308 | ||||||||||
| Interest expense, net | 9,659 | 7,226 | 8,426 | ||||||||||
| Other (income) expense, net | (248 | ) | 139 | 3,176 | |||||||||
| Income before income tax expense | 38,080 | 71,108 | 59,706 | ||||||||||
| Income tax expense (benefit) | 5,422 | 13,546 | (21,078 | ) | |||||||||
| Net income | $ | 32,658 | $ | 57,562 | $ | 80,784 | |||||||
| Basic net income per common share: | $ | 0.24 | $ | 0.41 | $ | 0.58 | |||||||
| Diluted net income per common share: | $ | 0.24 | $ | 0.40 | $ | 0.57 | |||||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 135,299 | 141,581 | 139,268 | ||||||||||
| Diluted | 136,692 | 143,652 | 140,515 | ||||||||||
|
Entegris, Inc. and Subsidiaries |
|||||||
| March 30, 2019 | December 31, 2018 | ||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 342,360 | $ | 482,062 | |||
| Trade accounts and notes receivable, net | 232,138 | 222,055 | |||||
| Inventories, net | 271,510 | 268,140 | |||||
| Deferred tax charges and refundable income taxes | 52,629 | 17,393 | |||||
| Other current assets | 24,175 | 39,688 | |||||
| Total current assets | 922,812 | 1,029,338 | |||||
| Property, plant and equipment, net | 442,395 | 419,529 | |||||
| Right-of-use assets | 43,868 | — | |||||
| Goodwill | 584,537 | 550,202 | |||||
| Intangible assets | 284,581 | 295,687 | |||||
| Deferred tax assets and other noncurrent tax assets | 22,819 | 10,162 | |||||
| Other | 12,996 | 12,723 | |||||
| Total assets | $ | 2,314,008 | $ | 2,317,641 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Long-term debt, current maturities | 4,000 | 4,000 | |||||
| Accounts payable | 78,620 | 93,055 | |||||
| Accrued liabilities | 107,753 | 141,020 | |||||
| Income tax payable | 22,407 | 31,593 | |||||
| Total current liabilities | 212,780 | 269,668 | |||||
| Long-term debt, excluding current maturities | 934,269 | 934,863 | |||||
| Long-term lease liability | 40,547 | — | |||||
| Other liabilities | 125,948 | 101,085 | |||||
| Shareholders’ equity | 1,000,464 | 1,012,025 | |||||
| Total liabilities and shareholders’ equity | $ | 2,314,008 | $ | 2,317,641 | |||
|
Entegris, Inc. and Subsidiaries |
||||||||
| Three months ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 32,658 | $ | 57,562 | ||||
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation | 16,721 | 15,897 | ||||||
| Amortization | 18,657 | 11,669 | ||||||
| Stock-based compensation expense | 4,653 | 4,128 | ||||||
| Other | 5,694 | 782 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade accounts and notes receivable | (9,109 | ) | (6,011 | ) | ||||
| Inventories | (2,131 | ) | (14,955 | ) | ||||
| Accounts payable and accrued liabilities | (45,019 | ) | (33,985 | ) | ||||
| Income taxes payable and refundable income taxes | (42,873 | ) | 6,692 | |||||
| Other | 18,211 | (2,962 | ) | |||||
| Net cash (used in) provided by operating activities | (2,538 | ) | 38,817 | |||||
| Investing activities: | ||||||||
| Acquisition of property and equipment | (34,465 | ) | (37,656 | ) | ||||
| Acquisition of businesses, net of cash acquired | (49,789 | ) | (21,047 | ) | ||||
| Other | 197 | 146 | ||||||
| Net cash used in investing activities | (84,057 | ) | (58,557 | ) | ||||
| Financing activities: | ||||||||
| Payments on long-term debt | (1,000 | ) | (25,000 | ) | ||||
| Issuance of common stock | 917 | 473 | ||||||
| Taxes paid related to net share settlement of equity awards | (7,727 | ) | (14,123 | ) | ||||
| Repurchase and retirement of common stock | (35,321 | ) | (10,000 | ) | ||||
| Dividend payments | (9,470 | ) | (9,883 | ) | ||||
| Other | (250 | ) | (246 | ) | ||||
| Net cash used in financing activities | (52,851 | ) | (58,779 | ) | ||||
| Effect of exchange rate changes on cash | (256 | ) | 3,347 | |||||
| Decrease in cash and cash equivalents | (139,702 | ) | (75,172 | ) | ||||
| Cash and cash equivalents at beginning of period | 482,062 | 625,408 | ||||||
| Cash and cash equivalents at end of period | $ | 342,360 | $ | 550,236 | ||||
Entegris, Inc. and Subsidiaries
Segment Information
(In
thousands)
(Unaudited)
Note: In the first quarter of 2019, the Company has changed its
definition of segment profit to include inter-segment sales. The Company
updated its recognition of inter-segment sales to recognize the revenue
and profit associated with products and components produced in one
segment and supplied to another, before being sold to the ultimate end
customer. The Company accounts for inter-segment sales and transfers as
if the sales or transfers were to third parties, that is, at approximate
market prices. Inter-segment sales are presented as an elimination
below. Prior quarter information was recast to reflect the change in the
Company’s definition of segment profit.
| Three months ended | ||||||||||||
| Net sales | March 30, 2019 | March 31, 2018 | December 31, 2018 | |||||||||
| Specialty Chemicals and Engineered Materials | $ | 124,470 | $ | 130,743 | $ | 133,928 | ||||||
| Microcontamination Control | 157,706 | 118,923 | 158,500 | |||||||||
| Advanced Materials Handling | 116,064 | 124,078 | 115,527 | |||||||||
| Inter-segment elimination | (7,193 | ) | (6,545 | ) | (6,313 | ) | ||||||
| Total net sales | $ | 391,047 | $ | 367,199 | $ | 401,642 | ||||||
| Three months ended | |||||||||||
| Segment profit | March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||
| Specialty Chemicals and Engineered Materials | $ | 24,431 | $ | 30,921 | $ | 28,221 | |||||
| Microcontamination Control | 47,323 | 40,311 | 46,879 | ||||||||
| Advanced Materials Handling | 22,367 | 25,463 | 19,096 | ||||||||
| Total segment profit | 94,121 | 96,695 | 94,196 | ||||||||
| Amortization of intangible assets | 18,657 | 11,669 | 17,050 | ||||||||
| Unallocated expenses | 27,973 | 6,553 | 5,838 | ||||||||
| Total operating income | $ | 47,491 | $ | 78,473 | $ | 71,308 | |||||
|
Entegris, Inc. and Subsidiaries |
||||||||||||
| Three months ended | ||||||||||||
| March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||||
| Net sales | $ | 391,047 | $ | 367,199 | $ | 401,642 | ||||||
| Gross profit-GAAP | $ | 177,393 | $ | 175,997 | $ | 179,740 | ||||||
| Adjustments to gross profit: | ||||||||||||
| Severance related to organizational realignment | 358 | — | 460 | |||||||||
| Charge for fair value mark-up of acquired inventory sold | 2,155 | — | 3,379 | |||||||||
| Adjusted gross profit | $ | 179,906 | $ | 175,997 | $ | 183,579 | ||||||
| Gross margin – as a % of net sales | 45.4 | % | 47.9 | % | 44.8 | % | ||||||
| Adjusted gross margin – as a % of net sales | 46.0 | % | 47.9 | % | 45.7 | % | ||||||
Entegris, Inc. and Subsidiaries
Reconciliation of GAAP
Segment Profit to Adjusted Operating Income
(In thousands)
(Unaudited)
Note: In the first quarter of 2019, the Company has changed its
definition of segment profit to include inter-segment sales. The Company
updated its recognition of inter-segment sales to recognize the revenue
and profit associated with products and components produced in one
segment and supplied to another, before being sold to the ultimate end
customer. The Company accounts for inter-segment sales and transfers as
if the sales or transfers were to third parties, that is, at approximate
market prices. Prior quarter information was recast to reflect the
change in the Company’s definition of segment profit.
| Three months ended | |||||||||||
| Segment profit-GAAP | March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||
| Specialty Chemicals and Engineered Materials | $ | 24,431 | $ | 30,921 | $ | 28,221 | |||||
| Microcontamination Control | 47,323 | 40,311 | 46,879 | ||||||||
| Advanced Materials Handling | 22,367 | 25,463 | 19,096 | ||||||||
| Total segment profit | 94,121 | 96,695 | 94,196 | ||||||||
| Amortization of intangible assets | 18,657 | 11,669 | 17,050 | ||||||||
| Unallocated expenses | 27,973 | 6,553 | 5,838 | ||||||||
| Total operating income | $ | 47,491 | $ | 78,473 | $ | 71,308 | |||||
| Three months ended | |||||||||||
| Adjusted segment profit | March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||
| Specialty Chemicals and Engineered Materials1 | $ | 25,070 | $ | 30,921 | $ | 28,221 | |||||
| Microcontamination Control 2 | 50,082 | 40,311 | 50,258 | ||||||||
| Advanced Materials Handling 3 | 22,945 | 25,463 | 19,556 | ||||||||
| Total adjusted segment profit | 98,097 | 96,695 | 98,035 | ||||||||
| Amortization of intangible assets4 | — | — | — | ||||||||
| Unallocated expenses5 | 5,917 | 6,553 | 4,550 | ||||||||
| Total adjusted operating income | $ | 92,180 | $ | 90,142 | $ | 93,485 | |||||
1 Adjusted segment profit for Specialty Chemicals and
Engineered Materials for the three months ended March 30, 2019 excludes
charges for fair value mark-up of acquired inventory sold of $120 and
excludes charges for severance related to organizational realignment of
$519.
2 Adjusted segment profit for Microcontamination
Control for the three months ended March 30, 2019 excludes charges for
fair value mark-up of acquired inventory sold of $2,035 and excludes
charges for severance related to organizational realignment of $724. For
the three months ended December 31, 2018, adjusted segment profit
excludes charges for fair value mark-up of acquired inventory sold of
$3,379.
3Adjusted segment profit for Advanced Materials
Handling for the three months ended March 30, 2019 excludes charges for
severance related to organizational realignment of $578. For the three
months ended December 31, 2018 adjusted segment profit excludes
severance charges of $460.
4 Adjusted amortization of
intangible assets excludes amortization expense of $18,657, $11,669 and
$17,050 for the three months ended March 30, 2019, March 31, 2018, and
December 31, 2018 respectively.
5 Adjusted unallocated
expenses for the three months ended March 30, 2019 excludes deal and
integration expenses of $22,056. Adjusted unallocated expenses for the
three months ended December 31, 2018, excludes integration expenses of
$1,288.
|
Entegris, Inc. and Subsidiaries |
||||||||||||
| Three months ended | ||||||||||||
| March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||||
| Net sales | $ | 391,047 | $ | 367,199 | $ | 401,642 | ||||||
| Net income | $ | 32,658 | $ | 57,562 | $ | 80,784 | ||||||
| Adjustments to net income: | ||||||||||||
| Income tax expense (benefit) | 5,422 | 13,546 | (21,078 | ) | ||||||||
| Interest expense, net | 9,659 | 7,226 | 8,426 | |||||||||
| Other (income) expense, net | (248 | ) | 139 | 3,176 | ||||||||
| GAAP – Operating income | 47,491 | 78,473 | 71,308 | |||||||||
| Charge for fair value write-up of acquired inventory sold | 2,155 | — | 3,379 | |||||||||
| Deal costs | 19,136 | — | — | |||||||||
| Integration costs | 2,920 | — | 1,288 | |||||||||
| Severance related to organizational realignment | 1,821 | — | 460 | |||||||||
| Amortization of intangible assets | 18,657 | 11,669 | 17,050 | |||||||||
| Adjusted operating income | 92,180 | 90,142 | 93,485 | |||||||||
| Depreciation | 16,721 | 15,897 | 16,880 | |||||||||
| Adjusted EBITDA | $ | 108,901 | $ | 106,039 | $ | 110,365 | ||||||
| Adjusted operating margin | 23.6 | % | 24.5 | % | 23.3 | % | ||||||
| Adjusted EBITDA – as a % of net sales | 27.8 | % | 28.9 | % | 27.5 | % | ||||||
|
Entegris, Inc. and Subsidiaries |
||||||||||||
| Three months ended | ||||||||||||
| March 30, 2019 | March 31, 2018 | December 31, 2018 | ||||||||||
| GAAP net income | $ | 32,658 | $ | 57,562 | $ | 80,784 | ||||||
| Adjustments to net income: | ||||||||||||
| Charge for fair value write-up of acquired inventory sold | 2,155 | — | 3,379 | |||||||||
| Deal Costs | 19,547 | — | — | |||||||||
| Integration Costs | 2,920 | — | 1,288 | |||||||||
| Severance related to organizational realignment | 1,821 | — | 460 | |||||||||
| Amortization of intangible assets | 18,657 | 11,669 | 17,050 | |||||||||
| Tax effect of adjustments to net income and discrete items1 | (9,864 | ) | (2,710 | ) | (5,603 | ) | ||||||
| Tax effect of legal entity restructuring | — | — | (34,478 | ) | ||||||||
| Tax effect of Tax Cuts and Jobs Act | — | 1,494 | 1,101 | |||||||||
| Non-GAAP net income | $ | 67,894 | $ | 68,015 | $ | 66,300 | ||||||
| Diluted earnings per common share | $ | 0.24 | $ | 0.40 | $ | 0.57 | ||||||
| Effect of adjustments to net income | $ | 0.26 | $ | 0.07 | $ | (0.10 | ) | |||||
| Diluted non-GAAP earnings per common share | $ | 0.50 | $ | 0.47 | $ | 0.47 | ||||||
1The tax effect of pre-tax adjustments to net income was
calculated using the applicable marginal tax rate during the respective
years.
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