Entegris Reports Strong Second-Quarter Results
BILLERICA, Mass., July 27, 2017 /PRNewswire/ -- Entegris, Inc. (NasdaqGS: ENTG), a leading specialty materials provider, today reported its financial results for the Company's second quarter ended July 1, 2017.
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Second-quarter sales were $329.0 million, an increase of 8.6% from the same quarter last year and a 3.7% increase sequentially. Second-quarter net income was $40.0 million, or $0.28 per diluted share, which included amortization of intangible assets of $11.0 million, as well as an asset impairment charge and severance expense of $3.6 million. Non-GAAP net income was $48.9 million, or $0.34 per diluted share.
For the first half of fiscal 2017, sales of $646.4 million increased 13.4% from the same period a year ago. First-half 2017 net income was $72.5 million, or $0.51 per share, which included amortization of intangible assets of $22.0 million, as well as an asset impairment charge and severance expense of $3.6 million. Non-GAAP net income for the first half of 2017 was $89.7 million, or $0.63 per diluted share.
Bertrand Loy, president and chief executive officer, said: "I am very pleased with Entegris' performance thus far this year which puts us on a solid path to grow well in excess of our markets in 2017. Our growth in the second-quarter was driven by positive industry trends and reflected strong performance across our portfolio of solutions, as well as successful product introductions to support the ongoing ramp of advanced semiconductor manufacturing technologies such as 3D NAND. Our first-half sales grew 13% from the prior year, driven by strong growth in Asia, particularly in Korea."
Mr. Loy added: "The quality of our execution and financial performance in the second quarter demonstrates the strength of our business model and our operating leverage, as we generated strong cash flow from operations and achieved an adjusted EBITDA of $88.2 million, or 26.8% of sales."
Quarterly Financial Results Summary
(in thousands, except per share data)
GAAP Results Q2-2017 Q2-2016 Q1-2017 ------- ------- ------- Net sales $329,002 $303,052 $317,377 Operating income $59,090 $46,400 $50,920 Operating margin 18.0% 15.3% 16.0% Net income $39,991 $32,890 $32,514 Diluted earnings per share (EPS) $0.28 $0.23 $0.23 Non-GAAP Results Non-GAAP adjusted operating income $73,826 $57,462 $61,865 Adjusted operating margin 22.4% 19.0% 19.5% Non-GAAP net income $48,906 $40,290 $40,754 Non-GAAP EPS $0.34 $0.28 $0.28
Third-Quarter Outlook
For the third quarter ending September 30, 2017, the Company expects sales of $325 million to $340 million, net income of $36 million to $43 million, and net income per diluted share between $0.25 and $0.30. On a non-GAAP basis, EPS is expected to range from $0.30 to $0.35 per diluted share, which reflects net income on a non-GAAP basis in the range of $43 million to $50 million, which is adjusted for expected amortization expense of approximately $11 million or $0.05 per share.
Segment Results
As of December 31, 2016, the Company changed its financial segment reporting to the following segments:
Specialty Chemicals and Engineered Materials (SCEM): SCEM provides high-performance and high-purity process chemistries, gases, and materials and 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.
Second-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the second quarter on Thursday, July 27, 2017, at 9:00 a.m. Eastern Time. Participants should dial 1-877-852-6583 or 1-719-325-2495, referencing confirmation code 1492733. 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 12:00 p.m. ET on Thursday, July 27 until Saturday, September 9. A live and on-demand webcast of the call can also be accessed from the investor relations section of Entegris' website at http://investor.entegris.com/.
Management's slide presentation concerning the results for the second quarter, which may be referred to during the call, will be posted on the investor relations section of http://investor.entegris.com/ Thursday morning before the call.
ABOUT ENTEGRIS
Entegris is a leading specialty materials provider 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, 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 to Adjusted Operating Income and Adjusted EBITDA, GAAP Gross Profit to Adjusted Gross Profit, GAAP Segment Profit to Adjusted Operating Income, 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. 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 those about 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; the Company's capital allocation strategy; our ability to execute on our strategies; and other matters. These forward-looking statements are based on current management expectations and assumptions only as of the date of this press release, 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 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, 2016, filed on February 17, 2017, and in our other periodic filings. 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 July 1, 2017 July 2, 2016 April 1, 2017 ------------ ------------ ------------- Net sales $329,002 $303,052 $317,377 Cost of sales 178,699 163,847 177,781 Gross profit 150,303 139,205 139,596 Selling, general and administrative expenses 52,985 53,597 50,492 Engineering, research and development expenses 27,221 28,146 27,239 Amortization of intangible assets 11,007 11,062 10,945 Operating income 59,090 46,400 50,920 Interest expense, net 8,103 9,051 8,393 Other (income) expense, net (46) (1,054) 902 --- ------ --- Income before income tax expense 51,033 38,403 41,625 Income tax expense 11,042 5,513 9,111 Net income $39,991 $32,890 $32,514 ======= Basic net income per common share: $0.28 $0.23 $0.23 Diluted net income per common share: $0.28 $0.23 $0.23 Weighted average shares outstanding: Basic 141,696 140,953 141,501 Diluted 143,508 141,723 143,315
Entegris, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Six months ended July 1, 2017 July 2, 2016 ------------ ------------ Net sales $646,379 $570,076 Cost of sales 356,480 316,165 Gross profit 289,899 253,911 Selling, general and administrative expenses 103,477 101,553 Engineering, research and development expenses 54,460 54,048 Amortization of intangible assets 21,952 22,351 Operating income 110,010 75,959 Interest expense, net 16,496 18,200 Other expense (income), net 856 (1,729) --- ------ Income before income tax expense 92,658 59,488 Income tax expense 20,153 10,386 ------ ------ Net income $72,505 $49,102 ======= Basic net income per common share: $0.51 $0.35 Diluted net income per common share: $0.51 $0.35 Weighted average shares outstanding: Basic 141,599 140,867 Diluted 143,411 141,547
Entegris, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands) (Unaudited) July 1, 2017 December 31, 2016 ------------ ----------------- ASSETS Cash and cash equivalents $405,635 $406,389 Accounts receivable, net 171,113 165,675 Inventories 194,155 183,529 Deferred tax charges and refundable income taxes 16,716 20,140 Other current assets 21,374 24,398 ------ ------ Total current assets 808,993 800,131 Property, plant and equipment, net 341,146 321,562 Goodwill 355,178 345,269 Intangible assets 206,182 217,548 Deferred tax assets 8,622 8,022 Other assets 7,322 7,000 Total assets $1,727,443 $1,699,532 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Long-term debt, current maturities $100,000 $100,000 Accounts payable 56,961 61,617 Accrued liabilities 75,275 83,530 Income tax payable 18,786 16,424 ------ ------ Total current liabilities 251,022 261,571 Long-term debt, excluding current maturities 435,910 484,677 Other liabilities 58,242 54,066 Shareholders' equity 982,269 899,218 ------- ------- Total liabilities and shareholders' equity $1,727,443 $1,699,532 ========== ==========
Entegris, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three months ended Six months ended July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 ------------ ------------ ------------ ------------ Operating activities: Net income $39,991 $32,890 $72,505 $49,102 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 14,411 13,825 28,388 27,525 Amortization 11,007 11,062 21,952 22,351 Stock-based compensation expense 4,039 3,505 7,909 6,366 Provision for deferred income taxes (215) (720) 3,207 (931) Other 6,497 4,408 10,130 9,204 Changes in operating assets and liabilities: Trade accounts and notes receivable 4,514 (29,300) (3,032) (36,099) Inventories (8,422) 1,609 (13,837) (11,389) Accounts payable and accrued liabilities 10,177 23,065 (13,313) 13,555 Income taxes payable and refundable income taxes 4,209 1,133 2,957 407 Other (1,049) (278) 1,725 (1,553) Net cash provided by operating activities 85,159 61,199 118,591 78,538 ----------------------------------------- ------ ------ ------- ------ Investing activities: Acquisition of business net of cash acquired (20,000) - (20,000) - Acquisition of property and equipment (20,302) (14,325) (42,492) (32,144) Other 25 837 211 (1,658) ----- --- --- --- ------ Net cash used in investing activities (40,277) (13,488) (62,281) (33,802) ------------------------------------- ------- ------- ------- ------- Financing activities: Payments on long-term debt (25,000) (25,000) (50,000) (25,000) Issuance of common stock 1,864 2,380 2,905 2,380 Taxes paid related to net share settlement of (664) (136) (5,239) (2,203) equity awards Other (5,000) 42 (9,270) (3,482) Net cash used in financing activities (28,800) (22,714) (61,604) (28,305) Effect of exchange rate changes on cash (1,606) 4,343 4,540 7,487 --------------------------------------- ------ ----- ----- ----- Increase (decrease) in cash and cash equivalents 14,476 29,340 (754) 23,918 Cash and cash equivalents at beginning of period 391,159 344,403 406,389 349,825 ------------------------------------------------ ------- ------- ------- ------- Cash and cash equivalents at end of period $405,635 $373,743 $405,635 $373,743 ========================================== ======== ======== ======== ========
Entegris, Inc. and Subsidiaries Segment Information (In thousands) (Unaudited) Three months ended Six months ended Net sales July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 --------- ------------ ------------ ------------- ------------ ------------ Specialty Chemicals and Engineered $121,174 $111,782 $114,435 $235,609 $212,889 Materials Microcontamination Control 104,407 91,584 100,055 204,462 169,203 Advanced Materials Handling 103,421 99,686 102,887 206,308 187,984 ------- ------ ------- ------- ------- Total net sales $329,002 $303,052 $317,377 $646,379 $570,076 ======== ======== ======== ======== ========
Three months ended Six months ended Segment profit July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 -------------- ------------ ------------ ------------- ------------ ------------ Specialty Chemicals and Engineered $34,174 $28,914 $28,140 $62,314 $51,330 Materials Microcontamination Control 36,484 28,566 35,581 72,065 46,706 Advanced Materials Handling 19,573 22,519 18,276 37,849 41,430 ------ ------ ------ ------ ------ Total segment profit 90,231 79,999 81,997 172,228 139,466 Amortization of intangibles 11,007 11,062 10,945 21,952 22,351 Unallocated expenses 20,134 22,537 20,132 40,266 41,156 ------ ------ Total operating income $59,090 $46,400 $50,920 $110,010 $75,959 ======= ======= ======= ======== =======
Entegris, Inc. and Subsidiaries Reconciliation of GAAP Gross Profit to Adjusted Gross Profit (In thousands) (Unaudited) Three months ended Six months ended July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 ------------ ------------ ------------- ------------ ------------ Net sales $329,002 $303,052 $317,377 $646,379 $570,076 Gross profit-GAAP $150,303 $139,205 $139,596 $289,899 $253,911 Adjustments to gross profit: Impairment of equipment 1,966 - - 1,966 - Adjusted gross profit $152,269 $139,205 $139,596 $291,865 $253,911 ======== ======== ======== ======== ======== Gross margin - as a % of net sales 45.7% 45.9% 44.0% 44.8% 44.5% Adjusted gross margin - as a % of net sales 46.3% 45.9% 44.0% 45.2% 44.5% ------------------------------------------- ---- ---- ---- ---- ----
Entegris, Inc. and Subsidiaries Reconciliation of GAAP Segment Profit to Adjusted Operating Income (In thousands) (Unaudited) Three months ended Six months ended Segment profit-GAAP July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 ------------------- ------------ ------------ ------------- ------------ ------------ Specialty Chemicals and Engineered Materials $34,174 $28,914 $28,140 $62,314 $51,330 Microcontamination Control 36,484 28,566 35,581 72,065 46,706 Advanced Materials Handling 19,573 22,519 18,276 37,849 41,430 ------ ------ ------ ------ ------ Total segment profit 90,231 79,999 81,997 172,228 139,466 Amortization of intangible assets 11,007 11,062 10,945 21,952 22,351 Unallocated expenses 20,134 22,537 20,132 40,266 41,156 Total operating income $59,090 $46,400 $50,920 $110,010 $75,959 ======= ======= ======= ======== ======= Segment profit margin-GAAP Specialty Chemicals and Engineered Materials 28.2% 25.9% 24.6% 26.4% 24.1% Microcontamination Control 34.9% 31.2% 35.6% 35.2% 27.6% Advanced Materials Handling 18.9% 22.6% 17.8% 18.3% 22.0%
Three months ended Six months ended Adjusted segment profit July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 ----------------------- ------------ ------------ ------------- ------------ ------------ Specialty Chemicals and Engineered Materials $34,174 $28,914 $28,140 $62,314 $51,330 Microcontamination Control (1) 37,927 28,566 35,581 73,508 46,706 Advanced Materials Handling (2) 21,859 22,519 18,276 40,135 41,430 ------ ------ ------ ------ ------ Total adjusted segment profit 93,960 79,999 81,997 175,957 139,466 Amortization of intangible assets (3) - - - - - Unallocated expenses 20,134 22,537 20,132 40,266 41,156 Total adjusted operating income $73,826 $57,462 $61,865 $135,691 $98,310 ======= ======= ======= ======== ======= Adjusted segment profit margin Specialty Chemicals and Engineered Materials 28.2% 25.9% 24.6% 26.4% 24.1% Microcontamination Control 36.3% 31.2% 35.6% 36.0% 27.6% Advanced Materials Handling 21.1% 22.6% 17.8% 19.5% 22.0%
(1) Adjusted segment profit for Microcontamination Control for the three and six months ended July 1, 2017 excludes charges for impairment of equipment and severance of $884 and $559, respectively. 2 Adjusted segment profit for Advanced Material Handling for the three and six months ended July 1, 2017 excludes charges for impairment of equipment of $2,286. 3 Adjusted amortization of intangible assets excludes amortization expense of $11,007, $11,062, and $10,945 for the three months ended July 1, 2017, July 2, 2016, and April 1, 2017, respectively and $21,952 and $22,351 for the six months ended July 1, 2017 and July 2, 2016, respectively.
Entegris, Inc. and Subsidiaries Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA (In thousands) (Unaudited) Three months ended Six months ended July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 ------------ ------------ ------------- ------------ ------------ Net sales $329,002 $303,052 $317,377 $646,379 $570,076 Net income $39,991 $32,890 $32,514 $72,505 $49,102 Adjustments to net income: Income tax expense 11,042 5,513 9,111 20,153 10,386 Interest expense, net 8,103 9,051 8,393 16,496 18,200 Other (income) expense, net (46) (1,054) 902 856 (1,729) --- ------ --- --- ------ GAAP - Operating income 59,090 46,400 50,920 110,010 75,959 Severance 559 - - 559 - Impairment of equipment 3,170 - - 3,170 - Amortization of intangible assets 11,007 11,062 10,945 21,952 22,351 ------ ------ ------ ------ ------ Adjusted operating income 73,826 57,462 61,865 135,691 98,310 Depreciation 14,411 13,825 13,977 28,388 27,525 ------ ------ ------ ------ ------ Adjusted EBITDA $88,237 $71,287 $75,842 $164,079 $125,835 ======= ======= ======= ======== ======== Adjusted operating margin 22.4% 19.0% 19.5% 21.0% 17.2% Adjusted EBITDA - as a % of net sales 26.8% 23.5% 23.9% 25.4% 22.1% ------------------------------------- ---- ---- ---- ---- ----
Entegris, Inc. and Subsidiaries Reconciliation of GAAP Net Income to Non-GAAP Earnings per Share (In thousands, except per share data) (Unaudited) Three months ended Six months ended July 1, 2017 July 2, 2016 April 1, 2017 July 1, 2017 July 2, 2016 ------------ ------------ ------------- ------------ ------------ GAAP net income $39,991 $32,890 $32,514 $72,505 $49,102 Adjustments to net income: Severance 559 - - 559 - Impairment of equipment 3,170 - - 3,170 - Gain on sale of equity investment - (38) - - (156) Amortization of intangible assets 11,007 11,062 10,945 21,952 22,351 Tax effect of adjustments to net income and discrete items (5,821) (3,624) (2,705) (8,526) (7,390) ------ ------ ------ ------ ------ Non-GAAP net income $48,906 $40,290 $40,754 $89,660 $63,907 ======= ======= ======= ======= ======= Diluted earnings per common share $0.28 $0.23 $0.23 $0.51 $0.35 Effect of adjustments to net income $0.06 $0.05 $0.06 $0.12 $0.10 Diluted non-GAAP earnings per common share $0.34 $0.28 $0.28 $0.63 $0.45 ------------------------------------------ ----- ----- ----- ----- -----
Contact:
Steven Cantor
VP of Corporate Relations
T + 978 436 6500
irelations@entegris.com
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SOURCE Entegris, Inc.