Entegris Inc 10-Q for FY2020 Q1

Entegris Inc (ENTG)

10-Q 2020-04-21 For: 2020-03-28

Added on April 09, 2026

About this 10-Q

Entegris Inc filed this 10-Q on April 21, 2020, covering the quarter ended March 28, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $412.33M; up 5.4% from $391.05M a year earlier
Net income: $61.01M; up 86.8% from net income of $32.66M a year earlier
Diluted EPS: $0.45; up 87.5% from $0.24 a year earlier

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Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of March 28, 2020 and December 31, 2019			4
Condensed Consolidated Statements of Operations for the Three Months Ended March 28, 2020 and March 30, 2019			5
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 28, 2020 and March 30, 2019			6
Condensed Consolidated Statements of Equity for the Three Months Ended March 28, 2020 and March 30, 2019			7
Condensed Consolidated Statements of Cash Flows for the Three Months ended March 28, 2020 and March 30, 2019			8
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures about Market Risk			32
Item 4. Controls and Procedures			32

PART II Other Information

Item 1. Legal Proceedings			33
Item 1A. Risk Factors			33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 6. Exhibits			39
Signatures			40


(In thousands, except share and per share data)	March 28, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	335,077	$	351,911
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,304 and $1,145	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 of accumulated depreciation of $540,013 and $522,424	474,841		479,544
Other assets:
Right-of-use assets	50,058		50,160
Goodwill	726,234		695,044
Intangible assets, net of accumulated amortization of $424,462 and $409,328	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 payroll and related benefits	29,590		62,340
Other accrued liabilities	60,857		87,778
Income taxes payable	25,982		26,108
Total current liabilities	201,990		264,433
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $9,112 and $9,516	1,074,888		932,484
Pension benefit obligations and other liabilities	35,295		37,867
Deferred tax liabilities and other noncurrent tax liabilities	71,516		71,586
Long-term lease liability	43,549		43,827
Commitments and contingent liabilities	—		—
Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of March 28, 2020 and December 31, 2019	—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of March 28, 2020: 134,808,929 and 134,606,529, respectively; issued and outstanding shares as of December 31, 2019: 134,929,768 and 134,727,368, respectively	1,348		1,349
Treasury stock, at cost: 202,400 shares held as of March 28, 2020 and December 31, 2019	(7,112)		(7,112)
Additional paid-in capital	833,159		842,784
Retained earnings	390,542		366,127
Accumulated other comprehensive loss	(46,610)		(37,259)
Total equity	1,171,327		1,165,889
Total liabilities and equity	$	2,598,565	$	2,516,086


	Three months ended
(In thousands, except per share data)	March 28, 2020		March 30, 2019
Net sales	$	412,327	$	391,047
Cost of sales	226,849		213,654
Gross profit	185,478		177,393
Selling, general and administrative expenses	58,891		82,254
Engineering, research and development expenses	29,632		28,991
Amortization of intangible assets	16,211		18,657
Operating income	80,744		47,491
Interest expense	10,559		10,884
Interest income	(321)		(1,225)
Other expense (income), net	878		(248)
Income before income tax expense	69,628		38,080
Income tax expense	8,622		5,422
Net income	$	61,006	$	32,658

Basic net income per common share	$	0.45	$	0.24
Diluted net income per common share	$	0.45	$	0.24

Weighted shares outstanding:
Basic	134,745		135,299
Diluted	136,369		136,692


	Three months ended
(In thousands)	March 28, 2020		March 30, 2019
Net income	$	61,006	$	32,658
Other comprehensive loss, net of tax
Foreign currency translation adjustments	(9,361)		(2,787)
Pension liability adjustments	10		24
Other comprehensive loss	(9,351)		(2,763)
Comprehensive income	$	51,655	$	29,895


(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings (deficit)		Foreign currency translation adjustments		Defined benefit pension adjustments		Total
Balance at December 31, 2018	136,179	$	1,362	(202)	$	(7,112)	$	837,658	$	213,753	$	(32,776)	$	(860)	$	1,012,025
Shares issued under stock plans	572	5		—	—		(6,817)		—		—		—		(6,812)
Share-based compensation expense	—	—		—	—		4,653		—		—		—		4,653
Repurchase and retirement of common stock	(1,035)	(10)		—	—		(6,364)		(23,413)		—		—		(29,787)
Dividends declared ($0.07 per share)	—	—		—	—		7		(9,517)		—		—		(9,510)
Pension liability adjustment	—	—		—	—		—		—		—		24		24
Foreign currency translation	—	—		—	—		—		—		(2,787)		—		(2,787)
Net income	—	—		—	—		—		32,658		—		—		32,658
Balance at March 30, 2019	135,716	$	1,357	(202)	$	(7,112)	$	829,137	$	213,481	$	(35,563)	$	(836)	$	1,000,464


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Supplemental Cash Flow Information	Three months ended
(unaudited)
(In thousands)	March 28, 2020		March 30, 2019
Non-cash transactions:
Deferred acquisition payments	$	1,451	$	14,001
Contingent consideration obligation	$	—	$	686
Equipment purchases in accounts payable	$	6,689	$	7,486
Dividends payable	$	89	$	65
Schedule of interest and income taxes paid:
Interest paid	$	15,296	$	17,124
Income taxes paid, net of refunds received	$	7,997	$	47,770


(In thousands):	As of January 10, 2020
Trade accounts and note receivable, net	$	1,189
Inventories, net	1,010
Other current assets	8
Property, plant and equipment	63
Identifiable intangible assets	41,680
Right-of-use assets	1,712
Accounts payable and accrued liabilities	(58)
Short-term lease liability	(150)
Long-term lease liability	(1,562)
Net assets acquired	43,892
Goodwill	31,751
Total purchase price, net of cash acquired	$	75,643


(In thousands)	Amount		Weighted average life in years
Developed technology	$	7,650	7.0
Trademarks and trade names	130		1.3
Customer relationships	33,900		15.0
	$	41,680	13.5


(In thousands):	As of September 17, 2019		As of March 28, 2020
Trade accounts and note receivable, net	$	3,455	$	3,455
Inventories, net	4,242		4,459
Other current assets	202		794
Property, plant and equipment	8,863		8,257
Identifiable intangible assets	42,179		16,439
Right-of-use assets	—		2,328
Other noncurrent assets	1,565		74
Accounts payable and accrued liabilities	(1,814)		(5,022)
Short-term lease liability	—		(88)
Long-term lease liability	—		(107)
Noncurrent deferred tax liabilities	(10,890)		(4,129)
Other noncurrent liabilities	—		(3,270)
Net assets acquired	47,802		23,190
Goodwill	25,212		49,608
Total purchase price, net of cash acquired	$	73,014	$	72,798


(In thousands):	As of July 15, 2019		As of March 28, 2020
Trade accounts and note receivable, net	$	3,575	$	3,575
Inventories, net	21,899		8,689

Other current assets	318		313
Property, plant and equipment	14,571		11,465
Identifiable intangible assets	74,900		79,390
Right-of-use assets	3,677		3,621


Accounts payable and accrued liabilities	(2,440)		(2,153)
Short-term lease liabilities	(144)		(88)
Long-term lease liabilities	(4,016)		(4,016)
Other noncurrent liabilities	(1,416)		(1,416)
Net assets acquired	110,924		99,380
Goodwill	51,457		63,042
Total purchase price, net of cash acquired	$	162,381	$	162,422


(In thousands):	As of March 8, 2019		As of December 31, 2019
Trade accounts and note receivable, net	$	1,840	$	1,840
Inventories, net	5,523		4,307

Other current assets	1,389		1,437
Property, plant and equipment	16,791		16,654
Identifiable intangible assets	7,976		6,870
Right-of-use assets	79		79
Deferred tax asset	1,104		1,066
Other noncurrent assets	—		28
Accounts payable and accrued liabilities	(2,461)		(2,861)
Deferred tax liabilities	(2,861)		(1,802)
Long-term lease liability	(37)		(37)
Net assets acquired	29,343		27,581
Goodwill	35,133		36,540
Total purchase price, net of cash acquired	$	64,476	$	64,121


(In thousands)	Specialty Chemicals and Engineered Materials		Microcontamination Control		Advanced Materials Handling		Total
December 31, 2019	$	397,952	$	240,021	$	57,071	$	695,044
Addition due to acquisitions	31,751		—		—		31,751
Purchase accounting adjustments	1,172		1,897		—		3,069
Foreign currency translation	(2,526)		(1,104)		—		(3,630)
March 28, 2020	$	428,349	$	240,814	$	57,071	$	726,234


March 28, 2020
(In thousands)	Gross carrying Amount		Accumulated amortization		Net carrying value
Developed technology	$	279,158	$	212,026	$	67,132
Trademarks and trade names	28,942		16,753		12,189
Customer relationships	435,880		168,548		267,332
Other	36,297		27,135		9,162
	$	780,277	$	424,462	$	355,815


(In thousands)	March 28, 2020		December 31, 2019
Raw materials	$	102,208	$	92,849
Work-in process	38,476		30,856
Finished goods	160,010		163,393
Total inventories, net	$	300,694	$	287,098


(In thousands)	Remaining 2020		2021	2022	2023	2024	Thereafter	Total
Future amortization expense	$	36,983	47,004	46,234	45,545	31,735	148,314	$	355,815


(In thousands)	Operating Leases
Remaining 2020	$	12,593
2021	10,077
2022	6,834
2023	6,092
2024	5,113
Thereafter	27,281
Total	$	67,990
Less: Interest	14,269
Present value of lease liabilities	$	53,721


	Three months ended March 28, 2020
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
Taiwan	$	25,182	$	42,483	$	24,801	$	—	$	92,466
United States	46,550		28,680		33,403		(7,285)		101,348
South Korea	20,129		20,122		15,161		—		55,412
Japan	17,123		28,111		10,420		—		55,654
China	15,510		18,197		11,639		—		45,346
Europe	8,608		13,488		12,548		—		34,644
Southeast Asia	11,112		8,180		8,165		—		27,457
	$	144,214	$	159,261	$	116,137	$	(7,285)	$	412,327


(In thousands, except lease term and discount rate)	Classification	March 28, 2020			December 31, 2019
Assets
Right-of-use assets	Right-of-use assets	$	50,058		$	50,160
Liabilities
Short-term lease liability	Other accrued liabilities	10,172			10,025
Long-term lease liability	Long-term lease liability	43,549			43,827
Total lease liabilities		$	53,721		$	53,852
Lease Term and Discount Rate
Weighted average remaining lease term (years)		8.3			8.4
Weighted average discount rate		4.9		%	4.9		%


	Three months ended March 30, 2019
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
Taiwan	$	25,173	$	38,490	$	18,123	$	—	$	81,786
United States	32,738		27,582		38,546		(7,193)		91,673
South Korea	19,326		25,815		15,978		—		61,119
Japan	11,678		25,095		11,390		—		48,163
China	14,157		22,165		9,846		—		46,168
Europe	8,777		10,775		15,599		—		35,151
Southeast Asia	12,621		7,784		6,582		—		26,987
	$	124,470	$	157,706	$	116,064	$	(7,193)	$	391,047


	Three months ended
(Dollars in thousands)	March 28, 2020						March 30, 2019						December 31, 2019
Net sales	$	412,327	100.0	%	$	391,047	100.0	%	$	426,998	100.0	%
Cost of sales	226,849		55.0		213,654		54.6		229,362		53.7
Gross profit	185,478		45.0		177,393		45.4		197,636		46.3
Selling, general and administrative expenses	58,891		14.3		82,254		21.0		67,171		15.7
Engineering, research and development expenses	29,632		7.2		28,991		7.4		30,352		7.1
Amortization of intangible assets	16,211		3.9		18,657		4.8		16,028		3.8
Operating income	80,744		19.6		47,491		12.1		84,085		19.7
Interest expense	10,559		2.6		10,884		2.8		13,375		3.1
Interest income	(321)		(0.1)		(1,225)		(0.3)		(632)		(0.1)
Other expense (income), net	878		0.2		(248)		(0.1)		248		0.1
Income before income taxes	69,628		16.9		38,080		9.7		71,094		16.6
Income tax expense	8,622		2.1		5,422		1.4		13,656		3.2
Net income	$	61,006	14.8	%	$	32,658	8.4	%	$	57,438	13.5	%


(In thousands)
Net sales in the quarter ended March 30, 2019	$	391,047
Increase, net associated with acquired businesses and divestitures	15,380
Increase associated with volume, pricing and mix	6,209
Decrease associated with effect of foreign currency translation	(309)
Net sales in the quarter ended March 28, 2020	$	412,327


In thousands	March 28, 2020		December 31, 2019
Cash and cash equivalents	$	335,077	$	351,911
Working capital	764,316		667,964
Total debt	1,078,888		936,484


Period	(a) Total Number of Shares Purchased⁽¹⁾	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 - February 1, 2020	105,000	$53.55	105,000	$95,718,888
February 2, 2020 - February 29, 2020	87,000	$55.87	87,000	$122,965,213
March 1, 2020 - March 28, 2020	411,514	$46.37	411,514	$103,884,865
Total	603,514	$48.99	603,514	$103,884,865


Reg. S-K Item 601(b) Reference	Exhibit No.	Document Filed Herewith
(10)	10.1	Entegris, Inc. 2020 Performance Share Award Agreement*
(10)	10.2	Entegris, Inc. 2020 RSU Unit Award Agreement*
(10)	10.3	Entegris, Inc. 2020 Stock Option Grant Agreement*
(31)	31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a).
(31)	31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a).
(32)	32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(101)	101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
(101)	101.SCH	XBRL Taxonomy Extension Schema Document
(101)	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
(101)	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
(101)	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
(101)	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
* A management contract or compensatory plan


						ENTEGRIS, INC.

Date: April 21, 2020						/s/ Gregory B. Graves
						Gregory B. Graves
						Executive Vice President and Chief Financial
						Officer (on behalf of the registrant and as
						principal financial officer)


Company TSR Percentile Rank			TSR Performance Multiplier
Below 25th percentile			0
25th percentile			50%
50th percentile			100%
85th percentile or above			200%


Dated: April 21, 2020			/s/ Bertrand Loy
			Bertrand Loy
			Chief Executive Officer
			(Principal Executive Officer)