Entegris Inc 10-Q for FY2022 Q3

Entegris Inc (ENTG)

10-Q 2022-11-02 For: 2022-10-01

Added on April 09, 2026

About this 10-Q

Entegris Inc filed this 10-Q on November 2, 2022, covering the quarter ended October 1, 2022 (FY2022 Q3).

Headline figures

Quarter ended October 1, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $993.83M; up 71.5% from $579.49M a year earlier
Net loss: $73.7M; compared with net income of $117.46M a year earlier
Diluted EPS: -$0.50; compared with $0.86 a year earlier

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Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of October 1, 2022 and December 31, 2021			4
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 1, 2022 and October 2, 2021			5
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 1, 2022 and October 2, 2021			6
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended October 1, 2022 and October 2, 2021			7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2022 and October 2, 2021			9
Notes to Condensed Consolidated Financial Statements			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures about Market Risk			42
Item 4. Controls and Procedures			42

PART II Other Information

Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 6. Exhibits			46
Signatures			48


(In thousands, except share and per share data)	October 1, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	752,787	$	402,565
Restricted cash	1,880		—
Trade accounts and notes receivable, net of allowance for credit losses of $4,304 and $2,349	519,793		347,413
Inventories, net	823,637		475,213
Deferred tax charges and refundable income taxes	22,024		35,312
Other current assets	102,155		52,867
Total current assets	2,222,276		1,313,370
Property, plant and equipment, net of accumulated depreciation of $1,120,337 and $653,104	1,383,693		654,098
Other assets:
Right-of-use assets	95,397		66,563
Goodwill	4,405,292		793,702
Intangible assets, net of accumulated amortization of $585,137 and $494,601	1,969,729		335,113
Deferred tax assets and other noncurrent tax assets	18,637		17,671
Other	38,380		11,379
Total assets	$	10,133,404	$	3,191,896
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt, including current portion of long-term debt	$	219,787	$	—
Accounts payable	187,697		130,734
Accrued payroll and related benefits	149,269		108,818
Accrued interest payable	74,513		6,073
Other accrued liabilities	166,924		84,240
Income taxes payable	42,831		49,136
Total current liabilities	841,021		379,001
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $147,515 and $7,973	5,627,698		937,027
Pension benefit obligations and other liabilities	54,048		37,816
Deferred tax liabilities and other noncurrent tax liabilities	411,450		64,170
Long-term lease liability	82,870		60,101
Commitments and contingent liabilities	—		—
Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of October 1, 2022 and December 31, 2021	—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of October 1, 2022: 149,236,984 and 149,034,584, respectively; issued and outstanding shares as of December 31, 2021: 135,719,366 and 135,516,966, respectively	1,492		1,357
Treasury stock, at cost: 202,400 shares held as of October 1, 2022 and December 31, 2021	(7,112)		(7,112)
Additional paid-in capital	2,190,961		879,845
Retained earnings	988,848		879,776
Accumulated other comprehensive loss	(57,872)		(40,085)
Total equity	3,116,317		1,713,781
Total liabilities and equity	$	10,133,404	$	3,191,896


	Three months ended				Nine months ended
(In thousands, except per share data)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales	$	993,828	$	579,493	$	2,335,963	$	1,663,689
Cost of sales	622,157		315,289		1,344,075		899,115
Gross profit	371,671		264,204		991,888		764,574
Selling, general and administrative expenses	226,446		71,032		404,239		215,042
Engineering, research and development expenses	64,990		41,972		160,953		121,692
Amortization of intangible assets	65,346		11,843		90,491		35,616
Operating income	14,889		139,357		336,205		392,224
Interest expense	84,150		9,395		129,027		31,744
Interest income	(1,395)		(56)		(2,065)		(181)
Other expense, net	12,852		1,917		27,373		29,807
(Loss) income before income tax expense	(80,718)		128,101		181,870		330,854
Income tax (benefit) expense	(7,015)		10,640		30,377		39,947
Net (loss) income	$	(73,703)	$	117,461	$	151,493	$	290,907

Basic (loss) earnings per common share	$	(0.50)	$	0.87	$	1.08	$	2.15
Diluted (loss) earnings per common share	$	(0.50)	$	0.86	$	1.08	$	2.13

Weighted shares outstanding:
Basic	148,570		135,583		140,045		135,383
Diluted	148,570		136,631		140,892		136,556


	Three months ended				Nine months ended
(In thousands)	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net (loss) income	$	(73,703)	$	117,461	$	151,493	$	290,907
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(37,461)		637		(48,603)		(1,622)
Pension liability adjustments	—		—		73		39
Interest rate swap - cash flow hedge	40,028		—		40,028		—
Income tax expense	(9,285)		—		(9,285)		—
Total Interest rate swap - cash flow hedge	30,743		—		30,743		—
Other comprehensive (loss) income	(6,718)		637		(17,787)		(1,583)
Comprehensive (loss) income	$	(80,421)	$	118,098	$	133,706	$	289,324


(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings		Foreign currency translation adjustments		Defined benefit pension adjustments		Interest Rate Swap - Cash flow hedge		Total
Balance at December 31, 2020	135,149	$	1,351	202	$	(7,112)	$	844,850	$	577,833	$	(36,588)	$	(840)	$	—	$	1,379,494
Shares issued under stock plans	392	4		—	—		(13,470)		—		—		—		—		(13,466)
Share-based compensation expense	—	—		—	—		7,138		—		—		—		—		7,138
Repurchase and retirement of common stock	(145)	(1)		—	—		(904)		(14,095)		—		—		—		(15,000)
Dividends declared ($0.08 per share)	—	—		—	—		8		(10,840)		—		—		—		(10,832)
Pension liability adjustment	—	—		—	—		—		—		—		39		—		39
Foreign currency translation	—	—		—	—		—		—		(3,716)		—		—		(3,716)
Net income	—	—		—	—		—		84,676		—		—		—		84,676
Balance at April 3, 2021	135,396	$	1,354	202	$	(7,112)	$	837,622	$	637,574	$	(40,304)	$	(801)	$	—	$	1,428,333
Shares issued under stock plans	559	5			—		15,185		—		—		—		—		15,190
Share-based compensation expense	—	—		—	—		7,519		—		—		—		—		7,519
Repurchase and retirement of common stock	(130)	(1)		—	—		(813)		(14,186)		—		—		—		(15,000)
Dividends declared ($0.08 per share)	—	—		—	—		7		(10,945)		—		—		—		(10,938)

Foreign currency translation	—	—		—	—		—		—		1,457		—		—		1,457
Net income	—	—		—	—		—		88,770		—		—		—		88,770
Balance at July 3, 2021	135,825	$	1,358	202	$	(7,112)	$	859,520	$	701,213	$	(38,847)	$	(801)	—		$	1,515,331
Shares issued under stock plans	65	1			—		779		—		—		—		—		780
Share-based compensation expense	—	—		—	—		7,467		—		—		—		—		7,467
Repurchase of common stock	(166)	(2)		—	—		(1,050)		(18,948)		—		—		—		(20,000)
Dividends declared ($0.08 per share)	—	—		—	—		—		(10,896)		—		—		—		(10,896)

Foreign currency translation	—	—		—	—		—		—		637		—		—		637
Net income	—	—		—	—		—		117,461		—		—		—		117,461
Balance at October 2, 2021	135,724	$	1,357	202	$	(7,112)	$	866,716	$	788,830	$	(38,210)	$	(801)	$	—	$	1,610,780


☒			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	Nine months ended
(unaudited)
(In thousands)	October 1, 2022		October 2, 2021
Non-cash transactions:
Deferred acquisition payments	$	—	$	250


Equipment purchases in accounts payable	19,362		15,965
Increase (Decrease) in dividends payable	8		(16)
Equity consideration on acquisition of CMC Materials Inc	1,265,690		—
Schedule of interest and income taxes paid:
Interest paid less capitalized interest	22,917		29,759
Income taxes paid, net of refunds received	96,729		85,409


(In thousands):
Cash paid to CMC Materials’ shareholders	$	3,836,983
Stock paid to CMC Materials’ shareholders	1,265,690
Repayment of CMC Materials’ indebtedness	918,578
Total purchase price	6,021,251
Less cash and cash equivalents acquired	280,636
Total purchase price, net of cash acquired	$	5,740,615


(In thousands):	July 6, 2022
Cash and cash equivalents	$	280,636
Accounts receivable and other current assets	206,887
Inventory	256,598
Property, plant and equipment	534,363
Identifiable intangible assets	1,727,119
Other noncurrent assets	44,149
Current liabilities	(213,089)
Deferred tax liabilities and other noncurrent liabilities	(448,550)
Net assets acquired	2,388,113
Goodwill	3,633,138
Total purchase price	$	6,021,251


(In thousands)	Amount		Weighted average life in years
Developed technology	$	1,005,300	6.4
Trademarks and trade names	234,400		14.9
Customer relationships	445,700		18.2
In-process research and development	30,100
Other	11,619		1.2
	$	1,727,119	10.7


(In thousands):	November 30, 2021		As of April 2, 2022
Inventories, net	$	967	$	967
Other current assets	19		19
Identifiable intangible assets	44,910		44,910
Right-of-use assets	1,912		1,912
Property, plant and equipment	1,002		1,002
Other noncurrent assets	18		18
Accounts payable and accrued liabilities	(43)		(30)
Short-term lease liability	(170)		(170)
Long-term lease liability	(1,742)		(1,742)
Net assets acquired	46,873		46,886
Goodwill	42,819		42,824
Total purchase price, net of cash acquired	$	89,692	$	89,710


(In thousands)	SCEM		MC		AMH		APS		Total
December 31, 2021	$	470,875	$	248,725	$	74,102	$	—	$	793,702
Addition due to acquisitions	275,771		—		—		3,357,367		3,633,138
Purchase accounting adjustments	5		—		—		—		5
Goodwill reallocation	(120,980)		—		—		120,980		—
Foreign currency translation	(1,863)		(8,667)		—		(11,023)		(21,553)
October 1, 2022	$	623,808	$	240,058	$	74,102	$	3,467,324	$	4,405,292


October 1, 2022
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value
Developed technology	$	1,298,717	$	281,407	$	1,017,310
Trademarks and trade names	267,718		25,680		242,038
Customer relationships	926,425		260,268		666,157
Other	62,006		17,782		44,224
	$	2,554,866	$	585,137	$	1,969,729


(In thousands)	Remaining 2022		2023	2024	2025	2026	Thereafter	Total
Future amortization expense	$	65,728	258,598	239,039	232,754	230,526	943,084	$	1,969,729


	Nine months ended
(In thousands)	October 1, 2022		October 2, 2021
Operating activities:
Net income	$	151,493	$	290,907
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	93,489		67,510
Amortization	90,491		35,616
Share-based compensation expense	57,544		22,124
Charge for fair value mark-up of acquired inventory sold	61,932		—
Provision for deferred income taxes	(56,964)		(12,307)
Loss on extinguishment of debt and modification	2,235		23,338
Charge for excess and obsolete inventory	17,582		10,066
Other	38,670		265
Changes in operating assets and liabilities:
Trade accounts and notes receivable	(34,378)		(53,358)
Inventories	(180,335)		(115,187)
Accounts payable and accrued liabilities	83,307		37,577
Other current assets	(4,248)		10,575
Income taxes payable and refundable income taxes	(15,637)		(35,275)
Other	15,049		2,623
Net cash provided by operating activities	320,230		284,474
Investing activities:
Acquisition of property, plant and equipment	(318,836)		(133,986)
Acquisition of businesses, net of cash acquired	(4,474,925)		(2,250)
Other	1,124		4,416
Net cash used in investing activities	(4,792,637)		(131,820)
Financing activities:
Proceeds from revolving credit facility and short-term debt	476,000		451,000
Payments of revolving credit facility and short-term debt	(271,000)		(601,000)
Proceeds from long-term debt	4,940,753		—
Payments of long-term debt	(145,000)		—
Payments for debt extinguishment costs	—		(19,080)
Payments for debt issuance costs	(99,489)		(5,069)
Payments for dividends	(42,413)		(32,650)
Issuance of common stock	10,764		17,872
Repurchase and retirement of common stock	—		(50,000)
Taxes paid related to net share settlement of equity awards	(22,747)		(15,368)

Other	(859)		(218)


(In thousands)	October 1, 2022		October 2, 2021
Balance at beginning of period	$	23,050	$	13,852
Revenue recognized that was included in the contract liability balance at the beginning of the period	(26,444)		(13,561)
Increases due to cash received, excluding amounts recognized as revenue during the period	40,725		16,758
Additions due to acquisitions	11,108		—
Balance at end of period	$	48,439	$	17,049


(In thousands)	October 1, 2022		December 31, 2021
Raw materials	$	342,668	$	191,986
Work-in-process	63,454		40,257
Finished goods	417,515		242,970
Total inventories, net	$	823,637	$	475,213


(In thousands)	October 1, 2022		December 31, 2021
Derivatives designated as hedging instruments:
Interest rate swap contract - Cash flow hedge	$	1,950,000	$	—


Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars	$	4,400	$	—
Foreign exchange contracts to sell U.S. dollars	23,175		—


	October 1, 2022
(In thousands):	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	752,787	$	—	$	—	$	752,787
Restricted cash	1,880		$	—	$	—	1,880
Derivative financial instruments - Interest rate swap - cash flow hedge	—		40,127		—		40,127
Total Assets	$	754,667	$	40,127	$	—	$	794,794

Liabilities:
Derivative financial instruments - Forward exchange contracts	$	—	$	336	$	—	$	336
Total Liabilities	$	—	$	336	$	—	$	336


(In thousands)	Derivative Assets				Derivative Liabilities
Condensed Consolidated Balance Sheet Location	October 1, 2022		December 31, 2021		October 1, 2022		December 31, 2021
Derivatives designated as hedging instruments - Interest rate swap contract -cash flow hedge
Other current assets	$	19,255	$	—	$	—	$	—
Other assets - long-term	20,773		—		—		—
Derivatives not designated as hedging instruments -Foreign exchange contracts
Other current assets	$	99	$	—	$	—	$	—
Other accrued liabilities	—		—		336		—


	Three months ended October 1, 2022
(In thousands)	SCEM		MC		AMH		APS		Inter-segment		Total
North America	$	86,259	$	42,716	$	67,794	$	69,618	$	(15,173)	$	251,214
Taiwan	29,462		70,536		38,712		43,604		—		182,314
China	26,805		58,398		28,717		53,040		—		166,960
South Korea	19,931		30,583		29,339		40,001		—		119,854
Japan	22,563		42,505		16,336		9,604		—		91,008
Europe	21,892		20,977		18,401		41,483		—		102,753
Southeast Asia	17,280		14,835		11,106		36,504		—		79,725
	$	224,192	$	280,550	$	210,405	$	293,854	$	(15,173)	$	993,828


	Three months ended October 2, 2021
(In thousands)	SCEM		MC		AMH		APS		Inter-segment		Total
North America	$	47,636	$	35,828	$	60,350	$	4,915	$	(8,964)	$	139,765
Taiwan	24,479		57,806		26,615		4,892		—		113,792
China	21,678		35,003		23,975		3,639		—		84,295
South Korea	18,319		24,763		28,487		5,336		—		76,905
Japan	20,735		42,440		13,701		904		—		77,780
Europe	11,952		17,583		26,041		1,299		—		56,875
Southeast Asia	9,806		12,454		7,031		790		—		30,081
	$	154,605	$	225,877	$	186,200	$	21,775	$	(8,964)	$	579,493


	Nine months ended October 1, 2022
(In thousands)	SCEM		MC		AMH		APS		Inter-segment		Total
North America	$	191,394	$	113,984	$	205,414	$	82,554	$	(40,155)	$	553,191
Taiwan	85,040		232,711		111,722		54,338		—		483,811
China	77,799		142,639		87,347		61,385		—		369,170
South Korea	56,793		93,718		89,367		52,382		—		292,260
Japan	65,659		137,103		44,701		11,202		—		258,665
Europe	46,499		60,670		65,976		45,986		—		219,131
Southeast Asia	46,196		40,495		28,075		44,969		—		159,735
	$	569,380	$	821,320	$	632,602	$	352,816	$	(40,155)	$	2,335,963


	Nine months ended October 2, 2021
(In thousands)	SCEM		MC		AMH		APS		Inter-segment		Total
North America	$	142,994	$	106,568	$	161,792	$	13,295	$	(27,338)	$	397,311
Taiwan	69,196		155,830		79,286		16,154		—		320,466
China	63,442		118,595		70,418		7,756		—		260,211
South Korea	58,266		83,725		73,769		15,627		—		231,387
Japan	66,258		114,654		37,875		2,520		—		221,307
Europe	32,025		44,562		63,171		4,276		—		144,034
Southeast Asia	28,526		36,563		20,932		2,952		—		88,973
	$	460,707	$	660,497	$	507,243	$	62,580	$	(27,338)	$	1,663,689


	Three months ended								Nine months ended
(Dollars in thousands)	October 1, 2022				October 2, 2021					October 1, 2022			October 2, 2021
Net sales	$	993,828	100.0	%	$	579,493	100.0	%			$	2,335,963	100.0	%	$	1,663,689	100.0	%
Cost of sales	622,157		62.6		315,289		54.4				1,344,075		57.5		899,115		54.0
Gross profit	371,671		37.4		264,204		45.6				991,888		42.5		764,574		46.0
Selling, general and administrative expenses	226,446		22.8		71,032		12.3				404,239		17.3		215,042		12.9
Engineering, research and development expenses	64,990		6.5		41,972		7.2				160,953		6.9		121,692		7.3
Amortization of intangible assets	65,346		6.6		11,843		2.0				90,491		3.9		35,616		2.1
Operating income	14,889		1.5		139,357		24.0				336,205		14.4		392,224		23.6
Interest expense	84,150		8.5		9,395		1.6				129,027		5.5		31,744		1.9
Interest income	(1,395)		(0.1)		(56)		—				(2,065)		(0.1)		(181)		—
Other expense, net	12,852		1.3		1,917		0.3				27,373		1.2		29,807		1.8
(Loss) income before income taxes	(80,718)		(8.1)		128,101		22.1				181,870		7.8		330,854		19.9
Income tax (benefit) expense	(7,015)		(0.7)		10,640		1.8				30,377		1.3		39,947		2.4
Net (loss) income	$	(73,703)	(7.4)	%	$	117,461	20.3	%			$	151,493	6.5	%	$	290,907	17.5	%


(In thousands)
Net sales in the quarter ended October 2, 2021	$	579,493
Increase mainly associated with volume exclusive of CMC Materials	136,693
Increase associated with acquired businesses	315,405
Decrease associated with effect of foreign currency translation	(37,763)
Net sales in the quarter ended October 1, 2022	$	993,828


(In thousands)
Net sales in the nine months ended October 2, 2021	$	1,663,689
Increase mainly associated with volume exclusive of CMC Materials	415,130
Decrease associated with effect of foreign currency translation	(67,792)
Increase associated with acquired businesses	324,936
Net sales in the nine months ended October 1, 2022	$	2,335,963


In thousands	October 1, 2022		December 31, 2021
Cash and cash equivalents including restricted cash	$	754,667	$	402,565
Working capital	1,381,255		934,369
Total debt, net of unamortized discount and debt issuance costs	5,847,485		937,027


(In thousands)	Total		Due within 3 months of October 1, 2022		Due later than one year from December 31, 2022
Long-term debt	$	5,995,000	$	—	$	5,995,000
Interest payments on long-term debt	2,116,019		79,646		2,036,373
Total	$	8,111,019	$	79,646	$	8,031,373


Reg. S-K Item 601(b) Reference	Exhibit No.	Document Filed Herewith
(10)	10.1	Fourth Amendment to Lease Agreement, dated as of September 16, 2022, by and between the Company and Rivertech Owner LLC
(10)	10.2	Separation Agreement and Release, dated as of September 1, 2022, by and between the Company and Todd Edlund
(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
(104)	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


						ENTEGRIS, INC.

Date: November 2, 2022						/s/ Gregory B. Graves
						Gregory B. Graves
						Executive Vice President and Chief Financial
						Officer (on behalf of the registrant and as
						principal financial officer)


LANDLORD:

RIVERTECH OWNER LLC
a Delaware limited liability company

By:
Name: Ron J. Hoyl
Title: Vice President
			Hereunto duly authorized

TENANT:

ENTEGRIS, INC.
a Delaware corporation

By:
Name:
Title:
			Hereunto duly authorized


Date:
		Todd Edlund

ENTEGRIS, INC.

Date:	By
		Susan Rice
	Title:	SVP, Global Human Resources


Dated: November 2, 2022			/s/ Bertrand Loy
			Bertrand Loy
			Chief Executive Officer
			(Principal Executive Officer)