Entegris Inc 10-Q for FY2020 Q3

Entegris Inc (ENTG)

10-Q 2020-10-22 For: 2020-09-26

Added on April 09, 2026

About this 10-Q

Entegris Inc filed this 10-Q on October 22, 2020, covering the quarter ended September 26, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 26, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $480.99M; up 22.0% from $394.15M a year earlier
Net income: $79.3M; up 94.5% from net income of $40.77M a year earlier
Diluted EPS: $0.58; up 93.3% from $0.30 a year earlier

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Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of September 26, 2020 and December 31, 2019			4
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 26, 2020 and September 28, 2019			5
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 26, 2020 and September 28, 2019			6
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 26, 2020 and September 28, 2019			7
Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 26, 2020 and September 28, 2019			9
Notes to Condensed Consolidated Financial Statements			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures about Market Risk			40
Item 4. Controls and Procedures			40

PART II Other Information

Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			46
Item 6. Exhibits			47
Signatures			48


(In thousands, except share and per share data)	September 26, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	447,972	$	351,911
Trade accounts and notes receivable, net of allowance for doubtful accounts of $3,370 and $1,145	300,489		234,409
Inventories, net	329,741		287,098
Deferred tax charges and refundable income taxes	38,100		24,552
Other current assets	30,148		34,427
Total current assets	1,146,450		932,397
Property, plant and equipment, net of accumulated depreciation of $571,199 and $522,424	490,298		479,544
Other assets:
Right-of-use assets	46,655		50,160
Goodwill	744,470		695,044
Intangible assets, net of accumulated amortization of $449,454 and $409,328	349,066		333,952
Deferred tax assets and other noncurrent tax assets	12,179		11,245
Other	12,510		13,744
Total assets	$	2,801,628	$	2,516,086
LIABILITIES AND EQUITY
Current liabilities:
Long-term debt, current maturities	$	—	$	4,000
Accounts payable	69,918		84,207
Accrued payroll and related benefits	77,585		62,340

Other accrued liabilities	74,264		87,778
Income taxes payable	25,606		26,108
Total current liabilities	247,373		264,433
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $9,620 and $9,516	1,085,380		932,484
Pension benefit obligations and other liabilities	38,064		37,867
Deferred tax liabilities and other noncurrent tax liabilities	88,103		71,586
Long-term lease liability	40,407		43,827
Commitments and contingent liabilities	—		—
Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of September 26, 2020 and December 31, 2019	—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of September 26, 2020: 135,238,325 and 135,035,925, respectively; issued and outstanding shares as of December 31, 2019: 134,929,768 and 134,727,368, respectively	1,352		1,349
Treasury stock, at cost: 202,400 shares held as of September 26, 2020 and December 31, 2019	(7,112)		(7,112)
Additional paid-in capital	835,953		842,784
Retained earnings	516,111		366,127
Accumulated other comprehensive loss	(44,003)		(37,259)
Total equity	1,302,301		1,165,889
Total liabilities and equity	$	2,801,628	$	2,516,086


	Three months ended						Nine months ended
(In thousands, except per share data)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net sales	$	480,987	$	394,147	$	1,341,719	$	1,164,068
Cost of sales	254,987		223,797		722,869		650,051
Gross profit	226,000		170,350		618,850		514,017
Selling, general and administrative expenses	71,195		71,232		196,958		217,636
Engineering, research and development expenses	36,295		31,173		98,499		90,788
Amortization of intangible assets	11,749		15,152		41,176		50,400
Operating income	106,761		52,793		282,217		155,193
Interest expense	12,781		11,388		36,345		33,587
Interest income	(130)		(1,172)		(664)		(4,020)
Other (income) expense, net	(1,752)		934		(1,351)		(121,329)
Income before income tax expense	95,862		41,643		247,887		246,955
Income tax expense	16,559		876		39,542		49,533
Net income	$	79,303	$	40,767	$	208,345	$	197,422

Basic earnings per common share	$	0.59	$	0.30	$	1.55	$	1.46
Diluted earnings per common share	$	0.58	$	0.30	$	1.53	$	1.45

Weighted shares outstanding:
Basic	134,957		135,092		134,801		135,256
Diluted	136,252		136,530		136,209		136,601


	Three months ended						Nine months ended
(In thousands)	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net income	$	79,303	$	40,767	$	208,345	$	197,422
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	4,765		(6,005)		(6,772)		(10,504)
Pension liability adjustments	9		17		28		27
Other comprehensive income (loss)	4,774		(5,988)		(6,744)		(10,477)
Comprehensive income	$	84,077	$	34,779	$	201,601	$	186,945


(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		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
Shares issued under stock plans	49	—			—		(572)		—		—		—		(572)
Share-based compensation expense	—	—		—	—		4,936		—		—		—		4,936
Repurchase and retirement of common stock	(422)	(4)		—	—		(2,579)		(12,417)		—		—		(15,000)
Dividends declared ($0.07 per share)	—	—		—	—		—		(9,550)		—		—		(9,550)
Pension liability adjustment	—	—		—	—		—		—		—		(14)		(14)
Foreign currency translation	—	—		—	—		—		—		(1,712)		—		(1,712)
Net income	—	—		—	—		—		123,997		—		—		123,997
Balance at June 29, 2019	135,343	$	1,353	(202)	$	(7,112)	$	830,922	$	315,511	$	(37,275)	$	(850)	$	1,102,549
Shares issued under stock plans	156	2			—		3,156		—		—		—		3,158
Share-based compensation expense	—	—		—	—		5,326		—		—		—		5,326
Repurchase of common stock	(358)	(4)		—	—		(2,206)		(12,790)		—		—		(15,000)
Dividends declared ($0.08 per share)	—	—		—	—		14		(10,909)		—		—		(10,895)
Pension liability adjustment	—	—		—	—		—		—		—		17		17
Foreign currency translation	—	—		—	—		—		—		(6,005)		—		(6,005)
Net income	—	—		—	—		—		40,767		—		—		40,767
Balance at September 28, 2019	135,141	$	1,351	(202)	$	(7,112)	$	837,212	$	332,579	$	(43,280)	$	(833)	$	1,119,917


☒			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)	September 26, 2020		September 28, 2019
Non-cash transactions:
Deferred acquisition payments	$	2,785	$	32,462
Contingent consideration obligation	—		686
Equipment purchases in accounts payable	7,543		3,431
Changes in dividends payable	74		307
Schedule of interest and income taxes paid:
Interest paid	33,164		37,366
Income taxes paid, net of refunds received	35,544		66,474


(In thousands):	July 10, 2020
Trade accounts and note receivable, net	$	937
Inventories, net	1,079
Identifiable intangible assets	18,180
Right-of-use assets	337

Accounts payable and accrued liabilities	(28)
Short-term lease liability	(150)
Long-term lease liability	(187)
Net assets acquired	20,168
Goodwill	16,099
Total purchase price, net of cash acquired	$	36,267


(In thousands)	Amount		Weighted average life in years
Developed technology	$	3,570	6.5
Trademarks and trade names	1,010		11.5
Customer relationships	13,600		15.5
	$	18,180	13.5


(In thousands):	As of January 10, 2020		As of June 27, 2020
Trade accounts and note receivable, net	$	1,189	$	1,189
Inventories, net	1,010		1,010
Other current assets	8		8
Property, plant and equipment	63		63
Identifiable intangible assets	41,680		41,680
Right-of-use assets	1,712		1,712
Deferred tax asset	—		102
Accounts payable and accrued liabilities	(58)		(58)
Short-term lease liability	(150)		(150)
Long-term lease liability	(1,562)		(1,562)
Net assets acquired	43,892		43,994
Goodwill	31,751		31,651
Total purchase price, net of cash acquired	$	75,643	$	75,645


(In thousands):	As of September 17, 2019		As of September 26, 2020
Trade accounts and note receivable, net	$	3,455	$	3,455
Inventories, net	4,242		4,459
Other current assets	202		739
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)		(5,217)
Short-term lease liability	—		(88)
Long-term lease liability	—		(107)
Noncurrent deferred tax liabilities	(10,890)		(3,751)
Other noncurrent liabilities	—		(3,270)
Net assets acquired	47,802		23,318
Goodwill	25,212		49,480
Total purchase price, net of cash acquired	$	73,014	$	72,798


(In thousands):	As of July 15, 2019		As of June 27, 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)		(1,874)
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		99,659
Goodwill	51,457		63,246
Total purchase price, net of cash acquired	$	162,381	$	162,905


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

Other current assets	1,437
Property, plant and equipment	16,654
Identifiable intangible assets	6,870
Right-of-use assets	79
Deferred tax asset	1,066
Other noncurrent assets	28
Accounts payable and accrued liabilities	(2,861)
Deferred tax liabilities	(1,802)
Long-term lease liability	(37)
Net assets acquired	27,581
Goodwill	36,540
Total purchase price, net of cash acquired	$	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		—		16,099		47,850
Purchase accounting adjustments	1,276		1,769		—		3,045
Foreign currency translation	(3,275)		1,806		—		(1,469)
September 26, 2020	$	427,704	$	243,596	$	73,170	$	744,470


(In thousands)	September 26, 2020		December 31, 2019
Raw materials	$	98,157	$	92,849
Work-in process	43,618		30,856
Finished goods	187,966		163,393
Total inventories, net	$	329,741	$	287,098


(In thousands)	Remaining 2020		2021	2022	2023	2024	Thereafter	Total
Future amortization expense	$	12,365	45,828	45,062	45,105	31,674	169,032	$	349,066


Year	Percentage
2023	102.188	%
2024	101.094	%
2025 and thereafter	100.000	%


September 26, 2020
(In thousands)	Gross carrying Amount		Accumulated amortization		Net carrying value
Developed technology	$	282,951	$	218,900	$	64,051
Trademarks and trade names	30,004		17,788		12,216
Customer relationships	449,270		184,851		264,419
Other	36,295		27,915		8,380
	$	798,520	$	449,454	$	349,066


(In thousands)	2020		2021	2022	2023	2024	Thereafter	Total
Contractual debt obligation maturities*	$	—	—	—	—	—	1,095,000	$	1,095,000


(In thousands, except lease term and discount rate)	Classification	September 26, 2020			December 31, 2019
Assets
Right-of-use assets	Right-of-use assets	$	46,655		$	50,160
Liabilities
Short-term lease liability	Other accrued liabilities	9,920			10,025
Long-term lease liability	Long-term lease liability	40,407			43,827
Total lease liabilities		$	50,327		$	53,852
Lease Term and Discount Rate
Weighted average remaining lease term (years)		8.1			8.4
Weighted average discount rate		5.0		%	4.9		%


(In thousands)	Operating Leases
Remaining 2020	$	3,239
2021	11,540
2022	7,669
2023	6,586
2024	5,501
Thereafter	28,207
Total	62,742
Less: Interest	12,415
Present value of lease liabilities	$	50,327


	Three months ended September 26, 2020
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	45,921	$	47,803	$	47,748	$	(7,404)	134,068
Taiwan	26,651		37,602		18,105		—		$	82,358
South Korea	22,389		21,780		30,201		—		74,370
Japan	18,487		30,386		11,882		—		60,755
China	20,334		29,150		16,828		—		66,312
Europe	8,111		18,237		12,903		—		39,251
Southeast Asia	8,587		8,583		6,703		—		23,873
	$	150,480	$	193,541	$	144,370	$	(7,404)	$	480,987


	Three months ended September 28, 2019
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	40,176	$	31,186	$	36,548	$	(6,838)	$	101,072
Taiwan	23,186		32,521		19,164		—		74,871
South Korea	18,441		27,239		20,195		—		65,875
Japan	13,587		25,160		9,417		—		48,164
China	14,699		23,544		12,354		—		50,597
Europe	7,806		9,845		12,587		—		30,238
Southeast Asia	9,855		6,484		6,991		—		23,330
	$	127,750	$	155,979	$	117,256	$	(6,838)	$	394,147


	Nine months ended September 26, 2020
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	137,594	$	109,937	$	121,147	$	(22,689)	$	345,989
Taiwan	78,079		122,443		65,240		—		265,762
South Korea	63,636		64,861		66,398		—		194,895
Japan	53,819		88,512		34,257		—		176,588
China	54,159		75,709		41,505		—		171,373
Europe	25,465		49,526		37,216		—		112,207
Southeast Asia	28,155		25,572		21,178		—		74,905
	$	440,907	$	536,560	$	386,941	$	(22,689)	$	1,341,719


	Nine months ended September 28, 2019
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	106,590	$	83,860	$	110,287	$	(20,409)	$	280,328
Taiwan	69,943		102,216		50,027		—		222,186
South Korea	55,463		81,585		52,939		—		189,987
Japan	40,354		74,976		32,761		—		148,091
China	49,269		68,247		32,853		—		150,369
Europe	24,235		32,022		42,594		—		98,851
Southeast Asia	33,918		20,964		19,374		—		74,256
	$	379,772	$	463,870	$	340,835	$	(20,409)	$	1,164,068


	Three months ended																				Nine months ended
(Dollars in thousands)	September 26, 2020						September 28, 2019						June 27, 2020						September 26, 2020			September 28, 2019
Net sales	$	480,987	100.0	%	$	394,147	100.0	%	$	448,405	100.0	%	$	1,341,719	100.0	%	$	1,164,068	100.0	%
Cost of sales	254,987		53.0		223,797		56.8		241,033		53.8		722,869		53.9		650,051		55.8
Gross profit	226,000		47.0		170,350		43.2		207,372		46.2		618,850		46.1		514,017		44.2
Selling, general and administrative expenses	71,195		14.8		71,232		18.1		66,872		14.9		196,958		14.7		217,636		18.7
Engineering, research and development expenses	36,295		7.5		31,173		7.9		32,572		7.3		98,499		7.3		90,788		7.8
Amortization of intangible assets	11,749		2.4		15,152		3.8		13,216		2.9		41,176		3.1		50,400		4.3
Operating income	106,761		22.2		52,793		13.4		94,712		21.1		282,217		21.0		155,193		13.3
Interest expense	12,781		2.7		11,388		2.9		13,005		2.9		36,345		2.7		33,587		2.9
Interest income	(130)		—		(1,172)		(0.3)		(213)		—		(664)		—		(4,020)		(0.3)
Other (income) expense, net	(1,752)		(0.4)		934		0.2		(477)		(0.1)		(1,351)		(0.1)		(121,329)		(10.4)
Income before income taxes	95,862		19.9		41,643		10.6		82,397		18.4		247,887		18.5		246,955		21.2
Income tax expense	16,559		3.4		876		0.2		14,361		3.2		39,542		2.9		49,533		4.3
Net income	$	79,303	16.5	%	$	40,767	10.3	%	$	68,036	15.2	%	$	208,345	15.5	%	$	197,422	17.0	%


(In thousands)
Net sales in the quarter ended September 28, 2019	$	394,147
Increase associated with acquired businesses	9,736
Increase associated with volume, pricing and mix	75,147
Increase associated with effect of foreign currency translation	1,957
Net sales in the quarter ended September 26, 2020	$	480,987


(In thousands)
Net sales in the nine months ended September 28, 2019	$	1,164,068
Increase associated with volume, pricing and mix	138,005
Increase associated with effect of foreign currency translation	2,082
Increase associated with acquired businesses	37,564
Net sales in the nine months ended September 26, 2020	$	1,341,719


In thousands	September 26, 2020		December 31, 2019
Cash and cash equivalents	$	447,972	$	351,911
Working capital	899,077		667,964
Total debt	1,085,380		936,484


Reg. S-K Item 601(b) Reference	Exhibit No.	Document Filed Herewith
(10)	10.1	Second Amendment to the Entegris, Inc. 401(k) Savings and Profit Sharing Plan.*
(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)
* A management contract or compensatory plan


						ENTEGRIS, INC.

Date: October 22, 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)


Dated: October 22, 2020			/s/ Bertrand Loy
			Bertrand Loy
			Chief Executive Officer
			(Principal Executive Officer)