UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~April 3,~~October 2, 2021


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

For the transition period from to

Commission file number: 001-32598

Entegris, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________

Delaware

41-1941551

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

129 Concord Road,

Billerica,

Massachusetts

01821

(Address of principal executive offices)

(Zip Code)

(978) 436-6500

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

_______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value per share

ENTG

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~April 23,~~October 22, 2021, there were ~~135,500,992~~135,514,586 shares of the registrant’s common stock outstanding.

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ENTEGRIS, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

FOR THE QUARTER ENDED ~~APRIL 3,~~OCTOBER 2, 2021


Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of ~~April 3,~~Oct ober 2 , 2021 and December 31, 2020			4
Condensed Consolidated Statements of Operations for the Three and N ine Months Ended ~~April 3,~~October 2 , 2021 and ~~March 28,~~Septe mber 26 , 2020			5
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended ~~April 3,~~Oct ober 2 , 2021 and ~~March 28,~~September 26 , 2020			6
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended ~~April 3,~~Oct ober 2 , 2021 and ~~March 28,~~September 26 , 2020			7
Condensed Consolidated Statements of Cash Flows for the ~~Three~~N ine Months Ended ~~April 3,~~October 2 , 2021 and ~~March 28,~~September 26 , 2020			89
Notes to Condensed Consolidated Financial Statements			1011
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1922
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3134
Item 4. Controls and Procedures			3134

PART II Other Information

Item 1. Legal Proceedings			3235
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3235
Item 6. Exhibits			3336
Signatures			3437

Cautionary Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “intend,” “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 may include statements about the impact of the COVID-19 pandemic on the Company’s operations and ~~markets;~~markets, including supply chain issues related thereto; future period guidance or projections; the Company’s performance relative to its markets, including the drivers of such performance; market and technology trends, including the duration and drivers of any growth trends and the impact of the COVID-19 pandemic on such trends; the development of new products and the success of their introductions; the focus of the Company’s engineering, research and development projects; the Company’s ability to execute on its business ~~strategies;~~strategies, including with respect to Company’s expansion of its manufacturing presence in Taiwan; the 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 impact of the acquisitions the Company has made and commercial partnerships the Company has established; future capital and other expenditures, including estimates thereof; the Company’s expected tax rate; the impact, financial or otherwise, of any organizational changes; the impact of accounting pronouncements; quantitative and qualitative disclosures about market risk; and other matters. These forward-looking statements are based on current management expectations and assumptions only as of the date of this Quarterly Report, 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, risks related to the COVID-19 pandemic on the global economy and financial markets, as well as on the Company, ~~our~~its customers and suppliers, which may impact ~~our~~its sales, gross margin, customer demand and ~~our~~its ability to supply ~~our~~its products to ~~our~~its customers; raw material shortages, supply and labor constraints and price increases; weakening of global and/or regional economic conditions, generally or specifically in the semiconductor industry, which could decrease the demand for the Company’s products and solutions; the Company’s ability to meet rapid demand shifts; the Company’s ability to continue technological innovation and introduce new products to meet customers’ rapidly changing requirements; the Company’s concentrated customer base; the Company’s ability to identify, complete and integrate acquisitions, joint ventures or other transactions; the Company’s ability to effectively implement any organizational changes; the Company’s ability to protect and enforce intellectual property rights; operational, political and legal risks of the Company’s international operations; the

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Company’s dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing processes; ~~raw material shortages, supply constraints and price increases;~~ changes in government regulations of the countries in which the Company operates, including the imposition of tariffs, export controls and other trade

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laws and restrictions and changes to foreign and national security policy, especially as they relate to China; fluctuation of currency exchange rates; fluctuations in the market price of the Company’s stock; the level of, and obligations associated with, the Company’s indebtedness; and other risk factors and additional information described in the Company’s filings with the Securities and Exchange Commission, including under the heading “Risks Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed on February 5, 2021, ~~under the heading “Risk Factors” in Item 1A of this Quarterly Report~~ and in the Company’s other periodic filings. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, the Company undertakes no obligation to update publicly any forward-looking statements or information contained herein, which speak as of their respective dates.

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share and per share data)	(In thousands, except share and per share data)	April 3, 2021		December 31, 2020		(In thousands, except share and per share data)	October 2, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	548,520	$	580,893	Cash and cash equivalents	$	475,752	$	580,893
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,718 and $2,384		282,649		264,392
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,356 and $2,384						Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,356 and $2,384	315,073		264,392
Inventories, net	Inventories, net	358,819		323,944		Inventories, net	429,016		323,944
Deferred tax charges and refundable income taxes	Deferred tax charges and refundable income taxes	20,227		21,136		Deferred tax charges and refundable income taxes	21,760		21,136
Other current assets	Other current assets	34,391		43,892		Other current assets	34,104		43,892
Total current assets	Total current assets	1,244,606		1,234,257		Total current assets	1,275,705		1,234,257
Property, plant and equipment, net of accumulated depreciation of $592,146 and $574,257		542,605		525,367
Property, plant and equipment, net of accumulated depreciation of $632,241 and $574,257						Property, plant and equipment, net of accumulated depreciation of $632,241 and $574,257	597,630		525,367
Other assets:	Other assets:					Other assets:
Right-of-use assets	Right-of-use assets	48,057		45,924		Right-of-use assets	56,990		45,924
Goodwill	Goodwill	747,518		748,037		Goodwill	749,933		748,037
Intangible assets, net of accumulated amortization of $457,862 and $445,795		325,454		337,632
Intangible assets, net of accumulated amortization of $482,098 and $445,795						Intangible assets, net of accumulated amortization of $482,098 and $445,795	302,487		337,632
Deferred tax assets and other noncurrent tax assets	Deferred tax assets and other noncurrent tax assets	14,684		14,519		Deferred tax assets and other noncurrent tax assets	17,565		14,519
Other	Other	10,615		11,960		Other	11,965		11,960
Total assets	Total assets	$	2,933,539	$	2,917,696	Total assets	$	3,012,275	$	2,917,696
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Accounts payable	Accounts payable	$	93,045	$	81,618	Accounts payable	$	120,611	$	81,618
Accrued payroll and related benefits	Accrued payroll and related benefits	49,554		94,364		Accrued payroll and related benefits	90,684		94,364

Other accrued liabilities	Other accrued liabilities	81,981		82,648		Other accrued liabilities	91,129		82,648
Income taxes payable	Income taxes payable	41,691		43,996		Income taxes payable	6,989		43,996
Total current liabilities	Total current liabilities	266,271		302,626		Total current liabilities	309,413		302,626
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $8,814 and $9,217		1,086,186		1,085,783
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $8,296 and $9,217						Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $8,296 and $9,217	936,704		1,085,783
Pension benefit obligations and other liabilities	Pension benefit obligations and other liabilities	36,663		36,457		Pension benefit obligations and other liabilities	36,118		36,457
Deferred tax liabilities and other noncurrent tax liabilities	Deferred tax liabilities and other noncurrent tax liabilities	73,133		73,606		Deferred tax liabilities and other noncurrent tax liabilities	66,774		73,606
Long-term lease liability	Long-term lease liability	42,953		39,730		Long-term lease liability	52,486		39,730
Commitments and contingent liabilities	Commitments and contingent liabilities	0		0		Commitments and contingent liabilities	—		—
Equity:	Equity:					Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; NaN issued and outstanding as of April 3, 2021 and December 31, 2020		0		0
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of April 3, 2021: 135,395,571 and 135,193,171, respectively; issued and outstanding shares as of December 31, 2020: 135,148,774 and 134,946,374, respectively		1,354		1,351
Treasury stock, at cost: 202,400 shares held as of April 3, 2021 and December 31, 2020		(7,112)		(7,112)
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of October 2, 2021 and December 31, 2020						Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of October 2, 2021 and December 31, 2020	—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of October 2, 2021: 135,724,073 and 135,521,673, respectively; issued and outstanding shares as of December 31, 2020: 135,148,774 and 134,946,374, respectively						Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of October 2, 2021: 135,724,073 and 135,521,673, respectively; issued and outstanding shares as of December 31, 2020: 135,148,774 and 134,946,374, respectively	1,357		1,351
Treasury stock, at cost: 202,400 shares held as of October 2, 2021 and December 31, 2020						Treasury stock, at cost: 202,400 shares held as of October 2, 2021 and December 31, 2020	(7,112)		(7,112)
Additional paid-in capital	Additional paid-in capital	837,622		844,850		Additional paid-in capital	866,716		844,850
Retained earnings	Retained earnings	637,574		577,833		Retained earnings	788,830		577,833
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(41,105)		(37,428)		Accumulated other comprehensive loss	(39,011)		(37,428)
Total equity	Total equity	1,428,333		1,379,494		Total equity	1,610,780		1,379,494
Total liabilities and equity	Total liabilities and equity	$	2,933,539	$	2,917,696	Total liabilities and equity	$	3,012,275	$	2,917,696

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three months ended
(In thousands, except per share data) April 3, 2021 March 28, 2020
Net sales $ 512,844 $ 412,327
Cost of sales 277,858 226,849
Gross profit 234,986 185,478
Selling, general and administrative expenses 71,389 58,891
Engineering, research and development expenses 37,748 29,632
Amortization of intangible assets 11,871 16,211
Operating income 113,978 80,744
Interest expense 11,652 10,559
Interest income (71) (321)
Other expense, net 4,330 878
Income before income tax expense 98,067 69,628
Income tax expense 13,391 8,622
Net income $ 84,676 $ 61,006
Basic earnings per common share $ 0.63 $ 0.45
Diluted earnings per common share $ 0.62 $ 0.45
Weighted shares outstanding:
Basic 135,068 134,745
Diluted 136,502 136,369


	Three months ended				Nine months ended
(In thousands, except per share data)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net sales	$	579,493	$	480,987	$	1,663,689	$	1,341,719
Cost of sales	315,289		254,987		899,115		722,869
Gross profit	264,204		226,000		764,574		618,850
Selling, general and administrative expenses	71,032		71,195		215,042		196,958
Engineering, research and development expenses	41,972		36,295		121,692		98,499
Amortization of intangible assets	11,843		11,749		35,616		41,176
Operating income	139,357		106,761		392,224		282,217
Interest expense	9,395		12,781		31,744		36,345
Interest income	(56)		(130)		(181)		(664)
Other expense (income), net	1,917		(1,752)		29,807		(1,351)
Income before income tax expense	128,101		95,862		330,854		247,887
Income tax expense	10,640		16,559		39,947		39,542
Net income	$	117,461	$	79,303	$	290,907	$	208,345

Basic earnings per common share	$	0.87	$	0.59	$	2.15	$	1.55
Diluted earnings per common share	$	0.86	$	0.58	$	2.13	$	1.53

Weighted shares outstanding:
Basic	135,583		134,957		135,383		134,801
Diluted	136,631		136,252		136,556		136,209

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Net income $ 84,676 $ 61,006
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (3,716) (9,361)
Pension liability adjustments 39 10
Other comprehensive loss (3,677) (9,351)
Comprehensive income $ 80,999 $ 51,655


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net income	$	117,461	$	79,303	$	290,907	$	208,345
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	637		4,765		(1,622)		(6,772)
Pension liability adjustments	—		9		39		28
Other comprehensive income (loss)	637		4,774		(1,583)		(6,744)
Comprehensive income	$	118,098	$	84,077	$	289,324	$	201,601

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(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, 2019 134,930 $ 1,349 (202) $ (7,112) $ 842,784 $ 366,127 $ (36,468) $ (791) $ 1,165,889
Shares issued under stock plans 483 5 — 0 (10,894) 0 0 0 (10,889)
Share-based compensation expense — 0 — 0 4,994 0 0 0 4,994
Repurchase and retirement of common stock (604) (6) — 0 (3,740) (25,818) 0 0 (29,564)
Dividends declared ($0.08 per share) — 0 — 0 15 (10,773) 0 0 (10,758)
Pension liability adjustment — 0 — 0 0 0 0 10 10
Foreign currency translation — 0 — 0 0 0 (9,361) 0 (9,361)
Net income — 0 — 0 0 61,006 0 0 61,006
Balance at March 28, 2020 134,809 $ 1,348 (202) $ (7,112) $ 833,159 $ 390,542 $ (45,829) $ (781) $ 1,171,327


(In thousands)	(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		(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, 2020		135,149	$	1,351	(202)	$	(7,112)	$	844,850	$	577,833	$	(36,588)	$	(840)	$	1,379,494
Balance at December 31, 2019																		Balance at December 31, 2019	134,930	$	1,349	(202)	$	(7,112)	$	842,784	$	366,127	$	(36,468)	$	(791)	$	1,165,889
Shares issued under stock plans	Shares issued under stock plans	392	4		—	0		(13,470)		0		0		0		(13,466)		Shares issued under stock plans	483	5		—	—		(10,894)		—		—		—		(10,889)
Share-based compensation expense	Share-based compensation expense	—	0		—	0		7,138		0		0		0		7,138		Share-based compensation expense	—	—		—	—		4,994		—		—		—		4,994
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(145)	(1)		—	0		(904)		(14,095)		0		0		(15,000)		Repurchase and retirement of common stock	(604)	(6)		—	—		(3,740)		(25,818)		—		—		(29,564)
Dividends declared ($0.08 per share)	Dividends declared ($0.08 per share)	—	0		—	0		8		(10,840)		0		0		(10,832)		Dividends declared ($0.08 per share)	—	—		—	—		15		(10,773)		—		—		(10,758)
Pension liability adjustment	Pension liability adjustment	—	0		—	0		0		0		0		39		39		Pension liability adjustment	—	—		—	—		—		—		—		10		10
Foreign currency translation	Foreign currency translation	—	0		—	0		0		0		(3,716)		0		(3,716)		Foreign currency translation	—	—		—	—		—		—		(9,361)		—		(9,361)
Net income	Net income	—	0		—	0		0		84,676		0		0		84,676		Net income	—	—		—	—		—		61,006		—		—		61,006
Balance at April 3, 2021		135,396	$	1,354	(202)	$	(7,112)	$	837,622	$	637,574	$	(40,304)	$	(801)	$	1,428,333
Balance at March 28, 2020																		Balance at March 28, 2020	134,809	$	1,348	(202)	$	(7,112)	$	833,159	$	390,542	$	(45,829)	$	(781)	$	1,171,327
Shares issued under stock plans																		Shares issued under stock plans	139	1			—		(83)		—		—		—		(82)
Share-based compensation expense																		Share-based compensation expense	—	—		—	—		5,655		—		—		—		5,655

Dividends declared ($0.08 per share)																		Dividends declared ($0.08 per share)	—	—		—	—		8		(10,988)		—		—		(10,980)
Pension liability adjustment																		Pension liability adjustment	—	—		—	—		—		—		—		9		9
Foreign currency translation																		Foreign currency translation	—	—		—	—		—		—		(2,176)		—		(2,176)
Net income																		Net income	—	—		—	—		—		68,036		—		—		68,036
Balance at June 27, 2020																		Balance at June 27, 2020	134,948	$	1,349	(202)	$	(7,112)	$	838,739	$	447,590	$	(48,005)	$	(772)	$	1,231,789
Shares issued under stock plans																		Shares issued under stock plans	290	3			—		(8,689)		—		—		—		(8,686)
Share-based compensation expense																		Share-based compensation expense	—	—		—	—		5,903		—		—		—		5,903
Repurchase of common stock																		Repurchase of common stock	—	—		—	—		—		—		—		—		—
Dividends declared ($0.08 per share)																		Dividends declared ($0.08 per share)	—	—		—	—		—		(10,782)		—		—		(10,782)
Pension liability adjustment																		Pension liability adjustment	—	—		—	—		—		—		—		9		9
Foreign currency translation																		Foreign currency translation	—	—		—	—		—		—		4,765		—		4,765
Net income																		Net income	—	—		—	—		—		79,303		—		—		79,303
Balance at September 26, 2020																		Balance at September 26, 2020	135,238	$	1,352	(202)	$	(7,112)	$	835,953	$	516,111	$	(43,240)	$	(763)	$	1,302,301

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(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, 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)
Pension liability adjustment	—	—		—	—		—		—		—		—		—
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 and retirement of common stock	(166)	(2)		—	—		(1,050)		(18,948)		—		—		(20,000)
Dividends declared ($0.08 per share)	—	—		—	—		—		(10,896)		—		—		(10,896)
Pension liability adjustment	—	—		—	—		—		—		—		—		—
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

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Operating activities:
Net income $ 84,676 $ 61,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 22,095 20,648
Amortization 11,871 16,211
Share-based compensation expense 7,138 4,994
Provision for deferred income taxes 1,581 (64)
Charge for excess and obsolete inventory 3,249 3,605
Other 3,336 2,022
Changes in operating assets and liabilities:
Trade accounts and notes receivable (21,564) (43,995)
Inventories (39,337) (18,205)
Accounts payable and accrued liabilities (28,591) (38,020)
Other current assets 9,400 5,825
Income taxes payable and refundable income taxes (3,588) (225)
Other 2,849 (2,399)
Net cash provided by operating activities 53,115 11,403
Investing activities:
Acquisition of property, plant and equipment (43,330) (22,585)
Acquisition of businesses, net of cash acquired 0 (75,630)
Other 72 5
Net cash used in investing activities (43,258) (98,210)
Financing activities:
Proceeds from short-term borrowings 0 217,000
Payments of short-term borrowings 0 (75,000)
Payments for dividends (10,908) (10,847)
Issuance of common stock 1,572 551
Repurchase and retirement of common stock (15,000) (29,564)
Taxes paid related to net share settlement of equity awards (15,038) (11,440)
Deferred acquisition payments 0 (16,125)
Other (1) (2,890)
Net cash (used in) provided by financing activities (39,375) 71,685
Effect of exchange rate changes on cash and cash equivalents (2,855) (1,712)
Decrease in cash and cash equivalents (32,373) (16,834)
Cash and cash equivalents at beginning of period 580,893 351,911
Cash and cash equivalents at end of period $ 548,520 $ 335,077


	Nine months ended
(In thousands)	October 2, 2021		September 26, 2020
Operating activities:
Net income	$	290,907	$	208,345
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	67,510		62,064
Amortization	35,616		41,176
Share-based compensation expense	22,124		16,552
Provision for deferred income taxes	(12,307)		14,958
Loss on extinguishment of debt and modification	23,338		2,378
Charge for excess and obsolete inventory	10,066		11,933
Other	265		3,836
Changes in operating assets and liabilities:
Trade accounts and notes receivable	(53,358)		(65,367)
Inventories	(115,187)		(54,278)
Accounts payable and accrued liabilities	37,577		10,076
Other current assets	10,575		2,189
Income taxes payable and refundable income taxes	(35,275)		(11,995)
Other	2,623		789
Net cash provided by operating activities	284,474		242,656
Investing activities:
Acquisition of property, plant and equipment	(133,986)		(79,560)
Acquisition of businesses, net of cash acquired	(2,250)		(111,145)
Other	4,416		265
Net cash used in investing activities	(131,820)		(190,440)
Financing activities:
Proceeds from revolving credit facility	51,000		217,000
Payments of revolving credit facility	(51,000)		(217,000)
Proceeds from long-term debt	400,000		400,000
Payments of long-term debt	(550,000)		(251,000)
Payments for debt extinguishment costs	(19,080)		—
Payments for debt issuance costs	(5,069)		(3,964)
Payments for dividends	(32,650)		(32,446)
Issuance of common stock	17,872		4,899
Repurchase and retirement of common stock	(50,000)		(29,564)
Taxes paid related to net share settlement of equity awards	(15,368)		(24,556)
Deferred acquisition payments	—		(16,125)
Other	(218)		(2,892)
Net cash (used in) provided by financing activities	(254,513)		44,352
Effect of exchange rate changes on cash and cash equivalents	(3,282)		(507)
(Decrease) increase in cash and cash equivalents	(105,141)		96,061
Cash and cash equivalents at beginning of period	580,893		351,911
Cash and cash equivalents at end of period	$	475,752	$	447,972

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


Supplemental Cash Flow Information	Supplemental Cash Flow Information	Three months ended				Supplemental Cash Flow Information	Nine months ended
(unaudited)	(unaudited)					(unaudited)
(In thousands)	(In thousands)	April 3, 2021		March 28, 2020		(In thousands)	October 2, 2021		September 26, 2020
Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Deferred acquisition payments	Deferred acquisition payments	$	0	$	1,451	Deferred acquisition payments	$	250	$	2,785

Equipment purchases in accounts payable	Equipment purchases in accounts payable	8,249		6,689		Equipment purchases in accounts payable	15,965		7,543
Changes in dividends payable		76		89
(Decrease) increase in dividends payable						(Decrease) increase in dividends payable	(16)		74
Schedule of interest and income taxes paid:	Schedule of interest and income taxes paid:					Schedule of interest and income taxes paid:
Interest paid	Interest paid	13,515		15,296		Interest paid	29,759		33,164
Income taxes paid, net of refunds received	Income taxes paid, net of refunds received	14,959		7,997		Income taxes paid, net of refunds received	85,409		35,544

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations Entegris, Inc. (“Entegris”, “the Company”, “us”, “we”, or “our”) is a leading supplier of advanced materials and process solutions for the semiconductor and other high-technology industries.

Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Intercompany profits, transactions and balances have been eliminated in consolidation.

Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, particularly receivables, inventories, property, plant and equipment, right-of-use assets, goodwill, intangibles, accrued expenses, short-term and long-term lease liability, income taxes and related accounts, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and contain all adjustments considered necessary, and are of a normal recurring nature, to present fairly the financial position as of ~~April 3,~~October 2, 2021 and December 31, 2020, and the results of operations and comprehensive income for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, the equity statements as of and for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, and cash flows for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020.

The condensed consolidated financial statements and accompanying notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company’s annual consolidated financial statements and notes. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis and consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2020. The results of operations for the three and nine months ended ~~April 3,~~October 2, 2021 are not necessarily indicative of the results to be expected for the full year.

Fair Value of Financial Instruments The carrying value of ~~cash equivalents,~~ accounts receivable, accounts payable, accrued payroll and related benefits, and other accrued liabilities approximates fair value due to the short maturity of those items. As of October 2, 2021, the Company has cash equivalents of $15.0 million, consisting of money market funds. The fair value of cash equivalents was determined based on Level 1 inputs, which include unadjusted quoted prices in active markets for identical assets. The fair value of long-term debt, including current maturities, was ~~$1,115.2~~$959.8 million at ~~April 3,~~October 2, 2021, compared to the carrying amount of long-term debt, including current maturities, of ~~$1,086.2~~$936.7 million at ~~April 3,~~October 2, 2021.

Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. The Company adopted this new guidance in the first quarter of fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements The Company currently has no material recent accounting pronouncements yet to be adopted.

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2. REVENUES

Revenue Recognition Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from advance payments received on sales of the Company’s products. The Company makes the required disclosures with respect to deferred revenue below.

The Company does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Nature of goods and servicesThe following is a description of principal activities from which the Company generates its revenues. The Company has three reportable segments. For more detailed information about reportable segments, see note 10 to the condensed consolidated financial statements. For each of the three reportable segments, the recognition of revenue regarding the nature of goods and services provided by the segments are similar and described below. The Company recognizes revenue for product sales at a point in time following the transfer of control of such products to the customer, which generally occurs upon shipment or delivery, depending on the terms of the underlying contracts. For product sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognizes the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations.

The Company generally recognizes revenue for sales of services when the Company has satisfied the performance obligation. The payment terms and revenue recognized is based on time and materials.

The Company also enters into arrangements to license its intellectual property. These arrangements typically permit the customer to use a specialized manufacturing process or patented technology and in return the Company receives a royalty fee. The Company recognizes revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property when the subsequent sale or usage occurs.

The Company offers certain customers cash discounts and volume rebates as sales incentives. The discounts and volume rebates are recorded as a reduction in sales at the time revenue is recognized in an amount estimated based on historical experience and contractual obligations. The Company periodically reviews the assumptions underlying its estimates of discounts and volume rebates and adjusts its revenues accordingly.

In addition, the Company offers free product rebates to certain customers. The Company utilizes an adjusted market approach to estimate the stand-alone selling price of the loyalty program and allocates a portion of the consideration received to the free product offering. The free product offering is redeemable upon future purchases of the Company’s products. The amount associated with free product rebates is recorded as deferred revenue on the balance sheet and is recognized as revenue when the free product is redeemed or when the likelihood of redemption is remote. The Company has deemed that the amount is immaterial for disclosure.

The Company provides for the estimated costs of fulfilling its obligations under product warranties at the time the related revenue is recognized. The Company estimates the costs based on historical failure rates, projected repair costs, and knowledge of specific product failures (if any). The specific warranty terms and conditions vary depending upon the product sold and the country in which ~~we do~~the Company does business, but generally include parts and labor over a period generally ranging from 90 days to one year. The Company regularly reevaluates its estimates to assess the adequacy of the recorded warranty liabilities and adjusts the amounts as necessary.

The Company’s contracts are generally short-term in nature. Most contracts’ terms do not exceed twelve months. Payment terms vary by the type and location of the Company’s customers and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer. Those customers that prepay are represented by the contract liabilities below until the performance obligations are satisfied.

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The following table provides information about contract liabilities from contracts with customers. The contract liabilities are included in other accrued liabilities balance in the condensed consolidated balance sheet.


(In thousands)	October 2, 2021		December 31, 2020
Contract liabilities - current	$	17,049	$	13,852

(In thousands) April 3, 2021 December 31, 2020
Contract liabilities - current $ 19,077 $ 13,852

Significant changes in the contract liabilities balances during the period are as follows:


	~~Three~~Nine months ended
(In thousands)	~~April 3,~~October 2, 2021
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	~~(9,713)~~(13,561)
Increases due to cash received, excluding amounts recognized as revenue during the period	~~14,938~~16,758

3. ACQUISITIONS

During the nine months ended October 2, 2021, the Company completed an acquisition for $2.5 million, substantially all of which was paid in cash and qualified as a business combination. This acquisition has been included in the Company’s condensed consolidated results of operations since its acquisition date. The effect of this business combination was not material to the Company’s condensed consolidated results of operations.

Global Measurement Technologies, Inc.

On July 10, 2020, the Company acquired Global Measurement Technologies, Inc. ~~(“GMTI”)~~, an analytical instrument provider for critical processes in semiconductor production, and its manufacturing partner Clean Room Plastics, Inc. (collectively, “GMTI”). GMTI reports into the Advanced Materials Handling segment of the Company. Costs associated with the acquisition of GMTI were $0.4 million and $1.0 million for the three and nine months ended September 26, 2020, respectively, and were expensed as incurred. These costs are included in the selling, general and administrative expenses in the Company’s condensed consolidated statement of operations. The acquisition was accounted for under the acquisition method of accounting, and GMTI’s results of operations are included in the Company’s condensed consolidated financial statements as of and since July 10, 2020. The acquisition does not constitute a material business combination.

The purchase price for GMTI includes cash consideration of $36.3 million, net of cash acquired, which was funded from the Company’s existing cash on hand.

The purchase price of GMTI exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $16.1 million. Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to the Company, which resulted in a purchase price in excess of the fair value of identifiable net assets. This additional investment value resulted in goodwill, which is ~~expected to be non-deductible~~deductible for income tax purposes.

During the quarter ended September 26, 2020, the Company finalized its fair value determination of the assets acquired and the liabilities assumed. The following table summarizes the final allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed at the date of the acquisition:


(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

The Company recognized the following finite-lived intangible assets as part of the acquisition of GMTI:


(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

Sinmat

On January 10, 2020, the Company acquired Sinmat, a chemical mechanical polishing slurry manufacturer. Sinmat reports into the Specialty Chemicals and Engineered Materials segment of the Company. The acquisition was accounted for under the acquisition method of accounting and Sinmat’s results of operations are included in the Company’s condensed consolidated financial statements as of and since January 10, 2020. Costs associated with the acquisition of Sinmat were $0.7 million for the ~~year~~nine months ended ~~March 28,~~September 26, 2020 and were expensed as incurred. These costs are included in the selling, general and administrative expenses in the Company’s condensed consolidated statement of operations. The acquisition does not constitute a material business combination.

The purchase price for Sinmat includes cash consideration of $76.2 million, or $75.6 million net of cash acquired, which was funded from the Company’s existing cash on hand.

The purchase price of Sinmat exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $31.7 million. Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to the Company, which resulted in a purchase price in excess of the fair value of identifiable net assets. This additional investment value resulted in goodwill, which is ~~expected to be non-deductible~~deductible for income tax purposes.

During the quarter ended June 27, 2020, the Company finalized its fair value determination of the assets acquired and the liabilities assumed. The following table summarizes the provisional and final allocations of the purchase price to the fair values assigned to the assets acquired and liabilities assumed at the date of the acquisition date and as adjusted as of June 27, 2020, respectively:


(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 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 0 102
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

The Company recognized the following finite-lived intangible assets as part of the acquisition of Sinmat:


(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

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4. INVENTORIES

Inventories consist of the following:

(In thousands) April 3, 2021 December 31, 2020
Raw materials $ 124,799 $ 97,319
Work-in process 36,980 32,316
Finished goods 197,040 194,309
Total inventories, net $ 358,819 $ 323,944


(In thousands)	October 2, 2021		December 31, 2020
Raw materials	$	162,314	$	97,319
Work-in process	42,538		32,316
Finished goods	224,164		194,309
Total inventories, net	$	429,016	$	323,944

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill activity for each of the Company’s reportable segments that carry goodwill, Specialty Chemicals and Engineered Materials (“SCEM”), Microcontamination Control (“MC”) and Advanced Materials Handling (“AMH”), for each period was as follows:


(In thousands)	Specialty Chemicals and Engineered Materials		Microcontamination Control		Advanced Materials Handling		Total
December 31, 2020	$	427,713	$	247,154	$	73,170	$	748,037
Addition due to acquisitions	—		—		932		932

Foreign currency translation	357		607		—		964
October 2, 2021	$	428,070	$	247,761	$	74,102	$	749,933

(In thousands) Specialty Chemicals and Engineered Materials Microcontamination Control Advanced Materials Handling Total
December 31, 2020 $ 427,713 $ 247,154 $ 73,170 $ 748,037
Foreign currency translation (31) (488) 0 (519)
April 3, 2021 $ 427,682 $ 246,666 $ 73,170 $ 747,518

Identifiable intangible assets at ~~April 3,~~October 2, 2021 and December 31, 2020 consist of the following:

April 3, 2021
(In thousands) Gross carrying
Amount Accumulated
amortization Net carrying
value
Developed technology $ 283,228 $ 224,340 $ 58,888
Trademarks and trade names 30,087 18,887 11,200
Customer relationships 449,606 201,743 247,863
Other 20,395 12,892 7,503
$ 783,316 $ 457,862 $ 325,454


October 2, 2021
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value
Developed technology	$	284,294	$	229,840	$	54,454
Trademarks and trade names	30,127		19,864		10,263
Customer relationships	449,768		218,634		231,134
Other	20,396		13,760		6,636
	$	784,585	$	482,098	$	302,487


December 31, 2020
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value
Developed technology	$	283,272	$	221,651	$	61,621
Trademarks and trade names	30,100		18,374		11,726
Customer relationships	449,659		193,313		256,346
Other	20,396		12,457		7,939
	$	783,427	$	445,795	$	337,632

Future amortization expense during the remainder of 2021, each of the succeeding four years and thereafter relating to intangible assets currently recorded in the Company’s condensed consolidated balance sheets is estimated to be the following at ~~April 3,~~October 2, 2021:

(In thousands) Remaining 2021 2022 2023 2024 2025 Thereafter Total
Future amortization expense $ 36,332 47,602 46,913 34,294 27,663 132,650 $ 325,454


(In thousands)	Remaining 2021		2022	2023	2024	2025	Thereafter	Total
Future amortization expense	$	12,272	47,735	47,047	34,433	27,900	133,100	$	302,487

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6. DEBT

Long-term debt as of October 2, 2021 and December 31, 2020 consists of the following:


(In thousands)	October 2, 2021		December 31, 2020
Senior unsecured notes due 2029	$	400,000	$	—
Senior unsecured notes due 2028	400,000		400,000
Senior secured term loan facility due 2025	145,000		145,000
Senior unsecured notes due 2026	—		550,000
	945,000		1,095,000
Unamortized discount and debt issuance costs	8,296		9,217
Total long-term debt	$	936,704	$	1,085,783

Annual maturities of long-term debt, excluding unamortized discount and issuance costs, due as of October 2, 2021 are as follows:


(In thousands)	2021		2022	2023	2024	2025	Thereafter	Total
Contractual debt obligation maturities*	$	—	—	—	—	145,000	800,000	$	945,000

*Subject to Excess Cash Flow payments to the lenders.

2029 Senior Unsecured Notes

On April 30, 2021, the Company issued $400 million aggregate principal amount of 3.625% senior unsecured notes due May 1, 2029 (the “2029 Notes”). The 2029 Notes were issued under an indenture dated as of April 30, 2021 (the “2029 Notes Indenture”) by and among the Company, certain subsidiaries of the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”). Interest on the 2029 Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2021. The Company incurred debt issuance costs of $4.1 million in connection with the 2029 Notes. These costs are reported in the condensed consolidated balance sheet as a direct deduction from the face amount of the 2029 Notes.

The Company used the net proceeds of the offering, together with cash on hand and $51 million borrowed under the Company’s senior secured revolving credit facility (the “Revolving Facility”), to pay the redemption price for the redemption in full of the $550 million aggregate principal amount of senior unsecured notes due 2026 (the “2026 Notes”) and to pay certain fees and expenses related to the offering. In connection with the redemption of the 2026 Notes, the Company incurred a loss on extinguishment of debt of $23.1 million, which is included in Other expense (income), net on the condensed consolidated statement of operations.

The 2029 Notes are guaranteed, jointly and severally, fully and unconditionally, on a senior unsecured basis, by the Company’s existing and future domestic subsidiaries, other than certain excluded subsidiaries, to the extent that such subsidiaries guarantee indebtedness under the Company’s senior secured term loan facility and Revolving Facility (together, the “Senior Secured Credit Facilities”) or the Company’s 4.375% senior unsecured notes due 2028 (the “2028 Notes”), and any other subsidiary of the Company, to the extent it incurs certain additional indebtedness (collectively, the “Guarantors”).

The 2029 Notes and the guarantees thereof are the Company’s and the Guarantors’ senior unsecured obligations, respectively, and will (i) rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior indebtedness (including the 2028 Notes); (ii) rank senior to any subordinated indebtedness that the Company or the Guarantors may incur; (iii) be effectively subordinated to all of the Company’s or the Guarantors’ existing and future secured indebtedness (including the Senior Secured Credit Facilities), in each case, to the extent of the value of the assets securing such indebtedness; and (iv) be structurally subordinated in right of payment to all existing and future obligations of the Company’s subsidiaries that do not guarantee the 2029 Notes.

At any time prior to May 1, 2024, the Company may, at its option, on any one or more occasions, redeem up to 40% of the aggregate principal amount of the 2029 Notes, at a redemption price equal to 103.625% of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, with an amount of cash equal to the net cash proceeds of an equity offering, as defined in the 2029 Notes Indenture, by the Company; provided that (1) at least 60% of the aggregate principal amount of 2029 Notes issued under the 2029 Notes Indenture remains outstanding immediately after the occurrence of each such redemption; and (2) the redemption occurs within 120 days of the date of the closing of such equity offering.

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Additionally, at any time prior to May 1, 2024, the 2029 Notes may be redeemed, in whole or in part, at the option of the Company, at a redemption price equal to 100% of the principal amount of the 2029 Notes redeemed, plus a “make whole” premium, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.

On or after May 1, 2024, the Company may, on any one or more occasions, redeem all or a part of the 2029 Notes, at its option, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the 2029 Notes redeemed, to, but not including, the applicable date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:


Year	Percentage
2024	102.719	%
2025	101.813	%
2026	100.906	%
2027 and thereafter	100.000	%

Upon the occurrence of certain change of control events accompanied by certain ratings events, the Company will be required to offer to repurchase all of the outstanding 2029 Notes at a purchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

The 2029 Notes Indenture contains covenants that, among other things, limit the Company’s ability and/or the ability of the Company’s subsidiaries to:

•incur liens;

•engage in sales-and-leaseback transactions; and

•consolidate, merge with or convey, transfer or lease all or substantially all of the Company’s and its subsidiaries’ assets to another person.

The 2029 Notes Indenture also, subject to certain exceptions, limits the ability of any non-Guarantor subsidiary of the Company to incur indebtedness. These covenants are subject to a number of other limitations and exceptions as set forth in the 2029 Notes Indenture. The Company was in compliance with all of the above covenants at October 2, 2021.

The 2029 Notes Indenture provides for events of default which, if certain of them occur, would permit the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding 2029 Notes to declare the principal of, and interest or premium, if any, and any other monetary obligations on, all the then-outstanding 2029 Notes to be due and payable immediately.

Amendment of Revolving Facility

In connection with its issuance of the 2029 Notes, the Company amended the Revolving Facility to provide for, among other things, lending commitments in an aggregate principal amount of up to $400.0 million, up from $300.0 million, and to extend the maturity to April 30, 2026 from November 6, 2023.

6.7. EARNINGS PER COMMON SHARE

Basic earnings per common share (“EPS”) is calculated based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is calculated based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per common share:


	Three months ended		Nine months ended
(In thousands)	October 2, 2021	September 26, 2020	October 2, 2021	September 26, 2020
Basic—weighted common shares outstanding	135,583	134,957	135,383	134,801
Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock	1,048	1,295	1,173	1,408
Diluted—weighted common shares and common shares equivalent outstanding	136,631	136,252	136,556	136,209

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Basic—weighted common shares outstanding 135,068 134,745
Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock 1,434 1,624
Diluted—weighted common shares and common shares equivalent outstanding 136,502 136,369

The Company excluded the following shares underlying stock-based awards from the calculations of diluted EPS because their inclusion would have been anti-dilutive for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020:

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Shares excluded from calculations of diluted EPS 140 252

Three months ended

Nine months ended

(In thousands)

October 2, 2021

September 26, 2020

October 2, 2021

September 26, 2020

Shares excluded from calculations of diluted EPS

148

223

149

245

7.8. OTHER EXPENSE (INCOME), NET

Other expense (income), net for the three and nine months ended October 2, 2021 and September 26, 2020 consists of the following:


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020

Loss (gain) on foreign currency transactions	$	1,919	$	(2,881)	$	6,281	$	(4,213)
Loss on extinguishment of debt and modification	—		908		23,338		2,378
Other, net	(2)		221		188		484
Other expense (income), net	$	1,917	$	(1,752)	$	29,807	$	(1,351)

9. LEASES

As of ~~April 3,~~October 2, 2021, the Company was obligated under operating lease agreements for certain sales offices and manufacturing facilities, manufacturing equipment, vehicles, information technology equipment and warehouse space. As of ~~April 3,~~October 2, 2021, the Company does not have material finance leases. ~~Our~~The Company’s leases have remaining lease terms of 1 year to 1320 years, some of which may include options to extend the lease for up to 6 years, and some of which may include options to terminate the leases within 1 year.

As of ~~April 3,~~October 2, 2021 and December 31, 2020, the Company’s operating lease components with initial or remaining terms in excess of one year were classified on the condensed consolidated balance sheet as follows, together with certain supplemental balance sheet information:


(In thousands, except lease term and discount rate)	Classification	October 2, 2021			December 31, 2020
Assets
Right-of-use assets	Right-of-use assets	$	56,990		$	45,924
Liabilities
Short-term lease liability	Other accrued liabilities	8,689			9,960
Long-term lease liability	Long-term lease liability	52,486			39,730
Total lease liabilities		$	61,175		$	49,690
Lease Term and Discount Rate
Weighted average remaining lease term (years)		9.8			7.9
Weighted average discount rate		4.5		%	5.0		%

(In thousands, except lease term and discount rate)
Classification April 3, 2021 December 31, 2020
Assets
Right-of-use assets Right-of-use assets $ 48,057 $ 45,924
Liabilities
Short-term lease liability Other accrued liabilities 8,903 9,960
Long-term lease liability Long-term lease liability 42,953 39,730
Total lease liabilities $ 51,856 $ 49,690
Lease Term and Discount Rate
Weighted average remaining lease term (years) 8.7 7.9
Weighted average discount rate 4.8 % 5.0 %

Expense for leases less than 12 months for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020 were not material. The components of lease expense for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020 are as follows:

Three months ended
(In thousands)
April 3, 2021 March 28, 2020
Operating lease cost $ 3,399 $ 3,541


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020

Operating lease cost	$	3,501	$	3,421	$	10,309	$	10,073

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The Company combines the amortization of the right-of-use assets and the change in the operating lease liability in the same line item in the condensed consolidated statement of cash flows. Other information related to the Company’s operating leases for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020 are as follows:


(In thousands)	October 2, 2021		September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from leases	$	8,318	$	8,049
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	20,963	$	3,132

(In thousands)
April 3, 2021 March 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from leases $ 2,782 $ 2,717
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $ 5,082 $ 912

Future minimum lease payments for noncancellable operating leases as of ~~April 3,~~October 2, 2021, were as follows:

(In thousands) Operating Leases
Remaining 2021 $ 11,235
2022 8,037
2023 6,490
2024 5,654
2025 5,181
Thereafter 28,026
Total 64,623
Less: Interest 12,767
Present value of lease liabilities $ 51,856


(In thousands)	Operating Leases
Remaining 2021	$	3,217
2022	10,460
2023	8,676
2024	7,202
2025	6,408
Thereafter	40,511
Total	76,474
Less: Interest	15,299
Present value of lease liabilities	$	61,175

8.10. SEGMENT REPORTING

The Company’s financial segment reporting reflects an organizational alignment intended to leverage the Company’s unique ~~portfolio~~breadth of capabilities to create ~~value for its customers by developing~~ mission-critical microcontamination control products, specialty chemicals and advanced materials handling solutions tothat maximize manufacturing yields, reduce manufacturing costs and enable higher device performance ~~of devices.~~for its customers. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers, and strategic and technology roadmaps. The Company leverages its expertise from these three segments to create new and increasingly integrated solutions for its customers. The Company’s business is reported in the following segments:

•Specialty Chemicals and Engineered Materials: 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 offers solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.

•Advanced Materials Handling: AMH develops solutions to monitor, protect, transport and deliver critical liquid chemistries, wafers, and other substrates for a broad set of applications in the semiconductor, ~~industry~~life sciences and other high-technology industries.

Summarized financial information for the Company’s reportable segments is shown in the following tables.

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Net sales
SCEM $ 166,541 $ 144,214
MC 207,099 159,261
AMH 148,541 116,137
Inter-segment elimination (9,337) (7,285)
Total net sales $ 512,844 $ 412,327


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net sales
SCEM	$	176,380	$	150,480	$	523,287	$	440,907
MC	225,877		193,541		660,497		536,560
AMH	186,200		144,370		507,243		386,941
Inter-segment elimination	(8,964)		(7,404)		(27,338)		(22,689)
Total net sales	$	579,493	$	480,987	$	1,663,689	$	1,341,719

1619


		Three months ended				Three months ended				Nine months ended
(In thousands)	(In thousands)	April 3, 2021		March 28, 2020			(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Segment profit	Segment profit						Segment profit
SCEM	SCEM	$	34,556	$	32,670		SCEM	$	41,091	$	32,600	$	120,592	$	98,208
MC	MC	70,566		50,167			MC	78,399		64,915		227,097		177,219
AMH	AMH	32,095		20,632			AMH	40,503		33,266		114,691		76,707
Total segment profit	Total segment profit	$	137,217	$	103,469		Total segment profit	$	159,993	$	130,781	$	462,380	$	352,134

The following table reconciles total segment profit to income before income tax expense:


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Total segment profit	$	159,993	$	130,781	$	462,380	$	352,134
Less:
Amortization of intangible assets	11,843		11,749		35,616		41,176
Unallocated general and administrative expenses	8,793		12,271		34,540		28,741
Operating income	139,357		106,761		392,224		282,217
Interest expense	9,395		12,781		31,744		36,345
Interest income	(56)		(130)		(181)		(664)
Other expense (income), net	1,917		(1,752)		29,807		(1,351)
Income before income tax expense	$	128,101	$	95,862	$	330,854	$	247,887

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Total segment profit $ 137,217 $ 103,469
Less:
Amortization of intangible assets 11,871 16,211
Unallocated general and administrative expenses 11,368 6,514
Operating income 113,978 80,744
Interest expense 11,652 10,559
Interest income (71) (321)
Other expense, net 4,330 878
Income before income tax expense $ 98,067 $ 69,628

In the following tables, revenue is disaggregated by customers’ country or region for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, respectively.


	Three months ended October 2, 2021
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	52,551	$	35,828	$	60,350	$	(8,964)	$	139,765
Taiwan	29,371		57,806		26,615		—		113,792
China	25,316		35,003		23,975		—		84,294
South Korea	23,655		24,763		28,487		—		76,905
Japan	21,639		42,440		13,701		—		77,780
Europe	13,251		17,583		26,041		—		56,875
Southeast Asia	10,597		12,454		7,031		—		30,082
	$	176,380	$	225,877	$	186,200	$	(8,964)	$	579,493

Three months ended April 3, 2021
(In thousands) SCEM MC AMH Inter-segment Total
North America $ 49,064 $ 34,592 $ 45,465 $ (9,337) $ 119,784
Taiwan 28,679 44,830 27,806 0 101,315
China 20,662 41,689 20,577 0 82,928
South Korea 25,170 28,011 18,905 0 72,086
Japan 22,480 36,723 12,005 0 71,208
Europe 11,777 11,117 16,494 0 39,388
Southeast Asia 8,709 10,137 7,289 0 26,135
$ 166,541 $ 207,099 $ 148,541 $ (9,337) $ 512,844


		Three months ended March 28, 2020										Three months ended September 26, 2020
(In thousands)	(In thousands)	SCEM		MC		AMH		Inter-segment		Total			(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	North America	$	46,550	$	28,680	$	33,403	$	(7,285)	$	101,348		North America	$	45,921	$	47,803	$	47,748	$	(7,404)	$	134,068
Taiwan	Taiwan	25,182		42,483		24,801		0		92,466			Taiwan	26,651		37,602		18,105		—		82,358
China	China	15,510		18,197		11,639		0		45,346			China	20,334		29,150		16,828		—		66,312
South Korea	South Korea	20,129		20,122		15,161		0		55,412			South Korea	22,389		21,780		30,201		—		74,370
Japan	Japan	17,123		28,111		10,420		0		55,654			Japan	18,487		30,386		11,882		—		60,755
Europe	Europe	8,608		13,488		12,548		0		34,644			Europe	8,111		18,237		12,903		—		39,251
Southeast Asia	Southeast Asia	11,112		8,180		8,165		0		27,457			Southeast Asia	8,587		8,583		6,703		—		23,873
		$	144,214	$	159,261	$	116,137	$	(7,285)	$	412,327			$	150,480	$	193,541	$	144,370	$	(7,404)	$	480,987

1720

~~9. SUBSEQUENT EVENT~~


	Nine months ended October 2, 2021
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	156,290	$	106,568	$	161,792	$	(27,338)	$	397,312
Taiwan	85,350		155,830		79,286		—		320,466
China	71,197		118,595		70,418		—		260,210
South Korea	73,893		83,725		73,769		—		231,387
Japan	68,778		114,654		37,875		—		221,307
Europe	36,300		44,562		63,171		—		144,033
Southeast Asia	31,479		36,563		20,932		0		88,974
	$	523,287	$	660,497	$	507,243	$	(27,338)	$	1,663,689

On April 16, 2021, the Company announced that it had priced its private offering of $400.0 million aggregate principal amount of 3.625% senior unsecured notes due 2029 (the “2029 Notes”). The 2029 Notes will be senior unsecured obligations of the Company and will be guaranteed by certain subsidiaries of the Company. The issuance of the 2029 Notes is expected to close on April 30, 2021, subject to customary closing conditions.

The Company expects the net proceeds of the offering to be approximately $394.0 million, after deducting estimated commissions and offering fees and expenses. The Company intends to use the net proceeds of the offering, together with cash on hand and approximately $75.0 million borrowed under the Company’s revolving credit facility (the “Revolving Facility”), to pay the redemption price for the redemption in full of the $550.0 million aggregate principal amount of 4.625% senior unsecured notes due 2026 that are currently outstanding. The redemption of the $550.0 million notes due 2026 is expected to result in a loss of $23.1 million on extinguishment of debt, which will be included in the Company’s condensed consolidated statement of operations.

In connection with the Company’s issuance of the 2029 Notes, the Company intends to amend the Revolving Facility to provide for lending commitments in an aggregate principal amount of up to $400.0 million and to extend the maturity to April 30, 2026. The Revolving Facility currently provides for lending commitments in an aggregate principal amount of up to $300.0 million, maturing on November 6, 2023.


	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
China	54,159		75,709		41,505		—		171,373
South Korea	63,636		64,861		66,398		—		194,895
Japan	53,819		88,512		34,257		—		176,588
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

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s condensed consolidated financial condition and results of operations should be read along with the condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The information, except for historical information, contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. You should review the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 as well as in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and ~~analysis.~~analysis or set forth elsewhere in this Quarterly Report on Form 10-Q. The Company assumes no obligation to publicly release the results of any revision or updates to these forward-looking statements to reflect future events or unanticipated occurrences.

Overview

This overview is not a complete discussion of the Company’s financial condition, changes in financial condition or results of operations; it is intended merely to facilitate an understanding of the most salient aspects of the Company’s financial condition and operating performance and to provide a context for the detailed discussion and analysis that follows. The discussion and analysis must be read in its entirety in order to fully understand the Company’s financial condition and results of operations.

The Company is a leading supplier of advanced materials and process solutions for the semiconductor and other high-technology industries. Our mission is to help our customers improve their productivity, performance and technology by providing solutions for the most advanced manufacturing environments. We leverage our unique breadth of capabilities to create mission-critical microcontamination control products, specialty chemicals and advanced materials handling solutions that maximize manufacturing yields, reduce manufacturing costs and enable higher device performance for our customers.

Our customized materials solutions enable the highest levels of performance essential to the manufacture of semiconductors. As our customers introduce more complex architectures and search for new materials with better electrical and structural properties to improve the performance of their devices, they rely on Entegris as a trusted partner to address these challenges. We understand these challenges and have solutions to address them, such as our advanced deposition materials, implant gases, formulated cleaning chemistries and selective etch chemistries. Our customers also require greater end-to-end materials purity and integrity in their manufacturing processes that, when combined with smaller dimensions and more complex architectures, can be challenging to achieve. To enable the use of new metals and the further miniaturization of chips, and to maximize yield and increase long-term device reliability, we provide products such as our advanced liquid and gas filtration and purification products that help to selectively remove new classes of contaminants throughout the semiconductor supply chain. In addition, to ensure purity levels are maintained across the entire supply chain, from bulk manufacturing, to transportation to and delivery through a fab, to application onto the wafer, we provide high-purity packaging and materials handling products.

Our business is organized and operated in three operating segments, which align with the key elements of the advanced semiconductor manufacturing ecosystem. The Specialty Chemicals and Engineered Materials segment, or SCEM, ~~segment~~ 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. The Microcontamination Control segment, or MC, ~~segment~~ offers solutions to filter and purify critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries. The Advanced Materials Handling segment, or AMH, ~~segment~~ develops solutions to monitor, protect, transport and deliver critical liquid chemistries, wafers and other substrates for a broad set of applications in the semiconductor, ~~industry,~~ life sciences and other high-technology industries. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers and strategic and technology roadmaps. With the technology, capabilities and complementary product portfolios from these segments, we believe we are uniquely positioned to collaborate across divisions to create new, co-optimized and increasingly integrated solutions for our customers. For example, our SCEM segment offers a highly selective nitride etch chemistry, our MC segment provides a liquid filter that is specifically matched to that formulation and our AMH segment ensures the integrity of the product as it is moved to and through the fab environment. See note 810 to the condensed consolidated financial statements for additional information on the Company’s three segments.

The Company’s fiscal year is the calendar period ending each December 31. The Company’s fiscal quarters consist of 13-week or 14-week periods that end on a Saturday. The Company’s fiscal quarters in 2021 end April 3, 2021, July 3, 2021, October 2, 2021 and December 31, 2021. Unaudited information for the three months ended April 3, 2021 and March 28, 2020 and the financial position as of April 3, 2021 and December 31, 2020 are included in this Quarterly Report on Form 10-Q.

Key operating factors Key factors ~~which~~that management believes have the largest impact on the overall results of operations of the Company include:

•Level of sales Since a significant portion of the Company’s product costs (except for raw materials, purchased components and direct labor) are largely fixed in the short-to-medium term, an increase or decrease in sales affects gross profits and overall profitability significantly. Also, increases or decreases in sales and operating profitability

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affect certain costs such as incentive compensation and commissions, which are highly variable in nature. The

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Company’s sales are subject to the effects of industry cyclicality, technological change, substantial competition, pricing pressures and foreign currency fluctuations.

•Variable margin on sales The Company’s variable margin on sales is determined by selling prices and the costs of manufacturing and raw materials. This is affected by a number of factors, which include the Company’s sales mix, purchase prices of raw materials (especially polymers, membranes, stainless steel and purchased components), domestic and international competition, direct labor costs and the efficiency of the Company’s production operations, among others.

•Fixed cost structure The Company’s operations include a number of large fixed or semi-fixed cost components, which include salaries, indirect labor and benefits, facility costs, lease expenses and depreciation and amortization. It is not possible to vary these costs easily in the short-term as volumes fluctuate. Accordingly, increases or decreases in sales volume can have a large effect on the usage and productivity of these cost components, resulting in a large impact on the Company’s profitability.

Impact of COVID-19 on our Business

~~As a result of the~~The COVID-19 pandemic ~~governmental~~continues to impact the global economy and cause significant macroeconomic uncertainty. Infection rates vary across the countries in which we operate. Governmental authorities have ~~implemented and are continuing~~continued to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, masking recommendations and mandates, vaccine recommendations and mandates, limits on gatherings, quarantines, shelter-in-place orders and business shutdowns. ~~In some cases, governmental re-opening plans~~We have been delayed or reversed due to spikes in the number of infections in the local area. We continue to monitor the situation regarding the COVID-19 pandemic, which remains fluid and uncertain, and to proactively manage and adapt our responses in collaboration with our employees, customers and suppliers. However, we are unable to accurately predict the full impact that COVID-19 may have on our business, results of operations, financial condition, liquidity and cash flows, which will depend on future developments that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, the duration and continued spread of the outbreak, its severity, potential additional waves of infection, the actions to mitigate the virus or its impact, the development, distribution, efficacy and acceptance of vaccines and how quickly and to what extent normal economic and operating conditions can resume.

~~Health and Safety~~

~~Commencing in the first quarter of 2020, we have~~ taken ~~and continue to take,~~ proactive, aggressive action to protect the health and safety of our employees, customers, partners and ~~suppliers. We enacted rigorous safety measures, including social distancing protocols, encouraging employees who do not need to be physically present on~~suppliers, consistent with the ~~manufacturing floor or in a lab to perform their work to work from home, suspending non-essential travel, implementing temperature checks~~latest and ~~other access controls at the entrances to our facilities, extensively and frequently disinfecting our workspaces and providing masks to employees who are physically present at our facilities.~~evolving governmental guidelines. We expect to continue to implement ~~these~~appropriate measures until the COVID-19 pandemic is adequately contained, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers. We expect that the pandemic may abate at different times in different regions, and accordingly our health and safety protocols may vary across regions.

~~Operations~~

We have important manufacturing operations in the United States, Japan, Korea, China, Malaysia, and Taiwan, all of which have been affected by the outbreak and have taken measures to try to contain it. Measures providing for business shutdowns have generally excluded certain essential services, and those essential services have commonly included critical infrastructure and the businesses that support that critical infrastructure. While all of our facilities currently remain operational, these measures have impacted and may further impact our workforce and operations, as well as those of our customers, suppliers and other third parties with which we do business. For example, in March 2020 the government of Malaysia issued an order that significantly reduced the number of employees who could be physically present to operate our Malaysian plant, which temporarily reduced the productivity of that plant. The government of Malaysia issued a similar order restricting movement throughout that country in January 2021. Our Malaysian plant is operating at normal capacity as of the date of this filing. In addition to reduced productivity, constraints and limits imposed on our operations may slow or diminish our research and development and customer qualification activities. During 2020, we experienced brief interruptions in operations at our sites in Hangzhou, China, San Luis Obispo, California and Bedford, Massachusetts and so far during 2021 we have experienced minor interruptions in operations at our site in San Luis Obispo, California and a brief construction delay to an expansion of our facility in Toronto, Canada. While governmental measures may be modified, extended or reimposed, we expect that, absent a significant surge in infections in the relevant local area or within our workforce or those of our suppliers, our manufacturing and research and development facilities will remain operational, largely at or near normal capacity. In connection with the COVID-19 pandemic, we have experienced limited absenteeism from employees who are required to be on-site to perform their jobs. We do not currently expect that our operations will be materially adversely affected by significant absenteeism. In addition, we have incurred incremental employee compensation related to the COVID-19 pandemic. For example, since April

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2020, we have awarded certain of our employees who are required to physically report to a manufacturing facility in order to perform their jobs during the COVID-19 crisis with a special appreciation bonus for their efforts in sustaining our production continuity.

~~Supply~~

We have not yet experienced any significant impacts or interruptions to our supply chain as a result of the COVID-19 pandemic. However, certain of our suppliers have faced difficulties maintaining operations in light of government-ordered restrictions, shelter-in-place mandates and outbreaks of infection within their workforces. As the pandemic continues, our suppliers may face challenges in maintaining their level of supply as a result of these or other factors. For example, as a result of the COVID-19 pandemic, during the first half of 2020, one of our critical valve suppliers was shut down and was unable to supply us with valves for certain of our gas purification products. In this instance we were able to procure this critical part from a second, pre-qualified source. Although we regularly monitor the financial health of companies in our supply chain, financial hardship on our suppliers or sub-suppliers caused by the COVID-19 pandemic could cause a disruption in our ability to obtain raw materials or components required to manufacture our products and thus require us to increase our safety stocks of certain raw materials or components, adversely affecting our operations. To mitigate the risk of potential supply interruptions from the COVID-19 pandemic, during 2020 and into 2021, we chose to increase certain inventory levels, causing us to hold more inventory than we might have otherwise maintained. We may decide to take similar actions going forward, which may result in increased charges for excess or obsolete inventory, which would have the effect of reducing our profitability. Additionally, restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, have resulted, in certain instances, in higher costs and delays, both on obtaining materials and shipping finished goods to customers. If these restrictions and disruptions continue, they could harm our profitability, make our products less competitive or cause our customers to seek alternative suppliers.

~~Demand~~

While the COVID-19 pandemic has caused economic and demand uncertainty, during the first quarter of 2021 we continued to see strong demand from leading-edge customers associated with end-uses in servers and other data center applications. We believe that a portion of the orders that we received in the first quarter of 2021 may have been a result of customers increasing their inventory to reduce their exposure to risks of future supply disruptions due to COVID-19 or global logistics constraints, which could offset demand for our products in the future. We anticipate that the pandemic will continue to contribute to global economic uncertainty, which could ultimately harm demand for our products.

~~Liquidity~~

Although there is uncertainty regarding the impact of the COVID-19 pandemic on our future results, we believe our business model, our current cash reserves and our balance sheet leave us well-positioned to manage our business through this crisis as we expect it to unfold. We have taken recent steps to strengthen our balance sheet. In April 2021, we announced and priced a private offering of $400 million aggregate principal amount of 3.625% senior unsecured notes due 2029, or the 2029 Notes. We plan to use the proceeds of the offering, together with cash on hand and approximately $75 million borrowed under our senior secured revolving facility due 2023, or the Revolving Facility, to pay the redemption price in full of the $550 million aggregate principal amount of 4.625% senior unsecured notes due 2026 that are currently outstanding, or the 2026 Notes, and to pay certain fees and expenses related to the offering. In addition, on April 30, 2020, we issued $400 million aggregate principal amount of 4.375% senior unsecured notes due April 15, 2028. We used a portion of the net proceeds of the offering to repay approximately $142 million of borrowings under the Revolving Facility, representing the entire aggregate principal amount outstanding thereunder. We also used a portion of the net proceeds of the offering to repay approximately $251 million of outstanding borrowings under our senior secured term loan facility, or the Term Loan Facility.

We have reviewed numerous potential scenarios in connection with the impact of COVID-19 on the global economy and the semiconductor industry. Based on our analysis, we believe our existing balances of domestic cash and cash equivalents, which totaled $171.9 million as of April 3, 2021, and our currently anticipated operating cash flows, after taking into account the anticipated issuance of the 2029 Notes and the use of net proceeds, cash on hand and borrowings to fund the redemption of the 2026 Notes, will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.

contained. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers.

While certain of our operations have from time-to-time been temporarily affected by government-mandated restrictions, to date we have not experienced significant adverse impacts to our global operations as a result of the COVID-19 pandemic. Broader impacts of the pandemic have included a more dynamic supply chain and global logistics environment, and we have experienced instances of raw material constraints, higher freight costs and delivery delays in both inbound shipments of raw materials and outgoing shipments of finished products to customers. While we continue to focus on mitigating risks to our operations and supply chain in the current industry environment, we expect some of the foregoing challenges to linger. From a demand perspective, during the third quarter of 2021 we continued to see strong demand for our leading-edge products, largely driven by accelerated digitalization, 5G applications and high-performance computing.

In ~~these~~the current circumstances, ~~there may be developments outside our control requiring us to adjust our operating plan. As such,~~ given the dynamic nature of ~~this~~the situation, ~~we cannot reasonably estimate the impacts that COVID-19 may have~~any impact on our financial condition, results of operations or cash flows in the ~~future.~~future continues to be difficult to estimate and predict, as it depends on future events that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, the duration and continued spread of the outbreak, its severity, potential additional waves of infection, the emergence of more virulent or more dangerous strains of the virus, the actions taken to mitigate the virus or its impact, the development, distribution, efficacy and acceptance of vaccines worldwide, how quickly and to what extent normal economic and operating conditions can resume, the broader impact that the pandemic is having on the economy and our industry and specific implications the pandemic may have on our suppliers and on global logistics. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding risks associated with the COVID-19 pandemic, including under the caption “The COVID-19 pandemic and ensuing governmental responses could materially adversely affect our financial condition and results of operations.”

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Overall Summary of Financial Results

For the three months ended ~~April 3,~~October 2, 2021, net sales increased ~~24%~~20% to ~~$512.8~~$579.5 million, compared to ~~$412.3~~$481.0 million for the three months ended ~~March 28,~~September 26, 2020. Total net sales increased primarily as a result of strong growth across all three segments, as we benefited from robust industry conditions ~~several node transitions~~ and ~~strong overall~~record demand for ~~the Company’s~~our products and solutions. Net sales for the three months ended ~~April 3,~~October 2, 2021 included sales of ~~$3.2~~$0.7 million from acquired businesses and favorable foreign currency translation effects of ~~$5.4~~$0.2 million.

~~The Company’s gross profit for the three months ended April 3, 2021 increased to $235.0 million, up from $185.5 million for the three months ended March 28, 2020.~~ The Company experienced a ~~45.8%~~45.6% gross margin for the three months ended ~~April 3,~~October 2, 2021, compared to ~~45.0%~~47.0% in the comparable year-ago period. The gross ~~profit~~margin decrease was primarily due to an unfavorable sales mix and ~~gross margin increases reflect~~ higher ~~factory utilization associated with~~materials, labor and freight costs, partially offset by higher sales ~~levels and a favorable sales mix.~~

The Company’s selling, general and administrative, or SG&A, expense increased by $12.5 million for the three months ended April 3, 2021 compared to the year-ago quarter, mainly due to higher employee costs resulting from increased headcount, benefits and merit increases.levels.

As a result of the aforementioned factors, the Company reported net income of ~~$84.7~~$117.5 million, or ~~$0.62~~$0.86 per diluted share, for the quarter ended ~~April 3,~~October 2, 2021, compared to net income of ~~$61.0~~$79.3 million, or ~~$0.45~~$0.58 per diluted share, a year ago.

~~On April 16, 2021, the Company announced that it had priced its private offering~~

Table of the 2029 Notes. The 2029 Notes will be senior unsecured obligations of the Company and will be guaranteed by certain subsidiaries of the Company. The issuance of the 2029 Notes is expected to close on April 30, 2021, subject to customary closing conditions.Contents

Cash and cash equivalents were ~~$548.5~~$475.8 million at ~~April 3,~~October 2, 2021, compared with ~~cash and cash equivalents of~~ $580.9 million at December 31, 2020. The Company had outstanding long-term debt (excluding current maturities) of ~~$1,086.2~~$936.7 million at ~~April 3,~~October 2, 2021, compared to $1,085.8 million at December 31, 2020.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting policies affected most significantly by estimates, assumptions and judgments used in the preparation of the Company’s condensed consolidated financial statements are described in Item 7 of its Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 5, 2021. On an ongoing basis, the Company evaluates the critical accounting policies used to prepare its condensed consolidated financial statements, including, but not limited to, those related to business acquisitions. There have been no material changes in these aforementioned critical accounting policies.

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Three and Nine Months Ended ~~April 3,~~October 2, 2021 Compared to Three and Nine Months Ended ~~March 28,~~September 26, 2020

The following table compares operating results for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, both in dollars and as a percentage of net sales, for each caption.


		Three months ended								Three months ended			Nine months ended
(Dollars in thousands)	(Dollars in thousands)	April 3, 2021				March 28, 2020					(Dollars in thousands)	October 2, 2021	September 26, 2020						October 2, 2021				September 26, 2020
Net sales	Net sales	$	512,844	100.0	%	$	412,327	100.0	%					Net sales	$	579,493	100.0	%	$	480,987	100.0	%		$	1,663,689	100.0	%	$	1,341,719	100.0	%
Cost of sales	Cost of sales	277,858		54.2		226,849		55.0						Cost of sales	315,289		54.4		254,987		53.0			899,115		54.0		722,869		53.9
Gross profit	Gross profit	234,986		45.8		185,478		45.0						Gross profit	264,204		45.6		226,000		47.0			764,574		46.0		618,850		46.1
Selling, general and administrative expenses	Selling, general and administrative expenses	71,389		13.9		58,891		14.3						Selling, general and administrative expenses	71,032		12.3		71,195		14.8			215,042		12.9		196,958		14.7
Engineering, research and development expenses	Engineering, research and development expenses	37,748		7.4		29,632		7.2						Engineering, research and development expenses	41,972		7.2		36,295		7.5			121,692		7.3		98,499		7.3
Amortization of intangible assets	Amortization of intangible assets	11,871		2.3		16,211		3.9						Amortization of intangible assets	11,843		2.0		11,749		2.4			35,616		2.1		41,176		3.1
Operating income	Operating income	113,978		22.2		80,744		19.6						Operating income	139,357		24.0		106,761		22.2			392,224		23.6		282,217		21.0
Interest expense	Interest expense	11,652		2.3		10,559		2.6						Interest expense	9,395		1.6		12,781		2.7			31,744		1.9		36,345		2.7
Interest income	Interest income	(71)		—		(321)		(0.1)						Interest income	(56)		—		(130)		—			(181)		—		(664)		—
Other expense, net		4,330		0.8		878		0.2
Other expense (income), net														Other expense (income), net	1,917		0.3		(1,752)		(0.4)			29,807		1.8		(1,351)		(0.1)
Income before income taxes	Income before income taxes	98,067		19.1		69,628		16.9						Income before income taxes	128,101		22.1		95,862		19.9			330,854		19.9		247,887		18.5
Income tax expense	Income tax expense	13,391		2.6		8,622		2.1						Income tax expense	10,640		1.8		16,559		3.4			39,947		2.4		39,542		2.9
Net income	Net income	$	84,676	16.5	%	$	61,006	14.8	%					Net income	$	117,461	20.3	%	$	79,303	16.5	%		$	290,907	17.5	%	$	208,345	15.5	%

Net sales For the three months ended ~~April 3,~~October 2, 2021, net sales increased by ~~24%~~20% to ~~$512.8~~$579.5 million, compared to ~~$412.3~~$481.0 million for the three months ended ~~March 28,~~September 26, 2020. An analysis of the factors underlying the increase in net sales is presented in the following table:


(In thousands)
Net sales in the quarter ended ~~March 28,~~September 26, 2020	$	~~412,327~~480,987
Increase mainly associated with volume ~~pricing and mix~~	~~91,865~~97,650
Increase associated with effect of foreign currency translation	~~5,411~~161
Increase associated with acquired businesses	~~3,241~~695
Net sales in the quarter ended ~~April 3,~~October 2, 2021	$	~~512,844~~579,493

~~The Company’s~~Total net sales increased primarily as a result of strong growth across all three divisions, as we benefited from ~~strong~~robust industry conditions ~~several node transitions~~ and ~~strong overall~~record demand for ~~the Company’s~~our products and ~~solutions compared to the year-ago quarter.~~solutions. Total net sales also reflected favorable foreign currency translation effects of $0.2 million and net sales associated with recent acquisitions of ~~$3.2 million and favorable foreign currency translation effects~~$0.7 million.

Table of ~~$5.4 million.~~Contents

On a geographic basis, sales percentage by customers’ country or region for the three months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020 and the percentage increase ~~(decrease)~~ in sales for the three months ended ~~April 3,~~October 2, 2021 compared to the sales for the three months ended ~~March 28,~~September 26, 2020 were as follows:

Three months ended
April 3, 2021 March 28, 2020 Percentage increase (decrease) in sales
North America 23 % 25 % 18 %
Taiwan 20 % 22 % 10 %
China 16 % 11 % 83 %
South Korea 14 % 13 % 30 %
Japan 14 % 13 % 28 %
Europe 8 % 8 % 14 %
Southeast Asia 5 % 7 % (5 %)


	Three months ended
	October 2, 2021		September 26, 2020		Percentage increase in sales
North America	24	%	28	%	4	%
Taiwan	20	%	17	%	38	%
China	15	%	14	%	27	%
South Korea	13	%	15	%	3	%
Japan	13	%	13	%	28	%
Europe	10	%	8	%	45	%
Southeast Asia	5	%	5	%	26	%

The increase in sales to customers in North America primarily relates to higher sales of Advanced Materials Handling products of 26% and Specialty Chemicals and Engineering Materials products of 14%, partially offset by lower sales of Microcontamination Control products of 25%. The increase in sales to customers in Taiwan, China and Southeast Asia was primarily driven by a general increase in demand for products in all three of the Company’s segments. The increase in sales in Japan primarily relates to higher sales of Microcontamination Control products. The increase in sales in Europe primarily relates to higher sales of Advanced Materials Handling products.

Net sales for the nine months ended October 2, 2021 were $1,663.7 million, up 24% from $1,341.7 million in the comparable year-ago period. An analysis of the factors underlying the increase in net sales is presented in the following table:


(In thousands)
Net sales in the nine months ended September 26, 2020	$	1,341,719
Increase mainly associated with volume	305,097
Increase associated with effect of foreign currency translation	9,496
Increase associated with acquired businesses	7,377
Net sales in the nine months ended October 2, 2021	$	1,663,689

The Company’s sales growth was strong across all three divisions, as we benefited from robust industry conditions and record demand for our products and solutions. Total net sales also reflected favorable foreign currency translation effects of $9.5 million and net sales associated with recent acquisitions of $7.4 million.

On a geographic basis, sales percentage by customers’ country or region for the nine months ended October 2, 2021 and September 26, 2020 and the percentage increase in sales for the nine months ended October 2, 2021 compared to the sales for the nine months ended September 26, 2020 were as follows:


	Nine months ended
	October 2, 2021		September 26, 2020		Percentage increase in sales
North America	24	%	26	%	15	%
Taiwan	19	%	20	%	21	%
South Korea	14	%	15	%	19	%
Japan	13	%	13	%	25	%
China	16	%	13	%	52	%
Europe	9	%	8	%	28	%
Southeast Asia	5	%	6	%	19	%

The increase in sales to customers in North America primarily relates to higher sales of Microcontamination Control products. The increase in sales to customers in Taiwan, South Korea, Japan and China was primarily driven by a general increase in demand for products in all three of the Company’s segments. The increase in sales from Europe primarily relates to higher sales of Advanced Materials Handling products. The ~~decrease~~increase in sales from Southeast Asia primarily relates to ~~lower demand for products from our SCEM segment.~~higher sales of Microcontamination Control products.

Gross ~~profit~~margin The Company’s gross profit increased 27% for the three months ended April 3, 2021 to $235.0 million, compared to $185.5 million for the three months ended March 28, 2020. The Company experienced a 45.8%following table sets forth gross margin ~~rate for the~~as a percentage of net revenues:

2325

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	Three months ended					Nine months ended
	October 2, 2021		September 26, 2020		Percentage point change	October 2, 2021		September 26, 2020		Percentage point change
Gross margin as a percentage of net revenues:	45.6	%	47.0	%	(1.4)	46.0	%	46.1	%	(0.1)

Gross margin decreased by 1.4 and 0.1 percentage points for the three and nine months ended ~~April 3,~~October 2, 2021, respectively, compared to ~~45.0%~~the same periods in the ~~comparable year-ago period. The gross profit~~prior year, primarily due to an unfavorable sales mix and ~~gross margin increases reflect~~ higher ~~factory utilization associated with~~materials, labor and freight costs, partially offset by higher sales ~~levels and a favorable sales mix.~~levels.

Selling, general and administrative expenses Selling, general and administrative, or SG&A, expenses were ~~$71.4~~$71.0 million in the three months ended ~~April 3,~~October 2, 2021, compared to ~~$58.9~~$71.2 million in the year-ago period. An analysis of the factors underlying the change in SG&A expenses is presented in the following table:


(In thousands)
Selling, general and administrative expenses in the quarter ended ~~March 28,~~September 26, 2020	$	~~58,891~~71,195
Employee costs	~~12,687~~
~~Integration costs~~	~~1,996~~
~~Deal and transaction costs~~	~~(1,431)~~2,371
Other decreases, net	~~(754)~~(2,534)
Selling, general and administrative expenses in the quarter ended ~~April 3,~~October 2, 2021	$	~~71,389~~71,032

SG&A expenses were $215.0 million for the first nine months of 2021, representing a 9% increase compared to SG&A expenses of $197.0 million in the year-ago period. An analysis of the factors underlying changes in SG&A is presented in the following table:


(In thousands)
Selling, general and administrative expenses in the nine months ended September 26, 2020	$	196,958
Employee costs	21,424
Other decreases, net	(3,340)
Selling, general and administrative expenses in the nine months ended October 2, 2021	$	215,042

Engineering, research and development expenses The Company’s engineering, research and development, or ER&D, efforts focus on the support or extension of current product lines and the development of new products and manufacturing technologies. ER&D expenses ~~were $37.7~~increased 16% to $42.0 million in the three months ended ~~April 3,~~October 2, 2021 compared to ~~$29.6~~$36.3 million in the year-ago period. An analysis of the factors underlying the increase in ER&D expenses is presented in the following table:


(In thousands)
Engineering, research and development expenses in the quarter ended ~~March 28,~~September 26, 2020	$	~~29,632~~36,295
Employee costs	~~5,640~~2,963
Project materials	~~1,835~~2,186
Other increases, net	~~641~~528
Engineering, research and development expenses in the quarter ended ~~April 3,~~October 2, 2021	$	~~37,748~~41,972

ER&D expenses increased 24% to $121.7 million in the first nine months of 2021, compared to $98.5 million in the year-ago period. An analysis of the factors underlying the increase in ER&D expenses is presented in the following table:


(In thousands)
Engineering, research and development expenses in the nine months ended September 26, 2020	$	98,499
Employee costs	12,820
Project materials	7,773
Other increases, net	2,600
Engineering, research and development expenses in the nine months ended October 2, 2021	$	121,692

Amortization expenses Amortization of intangible assets was ~~$11.9~~$11.8 million in the three months ended ~~April 3,~~October 2, 2021, compared to ~~$16.2~~$11.7 million for the three months ended ~~March 28,~~September 26, 2020. The increase primarily reflects additional amortization expense associated with recent acquisitions.

Amortization of intangible assets was $35.6 million in the nine months ended October 2, 2021, compared to $41.2 million for the nine months ended September 26, 2020. The decrease primarily reflects the elimination of amortization expense of ~~$5.0~~ $6.7

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million for acquired identifiable intangible assets ~~acquired in acquisitions~~ that became fully amortized in previous periods, partially offset by additional amortization expense of ~~$0.5~~$1.3 million associated with recent acquisitions.

Interest expense Interest expense includes interest associated with debt outstanding and the amortization of debt issuance costs associated with such borrowings. Interest expense was ~~$11.7~~$9.4 million in the three months ended ~~April 3,~~October 2, 2021, compared to ~~$10.6~~$12.8 million in the three months ended ~~March 28,~~September 26, 2020. The ~~increase~~decrease primarily reflects ~~higher~~lower average debt ~~levels.~~levels and interest rates.

Interest expense was $31.7 million in the nine months ended October 2, 2021, compared to $36.3 million in the nine months ended September 26, 2020. The decrease reflects lower average debt levels and interest rates.

Interest income Interest income ~~was~~of $0.1 million in the three months ended ~~April 3,~~October 2, 2021 was flat compared to ~~$0.3~~$0.1 million in the three months ended ~~March 28,~~September 26, 2020.

Interest income was $0.2 million in the nine months ended October 2, 2021, compared to $0.7 million in the nine months ended September 26, 2020. The decrease reflects lower average interest ~~rates.~~rates and cash levels.

Other expense (income), net Other expense, net was ~~$4.3~~$1.9 million in the three months ended ~~April 3,~~October 2, 2021 and consisted mainly of foreign currency transaction losses of ~~$4.3~~$1.9 million. Other ~~expense,~~income, net was ~~$0.9~~$1.8 million in the three months ended ~~March 28,~~September 26, 2020 and consisted mainly of foreign currency transaction gains of $2.9 million, partially offset by loss on debt extinguishment costs of $0.9 million associated with payments on the Company’s senior secured term loan facility due 2025, or the Term Loan Facility.

Other expense, net was $29.8 million in the nine months ended October 2, 2021 and consisted mainly of a loss on extinguishment of debt of $23.1 million associated with the redemption of the Company’s $550 million aggregate principal amount of senior unsecured notes due 2026, or the 2026 Notes (see note 6 to the Company’s condensed consolidated financial statements), and foreign currency transaction losses of ~~$0.6~~$6.3 million. Other income, net was $1.4 million in the nine months ended September 26, 2020 and consisted primarily of foreign currency transaction gains of $4.2 million, partially offset by losses on debt extinguishment costs of $2.4 million associated with payments on the Term Loan Facility.

Income tax expense Income tax expense was ~~$13.4~~$10.6 million and $39.9 million in the three and nine months ended ~~April 3,~~October 2, 2021, respectively, compared to income tax expense of ~~$8.6~~$16.6 million and $39.5 million in the three and nine months ended ~~March 28,~~September 26, 2020, respectively. The Company’s year-to-date effective income tax rate at ~~April 3,~~October 2, 2021 was ~~13.7%~~12.1%, compared to ~~12.4%~~16.0% at ~~March 28,~~September 26, 2020.

The income tax expense for the three months ended April 3, 2021 and March 28, 2020 include discrete benefits of $7.5 million and $5.0 million, respectively, recorded in connection with share-based compensation. The increasedecrease in the year-to-date effective income tax rate from 2020 to 2021 primarily relates to the reversal of a valuation allowance on foreign tax credits generated during 2020 and 2021 of $9.4 million, the recognition of a capital loss tax benefit of $3.8 million recorded during the nine months ended October 2, 2021 and a decrease in the foreign effective tax rate due to a change in the foreign income mix. These benefits were offset in part by tax recorded on the sale of intangible property of $3.5 million in the quarter ended July 3, 2021 and a valuation allowance of $3.4 million on federal foreign tax credits ~~generated~~recorded in the quarter ended September 26, 2020. Additionally, the income tax expense for the nine months ended October 2, 2021 and September 26, 2020 includes discrete benefits of ~~$1.4 million.~~$13.1 million and $12.0 million, respectively, recorded in connection with share-based compensation.

Net income Due to the factors noted above, the Company recorded net income of ~~$84.7~~$117.5 million, or ~~$0.62 per diluted share, in the three-month period ended April 3, 2021, compared to net income of $61.0 million, or $0.45~~$0.86 per diluted share, in the three months ended ~~March 28,~~October 2, 2021, compared to net income of $79.3 million, or $0.58 per diluted share, in the three months ended September 26, 2020. In the three months ended ~~April 3,~~October 2, 2021, net income, as a percentage of net sales, increased to ~~16.5%~~20.3% from ~~14.8%~~16.5% in the year-ago period.

In the nine months ended October 2, 2021, the Company recorded net income of $290.9 million, or $2.13 per diluted share, compared to net income of $208.3 million, or $1.53 per diluted share, in the nine months ended September 26, 2020. In the nine months ended October 2, 2021, net income, as a percentage of net sales, increased to 17.5% from 15.5% in the year-ago period.

Non-GAAP Financial Measures The Company’s condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, or GAAP. The Company also utilizes certain non-GAAP financial measures as a complement to financial measures provided in accordance with GAAP in order to better assess and reflect trends affecting the Company’s business and results of operations. See the section entitled “Non-GAAP Information” ~~included~~

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below ~~in this section~~ for additional detail, including the definition of certain non-GAAP financial measures and the reconciliation of these non-GAAP measures to the Company’s GAAP measures.

The Company’s principal non-GAAP financial measures are ~~Adjusted~~adjusted EBITDA and ~~Adjusted Operating Income,~~adjusted operating income, together with related measures thereof, and non-GAAP ~~Earnings Per Share.~~earnings per share.

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Adjusted EBITDA increased ~~25%~~23% to ~~$150.1~~$175.5 million in the three months ended ~~April 3,~~October 2, 2021, compared to ~~$120.3~~$142.4 million in the three months ended ~~March 28,~~September 26, 2020. In the three months ended ~~April 3,~~October 2, 2021, ~~Adjusted~~adjusted EBITDA, as a percentage of net sales, was flat at ~~29%~~30% compared to the year-ago period.

Adjusted ~~Operating Income~~EBITDA increased ~~29%~~27% to ~~$128.0~~$499.8 million in the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to ~~$99.6~~$394.1 million in the ~~three~~nine months ended ~~March 28,~~September 26, 2020. ~~Adjusted Operating Income,~~In the nine months ended October 2, 2021, adjusted EBITDA, as a percentage of net sales, increased to 30% from 29% in the year-ago period.

Adjusted operating income increased 26% to $152.7 million in the three months ended October 2, 2021, compared to $121.6 million in the three months ended September 26, 2020. Adjusted operating income, as a percentage of net sales, increased to 26% from 25% in the year-ago period.

Adjusted operating income increased 30% to $432.3 million in the nine months ended October 2, 2021, compared to $332.1 million in the nine months ended September 26, 2020. In the nine months ended October 2, 2021, adjusted operating income, as a percentage of net sales, increased to 26% from ~~24%~~25% in the year-ago period.

Non-GAAP ~~Earnings Per Share~~earnings per share increased ~~27%~~37% to ~~$0.70~~$0.92 in the three months ended ~~April 3,~~October 2, 2021, compared to ~~$0.55~~$0.67 in the three months ended ~~March 28,~~September 26, 2020. Non-GAAP earnings per share increased 35% to $2.47 in the nine months ended September 26, 2020, compared to $1.83 in the nine months ended September 26, 2020.

The increases in adjusted EBITDA, adjusted operating income and non-GAAP earnings per share for the three and nine months ended October 2, 2021 compared to the year-ago periods are generally attributable to the increases in sales and gross profit.

Segment Analysis

The Company reports its financial performance based on three reporting segments. The following is a discussion of the results of operations of these three business segments. See note 810 to the condensed consolidated financial statements for additional information on the Company’s three segments.

The following table presents selected net sales and segment profit data for the Company’s three reportable segments, along with unallocated general and administrative expenses, for the three and nine months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020.

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Specialty Chemicals and Engineered Materials
Net sales $ 166,541 $ 144,214
Segment profit 34,556 32,670
Microcontamination Control
Net sales $ 207,099 $ 159,261
Segment profit 70,566 50,167
Advanced Materials Handling
Net sales $ 148,541 $ 116,137
Segment profit 32,095 20,632
Unallocated general and administrative expenses $ 11,368 $ 6,514


	Three months ended				Nine months ended
(In thousands)	October 2, 2021		September 26, 2020			October 2, 2021		September 26, 2020
Specialty Chemicals and Engineered Materials
Net sales	$	176,380	$	150,480		$	523,287	$	440,907
Segment profit	41,091		32,600			120,592		98,208
Microcontamination Control
Net sales	$	225,877	$	193,541		$	660,497	$	536,560
Segment profit	78,399		64,915			227,097		177,219
Advanced Materials Handling
Net sales	$	186,200	$	144,370		$	507,243	$	386,941
Segment profit	40,503		33,266			114,691		76,707

Unallocated general and administrative expenses	$	8,793	$	12,271		$	34,540	$	28,741

Specialty Chemicals and Engineered Materials (SCEM)

For the ~~first~~third quarter of 2021, SCEM net sales increased to ~~$166.5~~$176.4 million, up 17% compared to ~~$144.2~~$150.5 million in the comparable period last year. The sales increase was primarily due to increased sales of ~~advanced deposition materials, cleaning chemistries,~~ specialty gases and advanced ~~coatings.~~deposition materials. SCEM reported a segment profit of ~~$34.6~~$41.1 million in the ~~first~~third quarter of 2021, up 6%26% from ~~$32.7~~$32.6 million in the year-ago period. The segment profit increase was primarily due to higher gross profit related to increased sales volume, partially offset by ~~a 17%~~an 11% increase in operating expenses, primarily due to higher compensation costs.

For the nine months ended October 2, 2021, SCEM net sales increased to $523.3 million, up 19% compared to $440.9 million in the comparable period last year. The sales increase was mainly due to increased sales of specialty gases and advanced deposition materials. SCEM reported a segment profit of $120.6 million in the nine months ended October 2, 2021, up 23% from $98.2 million in the year-ago period also due to higher sales levels and a gain on a sale of non-core intangibles, partially offset by an 11% increase in operating expenses.

Microcontamination Control (MC)

For the ~~first~~third quarter of 2021, MC net sales increased to ~~$207.1~~$225.9 million, up 17% compared to ~~$159.3~~$193.5 million in the comparable period last year. The sales increase was mainly due to improved ~~sales from~~performance across substantially all platforms, with growth

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especially strong in liquid filtration and gas ~~filtration~~microcontamination products. MC reported a segment profit of ~~$70.6~~$78.4 million in the ~~first~~third quarter of 2021, up ~~41%~~21% from ~~$50.2~~$64.9 million in the year-ago period. The segment profit improvement was primarily due to higher gross profit related to increased sales volume, ~~and favorable product mix,~~ partially offset by a ~~24%~~4% increase in operating expenses due to higher compensation costs.

For the nine months ended October 2, 2021, MC net sales increased to $660.5 million, up 23% compared to $536.6 million in the comparable period last year. The sales increase was mainly due to improved performance across substantially all platforms, with growth especially strong in liquid filtration and gas filtration products. MC reported a segment profit of $227.1 million in the nine months ended October 2, 2021, up 28% from $177.2 million in the year-ago period. The segment profit improvement was primarily due to higher gross profit related to the increased sales volume, partially offset by a 13% increase in operating expenses due to higher compensation costs.

Advanced Materials Handling (AMH)

For the ~~first~~third quarter of 2021, AMH net sales increased to ~~$148.5~~$186.2 million, up 29% compared to ~~$116.1~~$144.4 million in the comparable period last year. The sales increase was mainly due to improved sales from ~~all major semi-related product platforms,~~wafer handling, fluid handling and measurement products and sales of our Aramus high purity bags, as well as additional sales of ~~$2.7~~$0.7 million attributable to the Company’s acquisition of Global Measurement

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Technologies, Inc., or ~~GMTI, in the third quarter of 2020.~~GMTI. AMH reported a segment profit of ~~$32.1~~$40.5 million in the ~~first~~third quarter of 2021, up ~~56%~~22% from ~~$20.6~~$33.3 million in the year-ago period. The segment profit increase was primarily due to higher sales volume, partially offset by a 14% increase in operating expenses due to higher compensation costs.

For the nine months ended October 2, 2021, AMH net sales increased to $507.2 million, up 31% compared to $386.9 million in the comparable period last year. The sales increase was mainly due to improved sales from wafer handling, fluid handling and ~~favorable product mix,~~measurement products and sales of our Aramus high purity bags, as well as additional sales of $6.8 million attributable to the acquisition of GMTI. AMH reported a segment profit of $114.7 million in the nine months ended October 2, 2021, up 50% from $76.7 million in the year-ago period. The segment profit increase was primarily due to higher sales volume, partially offset by a 16% increase in operating expenses, primarily due to higher compensation costs.

Unallocated general and administrative expenses

Unallocated general and administrative expenses totaled ~~$11.4~~$8.8 million in the ~~first~~third quarter of 2021, compared to ~~$6.5~~$12.3 million in the comparable period last year. The ~~$4.9~~$3.5 million decrease mainly reflects a $2.0 million decrease in charitable donation costs and a $1.0 million decrease in deal and integration costs from the comparable period last year.

Unallocated general and administrative expenses for the nine months ended October 2, 2021 totaled $34.5 million, up from $28.7 million in the nine months ended September 26, 2020. The $5.8 million increase mainly reflects ~~a $5.1 million increase in~~higher employee costs.

Liquidity and Capital Resources

We consider the following when assessing our liquidity and capital resources:

In thousands April 3, 2021 December 31, 2020
Cash and cash equivalents $ 548,520 $ 580,893
Working capital 978,335 931,631
Total debt 1,086,186 1,085,783


In thousands	October 2, 2021		December 31, 2020
Cash and cash equivalents	$	475,752	$	580,893
Working capital	966,292		931,631
Total debt	936,704		1,085,783

The Company has historically financed its operations and capital requirements through cash flow from its operating activities, long-term loans, lease financing and borrowings under domestic and international short-term lines of credit. On April ~~16,~~30, 2021, ~~we agreed to sell $400~~the Company issued $400.0 million aggregate principal amount of ~~our~~3.625% senior unsecured notes due May 1, 2029, or the 2029 Notes. The ~~sale of the 2029 Notes is expected to close on April 30, 2021, subject to customary closing conditions. We intend to use~~Company used the net proceeds of the offering, together with cash on hand and ~~approximately $75 million borrowed~~borrowings under the Company’s senior secured revolving credit facility, or the Revolving Facility, to ~~pay the redemption price for the redemption in full~~redeem all of the 2026 ~~Notes and to pay certain fees and expenses related to the offering.~~Notes. The redemption of the 2026 Notes ~~is conditioned~~resulted in a loss on ~~the Company’s receipt~~extinguishment of ~~$400 million~~debt of ~~proceeds from a new offering~~$23.1 million. In connection with our issuance of ~~unsecured notes, such as~~ the 2029 ~~Notes.~~Notes, we amended the Revolving Facility to provide for, among other things, lending commitments in an aggregate principal amount of up to $400.0 million (up from $300.0 million) and to extend the maturity date to April 30, 2026.

Although there is uncertainty regarding the impact of the COVID-19 pandemic on ~~the Company’s~~our future results, we believe our business model, ~~and~~ our current cash reserves ~~will help~~and our balance sheet leave us well-positioned to manage our business through this crisis as we expect it to unfold. We have reviewed numerous potential scenarios in connection with the impact of COVID-19 on the global economy and the semiconductor industry. Based on our analysis, we believe our existing balances of domestic cash and cash equivalents and our currently anticipated operating cash flows ~~after taking into account the anticipated issuance of the 2029 Notes and the use of net proceeds, cash on hand and borrowings to fund the redemption of the 2026 Notes,~~ will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months and for the longer term.

We may seek to take advantage of opportunities to raise additional capital through additional debt financing or through public or private sales of securities. If in the future our available liquidity is not sufficient to meet the Company’s operating and debt

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service obligations as they come due, management would need to pursue alternative arrangements through additional equity or debt financing in order to meet the Company’s cash requirements. There can be no assurance that any such financing would be available on commercially acceptable terms, or at all. To date, in fiscal 2021, we have not experienced difficulty accessing the capital and credit markets, ~~as evidenced by our recent announcement of our $400 million note offering; however,~~but future volatility in the capital and credit markets may increase costs associated with issuing debt instruments or affect our ability to access those markets. In addition, it is possible that our ability to access the capital and credit markets could be limited at a time when we would like, or need, to do so, which could have an adverse impact on our ability to refinance maturing debt and/or react to changing economic and business conditions.

In summary, our cash flows for each period were as follows:

Three months ended
(in thousands) April 3, 2021 March 28, 2020
Net cash provided by operating activities $ 53,115 $ 11,403
Net cash used in investing activities (43,258) (98,210)
Net cash (used in) provided by financing activities (39,375) 71,685
Decrease in cash and cash equivalents (32,373) (16,834)


	Nine months ended
(in thousands)	October 2, 2021		September 26, 2020
Net cash provided by operating activities	$	284,474	$	242,656
Net cash used in investing activities	(131,820)		(190,440)
Net cash (used in) provided by financing activities	(254,513)		44,352
(Decrease) increase in cash and cash equivalents	(105,141)		96,061

Operating activitiesCash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. Cash flows provided by operating activities totaled ~~$53.1~~$284.5 million in the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to ~~$11.4~~$242.7 million in the ~~three~~nine months ended ~~March 28,~~September 26, 2020. The increase in cash provided by operating activities was primarily due to higher net income, net of non-cash adjustments, including the loss on debt extinguishment and ~~a lower~~modifications, partially offset by the net change in working capital and other assets and liabilities. The net change in

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working capital and other assets and liabilities resulted in a decrease to cash provided by ~~operations~~operating activities of ~~$80.8~~$153.0 million for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 compared to a decrease of ~~$97.0~~$118.6 million for the ~~three~~nine months ended ~~March 28,~~September 26, 2020.

Changes in working capital and other assets and liabilities for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 were driven primarily by increases in inventories, accounts ~~receivable and accounts~~ payable and ~~decreases in accrued liabilities. The change for accounts receivable was primarily due to the timing of collections.~~income taxes payable. The change for inventory was driven by an increase in business activity. The change for accounts payable ~~and accrued liabilities~~was due to timing of payments. The change for income taxes payable was primarily driven by a higher ~~accounts payables due to timing of payments and higher accrued bonuses in 2021, partially offset by a higher payment of the previous year incentive compensation.~~income taxes paid.

Investing activities Cash flows used in investing activities totaled ~~$43.3~~$131.8 million in the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to ~~$98.2~~$190.4 million in the ~~three~~nine months ended ~~March 28,~~September 26, 2020. The change ~~was due to less~~resulted primarily from a reduction in cash paid for acquisitions of businesses, partially offset by higher cash paid for acquisition of property, plant and equipment.

Acquisition of property, plant and equipment totaled ~~$43.3~~$134.0 million in the ~~three~~nine months ended ~~April 3,~~October 2, 2021, which primarily reflected investments in facilities, equipment and tooling, compared to ~~$22.6~~$79.6 million in the ~~three~~nine months ended ~~March 28,~~September 26, 2020, which primarily reflected investments in equipment and tooling.

In the ~~three~~nine months ended ~~March 28,~~October 2, 2021, the Company acquired a business for $2.5 million, net of cash acquired. In the nine months ended September 26, 2020, the Company ~~acquired Sinmat. The~~used cash ~~used~~ to acquire the Sinmat business and GMTI for ~~the three months ended March 28, 2020 was $75.6~~$111.1 million, net of cash acquired. The ~~transaction is~~transactions are described in further detail in note 3 to the Company’s condensed consolidated financial statements.

As of ~~April 3,~~October 2, 2021, the Company expects its full-year capital expenditures in 2021 to be approximately $225.0 million for growth capacity investments and the initial phase of the previously announced investment in our new facility in Taiwan. As of ~~April 3,~~October 2, 2021, the Company had outstanding capital purchase obligations of ~~$55.5~~$192.4 million for the construction or purchase of plant and equipment not yet recorded in the Company’s condensed consolidated financial statements as the Company had not received the related goods or property as of such date.

Financing activities Cash ~~flows~~ used in financing activities totaled ~~$39.4~~$254.5 million during the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to ~~$71.7~~cash provided by financing activities of $44.4 million during the ~~three~~nine months ended ~~March 28,~~September 26, 2020. The change was primarily due to ~~absence~~a $318.1 million increase in payments on long-term debt and debt extinguishment and a $20.4 million increase in repurchase and retirement of ~~net short-term debt activity~~common stock. The Company made a payment of $569.1 million related to the redemption of the $550.0 million aggregate principal amount of 2026 Notes during the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to a ~~net source~~payment of ~~cash~~$251.0 million of ~~$142.0 million~~outstanding borrowings under the Term Loan Facility in the ~~comparable period in 2020, and a $3.6 million~~nine months ended September 26, 2020. The increase in cash flows used ~~to pay taxes for net share settlements of equity awards,~~in financing activities was offset in part by the absence of a $16.1 million deferred acquisition payment related to our acquisition of Digital Specialty Chemicals in 2020, a $13.0 million increase in proceeds from the issuance of common stock and a $9.2 million decrease in taxes paid related to net share settlement of ~~$14.6 million in repurchases of the Company’s common stock.~~equity awards.

Our total dividend payments were ~~$10.9~~$32.7 million in the ~~three~~nine months ended ~~April 3,~~October 2, 2021, compared to ~~$10.8~~$32.4 million in the ~~three~~nine months ended ~~March 28,~~September 26, 2020. We have paid a cash dividend in each of the past 1416 quarters. On ~~April 14,~~October 13, 2021, the

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Company’s Board of Directors declared a quarterly cash dividend of $0.08 per share ~~of common stock, payable~~to be paid on ~~May 19,~~November 17, 2021 to ~~stockholders~~shareholders of record on ~~April 28,~~the close of business on October 27, 2021.

Other Liquidity and Capital Resources Considerations

~~The Company’s Term Loan Facility matures on November 6, 2025 and bore interest at a rate per annum of 2.1% at~~On April ~~3, 2021. As of April 3,~~30, 2021, the Company issued $400.0 million aggregate principal amount of the 2029 Notes. The Company used the net proceeds of the offering, together with cash on hand and borrowings under the Revolving Facility, to redeem all of the 2026 Notes. We capitalized $4.1 million of third-party expenses related to the issuance of the 2029 as debt issuance costs. At October 2, 2021, we had $400.0 million aggregate principal amount outstanding ~~under~~on the ~~Term Loan Facility was $145.0~~2029 Notes.

The Company voluntarily redeemed its $550.0 million aggregate principal amount of 2026 Notes at a redemption price of 103.469%(expressed as percentage of principal amount), plus accrued and unpaid interest of $5.6 million. The redemption of the 2026 Notes resulted in a loss on extinguishment of debt of $23.1 million.

~~The Company’s~~In connection with our issuance of the 2029 Notes, we amended the Revolving Facility ~~provides~~to provide for, among other things, lending commitments in an aggregate principal amount of up to $400.0 million (up from $300.0 ~~million, maturing on November 6, 2023.~~million) and to extend the maturity date to April 30, 2026. The Revolving Facility bears interest at a rate per annum equal to, at the Company’s option, either a base rate (such as prime rate) or LIBOR plus, in each case, an applicable margin. In connection with our issuance of the 2029 Notes, we intend to amend the Revolving Facility to provide for lending commitments in an aggregate principal amount of up to $400.0 million and to extend the maturity to April 30, 2026. At ~~April 3,~~October 2, 2021, there was no balance outstanding under the Revolving Facility and we had undrawn outstanding letters of credit of $0.2 million.

The Company’s Term Loan Facility matures on November 6, 2025 and bore interest at a rate per annum of 2.1% at October 2, 2021. As of ~~April 3,~~October 2, 2021, the aggregate principal amount outstanding under the Term Loan Facility was $145.0 million.

As of October 2, 2021, we had ~~$550.0 million aggregate principal amount of 2026 Notes and~~ $400.0 million aggregate principal amount of 4.375% senior unsecured notes due April 15, 2028 outstanding.

Through ~~April 3,~~October 2, 2021, the Company was in compliance with all applicable financial covenants under its ~~credit facilities.~~debt arrangements.

The Company also has a line of credit with one bank that provides for borrowings ofin Japanese yen for the Company’s Japanese ~~subsidiary,~~subsidiaries, equivalent to an aggregate of approximately $9.0 million. There were no outstanding borrowings under this line of credit at ~~April 3,~~October 2, 2021.

As of ~~April 3,~~October 2, 2021, the Company’s sources of available funds were its cash and cash equivalents of ~~$548.5~~$475.8 million, funds available under the Revolving Facility and international credit facilities and cash flow generated from operations. As of ~~April 3,~~October 2, 2021, the amount of cash and cash equivalents held in certain of our foreign operations totaled approximately ~~$376.6~~$330.8 million. If we repatriate such funds, we ~~will~~may be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes

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on those amounts during the period when such repatriation occurs. We have accrued taxes ~~for the tax effect of repatriating the funds to the United States.~~on any earnings that are not indefinitely reinvested. We estimate that no material withholding taxes would be incurred if any indefinitely reinvested earnings were distributed.

Off-Balance Sheet Arrangements

As of ~~April 3,~~October 2, 2021, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2020, except for long-term debt. On April 30, 2021, the Company issued $400.0 million aggregate principal amount of 2029 Notes. On May 4, 2021, the Company redeemed the $550.0 million aggregate principal amount of 2026 Notes. Refer to note 6 to the Company’s condensed consolidated financial statements for a discussion of recent debt activity.

Recently adopted accounting pronouncements Refer to note 1 to the Company’s condensed consolidated financial statements for a discussion of recently adopted accounting pronouncements.

Recently issued accounting pronouncements Refer to note 1 to the Company’s condensed consolidated financial statements for a discussion of recently issued but not yet adopted accounting pronouncements.

Non-GAAP Information The Company’s condensed consolidated financial statements are prepared in conformity with GAAP.

The Company also utilizes certain non-GAAP financial measures as a complement to financial measures provided in accordance with GAAP in order to better assess and reflect trends affecting the Company’s business and results of operations. These non-GAAP financial measures include ~~Adjusted~~adjusted EBITDA and ~~Adjusted Operating Income,~~adjusted operating income, together with related measures thereof, and non-GAAP ~~Earnings Per Share,~~earnings per share, as well as certain other supplemental non-GAAP financial measures included in the discussion of the Company’s financial results.

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Adjusted EBITDA ~~a non-GAAP financial measure,~~ is defined by the Company as net income before, as applicable, (1) income tax expense, (2) interest expense, (3) interest income, (4) other expense (income) ~~expense,~~, net, (5) charge for fair value write-up of acquired inventory sold, (6) deal and transaction costs, (7) integration costs, (8) severance and restructuring costs, (9) amortization of intangible assets and (10) depreciation. Adjusted ~~Operating Income, another non-GAAP financial measure,~~operating income is defined by the Company as ~~Adjusted~~adjusted EBITDA exclusive of the depreciation addback noted above. The Company also utilizes non-GAAP financial measures whereby ~~Adjusted~~adjusted EBITDA and ~~Adjusted Operating Income~~adjusted operating income are each divided by the Company’s net sales to derive ~~Adjusted~~adjusted EBITDA ~~Margin~~margin and ~~Adjusted Operating Margin,~~adjusted operating margin, respectively.

Non-GAAP EPS ~~a non-GAAP financial measure,~~ is defined by the Company as net income before, as applicable, (1) charge for fair value write-up of acquired inventory sold, (2) deal and transaction costs, (3) integration costs, (4) severance and restructuring costs, (5) loss on extinguishment of debt ~~extinguishment,~~and modification, (6) amortization of intangible assets, (7) ~~tax effect of legal entity restructuring and (8)~~ the tax effect of the foregoing adjustments to net income, stated on a per share ~~basis.~~basis and (8) tax effect of legal entity restructuring.

The Company provides supplemental non-GAAP financial measures to help management and investors to better understand its business and believes these measures provide investors and analysts additional and meaningful information for the assessment of the Company’s ongoing results. Management also uses these non-GAAP measures to assist in the evaluation of the performance of the Company’s business segments and to make operating decisions.

Management believes the Company’s non-GAAP measures help indicate the Company’s baseline performance before certain gains, losses or other charges that may not be indicative of the Company’s business or future outlook and offer a useful view of business performance in that the measures provide a more consistent means of comparing performance. The Company believes the non-GAAP measures aid investors’ overall understanding of the Company’s results by providing a higher degree of transparency for such items and providing a level of disclosure that will help investors understand how management plans, measures and evaluates the Company’s business performance. Management believes that the inclusion of non-GAAP measures provides greater consistency in its financial reporting and facilitates investors’ understanding of the Company’s historical operating trends by providing an additional basis for comparisons to prior periods.

Management uses ~~Adjusted~~adjusted EBITDA and ~~Adjusted Operating Income~~adjusted operating income to assist it in evaluations of the Company’s operating performance by excluding items that management does not consider as relevant in the results of its ongoing operations. Internally, these non-GAAP measures are used by management for planning and forecasting purposes, including the preparation of internal budgets; for allocating resources to enhance financial performance; for evaluating the effectiveness of operational strategies; and for evaluating the Company’s capacity to fund capital expenditures, secure financing and expand its business.

In addition, and as a consequence of the importance of these non-GAAP financial measures in managing its business, the Company’s Board of Directors uses non-GAAP financial measures in the evaluation process to determine management compensation.

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The Company believes that certain analysts and investors use ~~Adjusted~~adjusted EBITDA, ~~Adjusted Operating Income~~adjusted operating income and non-GAAP EPS as supplemental measures to evaluate the overall operating performance of firms in the Company’s industry. Additionally, lenders or potential lenders use ~~Adjusted~~adjusted EBITDA measures to evaluate the Company’s creditworthiness.

The presentation of non-GAAP financial measures is not meant to be considered in isolation, as a substitute for, or superior to, financial measures or information provided in accordance with GAAP. Management strongly encourages investors to review the Company’s condensed consolidated financial statements in their entirety and to not rely on any single financial measure.

Management notes that the use of non-GAAP measures has limitations, including but not limited to:

First, non-GAAP financial measures are not standardized. Accordingly, the methodology used to produce the Company’s non-GAAP financial measures is not computed under GAAP and may differ notably from the methodology used by other companies. For example, the Company’s non-GAAP measure of ~~Adjusted~~adjusted EBITDA may not be directly comparable to EBITDA or an adjusted EBITDA measure reported by other companies.

Second, the Company’s non-GAAP financial measures exclude items such as amortization and depreciation that are recurring. Amortization of intangibles and depreciation have been, and will continue to be for the foreseeable future, a significant recurring expense with an impact upon the Company’s results of operations, notwithstanding the lack of immediate impact upon cash flows.

Third, there is no assurance that the Company will not have future charges for fair value write-up of acquired inventory, restructuring activities, deal costs, integration costs, or similar items and, therefore, may need to record additional charges (or credits) associated with such items, including the tax effects thereon. The exclusion of these items in the Company’s non-GAAP measures should not be construed as an implication that these costs are unusual, infrequent or non-recurring.

Management considers these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their most directly comparable

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financial measures calculated in accordance with GAAP. The calculations of ~~Adjusted~~adjusted EBITDA, ~~Adjusted Operating Income,~~adjusted operating income, and non-GAAP EPS, and reconciliations between these financial measures and their most directly comparable GAAP equivalents, are presented below in the accompanying tables.

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Reconciliation of GAAP Net Income to Adjusted Operating Income and Adjusted EBITDA


	Three months ended						Nine months ended
(In thousands)	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net sales	$	579,493		$	480,987		$	1,663,689		$	1,341,719
Net income	$	117,461		$	79,303		$	290,907		$	208,345
Net income - as a % of net sales	20.3		%	16.5		%	17.5		%	15.5		%
Adjustments to net income
Income tax expense	10,640			16,559			39,947			39,542
Interest expense	9,395			12,781			31,744			36,345
Interest income	(56)			(130)			(181)			(664)
Other expense (income), net	1,917			(1,752)			29,807			(1,351)
GAAP – Operating income	139,357			106,761			392,224			282,217
Operating margin - as a % of net sales	24.0		%	22.2		%	23.6		%	21.0		%
Charge for fair value write-up of acquired inventory sold	—			229			—			590
Deal and transaction costs	—			642			—			2,576
Integration costs	1,290			1,260			3,966			1,663
Severance and restructuring costs	206			971			529			3,863

Amortization of intangible assets	11,843			11,749			35,616			41,176
Adjusted operating income	152,696			121,612			432,335			332,085
Adjusted operating margin - as a % of net sales	26.3		%	25.3		%	26.0		%	24.8		%
Depreciation	22,841			20,777			67,510			62,064
Adjusted EBITDA	$	175,537		$	142,389		$	499,845		$	394,149




Adjusted EBITDA – as a % of net sales	30.3		%	29.6		%	30.0		%	29.4		%

Three months ended
(In thousands) April 3, 2021 March 28, 2020
Net sales $ 512,844 $ 412,327
Net income $ 84,676 $ 61,006
Net income - as a % of net sales 16.5 % 14.8 %
Adjustments to net income
Income tax expense 13,391 8,622
Interest expense 11,652 10,559
Interest income (71) (321)
Other expense, net 4,330 878
GAAP – Operating income 113,978 80,744
Operating margin -as a % of net sales 22.2 % 19.6 %
Charge for fair value write-up of acquired inventory sold — 361
Deal and transaction costs — 1,431
Integration costs 2,044 48
Severance and restructuring costs 143 843
Amortization of intangible assets 11,871 16,211
Adjusted operating income 128,036 99,638
Adjusted operating margin - as a % of net sales 25.0 % 24.2 %
Depreciation 22,095 20,648
Adjusted EBITDA $ 150,131 $ 120,286
Adjusted EBITDA – as a % of net sales 29.3 % 29.2 %

Reconciliation of GAAP Net Income and Earnings per Share to Non-GAAP Net Income and Earnings per Share

Three months ended
(In thousands, except per share data) April 3, 2021 March 28, 2020
Net income $ 84,676 $ 61,006
Adjustments to net income
Charge for fair value write-up of acquired inventory sold — 361
Deal and transaction costs — 1,431
Integration costs 2,044 48
Severance and restructuring costs 143 843
Amortization of intangible assets 11,871 16,211
Tax effect of adjustments to net income and certain discrete tax items1
(3,221) (4,329)
Non-GAAP net income $ 95,513 $ 75,571
Diluted earnings per common share $ 0.62 $ 0.45
Effect of adjustments to net income 0.08 0.11
Diluted non-GAAP earnings per common share $ 0.70 $ 0.55


	Three months ended				Nine months ended
(In thousands, except per share data)	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net income	$	117,461	$	79,303	$	290,907	$	208,345
Adjustments to net income
Charge for fair value write-up of acquired inventory sold	—		229		—		590
Deal and transaction costs	—		642		—		2,576
Integration costs	1,290		1,260		3,966		1,663
Severance and restructuring costs	206		971		529		3,863
Loss on extinguishment of debt and modification	—		908		23,338		2,378


Amortization of intangible assets	11,843		11,749		35,616		41,176

Tax effect of adjustments to net income and certain discrete tax items1	(5,417)		(3,602)		(16,749)		(11,979)


Non-GAAP net income	$	125,383	$	91,460	$	337,607	$	248,612

Diluted earnings per common share	$	0.86	$	0.58	$	2.13	$	1.53
Effect of adjustments to net income	0.06		0.09		0.34		0.30
Diluted non-GAAP earnings per common share	$	0.92	$	0.67	$	2.47	$	1.83

1The tax effect of pre-tax adjustments to net income was calculated using the applicable marginal tax rate for each respective year.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s principal financial market risks are sensitivities to interest rates and foreign currency exchange rates. The Company’s interest-bearing cash equivalents and senior secured financing obligations are subject to interest rate fluctuations. The Company’s cash equivalents are instruments with maturities of three months or less. A ~~100 basis~~100-basis point change in interest rates would potentially increase or decrease annual net income by approximately ~~$3.1~~$2.6 million and ~~$1.5~~$2.4 million ~~for the quarter ended April 3,~~as of October 2, 2021 and ~~March 28, 2020.~~September 26, 2020, respectively.

The cash flows and results of operations of the Company’s foreign-based operations are subject to fluctuations in foreign exchange rates. We have sales denominated in the South Korean Won, New Taiwan Dollar, Chinese Renminbi, Canadian Dollar, Malaysian Ringgit, Singapore Dollar, Euro, Israeli Shekel and the Japanese Yen. Approximately ~~23.5%~~23.7% and ~~22.8%~~23.3% of the Company’s ~~2021 and 2020~~ sales for the quarters ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, respectively, are denominated in these currencies, respectively. Financial results therefore will be affected by changes in currency exchange rates. If all foreign currencies had experienced a 10% reduction versus the U.S. dollar during the three months ended ~~April 3,~~October 2, 2021 and ~~March 28,~~September 26, 2020, revenue for the quarters would have been negatively impacted by approximately ~~$12.5~~$13.4 million and ~~$9.4~~$11.2 million, respectively.

The Company occasionally uses derivative financial instruments to manage the foreign currency exchange rate risks associated with its foreign-based operations. At ~~April 3,~~October 2, 2021, the Company had no net exposure to any foreign currency forward contracts.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The Company’s management, including the Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, or the Exchange Act) as of ~~April 3,~~October 2, 2021. The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on management’s evaluation (with the participation of the Company’s CEO and CFO), as of ~~April 3,~~October 2, 2021, the Company’s CEO and CFO have concluded that the disclosure controls and procedures used by the Company were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the foregoing evaluation of disclosure controls and procedures that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company acquired GMTI on July 10, 2020. GMTI is not significant to the Company’s financial statements. The Company is continuing to integrate GMTI into the Company’s internal control over financial reporting, and the foregoing evaluation of the effectiveness of the Company’s disclosure controls and procedures does not include an assessment of those disclosure controls and procedures of GMTI that are subsumed by internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

As of ~~April 3,~~October 2, 2021, the Company is subject to various claims, legal actions, and complaints arising in the ordinary course of business. The Company believes the final outcome of these matters will not have a material adverse effect on its condensed consolidated financial statements. The Company expenses legal costs as incurred.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

On December 14, 2020, the Company’s Board of Directors authorized a repurchase program, effective February 16, 2021, covering the repurchase of up to an aggregate of $125 million of the Company’s common stock during a period of twelve months, in open market transactions and in accordance with one or more pre-arranged stock trading plans to be established in accordance with Rule 10b5-1 under the Exchange Act. This repurchase program replaced the previous repurchase program, which was originally approved in February 2020 and which expired pursuant to its terms on February 15, 2021. The previous program had substantially the same terms.

Period

(a)
Total Number of Shares Purchased

(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, 2021 - February 6, 2021 55,600 $102.65 55,600 $83,177,579
February 7, 2021 - March 6, 2021 41,800 $102.57 41,800 $121,792,050
March 7, 2021 - April 3, 2021 47,624 $105.10 47,624 $116,786,872
Total 145,024 $103.43 145,024 $116,786,872


Period	(a) Total Number of Shares Purchased	(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
July 4, 2021 - August 7, 2021	48,000	$118.42	48,000	$96,102,875
August 8, 2021 - September 4, 2021	59,500	$116.88	59,500	$89,148,784
September 5, 2021 - October 2, 2021	57,858	$127.24	57,858	$81,787,007
Total	165,358	$120.95	165,358	$81,787,007

The Company issues common stock awards under its equity incentive plans. In the condensed consolidated financial statements, the Company treats shares of common stock withheld for tax purposes on behalf of its employees in connection with the vesting or exercise of the awards as common stock repurchases because they reduce the number of shares that would have been issued upon vesting or exercise. These withheld shares of common stock are not considered common stock repurchases under the Company’s authorized common stock repurchase ~~plan.~~plan and not included in the table above.

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Item 6. Exhibits

EXHIBIT INDEX

A.The Company hereby incorporates by reference as exhibits to this Quarterly Report on Form 10-Q the following documents:

Reg. S-K Item 601(b) Reference

Document Incorporates

Referenced Document on file with the Commission

(4)

Indenture, date d as of April 30, 2021 , by and among the Company, certain subsidiaries of the Company and Wells Fargo Bank, National Association, as trustee, including the form of note issuable thereunder.

Exhibit 4.1 to Entegris, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2021

B.The Company hereby files as exhibits to this Quarterly Report on Form 10-Q the following documents:


Reg. S-K Item 601(b) Reference	Exhibit No.	Document Filed Herewith
(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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						ENTEGRIS, INC.

Date: ~~April 27,~~October 26, 2021						/s/ Gregory B. Graves
						Gregory B. Graves
						Executive Vice President and Chief Financial
						Officer (on behalf of the registrant and as
						principal financial officer)

3437


	Three months ended April 3, 2021
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	49,064	$	34,592	$	45,465	$	(9,337)	$	119,784
Taiwan	28,679		44,830		27,806		0		101,315
China	20,662		41,689		20,577		0		82,928
South Korea	25,170		28,011		18,905		0		72,086
Japan	22,480		36,723		12,005		0		71,208
Europe	11,777		11,117		16,494		0		39,388
Southeast Asia	8,709		10,137		7,289		0		26,135
	$	166,541	$	207,099	$	148,541	$	(9,337)	$	512,844