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 ~~March 28, 2020~~April 3, 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 ~~17, 2020,~~23, 2021, there were ~~134,606,530~~135,500,992 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 ~~MARCH 28, 2020~~APRIL 3, 2021


Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019~~2020			4
Condensed Consolidated Statements of Operations for the Three Months Ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~			5
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~			6
Condensed Consolidated Statements of Equity for the Three Months Ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~			7
Condensed Consolidated Statements of Cash Flows for the Three Months ~~ended~~Ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~			8
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2019
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3231
Item 4. Controls and Procedures			3231

PART II Other Information

Item 1. Legal Proceedings			33
~~Item 1A. Risk~~ ~~Factors~~			3332
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3832
Item 6. Exhibits			3933
Signatures			4034

Cautionary Statements

This Quarterly Report on Form 10-Q contains “forward-looking ~~statements” within the meaning of the Private Securities Litigation Reform Act of 1995.~~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; future period guidance or projections; the Company’s performance relative to its ~~markets;~~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;~~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; 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 effect of the Tax Cuts and Jobs Act;~~ 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, ~~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;~~ risks related to the COVID-19 pandemic on the global economy and financial markets, as well as on the Company, our customers and suppliers, which may impact our sales, gross margin, customer demand and our ability to supply our products to our customers; 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, ~~effect~~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 Company’s dependence on sole source and limited source suppliers; the increasing complexity of certain manufacturing

~~Table of Contents~~

processes; raw material shortages, supply constraints and price increases; changes in government regulations of the countries in which the Company ~~operates;~~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, ~~2019,~~2020, filed on February ~~7, 2020,~~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.

Table of Contents

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)	March 28, 2020		December 31, 2019		(In thousands, except share and per share data)	April 3, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	335,077	$	351,911	Cash and cash equivalents	$	548,520	$	580,893
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,304 and $1,145		277,796		234,409
Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,718 and $2,384						Trade accounts and notes receivable, net of allowance for doubtful accounts of $2,718 and $2,384	282,649		264,392
Inventories, net	Inventories, net	300,694		287,098		Inventories, net	358,819		323,944
Deferred tax charges and refundable income taxes	Deferred tax charges and refundable income taxes	25,650		24,552		Deferred tax charges and refundable income taxes	20,227		21,136
Other current assets	Other current assets	27,089		34,427		Other current assets	34,391		43,892
Total current assets	Total current assets	966,306		932,397		Total current assets	1,244,606		1,234,257
Property, plant and equipment, net of accumulated depreciation of $540,013 and $522,424		474,841		479,544
Property, plant and equipment, net of accumulated depreciation of $592,146 and $574,257						Property, plant and equipment, net of accumulated depreciation of $592,146 and $574,257	542,605		525,367
Other assets:	Other assets:					Other assets:
Right-of-use assets	Right-of-use assets	50,058		50,160		Right-of-use assets	48,057		45,924
Goodwill	Goodwill	726,234��		695,044		Goodwill	747,518		748,037
Intangible assets, net of accumulated amortization of $424,462 and $409,328		355,815		333,952
Intangible assets, net of accumulated amortization of $457,862 and $445,795						Intangible assets, net of accumulated amortization of $457,862 and $445,795	325,454		337,632
Deferred tax assets and other noncurrent tax assets	Deferred tax assets and other noncurrent tax assets	11,563		11,245		Deferred tax assets and other noncurrent tax assets	14,684		14,519
Other	Other	13,748		13,744		Other	10,615		11,960
Total assets	Total assets	$	2,598,565	$	2,516,086	Total assets	$	2,933,539	$	2,917,696
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Long-term debt, current maturities		$	4,000	$	4,000

Accounts payable	Accounts payable	81,561		84,207		Accounts payable	$	93,045	$	81,618
Accrued payroll and related benefits	Accrued payroll and related benefits	29,590		62,340		Accrued payroll and related benefits	49,554		94,364

Other accrued liabilities	Other accrued liabilities	60,857		87,778		Other accrued liabilities	81,981		82,648
Income taxes payable	Income taxes payable	25,982		26,108		Income taxes payable	41,691		43,996
Total current liabilities	Total current liabilities	201,990		264,433		Total current liabilities	266,271		302,626
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $9,112 and $9,516		1,074,888		932,484
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $8,814 and $9,217						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
Pension benefit obligations and other liabilities	Pension benefit obligations and other liabilities	35,295		37,867		Pension benefit obligations and other liabilities	36,663		36,457
Deferred tax liabilities and other noncurrent tax liabilities	Deferred tax liabilities and other noncurrent tax liabilities	71,516		71,586		Deferred tax liabilities and other noncurrent tax liabilities	73,133		73,606
Long-term lease liability	Long-term lease liability	43,549		43,827		Long-term lease liability	42,953		39,730
Commitments and contingent liabilities	Commitments and contingent liabilities	—		—		Commitments and contingent liabilities	0		0
Equity:	Equity:					Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of March 28, 2020 and December 31, 2019		—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of March 28, 2020: 134,808,929 and 134,606,529, respectively; issued and outstanding shares as of December 31, 2019: 134,929,768 and 134,727,368, respectively		1,348		1,349
Treasury stock, at cost: 202,400 shares held as of March 28, 2020 and December 31, 2019		(7,112)		(7,112)
Preferred stock, par value $.01; 5,000,000 shares authorized; NaN issued and outstanding as of April 3, 2021 and December 31, 2020						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						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						Treasury stock, at cost: 202,400 shares held as of April 3, 2021 and December 31, 2020	(7,112)		(7,112)
Additional paid-in capital	Additional paid-in capital	833,159		842,784		Additional paid-in capital	837,622		844,850
Retained earnings	Retained earnings	390,542		366,127		Retained earnings	637,574		577,833
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(46,610)		(37,259)		Accumulated other comprehensive loss	(41,105)		(37,428)
Total equity	Total equity	1,171,327		1,165,889		Total equity	1,428,333		1,379,494
Total liabilities and equity	Total liabilities and equity	$	2,598,565	$	2,516,086	Total liabilities and equity	$	2,933,539	$	2,917,696

See the accompanying notes to condensed consolidated financial statements.

Table of Contents

ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three months ended							Three months ended
(In thousands, except per share data)	(In thousands, except per share data)	March 28, 2020		March 30, 2019		(In thousands, except per share data)	April 3, 2021		March 28, 2020
Net sales	Net sales	$	412,327	$	391,047	Net sales	$	512,844	$	412,327
Cost of sales	Cost of sales	226,849		213,654		Cost of sales	277,858		226,849
Gross profit	Gross profit	185,478		177,393		Gross profit	234,986		185,478
Selling, general and administrative expenses	Selling, general and administrative expenses	58,891		82,254		Selling, general and administrative expenses	71,389		58,891
Engineering, research and development expenses	Engineering, research and development expenses	29,632		28,991		Engineering, research and development expenses	37,748		29,632
Amortization of intangible assets	Amortization of intangible assets	16,211		18,657		Amortization of intangible assets	11,871		16,211
Operating income	Operating income	80,744		47,491		Operating income	113,978		80,744
Interest expense	Interest expense	10,559		10,884		Interest expense	11,652		10,559
Interest income	Interest income	(321)		(1,225)		Interest income	(71)		(321)
Other expense (income), net		878		(248)
Other expense, net						Other expense, net	4,330		878
Income before income tax expense	Income before income tax expense	69,628		38,080		Income before income tax expense	98,067		69,628
Income tax expense	Income tax expense	8,622		5,422		Income tax expense	13,391		8,622
Net income	Net income	$	61,006	$	32,658	Net income	$	84,676	$	61,006

Basic net income per common share		$	0.45	$	0.24
Diluted net income per common share		$	0.45	$	0.24
Basic earnings per common share						Basic earnings per common share	$	0.63	$	0.45
Diluted earnings per common share						Diluted earnings per common share	$	0.62	$	0.45

Weighted shares outstanding:	Weighted shares outstanding:					Weighted shares outstanding:
Basic	Basic	134,745		135,299		Basic	135,068		134,745
Diluted	Diluted	136,369		136,692		Diluted	136,502		136,369

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							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Net income	Net income	$	61,006	$	32,658	Net income	$	84,676	$	61,006
Other comprehensive loss, net of tax
Other comprehensive income (loss), net of tax						Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	Foreign currency translation adjustments	(9,361)		(2,787)		Foreign currency translation adjustments	(3,716)		(9,361)
Pension liability adjustments	Pension liability adjustments	10		24		Pension liability adjustments	39		10
Other comprehensive loss	Other comprehensive loss	(9,351)		(2,763)		Other comprehensive loss	(3,677)		(9,351)
Comprehensive income	Comprehensive income	$	51,655	$	29,895	Comprehensive income	$	80,999	$	51,655

See the accompanying notes to condensed consolidated financial statements.

Table of Contents

ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(In thousands)	(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings (deficit)		Foreign currency translation adjustments		Defined benefit pension adjustments		Total		(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings		Foreign currency translation adjustments		Defined benefit pension adjustments		Total
Balance at December 31, 2018		136,179	$	1,362	(202)	$	(7,112)	$	837,658	$	213,753	$	(32,776)	$	(860)	$	1,012,025
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	572	5		—	—		(6,817)		—		—		—		(6,812)		Shares issued under stock plans	483	5		—	0		(10,894)		0		0		0		(10,889)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		4,653		—		—		—		4,653		Share-based compensation expense	—	0		—	0		4,994		0		0		0		4,994
Repurchase and retirement of common stock	Repurchase and retirement of common stock	(1,035)	(10)		—	—		(6,364)		(23,413)		—		—		(29,787)		Repurchase and retirement of common stock	(604)	(6)		—	0		(3,740)		(25,818)		0		0		(29,564)
Dividends declared ($0.07 per share)		—	—		—	—		7		(9,517)		—		—		(9,510)
Dividends declared ($0.08 per share)																		Dividends declared ($0.08 per share)	—	0		—	0		15		(10,773)		0		0		(10,758)
Pension liability adjustment	Pension liability adjustment	—	—		—	—		—		—		—		24		24		Pension liability adjustment	—	0		—	0		0		0		0		10		10
Foreign currency translation	Foreign currency translation	—	—		—	—		—		—		(2,787)		—		(2,787)		Foreign currency translation	—	0		—	0		0		0		(9,361)		0		(9,361)
Net income	Net income	—	—		—	—		—		32,658		—		—		32,658		Net income	—	0		—	0		0		61,006		0		0		61,006
Balance at March 30, 2019		135,716	$	1,357	(202)	$	(7,112)	$	829,137	$	213,481	$	(35,563)	$	(836)	$	1,000,464
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

(In thousands) Common
shares
outstanding Common
stock Treasury shares Treasury stock Additional
paid-in
capital Retained earnings
(deficit) Foreign currency translation adjustments Defined benefit pension adjustments Total
Balance at December 31, 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 — — (10,894) — — — (10,889)
Share-based compensation expense — — — — 4,994 — — — 4,994
Repurchase and retirement of common stock (604) (6) — — (3,740) (25,818) — — (29,564)
Dividends declared ($0.08 per share) — — — — 15 (10,773) — — (10,758)
Pension liability adjustment — — — — — — — 10 10
Foreign currency translation — — — — — — (9,361) — (9,361)
Net income — — — — — 61,006 — — 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)	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		—	0		(13,470)		0		0		0		(13,466)
Share-based compensation expense	—	0		—	0		7,138		0		0		0		7,138
Repurchase and retirement of common stock	(145)	(1)		—	0		(904)		(14,095)		0		0		(15,000)
Dividends declared ($0.08 per share)	—	0		—	0		8		(10,840)		0		0		(10,832)
Pension liability adjustment	—	0		—	0		0		0		0		39		39
Foreign currency translation	—	0		—	0		0		0		(3,716)		0		(3,716)
Net income	—	0		—	0		0		84,676		0		0		84,676
Balance at April 3, 2021	135,396	$	1,354	(202)	$	(7,112)	$	837,622	$	637,574	$	(40,304)	$	(801)	$	1,428,333

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							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	61,006	$	32,658	Net income	$	84,676	$	61,006
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	Depreciation	20,648		16,721		Depreciation	22,095		20,648
Amortization	Amortization	16,211		18,657		Amortization	11,871		16,211
Share-based compensation expense	Share-based compensation expense	4,994		4,653		Share-based compensation expense	7,138		4,994
Provision for deferred income taxes	Provision for deferred income taxes	(64)		6		Provision for deferred income taxes	1,581		(64)
Charge for excess and obsolete inventory						Charge for excess and obsolete inventory	3,249		3,605
Other	Other	5,627		5,688		Other	3,336		2,022
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade accounts and notes receivable	Trade accounts and notes receivable	(43,995)		(9,109)		Trade accounts and notes receivable	(21,564)		(43,995)
Inventories	Inventories	(18,205)		(2,131)		Inventories	(39,337)		(18,205)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(38,020)		(45,019)		Accounts payable and accrued liabilities	(28,591)		(38,020)
Other current assets	Other current assets	5,825		17,778		Other current assets	9,400		5,825
Income taxes payable and refundable income taxes	Income taxes payable and refundable income taxes	(225)		(42,873)		Income taxes payable and refundable income taxes	(3,588)		(225)
Other	Other	(2,399)		433		Other	2,849		(2,399)
Net cash provided by (used in) operating activities		11,403		(2,538)
Net cash provided by operating activities						Net cash provided by operating activities	53,115		11,403
Investing activities:	Investing activities:					Investing activities:
Acquisition of property, plant and equipment	Acquisition of property, plant and equipment	(22,585)		(34,465)		Acquisition of property, plant and equipment	(43,330)		(22,585)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(75,630)		(49,789)		Acquisition of businesses, net of cash acquired	0		(75,630)
Other	Other	5		197		Other	72		5
Net cash used in investing activities	Net cash used in investing activities	(98,210)		(84,057)		Net cash used in investing activities	(43,258)		(98,210)
Financing activities:	Financing activities:					Financing activities:
Proceeds from short-term borrowings and long-term debt		217,000		—
Payments of long-term debt		(75,000)		(1,000)
Proceeds from short-term borrowings						Proceeds from short-term borrowings	0		217,000
Payments of short-term borrowings						Payments of short-term borrowings	0		(75,000)

Payments for dividends	Payments for dividends	(10,847)		(9,470)		Payments for dividends	(10,908)		(10,847)
Issuance of common stock	Issuance of common stock	551		917		Issuance of common stock	1,572		551
Repurchase of common stock		(29,564)		(35,321)
Repurchase and retirement of common stock						Repurchase and retirement of common stock	(15,000)		(29,564)
Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	(11,440)		(7,727)		Taxes paid related to net share settlement of equity awards	(15,038)		(11,440)
Deferred acquisition payments	Deferred acquisition payments	(16,125)		—		Deferred acquisition payments	0		(16,125)
Other	Other	(2,890)		(250)		Other	(1)		(2,890)
Net cash provided by (used in) financing activities		71,685		(52,851)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(39,375)		71,685
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(1,712)		(256)		Effect of exchange rate changes on cash and cash equivalents	(2,855)		(1,712)
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	(16,834)		(139,702)		Decrease in cash and cash equivalents	(32,373)		(16,834)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	351,911		482,062		Cash and cash equivalents at beginning of period	580,893		351,911
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	335,077	$	342,360	Cash and cash equivalents at end of period	$	548,520	$	335,077

See the accompanying notes to condensed consolidated financial statements.

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)


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

Equipment purchases in accounts payable	8,249		6,689
Changes in dividends payable	76		89
Schedule of interest and income taxes paid:
Interest paid	13,515		15,296
Income taxes paid, net of refunds received	14,959		7,997

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 ~~global developer, manufacturer and~~ supplier of ~~microcontamination control products, specialty chemicals and~~ advanced materials ~~handling~~and process solutions for ~~manufacturing processes in~~ 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 ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019,~~2020, and the results of operations and comprehensive income for the three months ended April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ the equity statements as of and for the three months ended April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ and cash flows for the three months ended April 3, 2021 and March 28, ~~2020 and March 30, 2019.~~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, ~~2019.~~2020. The results of operations for the three months ended ~~March 28, 2020~~April 3, 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. The fair value of long-term debt, including current maturities, was ~~$1,014.8~~$1,115.2 million at ~~March 28, 2020,~~April 3, 2021, compared to the carrying amount of long-term debt, including current maturities, of ~~$1,078.9~~$1,086.2 million at ~~March 28, 2020.~~April 3, 2021.

~~Recent~~Recently Adopted Accounting Pronouncements ~~Adopted in 2020~~ In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a new forward-looking “expected loss” model that replaces the current “incurred loss” model and generally will result in the earlier recognition of allowances for losses.

~~The Company adopted ASU No. 2016-13 on January 1, 2020, and there was no material effect on its condensed consolidated financial statements.~~

~~Recent 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, ~~2021,~~2020, including interim periods within that fiscal year. ~~Early adoption is permitted.~~ The Company isadopted this new guidance in the ~~process~~first quarter of ~~evaluating~~fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on the ~~impacts of this guidance on its~~condensed consolidated financial ~~statements and related disclosures.~~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 ~~goods sold.~~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 services The 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 910 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. ~~If applicable, the~~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 inrevenue 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 ~~deems~~has deemed that the amount is immaterial for disclosure.

The Company provides for the estimated costs of fulfilling ~~our~~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 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 ~~adjust~~adjusts the amounts as necessary.

The Company’s contracts are generally short-term in nature. Most ~~contracts~~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.

~~Table of Contents~~


(In thousands)	(In thousands)	March 28, 2020		December 31, 2019		(In thousands)	April 3, 2021		December 31, 2020
Contract liabilities - current	Contract liabilities - current	$	10,610	$	13,022	Contract liabilities - current	$	19,077	$	13,852

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


	Three months ended
(In thousands)	~~March 28, 2020~~April 3, 2021
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	~~(7,596)~~(9,713)
Increases due to cash received, excluding amounts recognized as revenue during the period	~~5,184~~14,938

3. ACQUISITIONS

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. GMTI reports into the Advanced Materials Handling segment of the Company. 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 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 ~~Material~~Materials segment of the Company. The acquisition was accounted for under the acquisition method of accounting and ~~the~~Sinmat’s results of ~~Sinmat~~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 ~~three months~~year ended March 28, 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, ~~(subject to revision for certain adjustments),~~ 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 ~~$31.8~~$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 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 ~~allocation of the purchase price to the fair values assigned to the assets acquired~~ and ~~liabilities assumed at the date of the acquisition date:~~


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

~~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

~~The~~ final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible, but not later than one year from the acquisition date. The allocation of the purchase price to the assets acquired and the liabilities assumed is

~~complete with the exception of the value allocated to income tax and intangible accounts. To the extent that the Company’s estimates require adjustment, the Company will modify the values.~~

~~Hangzhou Anow Microfiltration Co., Ltd.~~

On September 17, 2019, the Company acquired Hangzhou Anow Microfiltration Co., Ltd. (Anow), a filtration company for diverse industries including semiconductor, pharmaceutical, and medical. Anow reports into the Microcontamination Control segment of the Company. The acquisition was accounted for under the acquisition method of accounting and the results of Anow are included in the Company’s condensed consolidated financial statements as of and since September 17, 2019. The acquisition does not constitute a material business combination.

The purchase price for Anow is $72.8 million, net of cash acquired. The purchase price includes (1) cash consideration of $73.0 million, or $69.3 million net of cash acquired (subject to revision for certain adjustments), which was funded from the Company’s existing cash on hand, and (2) $3.5 million deferred payment due to the seller no earlier than September 18, 2021, at which time either the seller of the Company can exercise its option to receive or pay the deferred payment, respectively.

The purchase price of Anow exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $49.6 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 for income tax purposes.

~~The following table summarizes the provisional allocation~~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 ~~March 28, 2020:~~June 27, 2020, respectively:

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

~~The change in the allocation of purchase price is due to the acquisition occurring near the quarter end date of September 29, 2019 which required an estimated allocation of values.~~


(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 ~~Anow:~~Sinmat:


(In thousands)	(In thousands)	Amount		Weighted average life in years	(In thousands)	Amount		Weighted average life in years
Developed technology	Developed technology	$	6,764	6.8	Developed technology	$	7,650	7.0
Trademarks and trade names	Trademarks and trade names	2,019		7.3	Trademarks and trade names	130		1.3
Customer relationships	Customer relationships	7,656		14.3	Customer relationships	33,900		15.0
		$	16,439	10.3		$	41,680	13.5

The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible, but not later than one year from the acquisition date. The allocation of the purchase price to the assets acquired and the liabilities assumed is complete with the exception of the value allocated to income tax accounts. To the extent that the Company’s estimates require adjustment, the Company will modify the values.

~~MPD Chemicals~~

On July 15, 2019, the Company acquired MPD Chemicals (MPD), a provider of advanced materials to the specialty chemical, technology, and life sciences industries. MPD reports into the Specialty Chemicals and Engineered Material segment of the Company. The acquisition was accounted for under the acquisition method of accounting and the results of MPD are included in the Company’s condensed consolidated financial statements as of and since July 15, 2019. The acquisition does not constitute a material business combination.

The purchase price for MPD is $162.4 million, net of cash acquired. The purchase price includes (1) cash consideration of $157.9 million (subject to revision for customary working capital adjustments), which was funded from the Company’s existing cash on hand, and (2) a fixed deferred payment of $5.0 million that is due on January 15, 2022, recorded at $4.5 million, which represents the fair value of this fixed deferred payment as of the acquisition date.

The fair value of the fixed deferred payment was determined by taking the present value of this fixed deferred payment based on the term and a discount factor. The fixed deferred payment is reflected in pension benefit obligations and other liabilities in the Company’s condensed consolidated balance sheets.

The purchase price of MPD exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $63.0 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 deductible for income tax purposes.

The following table summarizes the provisional allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed at the date of the acquisition date and adjusted as of March 28, 2020:

(In thousands): As of July 15, 2019 As of March 28, 2020
Trade accounts and note receivable, net $ 3,575 $ 3,575
Inventories, net 21,899 8,689
Other current assets 318 313
Property, plant and equipment 14,571 11,465
Identifiable intangible assets 74,900 79,390
Right-of-use assets 3,677 3,621
Accounts payable and accrued liabilities (2,440) (2,153)
Short-term lease liabilities (144) (88)
Long-term lease liabilities (4,016) (4,016)
Other noncurrent liabilities (1,416) (1,416)
Net assets acquired 110,924 99,380
Goodwill 51,457 63,042
Total purchase price, net of cash acquired $ 162,381 $ 162,422

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

(In thousands) Amount Weighted
average life in
years
Developed technology $ 12,750 11.0
Trademarks and trade names 620 2.0
Customer relationships 66,020 17.0
$ 79,390 16.0

The allocation of the purchase price to the assets acquired and liabilities assumed is complete with the exception of the value allocated to income tax accounts. To the extent that the Company’s estimates require adjustments, the Company will modify the value.

~~Digital Specialty Chemicals~~

On March 8, 2019, the Company acquired Digital Specialty Chemicals Limited (DSC), a Toronto, Canada-based provider of advanced materials to the specialty chemical, technology, and pharmaceutical industries. DSC reports into the Specialty Chemicals and Engineered Materials segment of the Company. The acquisition was accounted for under the acquisition method of accounting and the results of operations of DSC are included in the Company’s condensed consolidated financial statements as of and since March 8, 2019. Costs associated with the acquisitions of DSC were $2.1 million for the three months ended march 30, 2019 and were expensed as incurred. These costs were included in selling, general and administrative expense in the

~~Company’s condensed consolidated statements of operations. The acquisition does not constitute a material business combination.~~

The purchase price for DSC is $64.1 million, net of cash acquired. The purchase price includes (1) cash consideration of $49.9 million, or $49.4 million net of cash acquired, which was funded from the Company’s existing cash on hand, (2) a fixed deferred payment of $16.1 million that is due on March 31, 2022, recorded at $14.0 million representing the fair value of this fixed deferred payment as of the acquisition date, and (3) an earnout-based contingent consideration of $0.7 million based on the operating performance of DSC for a twelve-month period ended March 31, 2021.

Upon closing the acquisition, the Company recorded a contingent consideration obligation of $0.7 million, which represents the fair value of the earnout-based contingent consideration. This amount was estimated based on a Black Scholes model. Subsequent changes in the fair value of this obligation will be recognized as adjustments to the contingent consideration obligation and reflected within the Company’s condensed consolidated statements of operations.

On December 3, 2019 the Company entered into a settlement agreement to accelerate the fixed deferred payment of $16.1 million to no later than March 8, 2020. This payment was made in the first quarter of 2020. The Company adjusted the fair value of the fixed deferred payment from its fair value to the full value resulting in an additional $1.6 million charge to interest expense in the fourth quarter of 2019 and the liability was adjusted from other long-term liabilities to other accrued liabilities in the condensed consolidated balance sheet as of December 31, 2019. In addition to the acceleration of the fixed deferred payment, it was determined that the earnout-based contingent consideration of $0.7 million will never become owed to the sellers under the original purchase agreement. The Company removed the liability and credited selling, general and administrative expensed in the fourth quarter of 2019.

The purchase price of DSC exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $36.5 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 for income tax purposes.

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 and as adjusted as of December 31, 2019:

(In thousands): As of March 8, 2019 As of December 31, 2019
Trade accounts and note receivable, net $ 1,840 $ 1,840
Inventories, net 5,523 4,307
Other current assets 1,389 1,437
Property, plant and equipment 16,791 16,654
Identifiable intangible assets 7,976 6,870
Right-of-use assets 79 79
Deferred tax asset 1,104 1,066
Other noncurrent assets — 28
Accounts payable and accrued liabilities (2,461) (2,861)
Deferred tax liabilities (2,861) (1,802)
Long-term lease liability (37) (37)
Net assets acquired 29,343 27,581
Goodwill 35,133 36,540
Total purchase price, net of cash acquired $ 64,476 $ 64,121

During the year ended December 31, 2019, the Company finalized its fair value determination of the assets acquired and liabilities assumed. The valuation of the assets acquired and liabilities assumed was based on the information that was available as of the acquisition date, and the expectations and assumptions that have been deemed reasonable by the Company’s management.

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4. INVENTORIES

Inventories consist of the following:


(In thousands)	(In thousands)	March 28, 2020		December 31, 2019		(In thousands)	April 3, 2021		December 31, 2020
Raw materials	Raw materials	$	102,208	$	92,849	Raw materials	$	124,799	$	97,319
Work-in process	Work-in process	38,476		30,856		Work-in process	36,980		32,316
Finished goods	Finished goods	160,010		163,393		Finished goods	197,040		194,309
Total inventories, net	Total inventories, net	$	300,694	$	287,098	Total inventories, net	$	358,819	$	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, 2019 $ 397,952 $ 240,021 $ 57,071 $ 695,044
Addition due to acquisitions 31,751 — — 31,751
Purchase accounting adjustments 1,172 1,897 — 3,069
Foreign currency translation (2,526) (1,104) — (3,630)
March 28, 2020 $ 428,349 $ 240,814 $ 57,071 $ 726,234


(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 ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019~~2020 consist of the following:


March 28, 2020
April 3, 2021								April 3, 2021
(In thousands)	(In thousands)	Gross carrying Amount		Accumulated amortization		Net carrying value		(In thousands)	Gross carrying Amount		Accumulated amortization		Net carrying value
Developed technology	Developed technology	$	279,158	$	212,026	$	67,132	Developed technology	$	283,228	$	224,340	$	58,888
Trademarks and trade names	Trademarks and trade names	28,942		16,753		12,189		Trademarks and trade names	30,087		18,887		11,200
Customer relationships	Customer relationships	435,880		168,548		267,332		Customer relationships	449,606		201,743		247,863
Other	Other	36,297		27,135		9,162		Other	20,395		12,892		7,503
		$	780,277	$	424,462	$	355,815		$	783,316	$	457,862	$	325,454


December 31, 2019
December 31, 2020								December 31, 2020
(In thousands)	(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value		(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value
Developed technology	Developed technology	$	272,334	$	204,689	$	67,645	Developed technology	$	283,272	$	221,651	$	61,621
Trademarks and trade names	Trademarks and trade names	29,106		16,326		12,780		Trademarks and trade names	30,100		18,374		11,726
Customer relationships	Customer relationships	405,537		161,551		243,986		Customer relationships	449,659		193,313		256,346
Other	Other	36,303		26,762		9,541		Other	20,396		12,457		7,939
		$	743,280	$	409,328	$	333,952		$	783,427	$	445,795	$	337,632

Future amortization expense during the remainder of ~~2020,~~2021, each of the ~~next~~succeeding four years and thereafter relating to intangible assets currently recorded in the Company’s condensed consolidated balance sheets is estimated ~~at March 28, 2020~~ to be the ~~following:~~following at April 3, 2021:


(In thousands)	(In thousands)	Remaining 2020		2021	2022	2023	2024	Thereafter	Total		(In thousands)	Remaining 2021		2022	2023	2024	2025	Thereafter	Total
Future amortization expense	Future amortization expense	$	36,983	47,004	46,234	45,545	31,735	148,314	$	355,815	Future amortization expense	$	36,332	47,602	46,913	34,294	27,663	132,650	$	325,454

6. 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 ~~denominators~~share amounts used in the computation of basic and diluted earnings per common ~~share (EPS):~~share:


		Three months ended				Three months ended
(In thousands)	(In thousands)	March 28, 2020	March 30, 2019	(In thousands)	April 3, 2021	March 28, 2020
Basic—weighted common shares outstanding	Basic—weighted common shares outstanding	134,745	135,299	Basic—weighted common shares outstanding	135,068	134,745
Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock	Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock	1,624	1,393	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	Diluted—weighted common shares and common shares equivalent outstanding	136,369	136,692	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 months ended April 3, 2021 and March 28, ~~2020 and March 30, 2019:~~2020:

Three months ended

(In thousands)

March 28, 2020

March 30, 2019

(In thousands)

April 3, 2021

March 28, 2020

Shares excluded from calculations of diluted EPS

252

460

Shares excluded from calculations of diluted EPS

140

252

7. ~~OTHER EXPENSE (INCOME), NET~~

~~Other expense (income), net for the three months ended March 28, 2020 and March 30, 2019 consists of the following:~~

Three months ended
(In thousands) March 28, 2020 March 30, 2019
Loss (gain) on foreign currency remeasurement 640 (720)
Other, net 238 472
Other expense (income), net $ 878 $ (248)

8. LEASES

As of ~~March 28, 2020,~~April 3, 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 ~~March 28, 2020, we do~~April 3, 2021, the Company does not have material finance leases. Our leases have remaining lease terms of 1 year to 1413 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 ~~March 28,~~April 3, 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 ~~and other~~as follows, together with certain supplemental balance sheet ~~information was as follows:~~information:


(In thousands, except lease term and discount rate)	(In thousands, except lease term and discount rate)	Classification	March 28, 2020			December 31, 2019			(In thousands, except lease term and discount rate)	Classification	April 3, 2021			December 31, 2020
Assets	Assets								Assets
Right-of-use assets	Right-of-use assets	Right-of-use assets	$	50,058		$	50,160		Right-of-use assets	Right-of-use assets	$	48,057		$	45,924
Liabilities	Liabilities								Liabilities
Short-term lease liability	Short-term lease liability	Other accrued liabilities	10,172			10,025			Short-term lease liability	Other accrued liabilities	8,903			9,960
Long-term lease liability	Long-term lease liability	Long-term lease liability	43,549			43,827			Long-term lease liability	Long-term lease liability	42,953			39,730
Total lease liabilities	Total lease liabilities		$	53,721		$	53,852		Total lease liabilities		$	51,856		$	49,690
Lease Term and Discount Rate	Lease Term and Discount Rate								Lease Term and Discount Rate
Weighted average remaining lease term (years)	Weighted average remaining lease term (years)		8.3			8.4			Weighted average remaining lease term (years)		8.7			7.9
Weighted average discount rate	Weighted average discount rate		4.9		%	4.9		%	Weighted average discount rate		4.8		%	5.0		%

Expense for leases less than 12 months for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~ were not material. The components of lease expense for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~ are as follows:


		Three months ended							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020

Operating lease cost	Operating lease cost	$	3,541	$	3,020	Operating lease cost	$	3,399	$	3,541

1715

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


(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from leases	Operating cash flows from leases	$	2,717	$	2,595	Operating cash flows from leases	$	2,782	$	2,717
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	912	$	181	Operating leases	$	5,082	$	912

Future minimum lease payments for noncancellable operating leases as of ~~March 28, 2020,~~April 3, 2021, were as follows:


(In thousands)	(In thousands)	Operating Leases		(In thousands)	Operating Leases
Remaining 2020		$	12,593
2021		10,077
Remaining 2021				Remaining 2021	$	11,235
2022	2022	6,834		2022	8,037
2023	2023	6,092		2023	6,490
2024	2024	5,113		2024	5,654
2025				2025	5,181
Thereafter	Thereafter	27,281		Thereafter	28,026
Total	Total	$	67,990	Total	64,623
Less: Interest	Less: Interest	14,269		Less: Interest	12,767
Present value of lease liabilities	Present value of lease liabilities	$	53,721	Present value of lease liabilities	$	51,856

9.8. SEGMENT REPORTING

The Company’s financial segment reporting reflects an organizational alignment intended to leverage the Company’s unique portfolio of capabilities to create value for its customers by developing mission-critical solutions to maximize manufacturing yields and enable higher performance of devices. 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):~~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):~~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):~~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 and other high-technology industries.

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


		Three months ended							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Net sales	Net sales					Net sales
SCEM	SCEM	$	144,214	$	124,470	SCEM	$	166,541	$	144,214
MC	MC	159,261		157,706		MC	207,099		159,261
AMH	AMH	116,137		116,064		AMH	148,541		116,137
Inter-segment elimination	Inter-segment elimination	(7,285)		(7,193)		Inter-segment elimination	(9,337)		(7,285)
Total net sales	Total net sales	$	412,327	$	391,047	Total net sales	$	512,844	$	412,327

1816


		Three months ended							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Segment profit	Segment profit					Segment profit
SCEM	SCEM	$	32,670	$	24,431	SCEM	$	34,556	$	32,670
MC	MC	50,167		47,323		MC	70,566		50,167
AMH	AMH	20,632		22,367		AMH	32,095		20,632
Total segment profit	Total segment profit	$	103,469	$	94,121	Total segment profit	$	137,217	$	103,469

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


		Three months ended							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Total segment profit	Total segment profit	$	103,469	$	94,121	Total segment profit	$	137,217	$	103,469
Less:	Less:					Less:
Amortization of intangible assets	Amortization of intangible assets	16,211		18,657		Amortization of intangible assets	11,871		16,211
Unallocated general and administrative expenses	Unallocated general and administrative expenses	6,514		27,973		Unallocated general and administrative expenses	11,368		6,514
Operating income	Operating income	80,744		47,491		Operating income	113,978		80,744
Interest expense	Interest expense	10,559		10,884		Interest expense	11,652		10,559
Interest income	Interest income	(321)		(1,225)		Interest income	(71)		(321)
Other expense (income), net		878		(248)
Other expense, net						Other expense, net	4,330		878
Income before income tax expense	Income before income tax expense	$	69,628	$	38,080	Income before income tax expense	$	98,067	$	69,628

In the following tables, revenue is disaggregated by customers’ country or region for the three months ended April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ respectively.


		Three months ended March 28, 2020																			Three months ended April 3, 2021
(In thousands)	(In thousands)	SCEM		MC		AMH		Inter-segment		Total		(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America												North America	$	49,064	$	34,592	$	45,465	$	(9,337)	$	119,784
Taiwan	Taiwan	$	25,182	$	42,483	$	24,801	$	—	$	92,466	Taiwan	28,679		44,830		27,806		0		101,315
United States		46,550		28,680		33,403		(7,285)		101,348
China												China	20,662		41,689		20,577		0		82,928
South Korea	South Korea	20,129		20,122		15,161		—		55,412		South Korea	25,170		28,011		18,905		0		72,086
Japan	Japan	17,123		28,111		10,420		—		55,654		Japan	22,480		36,723		12,005		0		71,208
China		15,510		18,197		11,639		—		45,346
Europe	Europe	8,608		13,488		12,548		—		34,644		Europe	11,777		11,117		16,494		0		39,388
Southeast Asia	Southeast Asia	11,112		8,180		8,165		—		27,457		Southeast Asia	8,709		10,137		7,289		0		26,135
		$	144,214	$	159,261	$	116,137	$	(7,285)	$	412,327		$	166,541	$	207,099	$	148,541	$	(9,337)	$	512,844

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


	Three months ended March 28, 2020
(In thousands)	SCEM		MC		AMH		Inter-segment		Total
North America	$	46,550	$	28,680	$	33,403	$	(7,285)	$	101,348
Taiwan	25,182		42,483		24,801		0		92,466
China	15,510		18,197		11,639		0		45,346
South Korea	20,129		20,122		15,161		0		55,412
Japan	17,123		28,111		10,420		0		55,654
Europe	8,608		13,488		12,548		0		34,644
Southeast Asia	11,112		8,180		8,165		0		27,457
	$	144,214	$	159,261	$	116,137	$	(7,285)	$	412,327

1917

9. SUBSEQUENT EVENT

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.

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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 ~~to the condensed consolidated financial statements~~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, ~~2019~~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. 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 ~~and~~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~~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 ~~global developer, manufacturer~~supplier of advanced materials and ~~supplier~~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 for manufacturing processes in the semiconductor and other high-technology industries. We leverage our unique breadth of capabilities to create value for our customers by developing mission-critical solutions tothat maximize manufacturing yields, reduce manufacturing costs and enable higher device ~~performance.~~performance for our customers.

Our ~~technology portfolio includes advanced~~customized materials and high-purity chemistries, with optimized packaging and delivery systems and in-process filtration and purification solutions that ensure high-value liquid chemistries and gases are free from contaminants before use. Our standard and customized products and solutions enable the highest levels of ~~purity and~~ performance ~~that are~~ essential to the manufacture of ~~semiconductors, flat panel displays, light emitting diodes, or LEDs, high-purity chemicals, solar cells,~~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 ~~lasers, optical~~filtration and ~~magnetic storage devices, and critical components for aerospace, glass manufacturing and biomedical applications. The majority~~purification products that help to selectively remove new classes of ~~our products are consumed at various times~~contaminants throughout the semiconductor supply chain. In addition, to ensure purity levels are maintained across the entire supply chain, from bulk manufacturing, ~~process, with demand driven in part by~~to transportation to and delivery through a fab, to application onto the ~~level of semiconductor~~wafer, we provide high-purity packaging and ~~other manufacturing activity.~~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, 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, 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, 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. ~~We leverage our expertise from these three segments~~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 98 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 ~~2020~~2021 end ~~March 28, 2020, June 27, 2020, September 26, 2020~~April 3, 2021, July 3, 2021, October 2, 2021 and December 31, ~~2020.~~2021. Unaudited information for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~ and the financial position as of ~~March 28, 2020~~April 3, 2021 and December 31, ~~2019~~2020 are included in this Quarterly Report on Form 10-Q.

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

~~Table of Contents~~

•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 ~~material~~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

~~A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization.~~

~~Health and Safety~~

~~From the earliest signs of the outbreak, we have taken proactive, aggressive action to protect the health and safety of our~~ ~~employees, customers, partners and suppliers~~. We enacted rigorous safety measures in all of our sites, including implementing social distancing protocols, requiring working from home for those employees that do not need to be physically present on the manufacturing floor or in a lab to perform their work, suspending travel, implemented temperature checks at the entrances to our facilities, extensively and frequently disinfecting our workspaces and providing masks to those employees who must be physically present. We expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business, ~~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.~~

~~Operations~~

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 the manufacturing floor or in a lab to perform their work to work from home, suspending non-essential travel, implementing temperature checks 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. We expect to continue to implement these 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 ~~U.S.,~~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 ~~exclude~~excluded certain essential services, and those essential services have commonly ~~include~~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, ~~vendors~~suppliers and ~~suppliers.~~other third parties with which we do business. For example, in March 2020 the government of Malaysia ~~has~~ issued an order that significantly ~~reduces~~reduced the number of employees who ~~can~~could be physically present to operate our Malaysian plant, which ~~has~~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, ~~the~~ constraints and limits imposed on our operations may slow or diminish our research and development ~~activities~~ and customer qualification ~~activities with our customers. We also~~activities. During 2020, we experienced brief interruptions in operations at our sites in Hangzhou, China, San Luis Obispo, California and Bedford, ~~Massachusetts.~~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 ~~extended,~~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 ~~full~~normal capacity. In connection with the COVID-19 pandemic, we have experienced limited absenteeism from ~~those~~ employees who are required to be on-site to perform their ~~jobs, and we~~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 ~~shelter-in-place mandates.~~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 ~~any~~ potential supply interruptions from the COVID-19 pandemic, during 2020 and into 2021, we chose to increase certain inventory levels, ~~during the quarter.~~causing us to hold more inventory than we might have otherwise maintained. We may decide to take similar actions going ~~forward.~~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 ~~started to result~~resulted, in certain instances, in higher costs and delays, both on obtaining ~~raw~~ materials and shipping finished goods to ~~customers, which~~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

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~~The outbreak~~While the COVID-19 pandemic has ~~significantly increased~~caused economic and demand ~~uncertainty. While~~uncertainty, during the first quarter of 2021 we ~~have seen~~continued to see strong demand from leading-edge customers associated with end-uses in servers and other data center ~~applications, we~~applications. We believe that a portion of ~~recent bookings~~the orders that we received in the first quarter of ~~orders~~2021 may ~~be attributable to~~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 ~~be an~~ offset ~~to future~~ demand for our ~~products. We have seen weakness~~products in ~~some mainstream fabs associated with~~ the slowdown in sales of automotive, aerospace, mobile phone, and other applications. Across our three divisions, certain customers impacted by governmental reactions to COVID-19 pushed out product deliveries and acceptance inspections during the first quarter of 2020. These sales that have been delayed are expected to be recorded in our second quarter.future. We anticipate that the ~~current outbreak or continued spread of COVID-19~~pandemic will ~~cause a~~continue to contribute to global economic ~~slowdown, and it is possible that it~~uncertainty, which could ~~cause a global recession. In the event of a recession,~~ultimately harm demand for our ~~products would decline and our business would be adversely effected.~~products.

Liquidity

Although there is uncertainty ~~related to~~regarding the ~~anticipated~~ impact of the ~~recent~~ COVID-19 ~~outbreak~~pandemic on our future results, we believe our business model, our current cash reserves and ~~the recent steps we have taken to strengthen~~ our balance sheet ~~such as drawing down a portion of our Revolving Facility,~~ leave us well-positioned to manage our business through this crisis as we expect it ~~continues~~ 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.

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.~~recommendations and requirements or as we otherwise see fit to protect the health and safety of our employees, customers, partners and suppliers. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts ofthat COVID-19 may have on our financial condition, results of operations or cash flows in the future. ~~In addition, see Part II—~~See Item 1A, “Risk Factors,” ~~included herein~~in our Annual Report on Form 10-K for ~~updates to our risk factors~~the year ended December 31, 2020 for additional information regarding risks associated with the COVID-19 ~~pandemic.~~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 ~~March 28, 2020,~~April 3, 2021, net sales increased 5%24% to ~~$412.3~~$512.8 million, compared to ~~$391.0~~$412.3 million for the three months ended March ~~30, 2019. Included in~~28, 2020. Total net sales increased primarily as a result of strong industry conditions, several node transitions and strong overall demand for the ~~quarterly~~Company’s products and solutions. Net sales for the three months ended ~~March 28, 2020 were net~~April 3, 2021 included sales ~~primarily associated~~of $3.2 million from acquired businesses ~~of $15.4 million~~ and ~~unfavorable~~favorable foreign currency translation effects of ~~$0.3~~$5.4 million. ~~The increase in revenue resulted from revenue attributable from acquired businesses and increased customer demand from the semiconductor market compared to the year-ago quarter.~~

Sales were down $14.7 million, or 3% on a sequential basis over sales of $427.0 million in the fourth quarter of 2019, including unfavorable foreign currency translation effects of $0.1 million and sales attributable to acquired businesses of $2.0 million. The ~~decrease in revenue resulted primarily from decreased customer demand from the semiconductor market compared to the previous quarter.~~

~~Reflecting the net sales increase, the~~ Company’s gross profit for the three months ended ~~March 28, 2020~~April 3, 2021 increased to ~~$185.5~~$235.0 million, up from ~~$177.4 million for the three months ended March 30, 2019. The Company experienced a 45.0% gross margin for the three months ended March 28, 2020, compared to 45.4% in the comparable year-ago period.~~

~~The Company’s selling, general and administrative (SG&A) expenses decreased by $23.4~~$185.5 million for the three months ended March 28, ~~2020~~2020. The Company experienced a 45.8% gross margin for the three months ended April 3, 2021, compared to 45.0% in the comparable year-ago period. The gross profit and gross margin increases reflect higher factory utilization associated with 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 ~~a $20.6 million reduction in deal~~higher employee costs resulting from increased headcount, benefits and ~~integration costs which in the year-ago quarter included deal costs associated with the terminated Versum transaction and integration expense activity associated with other acquisitions.~~merit increases.

As a result of the aforementioned factors, the Company reported net income of ~~$61.0~~$84.7 million, or ~~$0.45~~$0.62 per diluted share, for the quarter ended ~~March 28, 2020,~~April 3, 2021, compared to net income of ~~$32.7~~$61.0 million, or ~~$0.24~~$0.45 per diluted share, a year ago.

On ~~January 10, 2020,~~April 16, 2021, the Company ~~acquired Sinmat, a chemical mechanical polishing (CMP) slurry manufacturer. Sinmat reports into~~announced that it had priced its private offering of the ~~Specialty Chemicals~~2029 Notes. The 2029 Notes will be senior unsecured obligations of the Company and ~~Engineered Material segment~~will be guaranteed by certain subsidiaries of the Company. The ~~total purchase price~~issuance of the ~~acquisition was $75.6 million, net of cash acquired. The transaction~~2029 Notes is ~~described in further detail in note 3~~expected to ~~the Company’s condensed consolidated financial statements.~~close on April 30, 2021, subject to customary closing conditions.

Cash and cash equivalents were ~~$335.1~~$548.5 million at ~~March 28, 2020,~~April 3, 2021, compared with cash and cash equivalents of ~~$351.9~~$580.9 million at December 31, ~~2019.~~2020. The Company had outstanding long-term debt (excluding current maturities) of ~~$1,078.9~~$1,086.2 million at ~~March 28, 2020,~~April 3, 2021, compared to ~~$936.5~~$1,085.8 million at December 31, ~~2019.~~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

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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, ~~2019~~2020, filed with the Securities and Exchange ~~Commission.~~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 ~~impairment of long-lived assets, goodwill, income taxes and~~ business acquisitions. There have been no material changes in these aforementioned critical accounting policies.

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Three Months Ended ~~March 28, 2020~~April 3, 2021 Compared to Three Months Ended March ~~30, 2019 and Three Months Ended December 31, 2019~~28, 2020

The following table compares operating results for the three months ended April 3, 2021 and March 28, 2020 ~~with results for the three months ended March 30, 2019 and three months ended December 31, 2019~~ both in dollars and as a percentage of net sales, for each caption.


		Three months ended																							Three months ended
(Dollars in thousands)	(Dollars in thousands)	March 28, 2020						March 30, 2019						December 31, 2019								(Dollars in thousands)	April 3, 2021		March 28, 2020
Net sales	Net sales	$	412,327	100.0	%	$	391,047	100.0	%	$	426,998	100.0	%		Net sales	$	512,844	100.0	%	$	412,327		100.0	%
Cost of sales	Cost of sales	226,849		55.0		213,654		54.6		229,362		53.7			Cost of sales	277,858		54.2		226,849			55.0
Gross profit	Gross profit	185,478		45.0		177,393		45.4		197,636		46.3			Gross profit	234,986		45.8		185,478			45.0
Selling, general and administrative expenses	Selling, general and administrative expenses	58,891		14.3		82,254		21.0		67,171		15.7			Selling, general and administrative expenses	71,389		13.9		58,891			14.3
Engineering, research and development expenses	Engineering, research and development expenses	29,632		7.2		28,991		7.4		30,352		7.1			Engineering, research and development expenses	37,748		7.4		29,632			7.2
Amortization of intangible assets	Amortization of intangible assets	16,211		3.9		18,657		4.8		16,028		3.8			Amortization of intangible assets	11,871		2.3		16,211			3.9
Operating income	Operating income	80,744		19.6		47,491		12.1		84,085		19.7			Operating income	113,978		22.2		80,744			19.6
Interest expense	Interest expense	10,559		2.6		10,884		2.8		13,375		3.1			Interest expense	11,652		2.3		10,559			2.6
Interest income	Interest income	(321)		(0.1)		(1,225)		(0.3)		(632)		(0.1)			Interest income	(71)		—		(321)			(0.1)
Other expense (income), net		878		0.2		(248)		(0.1)		248		0.1
Other expense, net															Other expense, net	4,330		0.8		878			0.2
Income before income taxes	Income before income taxes	69,628		16.9		38,080		9.7		71,094		16.6			Income before income taxes	98,067		19.1		69,628			16.9
Income tax expense	Income tax expense	8,622		2.1		5,422		1.4		13,656		3.2			Income tax expense	13,391		2.6		8,622			2.1
Net income	Net income	$	61,006	14.8	%	$	32,658	8.4	%	$	57,438	13.5	%		Net income	$	84,676	16.5	%	$	61,006		14.8	%

Net sales For the three months ended ~~March 28, 2020,~~April 3, 2021, net sales increased by 5%24% to ~~$412.3~~$512.8 million, compared to ~~$391.0~~$412.3 million for the three months ended March ~~30, 2019.~~28, 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 ~~30, 2019~~28, 2020	$	~~391,047~~412,327
~~Increase, net associated with acquired businesses and divestitures~~	~~15,380~~
Increase associated with volume, pricing and mix	~~6,209~~91,865
~~Decrease~~Increase associated with effect of foreign currency translation	~~(309)~~5,411
Increase associated with acquired businesses	3,241
Net sales in the quarter ended ~~March 28, 2020~~April 3, 2021	$	~~412,327~~512,844

The Company’s sales ~~increase was primarily due~~benefited from strong industry conditions, several node transitions and strong overall demand for the Company’s products and solutions compared to the year-ago quarter. Total net sales also reflected net sales associated with ~~the Company’s~~ recent acquisitions of ~~$15.4~~$3.2 million ~~offset by unfavorable~~and favorable foreign currency translation effects of ~~$0.3~~$5.4 million. ~~Sales also increased from an increased customer demand from the semiconductor market compared to the year-ago quarter.~~

~~Sales percentage on~~On a geographic basis, sales percentage by customers’ country or region for the three months ended April 3, 2021 and March 28, 2020 ~~and March 30, 2019~~ and the percentage increase (decrease) in sales for the three months ended ~~March 28, 2020~~April 3, 2021 compared to the sales for the three months ended March ~~30, 2019~~28, 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	%)

The increase in sales to customers in North America, 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 in sales from Southeast Asia primarily relates to lower demand for products from our SCEM segment.

Gross profit 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% gross margin rate for the

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Three months ended
March 28, 2020 March 30, 2019 Percentage increase (decrease) in sales
Taiwan 22 % 21 % 13 %
North America 25 % 23 % 11 %
South Korea 13 % 16 % (9) %
Japan 13 % 12 % 16 %
China 11 % 12 % (2) %
Europe 8 % 9 % (1) %
Southeast Asia 7 % 7 % 2 %

The increase in sales for Taiwan was primarily driven by demand for our Advanced Materials Handling products. The increase in sales for North America was primarily driven by sales from recent acquisitions. The increase in sales from Japan was primarily driven by demand for our Specialty Chemicals and Engineered Materials products. The decrease in sales from South Korea is due to decline in demand for our Microcontamination Control products.

Sales were down $14.7 million, or 3% on a sequential basis over sales of $427.0 million for the fourth quarter of 2019, including unfavorable foreign currency translation effects of $0.1 million and sales associated attributable to an acquired business of $2.0 million. The decrease in revenue resulted from decreased customer demand from the semiconductor market compared to the previous quarter.

~~Gross profit~~ ~~The Company’s gross profit increased 5% for the~~ three months ended ~~March 28, 2020 to $185.5 million,~~April 3, 2021, compared to ~~$177.4 million for the three months ended March 30, 2019. The Company experienced a~~ 45.0% ~~gross margin rate for the three months ended March 28, 2020, compared to 45.4%~~ in the comparable year-ago period. The gross profit ~~increase reflects the increase in sales, and the gross margin decrease reflects lower-than-expected volumes. The gross profit~~ and gross margin ~~figures include an incremental cost of sales charge of $0.4 million and $2.2 million, respectively,~~increases reflect higher factory utilization associated with ~~the sale of inventory acquired in recent business acquisitions for the three months ended March 28, 2020~~higher sales levels and March 30, 2019. Based in part on the potential impact of the COVID-19 pandemic and ensuing governmental responses on production, productivity and increased freight expenses, we anticipate that our gross margin rate will decline slightly in the second quarter of 2020.a favorable sales mix.

Selling, general and administrative expenses ~~(SG&A)~~SG&A expenses were ~~$58.9~~$71.4 million ~~for~~in the three months ended ~~March 28, 2020, down $23.4~~April 3, 2021, compared to $58.9 million ~~or 28%, from~~in the ~~comparable three-month period a year earlier.~~year-ago period. An analysis of the factors underlying the ~~decrease~~change in SG&A expenses is presented in the following table:


(In thousands)
~~Selling, general and administrative expenses in the quarter ended March 30, 2019~~	$	~~82,254~~
~~Deal and transaction costs~~	~~(17,705)~~
~~Integration costs~~	~~(2,872)~~
~~Employee costs~~	~~(3,371)~~
~~Travel costs~~	~~(734)~~
~~Professional fees~~	~~812~~
~~Other increases, net~~	~~507~~
Selling, general and administrative expenses in the quarter ended March 28, 2020	$	58,891
Employee costs	12,687
Integration costs	1,996
Deal and transaction costs	(1,431)
Other decreases, net	(754)
Selling, general and administrative expenses in the quarter ended April 3, 2021	$	71,389

The deal and transactions costs were $17.7 million lower in the three months ended March 28, 2020 compared to the three month ended March 30, 2019, mainly due to the deal costs associated with the terminated merger of the Versum transaction.

Engineering, research and development expenses The Company’s engineering, research and development, ~~(ER&D)~~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 ~~$29.6~~$37.7 million in the three months ended ~~March 28, 2020~~April 3, 2021 compared to ~~$29.0~~$29.6 million in the year-ago period. An analysis of the factors underlying the increase in ER&D is presented in the following table:

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(In thousands)
~~Engineering, research and development expenses in the quarter ended March 30, 2019~~	$	~~28,991~~
~~Depreciation costs~~	~~653~~
~~Employee costs~~	~~(209)~~
~~Other decreases, net~~	~~197~~
Engineering, research and development expenses in the quarter ended March 28, 2020	$	29,632
Employee costs	5,640
Project materials	1,835
Other increases, net	641
Engineering, research and development expenses in the quarter ended April 3, 2021	$	37,748

Amortization expenses Amortization of intangible assets was ~~$16.2~~$11.9 million in the three months ended ~~March 28, 2020~~April 3, 2021, compared to ~~$18.7~~$16.2 million for the three months ended March ~~30, 2019.~~28, 2020. The decrease primarily reflects the elimination of amortization expense of ~~$4.3~~$5.0 million for an identifiable ~~backlog~~ intangible ~~asset~~assets acquired in ~~the Saes Pure Gas business (SPG) acquisition~~acquisitions that became fully amortized in ~~the second quarter of 2019,~~previous periods, partially offset by additional amortization expense of ~~$2.6~~$0.5 million associated with recent acquisitions.

~~Interest income~~ Interest income was $0.3 million in the three months ended March 28, 2020, compared to $1.2 million in the three months ended March 30, 2019. The decrease in interest income for the three months ended March 28, 2020 compared to the previous year period was due to lower average cash levels earning a lower interest rate.

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 million in the three months ended April 3, 2021, compared to $10.6 million in the three months ended March 28, ~~2020~~2020. The increase primarily reflects higher average debt levels.

Interest income Interest income was $0.1 million in the three months ended April 3, 2021, compared to ~~$10.9~~$0.3 million in the three months ended March ~~30, 2019.~~28, 2020. The decrease ~~primarily~~ reflects lower average interest ~~rates on the senior secured term loan facility, partially offset by higher average debt levels on the revolving facility.~~rates.

Other expense, ~~(income),~~ net Other expense, net was $4.3 million in the three months ended April 3, 2021 and consisted mainly of foreign currency transaction losses of $4.3 million. Other expense, net was $0.9 million in the three months ended March 28, 2020 and consisted mainly of foreign currency transaction losses of $0.6 million. Other income, net was $0.2 million in the three months ended March 30, 2019 and consisted mainly of foreign currency transaction gains of $0.7 million, partially offset by $0.4 million charges of third-party costs associated with the amendment of the credit agreement.

Income tax expense Income tax expense was $13.4 million in the three months ended April 3, 2021, compared to income tax expense of $8.6 million in the three months ended March 28, 2020, ~~compared to income tax expense of $5.4 million in the three months ended March 30, 2019.~~respectively. The Company’s year-to-date effective tax rate at April 3, 2021 was ~~12.4% in 2020,~~13.7%, compared to ~~14.2% in 2019.~~ 12.4% at March 28, 2020.

The ~~year-to-date~~ income tax expense infor the three months ended April 3, 2021 and March 28, 2020 ~~and 2019 includes~~include discrete benefits of ~~$5.0~~$7.5 million and ~~$2.8~~$5.0 million, respectively, recorded in connection with share-based compensation. The ~~decrease~~increase in the effective tax rate from ~~2019~~2020 to ~~2020~~2021 primarily relates to ~~decreased accrued withholding taxes due to~~ a ~~portion~~valuation allowance on federal foreign tax credits generated in 2021 of ~~the Company’s foreign earnings being permanently reinvested in 2020 and an increase in the federal research and development credit.~~$1.4 million.

Net income Due to the factors noted above, the Company recorded net income of $84.7 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 per diluted share, in the ~~three-month period~~three months ended March 28, ~~2020, compared to net income of $32.7 million, or $0.24 per diluted share, in the three-month period ended March 30, 2019.~~2020. In the ~~three-month period~~three months ended ~~March 28, 2020,~~April 3, 2021, net income, as a percentage of net sales, increased to ~~14.8%~~16.5% from ~~8.4%~~14.8% 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, ~~(GAAP).~~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 “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 EBITDA and Adjusted Operating Income, together with related measures thereof, and non-GAAP Earnings Per Share.

Adjusted EBITDA increased ~~10.5%~~25% to $150.1 million in the three months ended April 3, 2021, compared to $120.3 million in the ~~three-month period~~three months ended March 28, ~~2020, compared to $108.9 million in the three-month period ended March 30, 2019.~~2020. In the three ~~month-period~~months ended ~~March 28, 2020,~~April 3, 2021, Adjusted EBITDA, as a percentage of net sales, ~~increased~~was flat at 29% compared to ~~29.2% from 27.8% in~~ the year-ago period.

Adjusted Operating Income increased ~~8.1%~~29% to $128.0 million in the three months ended April 3, 2021, compared to $99.6 million in the ~~three-month period~~three months ended March 28, ~~2020, compared to $92.2 million in the three-month period ended March 30, 2019.~~2020. Adjusted Operating Income, as a percentage of net sales, increased to ~~24.2%~~25% from ~~23.6%~~24% in the year-ago period.

Non-GAAP Earnings Per Share ~~was~~increased 27% to $0.70 in the three months ended April 3, 2021, compared to $0.55 in the ~~three-month period~~three months ended March 28, ~~2020, compared~~2020.

The increases in adjusted EBITDA, adjusted operating income and non-GAAP earnings per share are generally attributable to ~~$0.50~~the increases in ~~the three-month period ended March 30, 2019.~~sales and gross profit.

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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 98 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 months ended April 3, 2021 and March 28, ~~2020 and March 30, 2019.~~2020.


		Three months ended							Three months ended
(In thousands)	(In thousands)	March 28, 2020		March 30, 2019		(In thousands)	April 3, 2021		March 28, 2020
Specialty Chemicals and Engineered Materials	Specialty Chemicals and Engineered Materials					Specialty Chemicals and Engineered Materials
Net sales	Net sales	$	144,214	$	124,470	Net sales	$	166,541	$	144,214
Segment profit	Segment profit	32,670		24,431		Segment profit	34,556		32,670
Microcontamination Control	Microcontamination Control					Microcontamination Control
Net sales	Net sales	$	159,261	$	157,706	Net sales	$	207,099	$	159,261
Segment profit	Segment profit	50,167		47,323		Segment profit	70,566		50,167
Advanced Materials Handling	Advanced Materials Handling					Advanced Materials Handling
Net sales	Net sales	$	116,137	$	116,064	Net sales	$	148,541	$	116,137
Segment profit	Segment profit	20,632		22,367		Segment profit	32,095		20,632

Unallocated general and administrative expenses						Unallocated general and administrative expenses	$	11,368	$	6,514

Specialty Chemicals and Engineered Materials (SCEM)

For the first quarter of ~~2020,~~2021, SCEM net sales increased to ~~$144.2~~$166.5 million, compared to ~~$124.5~~$144.2 million in the comparable period last year. The sales increase was due to increased sales of advanced deposition materials, cleaning chemistries, specialty gases and ~~additional sales of $12.4 million attributable to the acquisitions of DSC in the first quarter of 2019, MPD in the third quarter of 2019 and Sinmat in the first quarter of 2020.~~advanced coatings. SCEM reported a segment profit of ~~$32.7~~$34.6 million in the first quarter of ~~2020,~~2021, up ~~34%~~6% from ~~$24.4~~$32.7 million in the year-ago period. The segment profit increase was primarily due to higher gross profit related to ~~the~~ increased sales volume, partially offset by a 5%17% increase in operating expenses, primarily due to ~~recent acquisitions.~~higher compensation costs.

Microcontamination Control (MC)

For the first quarter of ~~2020,~~2021, MC net sales increased to ~~$159.3~~$207.1 million, compared to ~~$157.7~~$159.3 million in the comparable period last year. The sales increase was mainly due to improved sales from liquid filtration and gas filtration ~~products and additional sales of $3.0 million attributable to the acquisition of Anow in the third quarter of 2019, partially offset by weakened sales from gas purification~~ products. MC reported a segment profit of ~~$50.2~~$70.6 million in the first quarter of ~~2020,~~2021, up 6%41% from ~~$47.3~~$50.2 million in the year-ago period. The segment profit improvement was primarily due to higher gross profit related to ~~the~~ increased sales volume and favorable product mix, partially offset by a ~~decrease~~24% increase in operating expenses ~~of 1%.~~due to higher compensation costs.

Advanced Materials Handling (AMH)

For the first quarter of ~~2020,~~2021, AMH net sales ~~were flat at $116.1~~increased to $148.5 million, compared to $116.1 million in the comparable period last year. The sales increase was mainly due to improved sales from all major semi-related product platforms, sales of our Aramus high purity bags, as well as additional sales of $2.7 million attributable to the acquisition of Global Measurement

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Technologies, Inc., or GMTI, in the third quarter of 2020. AMH reported a segment profit of ~~$20.6~~$32.1 million in the first quarter of ~~2020, down 8%~~2021, up 56% from ~~$22.4~~$20.6 million in the year-ago period. The segment profit ~~decrease~~increase was primarily due to ~~lower gross profit related to~~higher sales volume and favorable product mix, ~~and volume,~~ partially offset by a ~~9% decrease~~16% increase in operating expenses ~~primarily~~ due to ~~lower spending and restructuring initiatives from the previous year.~~higher compensation costs.

Unallocated general and administrative expenses

Unallocated general and administrative expenses totaled ~~$6.5~~$11.4 million in the first quarter of ~~2020,~~2021, compared to ~~$28.0~~$6.5 million in the comparable period last year. The ~~$21.5~~$4.9 million ~~decrease~~increase mainly reflects a ~~$20.6~~$5.1 million ~~decrease~~increase in ~~deal and transaction costs and integration costs referenced in the discussion of SG&A above.~~employee costs.

Liquidity and Capital Resources

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


In thousands	In thousands	March 28, 2020		December 31, 2019		In thousands	April 3, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	335,077	$	351,911	Cash and cash equivalents	$	548,520	$	580,893
Working capital	Working capital	764,316		667,964		Working capital	978,335		931,631
Total debt	Total debt	1,078,888		936,484		Total debt	1,086,186		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. ~~Although there~~On April 16, 2021, we agreed to sell $400 million of our 2029 Notes. The sale of the 2029 Notes is

~~Table~~ expected to close on April 30, 2021, subject to customary closing conditions. We intend to use the net proceeds of ~~Contents~~

~~uncertainty~~the offering, together with cash on hand and approximately $75 million borrowed under the Revolving Facility, to pay the redemption price for the redemption in full of the 2026 Notes and to pay certain fees and expenses related to the ~~anticipated~~offering. The redemption of the 2026 Notes is conditioned on the Company’s receipt of $400 million of proceeds from a new offering of unsecured notes, such as the 2029 Notes.

Although there is uncertainty regarding the impact of the ~~recent~~ COVID-19 ~~outbreak~~pandemic on the Company’s future results, we believe our business model and our current cash reserves ~~and the recent steps we have taken to strengthen our balance sheet, such as drawing down a significant portion of our Revolving Facility,~~ will help us to manage our business through this crisis as we expect it ~~continues~~ 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. As~~months and for the ~~opportunity arises, we~~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 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 ~~2020,~~2021, we have not experienced difficulty accessing the capital and credit ~~markets;~~markets as evidenced by our recent announcement of our $400 million note offering; however, 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							Three months ended
(in thousands)	(in thousands)	March 28, 2020		March 30, 2019		(in thousands)	April 3, 2021		March 28, 2020
Net cash provided by (used in) operating activities		$	11,403	$	(2,538)
Net cash provided by operating activities						Net cash provided by operating activities	$	53,115	$	11,403
Net cash used in investing activities	Net cash used in investing activities	(98,210)		(84,057)		Net cash used in investing activities	(43,258)		(98,210)
Net cash provided by (used in) financing activities		71,685		(52,851)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(39,375)		71,685
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	$	(16,834)	$	(139,702)	Decrease in cash and cash equivalents	(32,373)		(16,834)

Operating activities

Cash 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 million in the three months ended April 3, 2021, compared to $11.4 million in the three months ended March 28, ~~2020 compared to cash flows used in operating activities of $2.5 million in the three months ended March 30, 2019.~~2020. The increase in cash provided by operating activities was primarily due to higher net income and ~~changes~~a lower 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 ~~(used in)~~ operations of $80.8 million for the three months ended April 3, 2021 compared to a decrease of $97.0 million for the three months ended March 28, ~~2020 compared to a decrease of $80.9 million for the three months ended March 30, 2019.~~2020.

Changes in working capital and other assets and liabilities for the three months ended ~~March 28, 2020~~April 3, 2021 were driven primarily by increases in inventories, accounts receivable and ~~inventories, partially offset by a decrease~~accounts payable and decreases in ~~income taxes payable.~~accrued liabilities. The change for accounts receivable was primarily due to the ~~Company's quarter closing date occurring several days prior to the end~~timing of ~~the calendar month, the period during which receivable collections are typically heavy, particularly for the Company's Asia operations as compared to the three months ended March 30, 2019.~~collections. The change for inventory ~~is due to~~was driven by an increase in ~~raw material purchases to provide a buffer related to any potential supply chain issues related to COVID-19.~~business activity. The change ~~related~~for accounts payable and accrued liabilities was primarily driven by a higher accounts payables due to ~~incomes taxes reflects lower income tax~~timing of payments and higher accrued bonuses in 2021, partially offset by a higher payment of the ~~three-month period ended March 28, 2020 compared to the three-month period March 30, 2019.~~previous year incentive compensation.

Investing activities Cash flows used in investing activities totaled $43.3 million in the three months ended April 3, 2021, compared to $98.2 million in the ~~three-month period~~three months ended March 28, ~~2020 compared to cash flows used in investing activities of $84.1 million in the three-month period ended March 30, 2019.~~2020. The change was due to ~~lower~~less cash paid for acquisitions ~~and~~of businesses, partially offset by higher cash paid for acquisition of property, plant and equipment.

Acquisition of property, plant and equipment totaled $43.3 million in the three months ended April 3, 2021, which primarily reflected investments in equipment and tooling, compared to $22.6 million in the ~~three-month period~~three months ended March 28, 2020, which primarily reflected investments in equipment and ~~tooling compared to $34.5 million in~~tooling.

In the ~~three-month period~~three months ended March ~~30, 2019, which primarily reflected investment in equipment and tooling.~~

~~On January 10,~~28, 2020, the Company acquired ~~Sinmat, a CMP slurry manufacturer. Sinmat reports into the Specialty Chemicals and Engineered Material segment of the Company.~~Sinmat. The cash used to acquire Sinmat for the ~~three-month period~~three months ended March 28, 2020 was $75.6 million, net of cash acquired. The transaction is described in further detail in note 3 to the Company’s condensed consolidated financial statements.

In the three-month period ended March 30, 2019, the Company acquired Digital Specialty Chemicals Limited (DSC), which provides advanced materials to the specialty chemical, technology and pharmaceutical industries. The cash used to acquire DSC for the three-month period ended March 30, 2019 was $49.8 million, net of cash acquired. The transaction is described in further detail in note 3 to the Company’s condensed consolidated financial statements.

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As of ~~March 28, 2020,~~April 3, 2021, the Company expects its full-year capital expenditures in ~~2020~~2021 to be approximately ~~$120.0 million.~~$225.0 million for growth capacity investments and the initial phase of the previously announced investment in our new facility in Taiwan. As of ~~March 28, 2020,~~April 3, 2021, the Company had outstanding capital purchase obligations of ~~$32.3~~$55.5 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 ~~yet~~ received the related goods or ~~property.~~property as of such date.

Financing activities Cash flows ~~provided by~~used in financing activities totaled $39.4 million during the three months ended April 3, 2021, compared to $71.7 million during the ~~three-month period~~three months ended March 28, ~~2020 compared to cash flows used in financing activities of $52.9 million during the three-month period ended March 30, 2019.~~2020. The change was primarily due to absence of net ~~long-term~~short-term debt activity ~~which was~~during the three months ended April 3, 2021, compared to a net source of cash of $142.0 million in the ~~three-month period ended March 28, 2020 compared to a use of cash of $1.0 million in the~~ comparable period in ~~2019~~2020, and a ~~$5.8~~$3.6 million ~~decrease~~increase in cash used to pay taxes for net share settlements of ~~repurchases~~equity awards, offset in part by the absence of ~~common stock, partially offset by~~ a $16.1 million deferred acquisition payment ~~in the three-month period ended March 28, 2020~~ related to our ~~DSC acquisition. In March~~acquisition of Digital Specialty Chemicals in 2020 and a decrease of $14.6 million in repurchases of the ~~Company suspended its share repurchase program.~~Company’s common stock.

Our total dividend payments were $10.9 million in the ~~three-month period~~three months ended April 3, 2021, compared to $10.8 million in the three months ended March 28, ~~2020 compared to $9.5 million in three-month period ended March 30, 2019.~~2020. We have paid a cash dividend in each of the past 1014 quarters. On April ~~15, 2020,~~14, 2021, the Board declared a quarterly cash dividend of $0.08 per share of common stock, payable on May ~~20, 2020~~19, 2021 to stockholders of record on April ~~29, 2020.~~28, 2021.

Other Liquidity and Capital Resources Considerations

The Company’s Term Loan Facility ~~has a principal amount of $396 million outstanding that~~ matures on November 6, 2025 and

~~bears~~ bore interest ~~rate~~ at a ~~3.61%~~rate per annum of 2.1% at ~~March 28, 2020.~~April 3, 2021. As of April 3, 2021, the aggregate principal amount outstanding under the Term Loan Facility was $145.0 million.

The Company’s Revolving Facility ~~has a senior secured revolving commitment facility~~provides for lending commitments in an aggregate principal amount of ~~$300~~up to $300.0 million,

maturing on November 6, 2023. 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 ~~March 28, 2020, $142.0 million is~~April 3, 2021, there was no balance outstanding under the Revolving Facility and we had undrawn outstanding letters of credit of $0.2 million.

~~We have $550~~As of April 3, 2021, we had $550.0 million aggregate principal amount of ~~4.625%~~2026 Notes and $400.0 million aggregate principal amount of 4.375% senior unsecured notes due ~~February 10, 2026~~April 15, 2028 outstanding.

Through ~~March 28, 2020,~~April 3, 2021, the Company was in compliance with all applicable financial covenants ~~included in the terms of~~

under its credit facilities.

The Company also has ~~lines~~a line of credit with ~~two banks~~one bank that ~~provide~~provides for borrowings of Japanese yen for the Company’s Japanese subsidiary, equivalent to an aggregate of approximately ~~$11.1~~$9.0 million. There were no outstanding borrowings under ~~these lines~~this line of credit at ~~March 28, 2020.~~April 3, 2021.

As of ~~March 28, 2020,~~April 3, 2021, the Company’s sources of available funds were its cash and cash equivalents of ~~$335.1~~$548.5 million,

funds available under the Revolving Facility and international credit facilities and cash flow generated from operations. As of

~~March 28, 2020,~~ April 3, 2021, the amount of cash and cash equivalents held in certain of our foreign operations totaled approximately

~~$201.5~~ $376.6 million. If we repatriate such funds, we will 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 ~~U.S. After March 28, 2020, to further increase domestic liquidity the Company repatriated approximately $38.0 million in cash from foreign jurisdictions back to the U.S.~~United States.

Off-Balance Sheet Arrangements

As of ~~March 28, 2020,~~April 3, 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, ~~2019, except for long-term debt. Long-term debt increased an additional $142 million during the quarter for borrowings on our Revolving Facility due 2023.~~2020.

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 adopted.~~pronouncements.

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

Non-GAAP Information The Company’s condensed consolidated financial statements are prepared in conformity with ~~accounting principles generally accepted in the United States (GAAP).~~GAAP.

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The Company also ~~provides~~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 EBITDA and Adjusted Operating Income, together with related measures thereof, and non-GAAP Earnings Per Share, ~~(EPS),~~ as well as certain other supplemental non-GAAP financial measures included in the discussion of the Company’s financial results.

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 (income) expense, ~~(income),~~ 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, is defined by the Company as Adjusted EBITDA exclusive of the depreciation addback noted above. The Company also utilizes non-GAAP financial measures whereby Adjusted EBITDA and Adjusted Operating Income are each divided by the Company’s net sales to derive Adjusted EBITDA Margin and 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 debt extinguishment, (6) amortization of intangible assets, (7) tax effect of legal entity restructuring and ~~(6)~~(8) the tax effect of ~~those~~the foregoing adjustments to net income, stated on a per share basis.

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 ~~its~~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 EBITDA and 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 EBITDA, 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 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:~~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 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.

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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 financial measures calculated in accordance with GAAP. The calculations of Adjusted EBITDA, 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							Three months ended
(In thousands)	(In thousands)	March 28, 2020			March 30, 2019			(In thousands)	April 3, 2021			March 28, 2020
Net sales	Net sales	$	412,327		$	391,047		Net sales	$	512,844		$	412,327
Net income	Net income	$	61,006		$	32,658		Net income	$	84,676		$	61,006
Net income - as a % of net sales								Net income - as a % of net sales	16.5		%	14.8		%
Adjustments to net income	Adjustments to net income							Adjustments to net income
Income tax expense	Income tax expense	8,622			5,422			Income tax expense	13,391			8,622
Interest expense	Interest expense	10,559			10,884			Interest expense	11,652			10,559
Interest income	Interest income	(321)			(1,225)			Interest income	(71)			(321)
Other expense (income), net		878			(248)
Other expense, net								Other expense, net	4,330			878
GAAP – Operating income	GAAP – Operating income	80,744			47,491			GAAP – Operating income	113,978			80,744
Operating margin -as a % of net sales								Operating margin -as a % of net sales	22.2		%	19.6		%
Charge for fair value write-up of acquired inventory sold	Charge for fair value write-up of acquired inventory sold	361			2,155			Charge for fair value write-up of acquired inventory sold	—			361
Deal and transaction costs	Deal and transaction costs	1,431			19,136			Deal and transaction costs	—			1,431
Integration costs	Integration costs	48			2,920			Integration costs	2,044			48
Severance and restructuring costs	Severance and restructuring costs	843			1,821			Severance and restructuring costs	143			843

Amortization of intangible assets	Amortization of intangible assets	16,211			18,657			Amortization of intangible assets	11,871			16,211
Adjusted operating income	Adjusted operating income	99,638			92,180			Adjusted operating income	128,036			99,638
Adjusted operating margin - as a % of net sales								Adjusted operating margin - as a % of net sales	25.0		%	24.2		%
Depreciation	Depreciation	20,648			16,721			Depreciation	22,095			20,648
Adjusted EBITDA	Adjusted EBITDA	$	120,286		$	108,901		Adjusted EBITDA	$	150,131		$	120,286

Net income - as a % of net sales		14.8		%	8.4		%
Adjusted operating income – as a % of net sales		24.2		%	23.6		%

Adjusted EBITDA – as a % of net sales	Adjusted EBITDA – as a % of net sales	29.2		%	27.8		%	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					Three months ended
(In thousands, except per share data)	(In thousands, except per share data)	March 28, 2020		March 30, 2019		(In thousands, except per share data)	April 3, 2021		March 28, 2020
Net income	Net income	$	61,006	$	32,658	Net income	$	84,676	$	61,006
Adjustments to net income	Adjustments to net income					Adjustments to net income
Charge for fair value write-up of acquired inventory sold	Charge for fair value write-up of acquired inventory sold	361		2,155		Charge for fair value write-up of acquired inventory sold	—		361
Deal and transaction costs	Deal and transaction costs	1,431		19,547		Deal and transaction costs	—		1,431
Integration costs	Integration costs	48		2,920		Integration costs	2,044		48
Severance and restructuring costs	Severance and restructuring costs	843		1,821		Severance and restructuring costs	143		843

Amortization of intangible assets	Amortization of intangible assets	16,211		18,657		Amortization of intangible assets	11,871		16,211

Tax effect of adjustments to net income and certain discrete tax items¹	Tax effect of adjustments to net income and certain discrete tax items¹	(4,329)		(9,864)		Tax effect of adjustments to net income and certain discrete tax items1	(3,221)		(4,329)

Non-GAAP net income	Non-GAAP net income	$	75,571	$	67,894	Non-GAAP net income	$	95,513	$	75,571

Diluted earnings per common share	Diluted earnings per common share	$	0.45	$	0.24	Diluted earnings per common share	$	0.62	$	0.45
Effect of adjustments to net income	Effect of adjustments to net income	0.11		0.26		Effect of adjustments to net income	0.08		0.11
Diluted non-GAAP earnings per common share	Diluted non-GAAP earnings per common share	$	0.55	$	0.50	Diluted non-GAAP earnings per common share	$	0.70	$	0.55

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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 point change in interest rates would potentially increase or decrease annual net income by approximately $3.1 million and $1.5 million ~~annually.~~for the quarter ended April 3, 2021 and March 28, 2020.

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 ~~Renmibi,~~Renminbi, Canadian Dollar, Malaysian Ringgit, Singapore Dollar, Euro, Israeli Shekel and the Japanese Yen. Approximately 23.5% and 22.8% of the Company’s 2021 and 2020 sales for the quarters ended April 3, 2021 and March 28, 2020, respectively, are denominated in these ~~currencies.~~currencies, respectively. Financial results therefore will be affected by changes in currency exchange rates. If all foreign currencies ~~were to see~~had experienced a 10% reduction versus the U.S. dollar during the three months ended April 3, 2021 and March 28, 2020, revenue for the quarters would behave been negatively impacted by approximately $12.5 million and $9.4 ~~million.~~million, respectively.

The Company occasionally uses derivative financial instruments to manage the foreign currency exchange rate risks associated with its foreign-based operations. At ~~March 28, 2020,~~April 3, 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, ~~(CEO)~~or CEO, and Chief Financial Officer, ~~(CFO),~~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, ~~(the 1934~~or the Exchange Act)) as of ~~March 28, 2020.~~April 3, 2021. The term “disclosure controls and procedures” means controls and other procedures ~~of a company~~ that are designed to ensure that information required to be disclosed by the ~~company~~Company in the reports that it files or submits under the ~~1934~~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~~Company in the reports that it files or submits under the ~~1934~~Exchange Act is accumulated and communicated to the ~~company’s~~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 ~~March 28, 2020,~~April 3, 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 ~~1934~~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 ~~1934~~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 ~~MPD Chemicals (MPD), Hangzhou Anow Microfiltration Co., Ltd. (Anow) and Sinmat~~GMTI on July ~~15, 2019, September 17, 2019 and January~~ 10, ~~2020, respectively. None of MPD, Anow and Sinmat~~2020. GMTI is not significant to the Company’s financial statements. The Company is continuing to integrate ~~MPD, Anow and Sinmat~~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 ~~MPD, Anow and Sinmat~~GMTI that are subsumed by internal control over financial ~~reporting.~~reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

As of ~~March 28, 2020,~~April 3, 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 1A. Risk Factors~~

This section augments and updates certain risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”). The following risk factors supersede the corresponding risks described in the Annual Report and should be read together with the other risk factors disclosed in the Annual Report. In addition to the other information in this Quarterly Report on Form 10-Q, all of these risk factors should be carefully considered in evaluating us and our common stock. Any of these risks, many of which are beyond our control, could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified below because they are common to all businesses. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Cautionary Statements” at the beginning of this Quarterly Report on Form 10-Q.

~~Risks Related to Our Business and Industry~~

~~The COVID-19 pandemic and ensuing governmental responses could materially adversely affect our financial condition and results of operations.~~

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns. We have important manufacturing operations in the U.S., 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 generally exclude certain essential services, and those essential services commonly include 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, vendors and suppliers. For example, the government of Malaysia has issued an order that significantly reduces the number of employees who can be physically present to operate our Malaysian plant, which has reduced the productivity of that plant. In addition to reduced productivity, the constraints and limits imposed on our operations may slow or diminish our research and development activities and qualification activities with our customers.Although many governmental measures have had specific expiration dates, some of those measures have already been extended more than once; as a result, there is considerable uncertainty regarding the duration of such measures and potential future measures.Restrictions on our manufacturing, support operations or workforce, or similar limitations for our vendors and suppliers, could limit our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations.Furthermore, restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, have started to result in higher costs and delays, which could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers.

The outbreak has significantly increased economic and demand uncertainty. We anticipate that the current outbreak or continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession.

In response to these developments, we have modified our business practices, including restricting employee travel, modifying employee work locations, implementing social distancing and enhanced sanitary measures in our facilities, and cancelling attendance at events and conferences. Many of our suppliers, vendors and service providers have made similar modifications. The resources available to employees working remotely may not enable them to maintain the same level of productivity and efficiency, and these and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. While we have experienced only limited absenteeism from those employees who are required to be on-site to perform their jobs, absenteeism may increase in the future and may harm our productivity.Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. 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. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, in which case our employees may become sick, our ability to perform critical functions could be harmed, and we may be unable to respond to the needs of our global business.~~The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of COVID-19 on our suppliers, third-party service providers, and/or customers.~~

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The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus and address its impact, and how quickly and to what extent normal economic and operating conditions can resume.Furthermore, the COVID-19 pandemic makes it more difficult for us to forecast demand and provide guidance for the remainder of 2020. Accordingly, any guidance we provide is likely to be less reliable than usual, and actual results are more likely to differ from any such guidance.~~In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.~~

Anticipated declines in the semiconductor industry and worldwide economic conditions, at least in the short term, are likely to cause demand for our products to decrease and to adversely affect our business.

We anticipate declines in industry and worldwide economic conditions at least in the short term, and these declines are likely to adversely affect our business for a period of time. We expect that the COVID-19 pandemic will cause an economic slowdown, and it is possible that it could cause a global recession or other adverse economic conditions across the world. In the event of a recession or other downturn in the worldwide economy, demand for our products would decline and our business would be adversely effected.Our revenue is primarily dependent upon demand from semiconductor manufacturers, which is largely driven by the current and anticipated demand for electronic products that utilize semiconductors. Despite recent increases in demand for semiconductors in applications such as smartphones, cloud computing, the Internet of Things, and artificial intelligence, the semiconductor industry has historically been, and is likely to continue to be, highly cyclical with periodic significant downturns, resulting in significantly decreased demand for products such as ours. We have previously experienced significant revenue deterioration and operating losses due to severe downturns in the semiconductor industry, which often occur suddenly. The semiconductor industry is also affected by seasonal shifts in demand. Although we currently anticipate an economic downturn in the near term as a result of the COVID-19 pandemic, we are unable to predict its duration or severity, nor are we able to predict the timing, duration or severity of any future downturns in the semiconductor industry. As a result, we could underperform the market or our peers.

During downturns and periods of soft demand, our revenue is reduced, and we typically experience greater pricing pressure and shifts in product and customer mix, which often adversely affect our gross margin and net income. Even moderate seasonality can cause our operating results to fluctuate significantly from one period to the next. Uncertain and volatile economic, political, public health or business conditions in any of our key sales regions can cause or exacerbate negative trends in business and consumer spending and have historically impacted customer demand for our products. These conditions can cause material adverse changes in our results of operations and financial condition, including:

•~~a decline in demand for our products, which, given our limited backlog, will have an immediate impact on our revenues;~~

•~~an increase in reserves for accounts receivable due to our customers’ inability to pay us;~~

•~~lower utilization of our manufacturing facilities, which could lead to lower margins;~~

•~~an increase in write-offs for excess or obsolete inventory that we cannot sell;~~

•potential impairment charges relating to goodwill, intangible assets, manufacturing equipment or other long-lived assets, to the extent that any downturn indicates that the carrying amount of the asset may not be recoverable;

•~~greater challenges in forecasting operating results, making business decisions, and identifying and prioritizing business risks; and~~

•~~additional cost reduction efforts, including additional restructuring activities, which may adversely affect our ability to capitalize on opportunities.~~

We anticipate that the COVID-19 pandemic will likely cause us to experience at least some of these adverse changes, but we cannot predict the degree to which they will occur. They may be more severe than we currently expect; for example, recent bookings of orders may be attributable to customers increasing their inventory to reduce their exposure to risks of future supply disruptions, which could be an offset to future demand for our products. Furthermore, to remain competitive, we must maintain a satisfactory level of engineering, research and development, invest in our infrastructure and maintain the ability to respond to any increases in demand and, as a result, a lower volume of sales can have a large and disproportionate impact on our profitability.

~~Our revenues and operating results are variable.~~

Our revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a number of factors, many of which are outside our control. We manage our expenses based in part on our expectations of future revenues. Because some of our expenses are relatively fixed in the short term, a change in the timing of revenue or the amount of profit we generate from a small number of transactions can unfavorably affect operating results in a particular period. Factors that may cause our financial results to fluctuate unpredictably include:

~~Table of Contents~~

•~~economic conditions in the semiconductor industry or in the other industries we serve;~~

•~~the impact of the COVID-19 pandemic on the global economy, the semiconductor industry, our manufacturing capabilities or our supply chain;~~

•~~the size and timing of customer orders;~~

•~~consolidation of our customers could impact their purchasing decisions and negatively affect our revenues;~~

•~~procurement shortages;~~

•~~the failure of our suppliers or outsource providers to perform their obligations;~~

•~~manufacturing difficulties;~~

•~~additional expenses we would expect to incur in our efforts to respond promptly to any supply shortages, manufacturing difficulties or other vendor problems;~~

•~~decisions to increase or accelerate our purchasing of raw materials, components or other supplies in an effort to mitigate supply risk;~~

•~~customer cancellations of or delays in shipments, installations or customer acceptances or, alternatively, acceleration of orders from customers to increase their inventory;~~

•~~our customers’ rate of replacement of our consumable products;~~

•~~changes in average selling prices, customer mix, and product mix;~~

•~~our ability to develop, introduce, and market new, enhanced, and competitive products in a timely manner;~~

•~~our competitors’ introduction of new products;~~

•~~legal or technical challenges to our products or technologies;~~

•~~disruptions in transportation, communication, demand, information technology, or supply, including strikes, acts of God, wars, terrorist activities, and natural or man-made disasters;~~

•~~legal, tax, accounting, or regulatory changes (including changes in import/export regulations and tariffs) or changes in the interpretation or enforcement of existing requirements;~~

•~~changes in our estimated tax rate; and~~

•~~foreign currency exchange rate fluctuations.~~

~~The COVID-19 pandemic is likely to exacerbate the adverse impact of many of these factors on our revenues and results of operations, at least in the short term.~~

We depend on single and limited source suppliers and an interruption in our ordinary sources of supply could affect our ability to manufacture our products and have an adverse effect on our results of operations.

We rely on single or limited source suppliers for raw materials, such as plastic polymers, filtration membranes, petroleum coke and other materials, which are critical to the manufacturing of our products. If we were to lose any one of these sources, it could be difficult for us to find an alternative supplier and we would need to qualify this new source through our customers’ rigorous qualification processes. Although we seek to reduce our dependence on sole and limited source suppliers, the partial or complete loss of any of these sources could interrupt our manufacturing operations and result in a material adverse effect on our results of operations. At times, we have experienced a limited supply of certain raw materials, which has resulted in delays, lost revenue, increased costs and risks associated with qualifying products made from such new raw materials with our customers. Events such as an industry-wide increase in demand for, or the discontinuation of, raw materials used in our products could harm our ability to acquire sufficient quantities and our manufacturing operations may be interrupted. For example, in 2019, we experienced a disruption in the supply of certain ceramic material for use in our coatings business in our SCEM division when the supplier was unable to produce these materials at the required specifications. In response, we worked collaboratively with the supplier to determine the root cause and to solve the manufacturing issue, reestablishing the supply of these materials. Although we were able to reestablish our supply of this raw material, we may be unable to do so in the future or with other raw materials, in which case raw materials shortages may adversely affect our operations. Additionally, our suppliers may not have the capacity to meet increases in our demand for raw materials, in turn, making it difficult for us to meet demand from our customers. Furthermore, prices for our raw materials can vary widely. While we have long-term arrangements with certain key suppliers that fix our price for the purchase of certain raw materials, if the cost of our raw materials increases and we are unable to correspondingly increase the sales price of our products or find other cost savings, our profit margins will decline.

~~Table of Contents~~

~~Although we have not yet experienced any significant impacts or interruptions to our supply chain as a result of the COVID-19 pandemic, there is no assurance that they will not occur in the future.Certain of our suppliers have faced difficulties maintaining operations in light of government-ordered restrictions and shelter-in-place mandates.~~If our suppliers or sub-suppliers are unable to maintain their operations or restrictions become more severe, we may encounter difficulties obtaining raw materials, which may cause us to fail to meet customer demand or require us to pay higher prices for these materials, either of which could harm our business and profitability.~~For example, one of our critical valve suppliers was shut down and was unable to supply us with valves for our gas purification products.~~Although in this instance we were able to procure this critical part from a second, pre-qualified source, we may be unable to find alternative sources of supply in the future and may therefore be adversely affected by supply interruptions resulting from the COVID-19 pandemic. Additionally, an economic slowdown caused by the COVID-19 pandemic could harm the financial health of our suppliers and sub-suppliers.Although we regularly monitor the financial health of companies in our supply chain, financial hardship on our suppliers or sub-suppliers could cause a disruption in our ability to obtain raw materials or components required to manufacture our products, adversely affecting our operations or require us to alter our payment terms with certain suppliers, including prepaying for raw materials, which could put downward pressure on our cash flow.

~~We are exposed to the risks of operating a global business as a significant amount of our sales and manufacturing activity occur outside the United States.~~

Sales to customers outside the United States accounted for approximately 75%, 76%, 78% and 79% of our net sales in the three months ended March 28, 2020 and in 2019, 2018 and 2017, respectively. We anticipate that international sales will continue to account for a majority of our net sales. In addition, a number of our key domestic customers derive a significant portion of their revenues from sales in international markets. We also manufacture a significant portion of our products outside the United States and are dependent on international suppliers for many of our parts and raw materials. We intend to continue to pursue opportunities in both sales and manufacturing internationally. Our international operations are subject to a number of risks and potential costs that could adversely affect our revenue and profitability, including:

•border closures, travel bans, entry limitations or inspections, and other restrictions on the international movement of goods, including actions to limit the export of goods in order to secure a domestic supply in light of actual or anticipated global shortages, as well as the potential exercise of governmental power to requisition or prioritize the production of specified goods or to commandeer facilities in the public interest, such as in the effort to combat the COVID-19 pandemic, any of which could adversely affect our ability to obtain supplies and delivery our products to customers;

•government actions, laws, rules, regulations and policies, such as “trade wars,” tariffs, sanctions or other changes in international trade requirements that affect our business and that of our customers and suppliers, any of which could impose additional costs on our operations and limit our ability to operate our business;

•~~challenges in hiring and integrating workers in different countries;~~

•challenges in managing a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, along with differing employment practices and labor issues;

•challenges of maintaining appropriate business processes, procedures and internal controls and complying with legal, environmental, health and safety, anti-bribery, anti-corruption and other regulatory requirements that vary by jurisdiction, including new and evolving requirements for social distancing and other measures to minimize the spread of COVID-19;

•~~challenges in developing relationships with local customers, suppliers and governments;~~

•fluctuating pricing and availability of raw materials and supply chain interruptions or slowdowns, including as a result of difficulties, financial or otherwise, faced by segments of the transportation industry;

•~~public health crises, such as the COVID-19 pandemic;~~

•~~expense and complexity of complying with U.S. and foreign import and export regulations, including the ability to obtain required import and export licenses;~~

•fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against foreign currencies that are important to our business, including Japanese yen, euro, Taiwanese dollar, Korean won, Chinese yuan, Singapore dollar or Malaysian ringgit, which could cause our sales and profitability to decline;

•~~liability for foreign taxes assessed at rates higher than those applicable to our domestic operations;~~

~~Table of Contents~~

•customer or government efforts to encourage operations and sourcing in a particular country, such as Korea and China, including efforts to develop and grow local competitors, requiring local manufacturing, and providing special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours; and

•political and economic instability and uncertainty, which may result in severely diminished liquidity and credit availability, rating downgrades of sovereign debt, declining valuation of certain investments, declines in consumer confidence, declines in economic growth, and increased volatility in unemployment rates.

~~In the past, these factors have disrupted our operations and increased our costs, and we expect that these factors will continue to do so in the future.~~

~~Risks Related to Owning our Common Stock~~

~~The price of our common stock has been volatile in the past and may be volatile in the future.~~

The price of our common stock has been volatile in the past and may be volatile in the future. In 2019, the closing price of our stock on The NASDAQ Global Select Market, or NASDAQ, ranged from a low of $27.43 to a high of $51.21, and from January 1, 2020 to April 9, 2020, it ranged from a low of $39.03 to a high of $58.47. The price of our common stock may show greater volatility in the future, particularly in light of the significant increase in volatility in the stock market in general as a result of the impact of the COVID-19 pandemic and ensuing governmental actions. The trading price of our common stock is subject to significant volatility in response to numerous factors, many of which are beyond our control or may be unrelated to our operating results, and which may adversely affect the market price of our common stock, including the following:

•any decision we make to modify, qualify, withdraw or cease providing any guidance regarding our anticipated financial results for future periods, as well as potential decreased confidence in any guidance we do provide;

•~~the failure to meet the published expectations of securities analysts, which in the future may vary more significantly from our actual results;~~

•~~changes in financial estimates by securities analysts;~~

•~~press releases or announcements by, or changes in market values of, comparable companies;~~

•~~volatility in the markets for high-technology stocks, general stock market price and volume fluctuations, which are particularly common among securities of high-technology companies;~~

•~~stock market price and volume fluctuations attributable to inconsistent trading volume levels;~~

•~~the public perception of equity values of publicly traded companies;~~

•~~fluctuations in our results of operations; and~~

•~~the other risks and uncertainties described in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K or our other filings with the SEC.~~

Fluctuations in our results could cause our stock price to decline significantly. We believe that period-to-period comparisons of our results of operations may not be meaningful, and you should not rely upon them as indicators of our future performance. Future decreases in our stock price may adversely impact our ability to raise sufficient additional capital in the future, if needed.

~~Table of Contents~~

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

Issuer Purchases of Equity Securities

~~The following table provides information concerning shares of the Company’s Common Stock $0.01 par value purchased during the three months ended March 28, 2020.~~

Period

(a)
Total Number of Shares Purchased⁽¹⁾

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

⁽¹⁾On ~~February 5,~~December 14, 2020, the Company’s Board of Directors authorized a repurchase program, effective February 16, ~~2020,~~

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 ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. This repurchase program replaced the

~~existing~~ previous repurchase program, which was originally approved in February ~~2018~~2020 and ~~amended in November 2018,~~ which expired pursuant to its terms on February 15, ~~2020.~~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

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 and accordingly are not included in the common stock repurchase totals in the preceding table.~~plan.

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Item 6. Exhibits

EXHIBIT INDEX

A.~~The following exhibits are incorporated by reference:~~

~~Reg. S-K Item 601(b) Reference~~

~~Document Incorporated~~

~~Referenced Document on file with the Commission~~

~~(10)~~

Entegris, Inc. 2019 Performance Share Award Agreement*

~~Exhibit 10.1 to Entegris, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2019~~

~~(10)~~

Entegris, Inc. 2019 RSU Unit Award Agreement*

~~Exhibit 10.2 to Entegris, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2019~~

~~(10)~~

Entegris, Inc. 2019 Stock Option Grant Agreement*

~~Exhibit 10.3 to Entegris, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2019~~

~~(10)~~

Amendment No. 2, dated February 5, 2020, to Executive Change in Control Termination Agreement, between Entegris Inc. and Bertrand Loy*

~~Exhibit 10.4 to Entegris, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2019~~

* A management contract or compensatory plan

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
(10) 10.1
Entegris, Inc. 2020 Performance Share Award Agreement*
(10) 10.2
Entegris, Inc. 2020 RSU Unit Award Agreement*
(10) 10.3
Entegris, Inc. 2020 Stock Option Grant Agreement*
(31) 31.1
Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a).
(31) 31.2
Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a).
(32) 32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(101) 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
(101) 101.SCH XBRL Taxonomy Extension Schema Document
(101) 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
(101) 101.DEF XBRL Taxonomy Extension Definition Linkbase Document
(101) 101.LAB XBRL Taxonomy Extension Label Linkbase Document
(101) 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
* A management contract or compensatory plan


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

3933

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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 ~~21, 2020~~27, 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)

4034


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


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

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


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


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

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


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


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