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 ~~July 1,~~September 30, 2023


☐			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.

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 ~~July 31,~~October 30, 2023, there were ~~150,108,285~~150,158,883 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 ~~JULY 1,~~SEPTEMBER 30, 2023


Description			Page
PART I Financial Information

Item 1. Financial Statements			4
Condensed Consolidated Balance Sheets as of ~~July 1,~~September 30, 2023 and December 31, 2022			4
Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022			5
Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022			6
Condensed Consolidated Statements of Equity for the Three and ~~Six~~Nine Months Ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022			7
Condensed Consolidated Statements of Cash Flows for ~~Six~~the Nine Months Ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022			89
Notes to Condensed Consolidated Financial Statements			1011
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures about Market Risk			4142
Item 4. Controls and Procedures			4142

PART II Other Information

Item 1. Legal Proceedings			4243
Item 1A. Risk Factors			4243
Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities			4243
Item 5. Other Information			4243
Item 6. Exhibits			4344
Signatures			4445

Cautionary Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “should,” “may,” “will,” “would” or the negative thereof and similar expressions are intended to identify such forward-looking statements. These forward-looking statements may include statements about supply chain matters; inflationary pressures; future period guidance or projections; the Company’s performance relative to its markets, including the drivers of such performance; market and technology trends, including the duration and drivers of any growth trends; 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 our business strategies, including with respect to the Company’s expansion of its manufacturing presence in Taiwan and in Colorado Springs; the Company’s capital allocation strategy, which may be modified at any time for any reason, including share repurchases, dividends, debt repayments and potential acquisitions; the impact of the acquisitions and divestitures the Company has made and commercial partnerships the Company has established, including the acquisition of CMC Materials, Inc. (now known as CMC Materials LLC) (“CMC Materials”); ~~the closing of any announced divestitures and the termination of strategic partnerships, including the timing thereof;~~ trends relating to the fluctuation of currency exchange rates; 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; the level of, and obligations associated with, the Company’s indebtedness, including the debts incurred in connection with the acquisition of CMC Materials; risks related to the acquisition and integration of CMC Materials, including unanticipated difficulties or expenditures relating thereto, the ability to achieve the anticipated synergies and value-creation contemplated by the acquisition of CMC Materials and the diversion of management time on transaction-related matters; raw material shortages, supply and labor constraints, price increases, inflationary pressures and rising interest rates;

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operational, political and legal risks of the Company’s international operations; the Company’s dependence on sole source and limited source suppliers; the Company’s

~~Table of Contents~~

ability to meet rapid demand shifts; the Company’s ability to continue technological innovation and introduce new products to meet customers’ rapidly changing requirements; substantial competition; the Company’s concentrated customer base; the Company’s ability to identify, complete and integrate acquisitions, joint ventures, divestitures or other similar transactions; the Company’s ability to consummate pending transactions on a timely basis or at all and the satisfaction of the conditions precedent to consummation of such pending transactions, including the satisfaction of regulatory conditions on the terms expected, at all or in a timely manner; the Company’s ability to effectively implement any organizational changes; the Company’s ability to protect and enforce intellectual property rights; the impact of regional and global instabilities, hostilities and geopolitical uncertainty, including, but not limited to, the ongoing ~~conflict in~~conflicts between Ukraine and Russia and between Israel and Hamas, as well as the global ~~response~~responses thereto; the increasing complexity of certain manufacturing processes; changes in government regulations of the countries in which the Company operates, including the imposition of tariffs, export controls and other trade laws and restrictions and changes to national security and international trade policy, especially as they relate to China; fluctuation of currency exchange rates; fluctuations in the market price of the Company’s stock; and other risk factors and additional information described in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including under the heading “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed on February 23, 2023, and in the Company’s other SEC filings. Except as required under the federal securities laws and the rules and regulations of the SEC, the Company undertakes no obligation to update publicly any forward-looking statements or information contained herein, which speak as of their respective dates.

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)


(In thousands, except share and per share data)	(In thousands, except share and per share data)	July 1, 2023		December 31, 2022		(In thousands, except share and per share data)	September 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	565,878	$	561,559	Cash and cash equivalents	$	594,020	$	561,559
Restricted cash	Restricted cash	1,139		1,880		Restricted cash	—		1,880
Trade accounts and notes receivable, net of allowance for credit losses of $4,384 and $5,443		435,973		535,485
Trade accounts and notes receivable, net of allowance for credit losses of $4,126 and $5,443						Trade accounts and notes receivable, net of allowance for credit losses of $4,126 and $5,443	463,083		535,485
Inventories, net	Inventories, net	740,351		812,815		Inventories, net	662,169		812,815
Deferred tax charges and refundable income taxes	Deferred tax charges and refundable income taxes	55,461		47,618		Deferred tax charges and refundable income taxes	67,848		47,618
Assets held-for-sale	Assets held-for-sale	1,051,947		246,531		Assets held-for-sale	1,045,217		246,531
Other current assets	Other current assets	117,799		129,297		Other current assets	111,223		129,297
Total current assets	Total current assets	2,968,548		2,335,185		Total current assets	2,943,560		2,335,185
Property, plant and equipment, net of accumulated depreciation of $830,906 and $770,093		1,364,760		1,393,337
Property, plant and equipment, net of accumulated depreciation of $869,951 and $770,093						Property, plant and equipment, net of accumulated depreciation of $869,951 and $770,093	1,406,357		1,393,337
Other assets:	Other assets:					Other assets:
Right-of-use assets	Right-of-use assets	81,048		94,940		Right-of-use assets	83,548		94,940
Goodwill	Goodwill	3,970,247		4,408,331		Goodwill	3,954,036		4,408,331
Intangible assets, net of accumulated amortization of $720,336 and $636,872		1,421,710		1,841,955
Intangible assets, net of accumulated amortization of $771,786 and $636,872						Intangible assets, net of accumulated amortization of $771,786 and $636,872	1,368,363		1,841,955
Deferred tax assets and other noncurrent tax assets	Deferred tax assets and other noncurrent tax assets	66,682		28,867		Deferred tax assets and other noncurrent tax assets	30,211		28,867
Other	Other	40,029		36,242		Other	38,541		36,242
Total assets	Total assets	$	9,913,024	$	10,138,857	Total assets	$	9,824,616	$	10,138,857
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Short-term debt, including current portion of long-term debt	Short-term debt, including current portion of long-term debt	$	—	$	151,965	Short-term debt, including current portion of long-term debt	$	—	$	151,965
Accounts payable	Accounts payable	132,157		172,488		Accounts payable	139,637		172,488
Accrued payroll and related benefits	Accrued payroll and related benefits	92,994		142,340		Accrued payroll and related benefits	109,284		142,340
Accrued interest payable	Accrued interest payable	24,939		25,571		Accrued interest payable	65,195		25,571
Liabilities held-for-sale	Liabilities held-for-sale	115,784		10,637		Liabilities held-for-sale	139,270		10,637
Other accrued liabilities	Other accrued liabilities	193,851		160,873		Other accrued liabilities	166,258		160,873
Income taxes payable	Income taxes payable	86,564		98,057		Income taxes payable	63,515		98,057
Total current liabilities	Total current liabilities	646,289		761,931		Total current liabilities	683,159		761,931
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $121,488 and $140,107		5,492,011		5,632,928
Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $113,003 and $140,107						Long-term debt, excluding current maturities, net of unamortized discount and debt issuance costs of $113,003 and $140,107	5,425,496		5,632,928
Pension benefit obligations and other liabilities	Pension benefit obligations and other liabilities	52,046		54,090		Pension benefit obligations and other liabilities	44,627		54,090
Deferred tax liabilities and other noncurrent tax liabilities	Deferred tax liabilities and other noncurrent tax liabilities	301,068		391,192		Deferred tax liabilities and other noncurrent tax liabilities	231,698		391,192
Long-term lease liability	Long-term lease liability	69,405		80,716		Long-term lease liability	71,347		80,716

Equity:	Equity:					Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of July 1, 2023 and December 31, 2022		—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of July 1, 2023: 150,308,245 and 150,105,845, respectively; issued and outstanding shares as of December 31, 2022: 149,339,486 and 149,137,086, respectively		1,503		1,493
Treasury stock, at cost: 202,400 shares held as of July 1, 2023 and December 31, 2022		(7,112)		(7,112)
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022						Preferred stock, par value $.01; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022	—		—
Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of September 30, 2023: 150,357,237 and 150,154,837, respectively; issued and outstanding shares as of December 31, 2022: 149,339,486 and 149,137,086, respectively						Common stock, par value $.01; 400,000,000 shares authorized; issued and outstanding shares as of September 30, 2023: 150,357,237 and 150,154,837, respectively; issued and outstanding shares as of December 31, 2022: 149,339,486 and 149,137,086, respectively	1,504		1,493
Treasury stock, at cost: 202,400 shares held as of September 30, 2023 and December 31, 2022						Treasury stock, at cost: 202,400 shares held as of September 30, 2023 and December 31, 2022	(7,112)		(7,112)
Additional paid-in capital	Additional paid-in capital	2,274,572		2,205,325		Additional paid-in capital	2,283,823		2,205,325
Retained earnings	Retained earnings	1,110,818		1,031,391		Retained earnings	1,128,907		1,031,391
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(27,576)		(13,097)		Accumulated other comprehensive loss	(38,833)		(13,097)
Total equity	Total equity	3,352,205		3,218,000		Total equity	3,368,289		3,218,000
Total liabilities and equity	Total liabilities and equity	$	9,913,024	$	10,138,857	Total liabilities and equity	$	9,824,616	$	10,138,857

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three months ended				Six months ended					Three months ended				Nine months ended
(In thousands, except per share data)	(In thousands, except per share data)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(In thousands, except per share data)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net sales	Net sales	$	901,000	$	692,489	$	1,823,396	$	1,342,135	Net sales	$	888,239	$	993,828	$	2,711,635	$	2,335,963
Cost of sales	Cost of sales	516,834		382,092		1,037,545		721,918		Cost of sales	521,165		622,157		1,558,710		1,344,075
Gross profit	Gross profit	384,166		310,397		785,851		620,217		Gross profit	367,074		371,671		1,152,925		991,888
Selling, general and administrative expenses	Selling, general and administrative expenses	145,596		90,685		315,463		177,793		Selling, general and administrative expenses	116,051		226,446		431,514		404,239
Engineering, research and development expenses	Engineering, research and development expenses	71,030		49,248		142,936		95,963		Engineering, research and development expenses	66,810		64,990		209,746		160,953
Amortization of intangible assets	Amortization of intangible assets	54,680		12,494		112,254		25,145		Amortization of intangible assets	51,239		65,346		163,493		90,491
Goodwill impairment	Goodwill impairment	—		—		88,872		—		Goodwill impairment	15,913		—		104,785		—
Gain on termination of alliance agreement	Gain on termination of alliance agreement	(154,754)		—		(154,754)		—		Gain on termination of alliance agreement	—		—		(154,754)		—
Operating income	Operating income	267,614		157,970		281,080		321,316		Operating income	117,061		14,889		398,141		336,205
Interest expense	Interest expense	80,908		32,001		167,054		44,877		Interest expense	77,820		84,150		244,874		129,027
Interest income	Interest income	(2,303)		(658)		(3,628)		(670)		Interest income	(2,226)		(1,395)		(5,854)		(2,065)
Other expense, net	Other expense, net	7,724		9,619		3,066		14,521		Other expense, net	10,243		12,852		13,309		27,373
Income before income tax (benefit) expense		181,285		117,008		114,588		262,588
Income (loss) before income tax (benefit) expense										Income (loss) before income tax (benefit) expense	31,224		(80,718)		145,812		181,870
Income tax (benefit) expense	Income tax (benefit) expense	(16,491)		17,517		4,978		37,392		Income tax (benefit) expense	(2,127)		(7,015)		2,851		30,377
Equity in net loss of affiliates	Equity in net loss of affiliates	130		—		130		—		Equity in net loss of affiliates	139		—		269		—
Net income		$	197,646	$	99,491	$	109,480	$	225,196
Net income (loss)										Net income (loss)	$	33,212	$	(73,703)	$	142,692	$	151,493

Basic earnings per common share		$	1.32	$	0.73	$	0.73	$	1.66
Diluted earnings per common share		$	1.31	$	0.73	$	0.73	$	1.65
Basic earnings (loss) per common share										Basic earnings (loss) per common share	$	0.22	$	(0.50)	$	0.95	$	1.08
Diluted earnings (loss) per common share										Diluted earnings (loss) per common share	$	0.22	$	(0.50)	$	0.95	$	1.08

Weighted shares outstanding:	Weighted shares outstanding:									Weighted shares outstanding:
Basic	Basic	149,825		135,895		149,626		135,783		Basic	150,127		148,570		149,793		140,045
Diluted	Diluted	150,837		136,454		150,609		136,503		Diluted	151,229		148,570		150,816		140,892

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 Six months ended
(In thousands) July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Net income $ 197,646 $ 99,491 $ 109,480 $ 225,196
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments (38,011) (9,014) (14,277) (11,142)
Pension liability adjustments — — 37 73
Interest rate swap - cash flow hedge, change in fair value - income (loss), net of tax expense (benefit) of $2,834 and $(69) for the three and six months ended, respectively. 9,716 — (239) —
Other comprehensive (loss) income (28,295) (9,014) (14,479) (11,069)
Comprehensive income $ 169,351 $ 90,477 $ 95,001 $ 214,127


	Three months ended				Nine months ended
(In thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net income (loss)	$	33,212	$	(73,703)	$	142,692	$	151,493
Other comprehensive loss, net of tax
Foreign currency translation adjustments	(9,174)		(37,461)		(23,451)		(48,603)
Pension liability adjustments	(33)		—		4		73
Interest rate swap - cash flow hedge, change in fair value - (loss) income, net of tax (benefit) expense of ($598) and ($667) for the three and nine months ended September 30, 2023 and $9,285 and $9,285 for the three and nine months ended October 1, 2022, respectively.	(2,050)		30,743		(2,289)		30,743
Other comprehensive loss	(11,257)		(6,718)		(25,736)		(17,787)
Comprehensive income (loss)	$	21,955	$	(80,421)	$	116,956	$	133,706

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(In thousands)	(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings		Foreign currency translation adjustments		Defined benefit pension adjustments		Interest Rate Swap - Cash flow hedge		Total		(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings		Foreign currency translation adjustments		Defined benefit pension adjustments		Interest Rate Swap - Cash flow hedge		Total
Balance at December 31, 2021	Balance at December 31, 2021	135,719	$	1,357	202	$	(7,112)	$	879,845	$	879,776	$	(38,863)	$	(1,222)	$	—	$	1,713,781	Balance at December 31, 2021	135,719	$	1,357	202	$	(7,112)	$	879,845	$	879,776	$	(38,863)	$	(1,222)	$	—	$	1,713,781
Shares issued under stock plans	Shares issued under stock plans	366	4		—	—		(12,742)		—		—		—		—		(12,738)		Shares issued under stock plans	366	4		—	—		(12,742)		—		—		—		—		(12,738)
Share-based compensation expense	Share-based compensation expense	—	—		—	—		9,285		—		—		—		—		9,285		Share-based compensation expense	—	—		—	—		9,285		—		—		—		—		9,285

Dividends declared ($0.10 per share)	Dividends declared ($0.10 per share)	—	—		—	—		—		(13,660)		—		—		—		(13,660)		Dividends declared ($0.10 per share)	—	—		—	—		—		(13,660)		—		—		—		(13,660)
Pension liability adjustment	Pension liability adjustment	—	—		—	—		—		—		—		73		—		73		Pension liability adjustment	—	—		—	—		—		—		—		73		—		73
Foreign currency translation	Foreign currency translation	—	—		—	—		—		—		(2,128)		—		—		(2,128)		Foreign currency translation	—	—		—	—		—		—		(2,128)		—		—		(2,128)
Net income	Net income	—	—		—	—		—		125,705		—		—		—		125,705		Net income	—	—		—	—		—		125,705		—		—		—		125,705
Balance at April 2, 2022	Balance at April 2, 2022	136,085	1,361		202	(7,112)		876,388		991,821		(40,991)		(1,149)		—		1,820,318		Balance at April 2, 2022	136,085	1,361		202	(7,112)		876,388		991,821		(40,991)		(1,149)		—		1,820,318
Shares issued under stock plans	Shares issued under stock plans	88	1			—		5,397		—		—		—		—		5,398		Shares issued under stock plans	88	1			—		5,397		—		—		—		—		5,398
Share-based compensation expense	Share-based compensation expense	—	—		—	—		10,182		—		—		—		—		10,182		Share-based compensation expense	—	—		—	—		10,182		—		—		—		—		10,182

Dividends declared ($0.10 per share)	Dividends declared ($0.10 per share)	—	—		—	—		—		(13,661)		—		—		—		(13,661)		Dividends declared ($0.10 per share)	—	—		—	—		—		(13,661)		—		—		—		(13,661)

Foreign currency translation	Foreign currency translation	—	—		—	—		—		—		(9,014)		—		—		(9,014)		Foreign currency translation	—	—		—	—		—		—		(9,014)		—		—		(9,014)
Net income	Net income	—	—		—	—		—		99,491		—		—		—		99,491		Net income	—	—		—	—		—		99,491		—		—		—		99,491
Balance at July 2, 2022	Balance at July 2, 2022	136,173	$	1,362	202	$	(7,112)	$	891,967	$	1,077,651	$	(50,005)	$	(1,149)	—		$	1,912,714	Balance at July 2, 2022	136,173	$	1,362	202	$	(7,112)	$	891,967	$	1,077,651	$	(50,005)	$	(1,149)	—		$	1,912,714
Shares issued under stock plans																				Shares issued under stock plans	137	1			—		(4,644)		—		—		—		—		(4,643)
Share-based compensation expense																				Share-based compensation expense	—	—		—	—		38,077		—		—		—		—		38,077
Issuance of common stock in connection with CMC Materials acquisition																				Issuance of common stock in connection with CMC Materials acquisition	12,927	129		—	—		1,265,561		—		—		—		—		1,265,690
Dividends declared ($0.10 per share)																				Dividends declared ($0.10 per share)	—	—		—	—		—		(15,100)		—		—		—		(15,100)

Interest Rate Swap - Cash flow hedge																				Interest Rate Swap - Cash flow hedge	—	—		—	—		—		—		—		—		30,743		30,743
Foreign currency translation																				Foreign currency translation	—	—		—	—		—		—		(37,461)		—		—		(37,461)
Net loss																				Net loss	—	—		—	—		—		(73,703)		—		—		—		(73,703)
Balance at October 1, 2022																				Balance at October 1, 2022	149,237	$	1,492	202	$	(7,112)	$	2,190,961	$	988,848	$	(87,466)	$	(1,149)	$	30,743	$	3,116,317

(In thousands) Common
shares
outstanding Common
stock Treasury shares Treasury stock Additional
paid-in
capital Retained earnings Foreign currency translation adjustments Defined benefit pension adjustments Interest Rate Swap - Cash flow hedge Total
Balance at December 31, 2022 149,339 $ 1,493 202 $ (7,112) $ 2,205,325 $ 1,031,391 $ (49,083) $ (83) $ 36,069 $ 3,218,000
Shares issued under stock plans 530 6 — — 8,981 — — — — 8,987
Share-based compensation expense — — — — 30,678 — — — — 30,678
Dividends declared ($0.10 per share) — — — — — (15,092) — — — (15,092)
Interest Rate Swap - Cash flow hedge — — — — — — — — (9,955) (9,955)
Pension liability adjustment — — — — — — — 37 — 37
Foreign currency translation — — — — — — 23,734 — — 23,734
Net loss — — — — — (88,166) — — — (88,166)
Balance at April 1, 2023 149,869 1,499 202 (7,112) 2,244,984 928,133 (25,349) (46) 26,114 3,168,223
Shares issued under stock plans 439 4 — — 18,130 — — — — 18,134
Share-based compensation expense — — — — 11,458 — — — — 11,458
Dividends declared ($0.10 per share) — — — — (14,961) — — — (14,961)
Interest Rate Swap - Cash flow hedge — — — — — — — 9,716 9,716
Foreign currency translation — — — — — (38,011) — — (38,011)
Net Income — — — — 197,646 — — — 197,646
Balance at July 1, 2023 150,308 $ 1,503 202 $ (7,112) $ 2,274,572 $ 1,110,818 $ (63,360) $ (46) $ 35,830 $ 3,352,205

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(In thousands)	Common shares outstanding	Common stock		Treasury shares	Treasury stock		Additional paid-in capital		Retained earnings		Foreign currency translation adjustments		Defined benefit pension adjustments		Interest Rate Swap - Cash flow hedge		Total
Balance at December 31, 2022	149,339	$	1,493	202	$	(7,112)	$	2,205,325	$	1,031,391	$	(49,083)	$	(83)	$	36,069	$	3,218,000
Shares issued under stock plans	530	6		—	—		8,981		—		—		—		—		8,987
Share-based compensation expense	—	—		—	—		30,678		—		—		—		—		30,678
Dividends declared ($0.10 per share)	—	—		—	—		—		(15,092)		—		—		—		(15,092)
Interest Rate Swap - Cash flow hedge	—	—		—	—		—		—		—		—		(9,955)		(9,955)
Pension liability adjustment	—	—		—	—		—		—		—		37		—		37
Foreign currency translation	—	—		—	—		—		—		23,734		—		—		23,734
Net loss	—	—		—	—		—		(88,166)		—		—		—		(88,166)
Balance at April 1, 2023	149,869	1,499		202	(7,112)		2,244,984		928,133		(25,349)		(46)		26,114		3,168,223
Shares issued under stock plans	439	4		—	—		18,130		—		—		—		—		18,134
Share-based compensation expense	—	—		—	—		11,458		—		—		—		—		11,458
Dividends declared ($0.10 per share)	—	—		—	—		—		(14,961)		—		—		—		(14,961)
Interest Rate Swap - Cash flow hedge	—	—		—	—		—		—		—		—		9,716		9,716
Pension liability adjustment	—	—		—	—		—		—		—		—		—		—
Foreign currency translation	—	—		—	—		—		—		(38,011)		—		—		(38,011)
Net Income	—	—		—	—		—		197,646		—		—		—		197,646
Balance at July 1, 2023	150,308	$	1,503	202	$	(7,112)	$	2,274,572	$	1,110,818	$	(63,360)	$	(46)	$	35,830	$	3,352,205
Shares issued under stock plans	49	1		—	—		(1,029)		—		—		—		—		(1,028)
Share-based compensation expense	—	—		—	—		10,280		—		—		—		—		10,280
Dividends declared ($0.10 per share)	—	—		—	—		—		(15,123)		—		—		—		(15,123)
Interest Rate Swap - Cash flow hedge	—	—		—	—		—		—		—		—		(2,050)		(2,050)
Pension liability adjustment	—	—		—	—		—		—		—		(33)		—		(33)
Foreign currency translation	—	—		—	—		—		—		(9,174)		—		—		(9,174)
Net Income	—	—		—	—		—		33,212		—		—		—		33,212
Balance at September 30, 2023	150,357	$	1,504	202	$	(7,112)	$	2,283,823	$	1,128,907	$	(72,534)	$	(79)	$	33,780	$	3,368,289

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six months ended					Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	109,480	$	225,196	Net income	$	142,692	$	151,493
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	90,494		48,286		Depreciation	130,125		93,489
Amortization	Amortization	112,254		25,145		Amortization	163,493		90,491
Share-based compensation expense	Share-based compensation expense	42,136		19,467		Share-based compensation expense	52,416		57,544

Charge for fair value mark-up of acquired inventory sold						Charge for fair value mark-up of acquired inventory sold	—		61,932
Provision for deferred income taxes	Provision for deferred income taxes	(66,814)		(23,472)		Provision for deferred income taxes	(95,366)		(56,964)
Impairment of goodwill	Impairment of goodwill	88,872		—		Impairment of goodwill	104,785		—
Loss on extinguishment of debt	Loss on extinguishment of debt	7,269		—		Loss on extinguishment of debt	10,862		2,235
Loss from sale of business and held-for-sale	Loss from sale of business and held-for-sale	28,577		—		Loss from sale of business and held-for-sale	28,579		—
Gain on termination of alliance agreement	Gain on termination of alliance agreement	(154,754)		—		Gain on termination of alliance agreement	(154,754)		—
Charge for excess and obsolete inventory	Charge for excess and obsolete inventory	23,287		13,916		Charge for excess and obsolete inventory	29,314		17,582
Amortization of debt issuance costs						Amortization of debt issuance costs	16,718		9,211
Other	Other	26,239		18,243		Other	21,801		29,459
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	17,941		(57,309)		Trade accounts and notes receivable	(295)		(34,378)
Inventories	Inventories	(5,009)		(124,941)		Inventories	63,340		(180,335)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(23,595)		27,145		Accounts payable and accrued liabilities	4,345		83,307
Other current assets	Other current assets	(1,534)		(2,592)		Other current assets	1,644		(4,248)
Income taxes payable and refundable income taxes	Income taxes payable and refundable income taxes	(15,570)		(3,548)		Income taxes payable and refundable income taxes	(36,774)		(15,637)
Other	Other	(384)		9,162		Other	(4,013)		15,049
Net cash provided by operating activities	Net cash provided by operating activities	278,889		174,698		Net cash provided by operating activities	478,912		320,230
Investing activities:	Investing activities:					Investing activities:
Acquisition of property, plant and equipment	Acquisition of property, plant and equipment	(250,043)		(192,097)		Acquisition of property, plant and equipment	(328,182)		(318,836)

Acquisition of businesses, net of cash acquired						Acquisition of businesses, net of cash acquired	—		(4,474,925)
Proceeds from sale of business	Proceeds from sale of business	134,286		—		Proceeds from sale of business	134,286		—
Proceeds from termination of alliance agreement	Proceeds from termination of alliance agreement	169,251		—		Proceeds from termination of alliance agreement	169,251		—
Other	Other	366		1,123		Other	1,919		1,124
Net cash provided by (used in) investing activities		53,860		(190,974)
Net cash used in investing activities						Net cash used in investing activities	(22,726)		(4,792,637)
Financing activities:	Financing activities:					Financing activities:
Proceeds from revolving credit facility and short-term debt	Proceeds from revolving credit facility and short-term debt	—		201,000		Proceeds from revolving credit facility and short-term debt	—		476,000
Payments of revolving credit facility and short-term debt	Payments of revolving credit facility and short-term debt	(135,000)		(193,000)		Payments of revolving credit facility and short-term debt	(135,000)		(271,000)
Proceeds from long-term debt	Proceeds from long-term debt	117,170		2,405,314		Proceeds from long-term debt	217,449		4,940,753
Payments of long-term debt	Payments of long-term debt	(293,671)		—		Payments of long-term debt	(468,950)		(145,000)

Payments for debt issuance costs	Payments for debt issuance costs	(3,475)		(10,579)		Payments for debt issuance costs	(3,475)		(99,489)
Payments for dividends	Payments for dividends	(30,150)		(27,484)		Payments for dividends	(45,202)		(42,413)
Issuance of common stock	Issuance of common stock	36,767		8,977		Issuance of common stock	37,633		10,764

Taxes paid related to net share settlement of equity awards	Taxes paid related to net share settlement of equity awards	(9,646)		(16,317)		Taxes paid related to net share settlement of equity awards	(11,540)		(22,747)

Other	Other	(578)		(587)		Other	(923)		(859)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(318,583)		2,367,324		Net cash (used in) provided by financing activities	(410,008)		4,846,009
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(10,588)		(10,382)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(15,597)		(21,500)
Increase in cash, cash equivalents and restricted cash	Increase in cash, cash equivalents and restricted cash	3,578		2,340,666		Increase in cash, cash equivalents and restricted cash	30,581		352,102
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	563,439		402,565		Cash, cash equivalents and restricted cash at beginning of period	563,439		402,565
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	567,017	$	2,743,231	Cash, cash equivalents and restricted cash at end of period	$	594,020	$	754,667

See the accompanying notes to condensed consolidated financial statements.

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ENTEGRIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

Supplemental Cash Flow Information

Six months ended

Supplemental Cash Flow Information

Nine months ended

(unaudited)

(In thousands)

July 1, 2023

July 2, 2022

(In thousands)

September 30, 2023

October 1, 2022

Non-cash transactions:

Original issue discount credit due from lender

—

65,389

Equipment purchases in accounts payable

22,607

23,394

Equipment purchases in accounts payable

35,684

19,362

Dividend payable

557

495

Dividend payable

628

666

Equity consideration on acquisition of CMC Materials

—

1,265,690

Schedule of interest and income taxes paid:

Interest paid less capitalized interest

260,282

15,699

Interest paid less capitalized interest

292,416

22,917

Income taxes paid, net of refunds received

85,913

62,168

Income taxes paid, net of refunds received

129,474

96,729

See the accompanying notes to condensed consolidated financial statements.

910

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ENTEGRIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and contain all adjustments considered necessary, and are of a normal recurring nature, to present fairly the financial position as of ~~July 1,~~September 30, 2023 and December 31, 2022, and the results of operations and comprehensive income for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, the equity statements as of and for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, and cash flows for the ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022.

Our recently acquired subsidiary, CMC Materials LLC (formerly known as CMC Materials, Inc.) (“CMC Materials”), follows a monthly reporting calendar. The second quarter of 2023 for CMC Materials ended on June 30, 2023, whereas the Company’s second quarter ended on July 1, 2023. The Company believes that use of the different fiscal periods for this entity has not had a material impact on the Company’s condensed consolidated financial position, results of operations, or liquidity. All significant intercompany balances and transactions have been eliminated in consolidation.

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 Quarterly Report on 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 Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

In the third quarter of 2023, in order to align its segment financial reporting with a change in its business structure, the Company realigned its segments. Following the segment realignment, the Company’s three reportable segments are as follows (1) Materials Solutions, (2) Microcontamination Control, and (3) Advanced Materials Handling. The current interim and succeeding annual periods will disclose the reportable segments with prior periods recast to reflect the change.

Recently Adopted Accounting Pronouncements The Company currently has no material recently adopted accounting pronouncements.

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

1011

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2. REVENUES

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


							Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022
Balance at beginning of period	Balance at beginning of period	$	60,476	$	23,050	Balance at beginning of period	$	60,476	$	23,050
Revenue recognized that was included in the contract liability balance at the beginning of the period	Revenue recognized that was included in the contract liability balance at the beginning of the period	(43,905)		(15,585)		Revenue recognized that was included in the contract liability balance at the beginning of the period	(32,736)		(26,444)
Increases due to cash received, excluding amounts recognized as revenue during the period	Increases due to cash received, excluding amounts recognized as revenue during the period	79,621		25,770		Increases due to cash received, excluding amounts recognized as revenue during the period	56,145		40,725
Contract liabilities included as part of disposition	Contract liabilities included as part of disposition	(6,226)		—		Contract liabilities included as part of disposition	(6,226)		—

Additions due to acquisitions						Additions due to acquisitions	—		11,108
Balance at end of period	Balance at end of period	$	89,966	$	33,235	Balance at end of period	$	77,659	$	48,439

3. GOODWILL IMPAIRMENT

During the first quarter of 2023, while the criteria had not been met to classify the reporting unit as held for sale, the Company was exploring market interest in a potential sale of the Electronic Chemicals (“EC”) reporting unit within what is now the Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions ~~segment.~~and the Specialty Chemicals and Engineered Materials segments). In connection with the sale process, management determined that certain impairment indicators were present and evaluated goodwill, intangible assets, and long-lived assets for impairment in connection with the quarter ending April 1, 2023.

Long-lived assets, including finite-lived intangible assets

The Company compared the estimated undiscounted future cash flows generated by the asset group to the carrying amount of the asset group for the reporting unit and determined that the undiscounted cash flows ~~are~~were expected to exceed the carrying value on a held and used basis, therefore no impairment was recorded on the long-lived asset or finite-lived intangible assets. The Company considered if the triggering event would cause a potential change to the useful life of the assets and did not consider a modification to the useful life necessary.

Goodwill

The Company compared the reporting unit’s fair value to its carrying amount, including goodwill, as of April 1, 2023. As the reporting unit’s carrying amount, including goodwill, exceeded its fair value, the Company determined the goodwill was impaired and recorded an impairment of $88.9 million during the ~~first quarter~~three months ended April 1, 2023 and an incremental impairment loss was recorded with the finalization of certain purchase price adjustments of $15.9 million during the three months ended September 30, 2023. The impairment is classified as goodwill impairment in the Company's condensed consolidated statement of operations. The goodwill impairment is non-taxable. The fair value of the reporting unit was determined using a market-based approach, which was aligned to the expected selling ~~price of approximately $700.0 million.~~price. We consider this a Level 3 measurement in the fair value hierarchy.

~~During~~Following the ~~second~~end of our third quarter of fiscal 2023, on October 2, 2023, we completed the sale of the EC reporting unit, ~~met~~which reported into the ~~classification for held for sale,~~Materials Solutions segment, see Note 5. ~~There was no goodwill impairment related to the EC reporting unit in the second quarter of 2023.~~

4. ACQUISITION

CMC Materials

On July 6, 2022 (the “Closing Date”), the Company completed its acquisition of CMC Materials, Inc. (now known as CMC Materials LLC) (“CMC Materials”) for approximately $6.0 billion in cash and stock (the “Acquisition”) pursuant to an Agreement and Plan of Merger, dated as of December 14, 2021 (the “Acquisition Agreement”). As a result of the Acquisition, CMC Materials became a wholly owned subsidiary of the Company. The Acquisition was accounted for under the acquisition method of accounting and the results of operations of CMC Materials are included in the Company's condensed consolidated financial statements as of and since July 6, 2022. CMC Materials reports into the Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials ~~segments~~segments) of the Company. Direct costs of ~~$39.5~~$31.9 million and $39.3 million associated with the acquisition of CMC Materials, consisting primarily of professional and consulting fees, were expensed as incurred in ~~fiscal year 2022.~~the three and nine months ended

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October 1, 2022, respectively. These costs are classified as selling, general and administrative expense in the Company's condensed consolidated statement of operations.

CMC Materials is a global supplier of consumable materials, primarily to semiconductor manufacturers. ~~The Company's~~CMC Materials’ products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. The acquisition broadened the Company’s solutions set and enables the Company to bring to market a broader array of innovative and high-value solutions, at a faster pace, to help customers improve productivity, performance and total cost of ownership.

~~Table of Contents~~

The purchase price of CMC Materials consisted of the following:


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

Under the terms of the Acquisition Agreement, the Company paid $133.00 per share for all outstanding shares of CMC Materials (excluding treasury shares). In addition, the Company settled all outstanding share-based compensation awards held by CMC Materials’ employees at the same per share price except for certain unvested performance units that were replaced by the Company’s restricted share units. The acquisition method of accounting requires the Company to include the amount associated with pre-combination service as purchase price for the acquisition, reflected in the table immediately above.

The Acquisition was funded with existing cash balances as well as funds raised by the Company through the issuance of debt in the form of a new term loan facility in the aggregate principal amount of $2,495.0 million, senior secured notes due 2029 in an aggregate principal amount of $1,600.0 million, senior unsecured notes due 2030 in an aggregate principal amount of $895.0 million, and a 364-Day Bridge Credit Facility in the aggregate principal amount of $275.0 million.

The following table summarizes the 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 6, 2022
Cash and cash equivalents	$	280,636
Accounts receivable and other current assets	207,472
Inventory	256,598
Property, plant and equipment	537,387
Identifiable intangible assets	1,736,219
Other noncurrent assets	39,725
Current liabilities	(211,417)
Deferred tax liabilities and other noncurrent liabilities	(452,805)
Net assets acquired	2,393,815
Goodwill	3,627,436
Total purchase price	$	6,021,251

The final valuation of assets acquired and liabilities assumed in connection with the Acquisition was completed in the second quarter of 2023.

The fair value of acquired inventories was $256.6 million and was valued at the estimated selling price less the cost of disposal and reasonable profit for the selling effort. The fair value write-up of acquired finished goods inventory was $61.9 million. This amount was recorded as an incremental cost of sales charge, amortized over the expected turn of the acquired inventory, during the year ended December 31, 2022.

The fair value of acquired property, plant and equipment of $537.4 million is valued at its fair value assuming held and used,

unless market data was available supporting the fair value.

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The Company recognized the following intangible assets as part of the acquisition of CMC Materials and finite-lived assets are amortized on a straight-line basis:

~~Table of Contents~~


(In thousands)	Amount		Weighted average life in years
Developed technology	$	1,043,000	7.3
Trademarks and trade names	236,600		14.9
Customer relationships	414,300		18.3
In-process research and development (1)	31,400
Other	10,919		1.0
	$	1,736,219	11.0

(1) In-process research and development assets are treated as indefinite-lived until the completion or abandonment of the associated research and development project, at which time the appropriate useful lives would be determined.

The fair value of acquired identifiable finite intangible assets was determined using an income method, which utilizes discounted cash flows to identify the fair value of each of the identifiable intangible assets. The Company normally utilizes the “income method,” which starts with a forecast of all of the expected future net cash flows attributable to the subject intangible asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Depending on the asset valued, the key assumptions included one or more of the following: (1) future revenue growth rates, (2) future gross margin, (3) future selling, general and administrative expenses, (4) royalty rates, and (5) discount rates. The valuations were 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. There are inherent uncertainties and management judgment required in these determinations. The fair value measurements of the assets acquired and liabilities assumed were based on valuations involving significant unobservable inputs, or Level 3 in the fair value hierarchy.

The purchase price of CMC Materials exceeded the fair value of the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed by $3,627.4 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. The purchase price also included the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value in addition to a going-concern element that represents the Company's ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process. This additional investment value resulted in goodwill. No amount of goodwill is expected to be deductible for tax purposes.

Pro Forma Results (Unaudited)

The following unaudited pro forma financial information presents the combined results of operations of the Company as if the acquisition of CMC Materials had occurred January 1, 2021. The unaudited pro forma financial information is not necessarily indicative of what the Company’s condensed consolidated results of operations actually would have been had the acquisition occurred at the beginning of each year. In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined company. The pro forma information does not include any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition.


		Three months ended			Six months ended				Three months ended			Nine months ended
(In thousands, except share data)	(In thousands, except share data)		July 2, 2022			July 2, 2022		(In thousands, except share data)		October 1, 2022			October 1, 2022
Net sales	Net sales		$	1,011,862		$	1,980,953	Net sales		$	993,828		$	2,974,781
Net income	Net income		70,417			170,681		Net income		63,940			234,621

Per share amounts:	Per share amounts:							Per share amounts:
Net income per common share - basic	Net income per common share - basic		$	0.47		$	1.15	Net income per common share - basic		$	0.43		$	1.58
Net income per common share - diluted	Net income per common share - diluted		$	0.47		$	1.13	Net income per common share - diluted		$	0.43		$	1.56

The unaudited pro forma financial information above gives effect to the following:

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•The elimination of transactions between Entegris and CMC Materials, which upon completion of the Acquisition would be considered intercompany. This reflects the elimination of intercompany sales and associated intercompany accounts.

•Incremental amortization and depreciation expense related to the estimated fair value of identifiable intangible assets and property, plant and equipment from the purchase price allocation.

•Interest expense on the new debt raised to fund in part the consideration paid to effect the Acquisition using the effective interest rates.

•The elimination of interest expense, net of the one-time gain on the termination of two swap instruments which were terminated on June 24, 2022 in connection with the repayment of CMC Materials’ debt upon completion of the Acquisition.

•The elimination of interest expense associated with the repayment of the $145.0 million senior secured term loan facility due 2025.

•The amortization of deferred financing costs and original issue discount associated with the aggregate new debt facilities.

•Transaction and integration costs directly attributable to the Acquisition were reclassed as of the beginning of the comparable prior annual reporting period.

•The income tax effect of the transaction accounting adjustments related to the Acquisition calculated using a blended statutory income tax rate of 22.5%.

•The incremental pro forma stock-based compensation expense for accelerated vesting upon the change in control for stock options, restricted stock units, restricted stock shares, phantom units, and other deferred restricted stock units.

•The additional cost of goods sold recognized in connection with the write-up of acquired finished goods inventory of $61.9 million. The write-up is recognized in cost of sales as the inventory is sold, which for purposes of these pro forma financial statements is assumed to occur within the first quarter after the Acquisition and is non-recurring in nature.

5. ASSET HELD-FOR-SALE AND DIVESTITURE

Asset Held-For-Sale - PIM

On October 11, 2022, the Company announced entry into a definitive agreement to sell its Pipeline and Industrials Materials (“PIM”) business, which became part of the Company with the acquisition of CMC Materials, to Infineum USA L.P. (“Infineum”). The PIM business specializes in the manufacture and sale of drag reducing agents and a range of valve maintenance products and services, and reports into the Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials ~~segment~~segments) of the Company. Effective February 10, 2023, the Company terminated the definitive agreement. In accordance with the terms of the agreement, the Company received a $12.0 million termination fee from Infineum in the first quarter of 2023 and incurred a transaction adviser fee of $1.1 million. The net amount of $10.9 million is recorded in Other expense, net in the condensed consolidated statement of operations. At the time of the termination, the transaction had not received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”).

During the fourth quarter of 2022, the related assets and liabilities were classified as held-for-sale in the Company’s consolidated balance sheet and measured at the lower of their carrying amount or fair value less cost to sell. The assets and liabilities continue to be classified as held-for-sale at ~~July 1,~~September 30, 2023.

The planned disposition of the PIM business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

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PIM Assets-held-for sale comprise the following as of ~~July 1,~~September 30, 2023:


(In thousands)
Assets:	~~July 1,~~September 30, 2023
Current assets	$	~~51,612~~49,277
Property, Plant and Equipment, net	~~110,944~~113,305
Intangible assets, net	76,692
Goodwill	12,707
Other assets	~~1,352~~1,364
Total assets-held-for sale	$	~~253,307~~253,345

Liabilities:
Accounts payable	$	~~6,628~~5,675
Accrued expenses	~~6,584~~7,978
Long-term liabilities	~~1,235~~1,959
Total liabilities-held-for sale	$	~~14,447~~15,612

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Income before income taxes attributable to the PIM business was ~~$12.7~~$12.0 million and ~~$21.3~~$33.3 million for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively.

Asset held-for-sale - EC Business

On May 10, 2023, the Company announced entry into a definitive agreement to sell its Electronic Chemicals (“EC”) business, which became part of the Company with the acquisition of CMC Materials, to ~~FUJIFILMS~~FUJIFILM Holdings America Corporation for approximately $700.0 million, subject to customary adjustments with respect to cash, working capital, indebtedness and transaction expenses. The EC business specializes in purification, formulation, blending, packaging and distribution of high-purity process chemicals used within the semiconductor and microelectronic manufacturing processes. ~~The divestiture is currently expected to close before~~In connection with the ~~end of 2023, subject to receipt of required regulatory approvals and other customary closing conditions. The EC business reports into~~held-for-sale classification, upon the ~~Advanced Planarization Solutions segment~~remeasurement of the ~~Company. The Company~~disposal group to its fair value, less cost to sell, we recognized a loss on the assets held-for-sale of $13.6 million as loss on ~~the~~held for sale for the ~~EC business for the~~ three ~~and six~~ months ended July 1, 2023 and a loss of $15.9 million on impairment of goodwill for the three months ended September 30, 2023. The loss ison assets held-for-sale are included in Selling, general and administrative expenses and the goodwill impairment is included in goodwill impairment in the condensed consolidated statement of operations.

The ~~planned~~ disposition of the EC business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

EC Assets-held-for sale comprise the following as of ~~July 1,~~September 30, 2023:


(In thousands)
Assets:	~~July 1,~~September 30, 2023
Current assets	$	~~106,063~~92,563
Property, Plant and Equipment, net	~~170,180~~177,020
Intangible assets, net	263,686
Goodwill	~~250,775~~250,638
Other assets	~~7,936~~7,965
Total assets-held-for sale	$	~~798,640~~791,872

Liabilities:
Accounts payable	$	~~16,706~~18,975
Accrued expenses	~~14,449~~15,255
Long-term liabilities	~~70,182~~89,428
Total liabilities-held-for sale	$	~~101,337~~123,658

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(Income)/Loss before income taxes attributable to the EC business was ~~$3.1~~($0.9) million and ~~$86.6~~$85.7 million for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023. The loss before income taxes attributed to the EC business for the three ~~and six~~ months ended ~~July 1,~~September 30, 2023 ~~included~~includes incremental goodwill impairment of $15.9 million. The loss before income taxes attributable to the EC business for the nine months ended September 30, 2023 includes total goodwill impairment charges of $104.8 million and loss on assets held-for-sale of $13.6 million ~~loss on held~~ for expected transaction expenses.

On October 2, 2023, following the end of our third quarter of 2023, the Company completed the sale ~~as noted above and~~of the ~~six months ended included~~EC business. The Company received gross cash proceeds of $737.1 million, or net proceeds of $694.3 million, which includes cash sold of $42.8 million, which remains subject to customary final post-closing adjustments. The Company intends to use the ~~$88.9 million goodwill impairment, see Note 5.~~proceeds of this transaction for early repayment of debt.

Divestiture - QED

During the first quarter of 2023, the Company announced entry into a definitive agreement to sell QED Technologies International, Inc. (“QED”), which offers magnetorheological finishing polishing and subaperture stitching interferometry metrology manufacturing ~~solutions.~~solutions to Quad-C Management, Inc. QED was a part of what is now the Materials Solutions segment (the segment resulting from combining the Advanced Planarization Solutions and the Specialty Chemicals and Engineered Materials ~~segment~~segments) and became part of the Company with the acquisition of CMC Materials.

The Company completed the divestiture of QED on March 1, 2023 and received proceeds of $134.3 million after adjustments with respect to cash, working capital, indebtedness and transaction expenses. The disposition of QED did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. The following table summarizes the fair value of the sale proceeds received in connection with the divestiture, which are subject to further post-closing adjustment:

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(In thousands)	March 1, 2023
Fair value of sale consideration	$	137,500
Final working capital adjustment	1,031
Cash transferred to the buyer on the closing balance sheet	(1,465)
Direct costs to sell	(2,780)
Fair value of sale consideration	$	134,286

The carrying amount of net assets associated with the QED business was approximately $149.2 million. The major classes of assets and liabilities sold consisted of the following:


(In thousands)	~~March 1, 2023~~
Assets:	March 1, 2023
Current assets	$	19,219
Property, plant and equipment, net	2,663
Goodwill	90,005
Intangible assets, net	48,661
Other assets	842
Total assets	$	161,390

Liabilities:
Accounts payable	$	1,340
Accrued expenses	8,750
Long-term liabilities	2,067
Total liabilities	$	12,157

As a result of the QED divestiture, the Company recognized a pre-tax loss of ~~$1.3 million and~~ $14.9 million presented in selling, general and administrative expenses on the condensed consolidated statements of operations for the ~~three and six~~nine months ended ~~July 1, 2023, respectively.~~September 30, 2023. The Company recorded an income tax benefit associated with the QED divestiture of approximately $6.8 million.

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Termination - Alliance Agreement

On June 5, 2023, the Company announced the termination of anthe Alliance Agreement (the “Alliance Agreement”) between the Company and MacDermid Enthone Inc., a global business unit of Element Solutions Inc (“MacDermid Enthone”). Under the Alliance Agreement, Entegris had been granted the exclusive right to distribute MacDermid Enthone's Viaform products, subject to certain conditions. In connection with the termination of the Alliance Agreement, Entegris ~~will receive~~received a payment of ~~$200.0 million, subject to certain adjustments, with~~ $170.0 million ~~that was paid~~ on June 2, 2023 ~~upon the termination of the alliance agreement~~ and will receive $30.0 million payable upon completion of customer ~~transitions.~~transitions, subject to certain adjustments. The Company recognized a pre-tax gain of $154.8 million presented in gain on termination of alliance agreement on the condensed consolidated statements of operations for the three and ~~six~~nine months ended ~~July 1, 2023.~~September 30, 2023, respectively.

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6. RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet that sum to the total of the same amounts shown in the condensed consolidated statement of cash flows.


(In thousands)	(In thousands)	July 1, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	565,878	$	561,559	Cash and cash equivalents	$	594,020	$	561,559
Restricted cash	Restricted cash	1,139		1,880		Restricted cash	—		1,880
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	567,017	$	563,439	Total cash, cash equivalents and restricted cash	$	594,020	$	563,439

The restricted cash represents cash held in a “Rabbi” trust. Prior to the acquisition of CMC Materials, CMC Materials’ change in control severance protection agreements required CMC Materials to establish a Rabbi trust prior to a change in control and fully fund the trust to cover all the severance benefits that may become payable under the agreements. The Company had no restricted cash as of September 30, 2023.

7. INVENTORIES

Inventories consist of the following:


(In thousands)	(In thousands)	July 1, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Raw materials	Raw materials	$	315,616	$	337,576	Raw materials	$	278,184	$	337,576
Work-in-process	Work-in-process	55,978		60,182		Work-in-process	51,596		60,182
Finished goods (1)	Finished goods (1)	368,757		415,057		Finished goods (1)	332,389		415,057
Total inventories, net	Total inventories, net	$	740,351	$	812,815	Total inventories, net	$	662,169	$	812,815

(1) Includes consignment inventories held by customers of ~~$23.9~~$21.3 million and $46.2 million at ~~July 1,~~September 30, 2023 and December 31, 2022, respectively.

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8. GOODWILL AND INTANGIBLE ASSETS

Goodwill activity for each of the Company’s reportable segments that carry goodwill, ~~Specialty Chemicals and Engineered~~ Materials ~~(“SCEM”), Advanced Planarization~~ Solutions (“~~APS”~~MS”), Microcontamination Control (“MC”), and Advanced Materials Handling (“AMH”), ~~and~~ was as follows at December 31, 2022 and ~~July 1~~September 30, 2023:


(In thousands)	(In thousands)	SCEM		APS		MC		AMH		Total		(In thousands)	MS		MC		AMH		Total
December 31, 2022	December 31, 2022	$	561,328	$	3,530,813	$	242,088	$	74,102	$	4,408,331	December 31, 2022	$	4,092,141	$	242,088	$	74,102	$	4,408,331

Goodwill impairment	Goodwill impairment	—		(88,872)		—		—		(88,872)		Goodwill impairment	(104,785)		—		—		(104,785)
Disposition of business	Disposition of business	(90,005)		—		—		—		(90,005)		Disposition of business	(90,005)		—		—		(90,005)
Purchase accounting adjustments	Purchase accounting adjustments	3,409		(4,430)		—		—		(1,021)		Purchase accounting adjustments	(1,021)		—		—		(1,021)

Assets held-for-sale	Assets held-for-sale	(3,885)		(250,775)		—		—		(254,660)		Assets held-for-sale	(254,524)		—		—		(254,524)
Foreign currency translation	Foreign currency translation	(33)		—		(3,493)		—		(3,526)		Foreign currency translation	(43)		(3,917)		—		(3,960)
July 1, 2023		$	470,814	$	3,186,736	$	238,595	$	74,102	$	3,970,247
September 30, 2023												September 30, 2023	$	3,641,763	$	238,171	$	74,102	$	3,954,036

The changes in our goodwill balance of ~~$438.1~~$454.3 million reflect (1) the goodwill impairment of our EC reporting unit of ~~$88.9~~$104.8 million, as described in Note 3, (2) the sale of the QED business and related goodwill of that business of $90.0 million, see Note 5, (3) purchase accounting adjustments of $1.0 million, (4) goodwill reclassified to asset held-for-sale of ~~$254.7~~$254.5 million related to the PIM and EC businesses as described in Note 5 and (5) foreign currency translation of ~~$3.5~~$4.0 million.

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Identifiable intangible assets at ~~July 1,~~September 30, 2023 and December 31, 2022 consist of the following:


July 1, 2023
September 30, 2023								September 30, 2023
(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	$	1,262,685	$	384,845	$	877,840	Developed technology	$	1,262,647	$	421,703	$	840,944
Trademarks and trade names	Trademarks and trade names	172,272		32,610		139,662		Trademarks and trade names	172,260		35,395		136,865
Customer relationships	Customer relationships	673,765		282,644		391,121		Customer relationships	673,718		294,056		379,662
In-process research and development (1)	In-process research and development (1)	9,400		—		9,400		In-process research and development (1)	7,600		—		7,600
Other	Other	23,924		20,237		3,687		Other	23,924		20,632		3,292
		$	2,142,046	$	720,336	$	1,421,710		$	2,140,149	$	771,786	$	1,368,363


December 31, 2022
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying value
Developed technology	$	1,302,101	$	313,876	$	988,225
Trademarks and trade names	250,473		29,565		220,908
Customer relationships	863,947		273,039		590,908
In-process research and development (1)	31,100		—		31,100
Other	31,206		20,392		10,814
	$	2,478,827	$	636,872	$	1,841,955

(1) Intangible assets acquired in a business combination that are in-process and used in research and development activities are considered indefinite-lived until the completion or abandonment of the research and development efforts. Once the research and development efforts are completed, we determine the useful life and begin amortizing the assets.

Future amortization expense relating to intangible assets currently recorded in the Company’s condensed consolidated balance sheets is estimated to be the following at ~~July 1,~~September 30, 2023:


(In thousands)	(In thousands)	Remaining 2023		2024	2025	2026	2027	Thereafter	Total		(In thousands)	Remaining 2023		2024	2025	2026	2027	Thereafter	Total
Future amortization expense	Future amortization expense	$	102,710	194,774	188,318	185,381	181,694	568,833	$	1,421,710	Future amortization expense	$	51,134	194,670	188,318	185,372	181,684	567,185	$	1,368,363

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9. DEBT

The Company’s debt as of ~~July 1,~~September 30, 2023 and December 31, 2022 consists of the following:


(In thousands)	(In thousands)	July 1, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Senior secured term loan facility due 2029	Senior secured term loan facility due 2029	2,318,499		2,495,000		Senior secured term loan facility due 2029	2,243,499		2,495,000
Senior secured notes due 2029	Senior secured notes due 2029	1,600,000		1,600,000		Senior secured notes due 2029	1,600,000		1,600,000
Senior unsecured notes due 2030	Senior unsecured notes due 2030	895,000		895,000		Senior unsecured notes due 2030	895,000		895,000
Senior unsecured notes due 2029	Senior unsecured notes due 2029	400,000		400,000		Senior unsecured notes due 2029	400,000		400,000
Senior unsecured notes due 2028	Senior unsecured notes due 2028	400,000		400,000		Senior unsecured notes due 2028	400,000		400,000
Bridge credit facility due 2023	Bridge credit facility due 2023	—		135,000		Bridge credit facility due 2023	—		135,000

Revolving facility due 2027	Revolving facility due 2027	—		—		Revolving facility due 2027	—		—
Total debt (par value)	Total debt (par value)	5,613,499		5,925,000		Total debt (par value)	5,538,499		5,925,000
Unamortized discount and debt issuance costs	Unamortized discount and debt issuance costs	121,488		140,107		Unamortized discount and debt issuance costs	113,003		140,107
Total debt, net	Total debt, net	$	5,492,011	$	5,784,893	Total debt, net	$	5,425,496	$	5,784,893
Less short-term debt, including current portion of long-term debt	Less short-term debt, including current portion of long-term debt	—		151,965		Less short-term debt, including current portion of long-term debt	—		151,965
Total long-term debt, net	Total long-term debt, net	$	5,492,011	$	5,632,928	Total long-term debt, net	$	5,425,496	$	5,632,928

Annual maturities of long-term debt, excluding unamortized discount and debt issuance costs, due as of ~~July 1,~~September 30, 2023 are as follows:


(In thousands)	(In thousands)	Remaining 2023		2024	2025	2026	2027	Thereafter	Total		(In thousands)	Remaining 2023		2024	2025	2026	2027	Thereafter	Total
Contractual debt obligation maturities(1)	Contractual debt obligation maturities(1)	$	—	—	—	—	—	5,613,499	$	5,613,499	Contractual debt obligation maturities(1)	$	—	—	—	—	—	5,425,496	5,425,496

(1) Subject to Excess Cash Flow payments to the lenders.

On March 10, 2023 and September 11, 2023, the Company and certain of its subsidiaries entered into Amendment No. 1 (the ~~“Amendment”~~“First Amendment”) and Amendment No. 2 (the “Second Amendment”), respectively, with the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, which amended the Credit and Guaranty Agreement, dated as of November 6, 2018 (as amended and restated as of July 6, 2022 and as further amended, restated, amended and restated, supplemented, modified and otherwise in effect prior to the effectiveness of the First Amendment and the Second Amendment, the “Existing Credit Agreement” and, the Existing Credit Agreement as amended by the First Amendment and the Second Amendment, the “Amended Credit Agreement”), by and among the Company, as borrower, certain subsidiaries of the Company party thereto, as guarantors, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent.

The First Amendment provides for, among other things, the refinancing of the Company’s outstanding term B loans under the Existing Credit Agreement in an aggregate principal amount of $2.495 billion (the “Original Tranche B Term Loans”) with a new tranche of term B loans under the Amended Credit Agreement in an aggregate principal amount of $2.495 billion (the “New Tranche B Term Loans”). The New Tranche B Term Loans will bear interest under the Amended Credit Agreement at a rate per annum equal to, at the Company’s option, either (i) Term SOFR plus an applicable margin of 2.75% or (ii) a base rate plus an applicable margin of 1.75%. Consistent with the Original Tranche B Term Loans, the new Tranche B Term Loans will mature on July 6, 2029. Other than as described herein (and more fully described in the Amendment), the terms of the Amended Credit Agreement are substantially similar to the terms of the Existing Credit Agreement.

The Second Amendment provides for, among other things, the reduction of the applicable rate of the Company’s outstanding term B loans under the Existing Credit Agreement (as amended by the First Amendment). After giving effect to the Second Amendment, such outstanding term B loans will bear interest, at a rate per annum equal to, at the Company’s option, either (i) Term SOFR plus an applicable margin of 2.50% or (ii) a base rate plus an applicable margin of 1.50%. Other than as described herein (and more fully described in the Second Amendment), the terms of the Amended Credit Agreement are substantially similar to the terms of the Existing Credit Agreement.

Additionally, as of ~~July 1,~~September 30, 2023, during the fiscal year 2023, the Company has repaid ~~$176.5~~$251.5 million of the outstanding borrowings under the ~~New Tranche B Term Loans.~~Amended Credit Agreement. In connection with this repayment and entry into the First Amendment and the Second Amendment, the Company incurred a pre-tax loss on extinguishment and modification of debt of ~~$3.8~~$4.5 million and ~~$7.6~~

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$12.1 million for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, which is included in Other expense, net on the condensed consolidated statements of operations.

On April 20, 2023, the Company repaid the principal amount of the $135.0 million bridge credit facility. In connection with the repayment of this debt, the Company incurred a pre-tax loss on extinguishment of debt of $0.7 million for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, which is included in Other expense, net on the condensed consolidated statements of operations.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company is required to record certain assets and liabilities at fair value. The valuation methods used for determining the fair value of these financial instruments by hierarchy are as follows:

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Level 1 Cash and cash equivalents consist of various bank accounts used to support our operations and investments in institutional money-market funds that are traded in active markets. The restricted cash represents cash held in a “Rabbi” trust, further described in Note 6.

Level 2 Derivative financial instruments include an interest rate swap contract and foreign exchange contracts. The fair value of our derivative instruments is estimated using standard valuation models and market-based observable inputs over the contractual term, including the prevailing SOFR based yield curves for the interest rate swap, and forward rates and/or the Overnight Index Swap curve for forward foreign exchange contracts, among others.

Level 3 No Level 3 financial instruments.

The following table presents financial instruments, other than debt, that we measure at fair value on a recurring basis. See Note 9 of this Report on Form 10-Q for a discussion of our debt. In instances where the inputs used to measure the fair value of an asset fall into more than one level of the hierarchy, we have classified it based on the lowest level input that is significant to the determination of the fair value.


		Fair Value Measurements at Reporting Date Using																	Fair Value Measurements at Reporting Date Using
(In thousands):	(In thousands):	Level 1				Level 2				Level 3				Total				(In thousands):	Level 1				Level 2				Level 3				Total
Assets:	Assets:	July 1, 2023		December 31, 2022		July 1, 2023		December 31, 2022		July 1, 2023		December 31, 2022		July 1, 2023		December 31, 2022		Assets:	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	565,878	$	561,559	$	—	$	—	$	—	$	—	$	565,878	$	561,559	Cash and cash equivalents	$	594,020	$	561,559	$	—	$	—	$	—	$	—	$	594,020	$	561,559
Restricted cash	Restricted cash	1,139		1,880		—		—		—		—		1,139		1,880		Restricted cash	—		1,880		—		—		—		—		—		1,880
Derivative financial instruments - Interest rate swap - cash flow hedge	Derivative financial instruments - Interest rate swap - cash flow hedge	—		—		46,281		46,589		—		—		46,281		46,589		Derivative financial instruments - Interest rate swap - cash flow hedge	—		—		43,633		46,589		—		—		43,633		46,589
Derivative financial instruments -Forward exchange contracts	Derivative financial instruments -Forward exchange contracts	—		—		—		726		—		—		—		726		Derivative financial instruments -Forward exchange contracts	—		—		—		726		—		—		—		726
Total Assets	Total Assets	$	567,017	$	563,439	$	46,281	$	47,315	$	—	$	—	$	613,298	$	610,754	Total Assets	$	594,020	$	563,439	$	43,633	$	47,315	$	—	$	—	$	637,653	$	610,754

Liabilities:	Liabilities:																	Liabilities:
Derivative financial instruments - Forward exchange contracts	Derivative financial instruments - Forward exchange contracts	$	—	$	—	$	—	$	193	$	—	$	—	$	—	$	193	Derivative financial instruments - Forward exchange contracts	$	—	$	—	$	—	$	193	$	—	$	—	$	—	$	193
Total Liabilities	Total Liabilities	$	—	$	—	$	—	$	193	$	—	$	—	$	—	$	193	Total Liabilities	$	—	$	—	$	—	$	193	$	—	$	—	$	—	$	193

Other Fair Value Disclosures

The estimated fair value and carrying value of our debt as of ~~July 1,~~September 30, 2023 and December 31, 2022 were as follows:

July 1, 2023 December 31, 2022
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
Total debt, net $ 5,492,011 $ 5,223,304 $ 5,784,893 $ 5,428,900

Table of Contents


	September 30, 2023				December 31, 2022
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Total debt, net	$	5,425,496	$	5,094,697	$	5,784,893	$	5,428,900

11. DERIVATIVE INSTRUMENTS

The Company is exposed to various market risks, including risks associated with interest rates and foreign currency exchange rates. One objective of the Company's risk management program is to mitigate these risks using derivative instruments.

Cash Flow Hedges - Interest Rate Swap Contract

In July 2022, the Company entered into a floating-to-fixed swap agreement on its variable rate debt under the Term Loan Facility. The interest rate swap was designated specifically to the Term Loan Facility and qualifies as a cash flow hedge. The notional amount is scheduled to decrease quarterly and will expire on December 30, 2025. As cash flow hedges, unrealized gains are recognized as assets and unrealized losses are recognized as liabilities. Unrealized gains and losses are designated as effective or ineffective based on a comparison of the changes in fair value of the interest rate swaps and changes in fair value of

~~Table of Contents~~

the underlying exposures being hedged. The effective portion is recorded as a component of accumulated other comprehensive income (loss) and will be reflected in earnings during the period the hedged transaction effects earnings, while the ineffective portion is recorded as a component of ~~Interest~~interest expense.

Foreign Currency Contracts Not Designated as Hedges

The Company enters into foreign exchange contracts in an effort to mitigate the risks associated with currency fluctuations on certain foreign currency balance sheet exposures. These foreign exchange contracts do not qualify for hedge accounting. The Company recognizes the change in fair value of its foreign currency forward contracts in the condensed consolidated statement of operations.

The notional amounts of our derivative instruments are as follows:

(In thousands) July 1, 2023 December 31, 2022
Derivatives designated as hedging instruments:
Interest rate swap contract - cash flow hedge $ 1,650,000 $ 1,950,000
Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars $ — $ 3,995
Foreign exchange contracts to sell U.S. dollars — 26,225


(In thousands)	September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments:
Interest rate swap contract - cash flow hedge	$	1,650,000	$	1,950,000


Derivatives not designated as hedging instruments:
Foreign exchange contracts to purchase U.S. dollars	$	—	$	3,995
Foreign exchange contracts to sell U.S. dollars	—		26,225

The fair values of our derivative instruments included in the condensed consolidated balance sheets are as follows:


(In thousands)	(In thousands)	Derivative Assets				Derivative Liabilities				(In thousands)	Derivative Assets				Derivative Liabilities
Condensed Consolidated Balance Sheet Location	Condensed Consolidated Balance Sheet Location	July 1, 2023		December 31, 2022		July 1, 2023		December 31, 2022		Condensed Consolidated Balance Sheet Location	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Derivatives designated as hedging instruments - Interest rate swap contract -cash flow hedge	Derivatives designated as hedging instruments - Interest rate swap contract -cash flow hedge									Derivatives designated as hedging instruments - Interest rate swap contract -cash flow hedge
Other current assets	Other current assets	$	34,382	$	32,481	$	—	$	—	Other current assets	$	31,827	$	32,481	$	—	$	—
Other assets - long-term	Other assets - long-term	11,899		14,108		—		—		Other assets - long-term	11,806		14,108		—		—
Derivatives not designated as hedging instruments -Foreign exchange contracts	Derivatives not designated as hedging instruments -Foreign exchange contracts									Derivatives not designated as hedging instruments -Foreign exchange contracts
Other current assets	Other current assets	$	—	726		$	—	$	—	Other current assets	$	—	726		$	—	$	—
Other accrued liabilities	Other accrued liabilities	—		—		—		193		Other accrued liabilities	—		—		—		193

The following table summarizes the effects of our derivative instruments on our condensed consolidated statements of operations:

Gain Recognized in Condensed Consolidated Statements of Income
(In thousands) Condensed Consolidated Statements of Operations Location Three months ended Six months ended
Derivatives designated as hedging instruments: July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Interest rate swap contract-cash flow hedge Interest expense, net $ (9,638) $ — $ (17,551) $ —
Derivatives not designated as hedging instruments:
Foreign exchange contracts Other expense, net $ (245) $ — $ (374) $ —

Table of Contents


		(Gain) Loss Recognized in Condensed Consolidated Statements of Income
(In thousands)	Condensed Consolidated Statements of Operations Location	Three months ended				Nine months ended
Derivatives designated as hedging instruments:		September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Interest rate swap contract-cash flow hedge	Interest expense, net	$	(9,530)	$	—	$	(27,081)	$	—

Derivatives not designated as hedging instruments:



Foreign exchange contracts	Other expense, net	$	—	$	562	$	(374)	$	562

The following table summarizes the effects of our derivative instruments on Accumulated Other Comprehensive Income:

~~Table of Contents~~


		Gain (Loss) recognized in Other Comprehensive Income (Loss)									Gain (Loss) recognized in Other Comprehensive Income (Loss)
(In thousands)	(In thousands)	Three months ended				Six months ended				(In thousands)	Three months ended				Nine months ended
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		Derivatives designated as hedging instruments:	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Interest rate swap contract - Cash flow hedge	Interest rate swap contract - Cash flow hedge	$	9,716	$	—	$	(239)	$	—	Interest rate swap contract - Cash flow hedge	$	(2,050)	$	30,743	$	(2,289)	$	30,743

We expect approximately ~~$34.4~~$31.8 million to be reclassified from accumulated other comprehensive income into interest expense, net during the next twelve months related to our interest rate swap based on projected rates of the SOFR forward curve as of ~~July 1,~~September 30, 2023.

12. INCOME TAXES

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the ~~company~~Company updates an estimate of the annual effective tax rate, and if the estimated tax rate changes, we make a cumulative adjustment.

The Company recorded income tax (benefit) expense of ~~$(16.5)~~($2.1) million and ~~$5.0~~$2.9 million for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively, compared to income tax (benefit) expense of ~~$17.5~~($7.0) million and ~~$37.4~~$30.4 million for the three and ~~six~~nine months ended ~~July 2,~~October 1, 2022, respectively. The Company’s effective income tax rate was ~~(9.1)%~~(6.8%) and ~~4.3%~~2.0% for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively, compared to ~~15.0%~~8.7% and ~~14.2%~~16.7% for the three and ~~six~~nine months ended ~~July 2,~~October 1, 2022, respectively.

The changes in our effective tax rate for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 compared to the prior year are primarily driven by temporary changes in the U.S. tax regulations pertaining to foreign tax credits and changes to the jurisdictional income mix ~~post-acquisition~~resulting from the Acquisition of CMC ~~and a discrete net benefit of $4.4 million related to incremental expense on completed divestitures offset by a tax benefit on the classification of assets as held-for-sale~~Materials in the three and ~~six~~nine month periods ended ~~July 1,~~September 30, 2023.

13. 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 applicable 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 applicable period. The following table presents a reconciliation of the share amounts used in the computation of basic and diluted earnings per common share:


		Three months ended		Six months ended			Three months ended		Nine months ended
(In thousands)	(In thousands)	July 1, 2023	July 2, 2022	July 1, 2023	July 2, 2022	(In thousands)	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
Basic—weighted common shares outstanding	Basic—weighted common shares outstanding	149,825	135,895	149,626	135,783	Basic—weighted common shares outstanding	150,127	148,570	149,793	140,045
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	1,012	559	983	720	Weighted common shares assumed upon exercise of stock options and vesting of restricted common stock	1,102	—	1,023	847
Diluted—weighted common shares and common shares equivalent outstanding	Diluted—weighted common shares and common shares equivalent outstanding	150,837	136,454	150,609	136,503	Diluted—weighted common shares and common shares equivalent outstanding	151,229	148,570	150,816	140,892

The Company excluded the following shares underlying stock-based awards from the calculations of diluted EPS because their inclusion would have been anti-dilutive for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022:

Three months ended

Six months ended

Three months ended

Nine months ended

(In thousands)

July 1, 2023

July 2, 2022

July 1, 2023

July 2, 2022

(In thousands)

September 30, 2023

October 1, 2022

September 30, 2023

October 1, 2022

Shares excluded from calculations of diluted EPS

580

595

791

519

Shares excluded from calculations of diluted EPS

465

1,610

672

415

14. OTHER EXPENSE, NET

Other expense, net for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022 consists of the following:


		Three months ended				Six months ended					Three months ended				Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022

Infineum termination fee, net	Infineum termination fee, net	$	—	$	—	$	(10,876)	$	—	Infineum termination fee, net	$	—	$	—	$	(10,876)	$	—
Loss on foreign currency transactions	Loss on foreign currency transactions	3,885		10,046		$	6,286	$	14,623	Loss on foreign currency transactions	4,928		13,631		11,214		28,254
Loss on extinguishment of debt and modification	Loss on extinguishment of debt and modification	4,481		—		8,361		—		Loss on extinguishment of debt and modification	4,532		2,235		12,893		2,235
Other, net	Other, net	(642)		(427)		(705)		(102)		Other, net	783		(3,014)		78		(3,116)
Other expense, net	Other expense, net	$	7,724	$	9,619	$	3,066	$	14,521	Other expense, net	$	10,243	$	12,852	$	13,309	$	27,373

Infineum termination fee, net

On October 11, 2022, the Company and Infineum entered into a definitive agreement for the sale of the Company’s PIM business. On February 10, 2023, the Company terminated the definitive agreement. In accordance with the terms of the definitive agreement, the Company received a $12.0 million termination fee from Infineum in the first quarter of 2023 and incurred a transaction fee of $1.1 million to the third-party financial adviser it had engaged to assist with the transaction.

15. SEGMENT REPORTING

In the third quarter of 2023, in order to align its segment financial reporting with a change in its business structure, the Company realigned its segments. Following the segment realignment, the Company’s three reportable segments are as follows: (1) Materials Solutions, (2) Microcontamination Control, and (3) Advanced Materials Handling. The current interim and succeeding annual periods will disclose the reportable segments with prior periods recast to reflect the change.

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

•~~Specialty Chemicals and Engineered Materials:~~ SCEM provides high-performance and high-purity process chemistries, gases and materials, and safe and efficient materials delivery systems to support semiconductor and other advanced manufacturing processes.

•~~Advanced Planarization~~Materials Solutions: ~~APS~~MS provides ~~complementary~~advanced consumable materials, such as chemical mechanical planarization ~~solutions, advanced~~(“CMP”) slurries and pads, deposition materials, process chemistries and ~~high-purity wet chemicals; including CMP slurries, pads,~~gases, formulated cleans, etchants and other ~~electronic chemicals.~~specialty materials, that enable our customers’ technical roadmap, improve device performance, lower their total cost of ownership and enhance their yields.

•Microcontamination Control: MC offers solutions to filter and purify critical liquid and gaseous chemistries used in semiconductor manufacturing processes and other high-technology industries.

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

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


		Three months ended				Six months ended					Three months ended				Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net sales	Net sales									Net sales
SCEM		$	200,073	$	179,412	$	398,077	$	345,188
APS		240,561		28,317		490,887		58,962
MS										MS	$	435,538	$	518,046	$	1,324,502	$	922,196

MC	MC	283,614		274,133		552,911		540,770		MC	286,217		280,550		839,128		821,320
AMH	AMH	190,356		224,084		409,209		422,197		AMH	180,248		210,405		589,457		632,602

Inter-segment elimination	Inter-segment elimination	(13,604)		(13,457)		(27,688)		(24,982)		Inter-segment elimination	(13,764)		(15,173)		(41,452)		(40,155)
Total net sales	Total net sales	$	901,000	$	692,489	$	1,823,396	$	1,342,135	Total net sales	$	888,239	$	993,828	$	2,711,635	$	2,335,963


		Three months ended				Six months ended					Three months ended				Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Segment profit	Segment profit									Segment profit
SCEM (1)		$	173,319	$	35,539	$	176,587	$	73,231
APS (2)		42,419		10,179		9,629		21,338
MS(1) (2)										MS(1) (2)	$	56,955	$	53,131	$	243,171	$	147,700

MC	MC	100,661		100,107		196,658		198,725		MC	101,132		105,335		297,790		304,062
AMH	AMH	35,830		46,926		83,995		93,616		AMH	31,642		42,077		115,637		135,693

Total segment profit	Total segment profit	$	352,229	$	192,751	$	466,869	$	386,910	Total segment profit	$	189,729	$	200,543	$	656,598	$	587,455

1)~~SCEM~~ Materials Solutions segment profit is inclusive of a $154.8 million gain, net on the termination of ~~alliance agreement~~the Alliance Agreement for ~~three and six~~the nine months ended ~~July 1,~~September 30, 2023. See Note 5 to the Company’s condensed consolidated financial statements for further discussion.

2)~~APS~~Materials Solutions segment ~~loss~~profit is inclusive of a ~~$88.9~~$15.9 million and $104.8 million goodwill impairment charge relating to the EC reporting unit for the ~~six~~three and nine months ended ~~July 1, 2023.~~September 30, 2023, respectively. See Note 3 to the Company’s condensed consolidated financial statements for further discussion.

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


		Three months ended				Six months ended					Three months ended				Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		(In thousands)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Total segment profit	Total segment profit	$	352,229	$	192,751	$	466,869	$	386,910	Total segment profit	$	189,729	$	200,543	$	656,598	$	587,455
Less:	Less:									Less:
Amortization of intangible assets	Amortization of intangible assets	54,680		12,494		112,254		25,145		Amortization of intangible assets	51,239		65,346		163,493		90,491
Unallocated general and administrative expenses	Unallocated general and administrative expenses	29,935		22,287		73,535		40,449		Unallocated general and administrative expenses	21,429		120,308		94,964		160,759
Operating income	Operating income	267,614		157,970		281,080		321,316		Operating income	117,061		14,889		398,141		336,205
Interest expense	Interest expense	80,908		32,001		167,054		44,877		Interest expense	77,820		84,150		244,874		129,027
Interest income	Interest income	(2,303)		(658)		(3,628)		(670)		Interest income	(2,226)		(1,395)		(5,854)		(2,065)
Other expense, net	Other expense, net	7,724		9,619		3,066		14,521		Other expense, net	10,243		12,852		13,309		27,373
Income before income tax (benefit) expense	Income before income tax (benefit) expense	$	181,285	$	117,008	$	114,588	$	262,588	Income before income tax (benefit) expense	$	31,224	$	(80,718)	$	145,812	$	181,870

In the following tables, revenue is disaggregated by customers’ country or region based on the ship to location of the customer for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, respectively.


		Three months ended July 1, 2023												Three months ended September 30, 2023
(In thousands)	(In thousands)	SCEM		APS		MC		AMH		Inter-segment		Total			(In thousands)	MS		MC		AMH		Inter-segment		Total
North America	North America	$	83,249	$	57,632	$	45,947	$	56,275	$	(13,604)	$	229,499		North America	$	141,427	$	42,115	$	52,130	$	(13,764)	$	221,908
Taiwan	Taiwan	23,947		33,179		53,987		28,780		—		139,893			Taiwan	61,094		61,710		28,249		—		151,053
China	China	17,697		33,006		54,701		35,213		—		140,617			China	47,012		60,009		38,409		—		145,430
South Korea	South Korea	21,037		34,848		29,824		27,184		—		112,893			South Korea	50,085		28,978		23,303		—		102,366
Japan	Japan	16,987		8,727		57,789		11,768		—		95,271			Japan	26,364		57,472		10,279		—		94,115
Europe	Europe	23,738		42,067		24,647		21,902		—		112,354			Europe	63,346		19,951		17,213		—		100,510
Southeast Asia	Southeast Asia	13,418		31,102		16,719		9,234		—		70,473			Southeast Asia	46,210		15,982		10,665		—		72,857
		$	200,073	$	240,561	$	283,614	$	190,356	$	(13,604)	$	901,000			$	435,538	$	286,217	$	180,248	$	(13,764)	$	888,239


		Three months ended July 2, 2022												Three months ended October 1, 2022
(In thousands)	(In thousands)	SCEM		APS		MC		AMH		Inter-segment		Total			(In thousands)	MS		MC		AMH		Inter-segment		Total
North America	North America	$	55,024	$	5,742	$	35,913	$	73,279	$	(13,457)	$	156,501		North America	$	155,877	$	42,716	$	67,794	$	(15,173)	$	251,214
Taiwan	Taiwan	28,314		5,494		84,132		39,292		—		157,232			Taiwan	73,066		70,536		38,712		—		182,314
China	China	28,450		4,365		43,720		31,802		—		108,337			China	79,845		58,398		28,717		—		166,960
South Korea	South Korea	18,456		6,333		29,443		30,019		—		84,251			South Korea	59,932		30,583		29,339		—		119,854
Japan	Japan	20,582		813		46,939		15,501		—		83,835			Japan	32,167		42,505		16,336		—		91,008
Europe	Europe	13,376		2,045		21,319		25,329		—		62,069			Europe	63,375		20,977		18,401		—		102,753
Southeast Asia	Southeast Asia	15,210		3,525		12,667		8,862		—		40,264			Southeast Asia	53,784		14,835		11,106		—		79,725
		$	179,412	$	28,317	$	274,133	$	224,084	$	(13,457)	$	692,489			$	518,046	$	280,550	$	210,405	$	(15,173)	$	993,828


		Six months ended July 1, 2023												Nine Months Ended September 30, 2023
(In thousands)	(In thousands)	SCEM		APS		MC		AMH		Inter-segment		Total			(In thousands)	MS		MC		AMH		Inter-segment		Total
North America	North America	$	164,568	$	123,642	$	87,713	$	131,873	$	(27,688)	$	480,108		North America	$	429,637	$	129,827	$	184,003	$	(41,452)	$	702,015
Taiwan	Taiwan	47,982		67,338		108,222		65,442		—		288,984			Taiwan	176,414		169,933		93,691		—		440,038
China	China	34,044		64,619		110,372		67,013		—		276,048			China	145,675		170,381		105,422		—		421,478
South Korea	South Korea	41,682		70,574		59,653		61,640		—		233,549			South Korea	162,341		88,631		84,943		—		335,915
Japan	Japan	37,264		17,806		107,542		23,084		—		185,696			Japan	81,434		165,014		33,363		—		279,811
Europe	Europe	46,894		82,338		51,651		43,886		—		224,769			Europe	192,578		71,602		61,099		—		325,279
Southeast Asia	Southeast Asia	25,643		64,570		27,758		16,271		—		134,242			Southeast Asia	136,423		43,740		26,936		—		207,099
		$	398,077	$	490,887	$	552,911	$	409,209	$	(27,688)	$	1,823,396			$	1,324,502	$	839,128	$	589,457	$	(41,452)	$	2,711,635


		Six months ended July 2, 2022												Nine Months Ended October 1, 2022
(In thousands)	(In thousands)	SCEM		APS		MC		AMH		Inter-segment		Total			(In thousands)	MS		MC		AMH		Inter-segment		Total
North America	North America	$	105,136	$	12,934	$	71,268	$	137,620	$	(24,982)	$	301,976		North America	$	273,948	$	113,984	$	205,414	$	(40,155)	$	553,191
Taiwan	Taiwan	55,577		10,735		162,175		73,010		—		301,497			Taiwan	139,378		232,711		111,722		—		483,811
China	China	50,993		8,346		84,241		58,630		—		202,210			China	139,184		142,639		87,347		—		369,170
South Korea	South Korea	36,861		12,382		63,135		60,028		—		172,406			South Korea	109,175		93,718		89,367		—		292,260
Japan	Japan	43,097		1,597		94,598		28,365		—		167,657			Japan	76,861		137,103		44,701		—		258,665
Europe	Europe	24,607		4,503		39,693		47,575		—		116,378			Europe	92,485		60,670		65,976		—		219,131
Southeast Asia	Southeast Asia	28,917		8,465		25,660		16,969		—		80,011			Southeast Asia	91,165		40,495		28,075		—		159,735
		$	345,188	$	58,962	$	540,770	$	422,197	$	(24,982)	$	1,342,135			$	922,196	$	821,320	$	632,602	$	(40,155)	$	2,335,963

16. SUBSEQUENT EVENTS

~~Segment Realignment~~
~~In the third quarter of~~Disposition and Debt Repayment

On October 2, 2023, ~~in order to align its segment financial reporting with a change in its business structure,~~ the Company ~~will implement a realignment~~completed the sale of ~~its segments. Following~~ the segment realignment, the Company’s three reportable segments will be as follows (1) Advanced Materials Handling, (2) Microcontamination Control, and (3) a new division that combines SCEM and APS. The succeeding interim and annual periods will disclose the reportable segments with prior periods recast to reflect the change.EC business. The Company ~~will evaluate any impairment implications from~~received cash proceeds of $737.1 million, or net proceeds of $694.3 million, which includes cash sold of $42.8 million, subject to customary final post-closing adjustments. On October 6, 2023 and October 31, 2023, the ~~segment changes~~Company made repayments of $287.2 million and ~~related reporting unit changes, if any, during~~$362.6 million, respectively, of outstanding borrowings under the ~~period in which~~senior secured term loan facility due 2029. The Company intends to use the ~~changes take effect.~~

remaining proceeds of this transaction for early repayment of debt.

Dividend

On ~~July 19,~~October 18, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share to be paid on ~~August 23,~~November 22, 2023 to shareholders of record on the close of business on ~~August 2,~~November 1, 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 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, 2022 as well as in our other SEC filings 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 or set forth elsewhere in this Quarterly Report on Form 10-Q. The Company assumes no obligation to publicly release the results of any revision or updates to these forward-looking statements to reflect future events or unanticipated occurrences.

Overview

The Company is a leading supplier of advanced materials and process solutions for the semiconductor and other high technology industries. We help our customers maximize manufacturing yields, reduce manufacturing costs, and enable higher device performance by leveraging our unique breadth of capabilities to provide mission critical ~~enhanced materials and process~~ solutions for the most advanced manufacturing environments.

In the third quarter of 2023, in order to align its segment financial reporting with a change in its business structure, the Company realigned its segments into three reportable segments discussed below. The current interim and succeeding annual periods will disclose the reportable segments with prior periods recast to reflect the change. Our business is organized and operated in ~~four~~three operating segments, which align with the key elements of the advanced

semiconductor manufacturing ecosystem.

•The Specialty Chemicals and Engineered Materials segment, or SCEM, provides high-performance and high-purity process chemistries, gases and materials, and safe and efficient materials delivery systems to support semiconductor and other advanced manufacturing processes.

•The ~~Advanced Planarization~~Materials Solutions segment, or ~~APS,~~MS, provides ~~complementary~~advanced consumable materials, such as chemical mechanical planarization ~~solutions, advanced~~(“CMP”) slurries and pads, deposition materials, process chemistries and ~~high-purity wet chemicals including CMP slurries, pads,~~gases, formulated cleans, etchants and other ~~electronic chemicals.~~specialty materials, that enable our customers’ technical roadmap, improve device performance, lower their total cost of ownership and enhance their yields.

•The Microcontamination Control segment, or MC, offers solutions to filter and purify critical liquid and gaseous chemistries used in semiconductor manufacturing processes and other high-technology industries.

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

These segments share common business systems and processes, technology centers and technology roadmaps. With the complementary capabilities within and across these segments, we believe we are uniquely positioned to create new, co-optimized and increasingly integrated solutions for our customers. For example, ~~after the acquisition of CMC Materials,~~ we can now offer ~~an end- to-end offering~~end-to-end solutions for our customers consisting of advanced deposition materials ~~from our SCEM segment,~~products, CMP slurries, pads and post-CMP cleaning chemistries from our ~~APS~~MS segment, CMP slurry filters from our MC segment, and CMP slurry high-purity packaging and fluid monitoring systems from our AMH segment.

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 2023 end on April 1, 2023, July 1, 2023, September 30, 2023 and December 31, 2023.

Impact of Export Control Regulations

On October ~~7, 2022,~~17, 2023, the U.S Department of Commerce, Bureau of Industry and Security (“BIS”) announced updates to export control regulations, ~~that restrict~~originally issued on October 7, 2022, regarding the sale of certain products and services related to ~~some companies~~advanced computing items, semiconductor manufacturing equipment, and ~~domestic fabs in China. These new~~items that can support end uses related to the development and production of advanced-node integrated circuits and semiconductor manufacturing equipment, among others. The updated rules ~~restrict~~modify and expand restrictions on the sale of products and the provision of ~~service~~certain services by U.S. persons to some companies and domestic fabs located in certain countries, including China, ~~operating at or above certain advanced technology nodes.~~without prior U.S. governmental authorization. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding risk associated with the impact of new export control regulations, including under the caption “Tariffs, export controls and other trade laws and restrictions resulting from international trade disputes, strained international relations and changes to foreign and national security policy, especially as they relate to China, could have an adverse impact on our operations and reduce the competitiveness or availability of our products relative to local and global competitors.”

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Impact of Conflict Between Israel and Hamas

The military conflict between Israel and militant groups led by Hamas has caused uncertainty in the global markets. Revenue relating to products manufactured from raw materials or components sourced from this region does not constitute a material portion of our business and historically we have not had significant revenue in this region. There continues to be uncertainty regarding the ultimate impact the conflict will have on the global economy, supply chains, logistics, fuel prices, raw material pricing and our business.

Recent Events

On February 10, 2023, the Company terminated the definitive agreement with Infineum to sell its PIM business. At the time of the termination, the transaction had not received clearance under the HSR Act. In accordance with the terms of the definitive agreement, the Company received a $12.0 million termination fee from Infineum in the first quarter of 2023. Also in the first quarter of 2023, the Company incurred a fee of $1.1 million to the third-party financial adviser it had engaged to assist with the transaction.

On March 1, 2023, the Company completed its divestiture of the QED business. The Company received proceeds of $134.3 million. See Note 5 to our condensed consolidated financial statements for further discussion.

On March 10, 2023, and September 11, 2023, the Company amended its Existing Credit Agreement. The ~~amendment~~First Amendment, dated March 10, 2023, provides for, among other things, the refinancing of the Company’s outstanding term B loans under the ~~Existing Credit Agreement~~senior secured term loan facility due 2029 in an aggregate principal amount of $2.495 billion ~~(the “Original Tranche B Term Loans”)~~ with a new tranche of term B loans ~~under the Amended Credit Agreement~~ in an aggregate principal amount of $2.495 ~~billion (the “New Tranche B Term Loans”).~~billion. The ~~New Tranche B Term Loans~~amended loans will bear interest ~~under the Amended Credit Agreement,~~ at a rate per annum equal to atthe Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.75% which is a reduction from the applicable margin of 3.00% prior to the amendment. The Second Amendment, dated September 11, 2023, provides for, among other things, the refinancing of the Company’s ~~option, either (i) Term~~outstanding term B loans under the senior secured term loan facility due 2029 in an aggregate principal amount of $2.318 billion with a new tranche of term B loans in an aggregate principal amount of $2.318 billion. The outstanding term B loans under the amended senior secured term loan facility due 2029 will bear interest, at a rate per annum equal to the SOFR plus an applicable margin of ~~2.75% or (ii)~~2.50% which is a ~~base rate plus an~~reduction from the applicable margin of ~~1.75%. Consistent with the Original Tranche B Term Loans, the new Tranche B Term Loans will mature on July 6, 2029.~~2.75% prior to this amendment. See Note 9 to our condensed consolidated financial statements for further discussion.

On May 10, 2023, the Company announced the entry into a definitive agreement to sell its Electronic Chemicals (“EC”) business to FUJIFILM Holdings America Corporation for $700.0 million, subject to customary adjustments with respect to cash, working capital, indebtedness and transaction expenses. The EC business was classified as an asset held for sale during the second quarter of 2023. See Note 5 to our condensed consolidated financial statements for further discussion. On October 2, 2023, the Company completed the sale of the EC business. The Company received cash proceeds of $737.1 million, or net proceeds of $694.3 million, which includes cash sold of $42.8 million, subject to customary final post-closing adjustments. On October 6, 2023 and October 31, 2023, the Company made repayments of $287.2 million and $362.6 million, respectively, of outstanding borrowings under the senior secured term loan facility due 2029. The Company intends to use the remaining proceeds of this transaction for early repayment of debt.

On June 5, 2023, the Company announced the termination of an alliance agreement between the Company and MacDermid Enthone Inc., a global business unit of Element Solutions Inc (“MacDermid Enthone”). ~~The proceeds from~~In connection with the ~~transaction are $200.0 million, subject to certain adjustments, with~~termination of the Alliance Agreement, Entegris received a payment of $170.0 million ~~that was paid~~ on June 2, 2023 ~~upon the termination of the alliance agreement~~ and will receive $30.0 million payable upon completion of customer ~~transitions.~~transitions, subject to certain adjustments. See Note 5 to our condensed consolidated financial statements for further discussion.

In the third quarter of 2023, in order to align its segment financial reporting with a change in its business structure, the Company will implement a realignment of its segments. Following the segment realignment, the Company’s three reportable segments will be as follows (1) Advanced Materials Handling, (2) Microcontamination Control, and (3) a new division that combines SCEM and APS. The succeeding interim and annual periods will disclose the reportable segments with prior periods recast to reflect the change.

Critical Accounting Policies and Estimates

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

The critical accounting policies affected most significantly by estimates, assumptions and judgments used in the preparation of the Company’s condensed consolidated financial statements are described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 23, 2023. On an ongoing basis, the Company evaluates the critical accounting policies used to prepare its condensed consolidated financial statements, including, but not limited to, those related to business acquisitions. There have been no material changes in these critical accounting policies and ~~estimates.~~estimates, except that the Company has evaluated the recoverability of certain long-lived assets such

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that we believe this is a critical accounting policy. See Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for the specific policy.

Three and ~~Six~~Nine Months Ended ~~July 1,~~September 30, 2023 Compared to Three and ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022

The following table compares operating results for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, both in dollars and as a percentage of net sales, for each caption.


		Three months ended								Six months ended									Three months ended								Nine months ended
(Dollars in thousands)	(Dollars in thousands)	July 1, 2023				July 2, 2022				July 1, 2023				July 2, 2022				(Dollars in thousands)	September 30, 2023				October 1, 2022				September 30, 2023				October 1, 2022
Net sales	Net sales	$	901,000	100.0	%	$	692,489	100.0	%	$	1,823,396	100.0	%	$	1,342,135	100.0	%	Net sales	$	888,239	100.0	%	$	993,828	100.0	%	$	2,711,635	100.0	%	$	2,335,963	100.0	%
Cost of sales	Cost of sales	516,834		57.4		382,092		55.2		1,037,545		56.9		721,918		53.8		Cost of sales	521,165		58.7		622,157		62.6		1,558,710		57.5		1,344,075		57.5
Gross profit	Gross profit	384,166		42.6		310,397		44.8		785,851		43.1		620,217		46.2		Gross profit	367,074		41.3		371,671		37.4		1,152,925		42.5		991,888		42.5
Selling, general and administrative expenses	Selling, general and administrative expenses	145,596		16.2		90,685		13.1		315,463		17.3		177,793		13.2		Selling, general and administrative expenses	116,051		13.1		226,446		22.8		431,514		15.9		404,239		17.3
Engineering, research and development expenses	Engineering, research and development expenses	71,030		7.9		49,248		7.1		142,936		7.8		95,963		7.2		Engineering, research and development expenses	66,810		7.5		64,990		6.5		209,746		7.7		160,953		6.9
Amortization of intangible assets	Amortization of intangible assets	54,680		6.1		12,494		1.8		112,254		6.2		25,145		1.9		Amortization of intangible assets	51,239		5.8		65,346		6.6		163,493		6.0		90,491		3.9
Goodwill impairment	Goodwill impairment	—		—		—		—		88,872		4.9		—		—		Goodwill impairment	15,913		1.8		—		—		104,785		3.9		—		—
Gain on termination of alliance agreement	Gain on termination of alliance agreement	(154,754)		(17.2)		—		—		(154,754)		(8.5)		—		—		Gain on termination of alliance agreement	—		—		—		—		(154,754)		(5.7)		—		—
Operating income	Operating income	267,614		29.7		157,970		22.8		281,080		15.4		321,316		23.9		Operating income	117,061		13.2		14,889		1.5		398,141		14.7		336,205		14.4
Interest expense	Interest expense	80,908		9.0		32,001		4.6		167,054		9.2		44,877		3.3		Interest expense	77,820		8.8		84,150		8.5		244,874		9.0		129,027		5.5
Interest income	Interest income	(2,303)		(0.3)		(658)		(0.1)		(3,628)		(0.2)		(670)		—		Interest income	(2,226)		(0.3)		(1,395)		(0.1)		(5,854)		(0.2)		(2,065)		(0.1)
Other expense, net	Other expense, net	7,724		0.9		9,619		1.4		3,066		0.2		14,521		1.1		Other expense, net	10,243		1.2		12,852		1.3		13,309		0.5		27,373		1.2
Income before income tax (benefit) expense		181,285		20.1		117,008		16.9		114,588		6.3		262,588		19.6
Income (loss) before income tax (benefit) expense																		Income (loss) before income tax (benefit) expense	31,224		3.5		(80,718)		(8.1)		145,812		5.4		181,870		7.8
Income tax (benefit) expense	Income tax (benefit) expense	(16,491)		(1.8)		17,517		2.5		4,978		0.3		37,392		2.8		Income tax (benefit) expense	(2,127)		(0.2)		(7,015)		(0.7)		2,851		0.1		30,377		1.3
Equity in net loss of affiliates	Equity in net loss of affiliates	130		—		—		—		130		—		—		—		Equity in net loss of affiliates	139		—		—		—		269		—		—		—
Net income		$	197,646	21.9	%	$	99,491	14.4	%	$	109,480	6.0	%	$	225,196	16.8	%
Net income (loss)																		Net income (loss)	$	33,212	3.7	%	$	(73,703)	(7.4)	%	$	142,692	5.3	%	$	151,493	6.5	%

Net sales For the three months ended ~~July 1,~~September 30, 2023, net sales ~~increased~~decreased by ~~30%~~11% to ~~$901.0~~$888.2 million, compared to ~~$692.5~~$993.8 million for the three months ended ~~July 2,~~October 1, 2022. An analysis of the factors underlying the decrease in net sales is presented in the following table:


(In thousands)
Net sales in the quarter ended October 1, 2022	$	993,828
Decrease associated with volume	(87,986)
Decrease associated with QED divestiture	(13,824)
Decrease associated with effect of foreign currency translation	(3,779)
Net sales in the quarter ended September 30, 2023	$	888,239

Included in the sales decrease were the effects of decreased demand from customers in the semiconductor market resulting in a decrease of $88.0 million, unfavorable foreign currency translation effects of $3.8 million, mainly due to the significant weakening of the Japanese yen relative to the U.S. dollar and an absence of sales totaling $13.8 million resulting from our divestiture of the QED business compared to the quarter ending October 1, 2022.

On a geographic basis, sales percentage by customers’ country or region for the three months ended September 30, 2023 and October 1, 2022 and the percentage increase (decrease) in sales for the three months ended September 30, 2023 compared to the

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sales for the three months ended October 1, 2022 were as follows:


	Three months ended
	September 30, 2023		October 1, 2022		Percentage increase (decrease) in sales
North America	25	%	25	%	(12	%)
Taiwan	17	%	18	%	(17	%)
China	16	%	17	%	(13	%)
South Korea	12	%	12	%	(15	%)
Japan	11	%	9	%	3	%
Europe	11	%	10	%	(2	%)
Southeast Asia	8	%	8	%	(9	%)

The decreases in sales to customers for all countries and regions that declined in the table above were principally driven by the lower sales demand of our products.

Net sales for the nine months ended September 30, 2023 were $2,711.6 million, which represents a 16% increase from $2,336.0 million in the nine months ended October 1, 2022. An analysis of the factors underlying the increase in net sales is presented in the following table:


(In thousands)
Net sales in the ~~quarter~~nine months ended ~~July 2,~~October 1, 2022	$	~~692,489~~2,335,963
Increase associated with CMC Materials acquisition	~~263,994~~ 537,837
Decrease associated with QED divestiture	(13,824)
Decrease associated with effect of foreign currency translation	(30,716)
Decrease mainly associated with volume exclusive of CMC Materials	~~(46,608)~~
~~Decrease associated with effect of foreign currency translation~~	~~(8,875)~~(117,625)
Net sales in the ~~quarter~~nine months ended ~~July 1,~~September 30, 2023	$	~~901,000~~2,711,635

Included in the sales increase were the inclusion of sales ~~associated with~~from the ~~acquisition~~Acquisition of CMC Materials of ~~$264.0~~$537.8 million. ~~In addition, there were~~This increase was offset by an absence of sales totaling $13.8 million resulting from our divestiture of QED, unfavorable foreign currency translation effects of $8.9 million, mainly due to the significant weakening of the Japanese yen relative to the U.S. dollar and effects of decreased demand from customers in the semiconductor market resulting in a decrease of $46.6 million compared to the quarter ending July 2, 2022.

On a geographic basis, sales percentage by customers’ country or region for the three months ended July 1, 2023 and July 2, 2022 and the percentage increase (decrease) in sales for the three months ended July 1, 2023 compared to the sales for the three

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~~months ended July 2, 2022 were as follows:~~
Three months ended
July 1, 2023 July 2, 2022 Percentage increase (decrease) in sales
North America 25 % 23 % 47 %
Taiwan 16 % 23 % (11 %)
China 16 % 16 % 30 %
South Korea 13 % 12 % 34 %
Japan 11 % 12 % 14 %
Europe 12 % 9 % 81 %
Southeast Asia 8 % 6 % 75 %

The increases in sales to customers for all countries and regions in the table above, except Taiwan, were principally driven by the inclusion of sales from the CMC Materials acquisition. The decrease in sales in Taiwan primarily relates to lower sales demand of AMH, MC and SCEM products offset by a partial increase in APS sales resulting from the inclusion of sales from the CMC Materials acquisition.

Net sales for the six months ended July 1, 2023 were $1,823.4 million, which represents a 36% increase from $1,342.1 million in the six months ended July 2, 2022. An analysis of the factors underlying the increase in net sales is presented in the following table:


~~(In thousands)~~
~~Net sales in the six months ended July 2, 2022~~	$	~~1,342,135~~
~~Increase associated with CMC acquisition~~	~~537,837~~
~~Decrease associated with effect of foreign currency translation~~	~~(26,937)~~
~~Decrease mainly associated with volume exclusive of CMC Materials~~	~~(29,639)~~
~~Net sales in the six months ended July 1, 2023~~	$	~~1,823,396~~

~~Included in the sales increase were sales associated with the acquisition of CMC Materials of $537.8 million. In addition, there were unfavorable foreign currency translation effects of $26.9~~$30.7 million, mainly due to the significant weakening of the Japanese yen relative to the U.S. dollar and decreased demand from customers in the semiconductor market resulting in a decrease of ~~$29.6~~$117.6 million compared to the ~~six-month~~nine-month period ended ~~July 2,~~October 1, 2022.

On a geographic basis, sales percentage by customers’ country or region for the ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022 and the percentage increase (decrease) in sales for the ~~six~~nine months ended ~~July 1,~~September 30, 2023 compared to the sales for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 were as follows:


		Six months ended							Nine months ended
		July 1, 2023		July 2, 2022		Percentage increase (decrease) in sales			September 30, 2023		October 1, 2022		Percentage increase (decrease) in sales
North America	North America	26	%	22	%	59	%	North America	26	%	24	%	27	%
Taiwan	Taiwan	16	%	22	%	(4	%)	Taiwan	16	%	21	%	(9	%)
South Korea	South Korea	13	%	13	%	35	%	South Korea	12	%	13	%	15	%
Japan	Japan	10	%	12	%	11	%	Japan	10	%	11	%	8	%
China	China	15	%	15	%	37	%	China	16	%	16	%	14	%
Europe	Europe	12	%	9	%	93	%	Europe	12	%	9	%	48	%
Southeast Asia	Southeast Asia	7	%	6	%	68	%	Southeast Asia	8	%	7	%	30	%

The increases in sales to customers for all countries and regions, except Taiwan, in the table above were principally driven by the inclusion of sales from the Acquisition of CMC ~~Materials acquisition.~~Materials. The decrease in sales in Taiwan primarily relates to lower sales demand of AMH, MC and ~~SCEM~~MS products offset by a partial increase in ~~APS~~ sales resulting from the inclusion of sales from the CMC Materials acquisition.

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Gross margin The following table sets forth gross margin as a percentage of net revenues:

Three months ended Six months ended
July 1, 2023 July 2, 2022 Percentage point change July 1, 2023 July 2, 2022 Percentage point change
Gross margin as a percentage of net revenues: 42.6 % 44.8 % (2.2) 43.1 % 46.2 % (3.1)


	Three months ended					Nine months ended
	September 30, 2023		October 1, 2022		Percentage point change	September 30, 2023		October 1, 2022		Percentage point change
Gross margin as a percentage of net revenues:	41.3	%	37.4	%	3.9	42.5	%	42.5	%	—

Gross margin ~~decreased~~increased by ~~2.2~~3.9 percentage points for the three months ended ~~July 1,~~September 30, 2023, compared to the same period in the prior year. Gross margin ~~declined~~improved primarily due to ~~unfavorable sales mix~~the absence of a $61.9 million charge, or 6.2 percentage point change, for a fair value write-up of acquired CMC Materials inventory sold during the three months ended October 1, 2022, partially offset by lower volumes and ~~lower factory utilization.~~the temporary impact of the termination of our alliance agreement with MacDermid Enthone.

Gross margin ~~decreased by 3.1 percentage points~~was flat for the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to the same period in the prior year. Gross margin ~~declined~~stayed flat primarily due to ~~unfavorable~~the absence of a $61.9 million charge or 2.6 percentage point change for fair value write-up of acquired CMC Materials inventory sold during the nine months ended October 1, 2022, partially offsetting the effect of lower sales ~~mix~~volumes and lower factory utilization. ~~In addition, the Company had restructuring costs of $7.4 million in the six months ended July 1, 2023.~~

Selling, general and administrative expenses Selling, general and administrative, or SG&A, expenses were ~~$145.6~~$116.1 million in the three months ended ~~July 1,~~September 30, 2023, compared to ~~$90.7~~$226.4 million in the year-ago period. The factors underlying the change in SG&A expenses is presented in the following table:


(In thousands)
Selling, general and administrative expenses in the quarter ended ~~July 2,~~October 1, 2022	$	~~90,685~~ 226,446
Integration, deal and transaction costs	(100,739)
Employee costs ~~mainly driven by the inclusion of CMC Materials~~	~~16,215~~
~~Integration costs~~	~~8,276~~
~~Loss on sale of QED business and asset held for sale~~	~~14,937~~
~~Depreciation expense, mainly driven by the inclusion of CMC Materials~~	~~4,227~~
~~Professional fees~~	~~5,474~~ (9,021)
Other ~~increases,~~decreases, net ~~mainly driven by the inclusion of CMC Materials~~	~~5,782~~ (635)
Selling, general and administrative expenses in the quarter ended ~~July 1,~~September 30, 2023	$	~~145,596~~116,051

SG&A expenses were ~~$315.5~~$431.5 million for the first ~~six~~nine months of 2023, representing ~~a 77%~~an 7% increase compared to SG&A expenses of ~~$177.8~~$404.2 million in the year-ago period. The factors underlying changes in SG&A is presented in the following table:


Selling, general and administrative expenses in the quarter ended ~~July 2,~~October 1, 2022	$	~~177,793~~404,239
Employee ~~costs other than share based compensation~~ costs, mainly driven by the inclusion of CMC Materials	~~36,359~~
~~Share based compensation costs~~	~~17,810~~
~~Integration costs~~	~~24,005~~45,148
Loss on sale of QED business and asset held for sale	28,579
Professional fees, mainly driven by the inclusion of CMC Materials	10,209
Computer supplies expense, mainly driven by the inclusion of CMC Materials	6,936
Depreciation expense, mainly driven by the inclusion of CMC Materials	~~8,800~~5,576
~~Professional fees~~Integration, deal and transaction costs	~~9,764~~ (81,153)
Other increases, net ~~mainly driven by the inclusion of CMC Materials~~	~~12,353~~11,980
Selling, general and administrative expenses in the quarter ended ~~July 1,~~September 30, 2023	$	~~315,463~~431,514

Engineering, research and development expenses The Company’s engineering, research and development, or ER&D, efforts focus on the support or extension of current product lines and the development of new products and manufacturing technologies. ER&D expenses increased ~~44%~~2.8% to ~~$71.0~~$66.8 million in the three months ended ~~July 1,~~September 30, 2023 compared to ~~$49.2~~$65.0 million in the year-ago period. The factors underlying the increase in ER&D expenses is presented in the following table:


(In thousands)
Engineering, research and development expenses in the quarter ended ~~July 2,~~October 1, 2022	$	~~49,248~~
~~Employee costs, mainly driven by the inclusion of CMC Materials~~	~~11,037~~
~~Project materials, mainly driven by the inclusion of CMC Materials~~	~~3,626~~64,990
Depreciation expense ~~mainly driven by the inclusion of CMC Materials~~	~~3,931~~2,208
Other ~~increases,~~decreases, net ~~mainly driven by the inclusion of CMC Materials~~	~~3,188~~ (388)
Engineering, research and development expenses in the quarter ended ~~July 1,~~September 30, 2023	$	~~71,030~~66,810

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ER&D expenses increased ~~49%~~30% to ~~$142.9~~$209.7 million in the first ~~six~~nine months of 2023, compared to ~~$96.0~~$161.0 million in the year-ago period. The factors underlying the increase in ER&D expenses is presented in the following table:


(In thousands)
Engineering, research and development expenses in the quarter ended ~~July 2,~~October 1, 2022	$	~~95,963~~160,953
Employee costs, mainly driven by the inclusion of CMC Materials	~~27,616~~27,548
Project materials, mainly driven by the inclusion of CMC Materials	~~6,399~~6,706
Depreciation expense, mainly driven by the inclusion of CMC Materials	~~7,725~~9,934
Other increases, net, mainly driven by the inclusion of CMC Materials	~~5,233~~4,605
Engineering, research and development expenses in the quarter ended ~~July 1,~~September 30, 2023	$	~~142,936~~209,746

Amortization expenses Amortization of intangible assets was ~~$54.7~~$51.2 million in the three months ended ~~July 1,~~September 30, 2023, compared to ~~$12.5~~$65.3 million for the three months ended ~~July 2,~~October 1, 2022. The ~~increase~~decrease primarily reflects ~~additional~~lower amortization ~~expense associated with~~due to the ~~recent acquisition~~intangibles disposed of ~~CMC Materials.~~as part of the QED disposition and PIM and EC intangibles reclassified as held-for-sale.

Amortization of intangible assets was ~~$112.3~~$163.5 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$25.1~~$90.5 million for the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The increase primarily reflects the additional amortization associated with the ~~recent~~ acquisition of CMC Materials.

Goodwill impairment The Company recorded a goodwill impairment charge of ~~$0.0~~$15.9 million and ~~$88.9~~$104.8 million in the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively. See Note 3 to our condensed consolidated financial statements for further discussion.

Gain on termination of alliance agreement On June 5, 2023, the Company announced the termination of an alliance agreement between the Company and MacDermid Enthone. The Company recognized a pre-tax gain, net of $154.8 million in the ~~three and six~~nine months ended ~~July 1,~~September 30, 2023. See Note 5 to our condensed financial statements for further discussion.

Interest expense Interest expense includes interest associated with debt outstanding and the amortization of debt issuance costs associated with such borrowings. Interest expense was ~~$80.9~~$77.8 million in the three months ended ~~July 1,~~September 30, 2023, compared to ~~$32.0~~$84.2 million in the three months ended ~~July 2,~~October 1, 2022. The ~~increase~~decrease primarily reflects ~~higher~~lower interest expense related to lower average debt balances for the ~~debt financing of~~period due to repayments on the ~~CMC Materials acquisition.~~Company’s outstanding debt.

Interest expense was ~~$163.4~~$244.9 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$44.9~~$129.0 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The increase primarily reflects higher interest expense related to the debt financing of the CMC Materials acquisition.

Other expense, net Other expense, net was ~~$7.7~~$10.2 million in the three months ended ~~July 1,~~September 30, 2023 and consisted mainly of a loss of extinguishment of debt of $4.5 million associated with the ~~repayments on~~Second Amendment to the Company’s ~~bridge credit facility and senior secured term loan facility~~Existing Credit Agreement (see Note 9 to the Company’s condensed consolidated financial statements) and foreign currency transaction losses of ~~$3.9 million~~$4.9 million. Other expense, net was ~~$9.6~~$12.9 million in the ~~six~~three months ended ~~July 2,~~October 1, 2022 and consisted mainly of foreign currency transaction losses of ~~$10.0~~$13.6 million.

Other expense, net was ~~$3.1~~$13.3 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023 and consisted mainly of loss of extinguishment and modification of debt of ~~$8.4~~$12.9 million associated with the repayments on the Company’s bridge credit facility and senior secured term loan facility and the ~~amendment~~amendments of the Company’s Existing Credit Agreement (see Note 9 to the Company’s condensed consolidated financial statements) and foreign currency transaction losses of ~~$6.3~~$11.2 million, partially offset by net proceeds received of $10.9 million resulting from the termination of the definitive agreement with ~~Infineum.~~Infineum related to the PIM business. Other expense, net was ~~$14.5~~$27.4 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and consisted mainly of foreign currency transaction losses of ~~$14.6~~$28.3 million.

Income tax (benefit) expenseIncome tax (benefit) expense was ~~$(16.5)~~($2.1) million and ~~$5.0~~$2.9 million in the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively, compared to income tax (benefit) expense of ~~$17.5~~($7.0) million and ~~$37.4~~$30.4 million in the three and ~~six~~nine months ended ~~July 2,~~October 1, 2022, respectively. The Company’s effective income tax rate was ~~(9.1)%~~(6.8%) and ~~4.3%~~2.0% for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, respectively, compared to ~~15.0%~~8.7% and ~~14.2%~~16.7% for the three and ~~six~~nine months ended ~~July 2,~~October 1, 2022, respectively.

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Net income Due to the factors noted above, the Company recorded net income of ~~$197.6~~$33.2 million, or ~~$1.31~~$0.22 per diluted share, in the three months ended ~~July 1,~~September 30, 2023, compared to net ~~income~~loss of ~~$99.5~~($73.7) million, or ~~$0.73~~($0.50) per diluted share, in the three months ended ~~July 2,~~October 1, 2022.

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In the ~~six~~nine months ended ~~July 1,~~September 30, 2023,, the Company recorded net income of ~~$109.5~~$142.7 million, or ~~$0.73~~$0.95 per diluted share, compared to net income of ~~$225.2~~$151.5 million, or ~~$1.65~~$1.08 per diluted share, in the ~~six~~nine months ended ~~July 2, 2022~~.October 1, 2022.

Non-GAAP Financial Measures The Company’s condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, or GAAP. The Company also utilizes certain non-GAAP financial measures as a complement to financial measures provided in accordance with GAAP in order to better assess and reflect trends affecting the Company’s business and results of operations. See the section entitled “Non-GAAP Information” below 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 18%~~decreased 21% to ~~$244.6~~$235.3 million in the three months ended ~~July 1,~~September 30, 2023, compared to ~~$207.4~~$298.4 million in the three months ended ~~July 2,~~October 1, 2022. In the three months ended ~~July~~September 30, 2023, adjusted EBITDA, as a percentage of net sales, decreased to 26% from 30% in the year-ago period.

Adjusted EBITDA increased 3% to $731.5 million in the nine months ended September 30, 2023, compared to $712.0 million in the nine months ended October 1, 2022. In the nine months ended September 30, 2023, adjusted EBITDA, as a percentage of net sales, decreased to 27% from 30% in the year-ago period.

Adjusted ~~EBITDA increased 20%~~operating income decreased 23% to ~~$496.2~~$195.7 million in the ~~six~~three months ended ~~July 1,~~September 30, 2023, compared to ~~$413.6~~$253.2 million in the ~~six~~three months ended ~~July 2,~~October 1, 2022. ~~In the six months ended July 1, 2023, adjusted EBITDA,~~Adjusted operating income, as a percentage of net sales, decreased to ~~27%~~22% from ~~31%~~25% in the year-ago period.

Adjusted operating income ~~increased 10%~~decreased 3% to ~~$200.9~~$601.4 million in the ~~three~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$183.0~~$618.5 million in the ~~three~~nine months ended ~~July 2,~~October 1, 2022. ~~Adjusted~~In the nine months ended September 30, 2023, adjusted operating income, as a percentage of net sales, decreased to 22% from 26% in the year-ago period.

Adjusted operating income increased 11% to $405.7 million in the six months ended July 1, 2023, compared to $365.3 million in the six months ended July 2, 2022. In the six months ended July 2, 2022, adjusted operating income, as a percentage of net sales, decreased to 22% from 27% in the year-ago period.

Non-GAAP earnings per share decreased ~~34%~~20% to ~~$0.66~~$0.68 in the three months ended ~~July 1,~~September 30, 2023, compared to ~~$1.00~~$0.85 in the three months ended ~~July 2,~~October 1, 2022. Non-GAAP earnings per share decreased ~~37%~~31% to ~~$1.31~~$2.00 in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$2.07~~$2.91 in the ~~six~~nine months ended ~~July 2,~~October 1, 2022.

The ~~increases~~decreases in adjusted EBITDA and non-GAAP earnings per shares for the three months ended September 30, 2023 and adjusted operating income for the three ~~and six~~ months ended ~~July 1,~~September 30, 2023 compared to the year-ago period is generally attributable to the decreases in sales and gross profit. The increases in adjusted EBITDA for the nine months ended September 30, 2023 compared to the year-ago period is generally attributable to the increases in sales and gross profit in connection with the CMC acquisition. The decrease in non-GAAP earnings per share for the ~~three and six~~nine months ended ~~July 1,~~September 30, 2023 compared to the year-ago period primarily is attributable to higher interest expense associated with debt financing in connection with the CMC acquisition.

Segment Analysis

~~The~~In the third quarter of 2023, in order to align its segment financial reporting with a change in its business structure, the Company ~~reports~~realigned its ~~financial performance based on four~~segments. Following the segment realignment, the Company’s three reportable ~~segments: Specialty Chemicals and Engineered~~segments are as follows (1) Materials ~~Advanced Planarization~~ Solutions, (2) Microcontamination Control, and (3) Advanced ~~Material~~Materials Handling. The current interim and succeeding annual periods will disclose the reportable segments with prior periods recast to reflect the change. See Note 15 to

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the condensed consolidated financial statements for additional information on the Company’s ~~four~~three segments. The following is a discussion of the results of operations of these ~~four~~three business segments.

The following table presents selected net sales and segment profit data for the Company’s ~~four~~three reportable segments, along with unallocated general and administrative expenses, for the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022.


		Three months ended				Six months ended					Three months ended						Nine months ended
(In thousands)	(In thousands)	July 1, 2023		July 2, 2022			July 1, 2023		July 2, 2022			(In thousands)	September 30, 2023		October 1, 2022			September 30, 2023		October 1, 2022
Specialty Chemicals and Engineered Materials
Materials Solutions												Materials Solutions
Net sales	Net sales	$	200,073	$	179,412		$	398,077	$	345,188		Net sales	$	435,538	$	518,046		$	1,324,502	$	922,196
Segment profit	Segment profit	173,319		35,539			176,587		73,231			Segment profit	56,955		53,131			243,171		147,700
Advanced Planarization Solutions
Net sales		$	240,561	$	28,317		490,887		58,962
Segment profit (loss)		42,419		10,179			9,629		21,338

Microcontamination Control	Microcontamination Control											Microcontamination Control
Net sales	Net sales	$	283,614	$	274,133		$	552,911	$	540,770		Net sales	$	286,217	$	280,550		$	839,128	$	821,320
Segment profit	Segment profit	100,661		100,107			196,658		198,725			Segment profit	101,132		105,335			297,790		304,062
Advanced Materials Handling	Advanced Materials Handling											Advanced Materials Handling
Net sales	Net sales	$	190,356	$	224,084		$	409,209	$	422,197		Net sales	$	180,248	$	210,405		$	589,457	$	632,602
Segment profit	Segment profit	35,830		46,926			83,995		93,616			Segment profit	31,642		42,077			115,637		135,693

Unallocated general and administrative expenses	Unallocated general and administrative expenses	$	29,935	$	22,287		$	73,535	$	40,449		Unallocated general and administrative expenses	$	21,429	$	120,308		$	94,964	$	160,759

~~Specialty Chemicals and Engineered~~ Materials ~~(SCEM)~~Solutions (MS)

For the ~~second~~third quarter of 2023, ~~SCEM~~MS net sales decreased to $435.5 million, down 16% compared to $518.0 million in the comparable period last year. The sales decrease was driven by lower volumes across most product lines and the absence of $13.8 million sales resulting from the divestiture of our QED business that was included in the prior year sales. MS reported a segment profit of $57.0 million in the third quarter of 2023, up 7% from $53.1 million in the year-ago period. The segment profit increase was primarily associated with the absence of a $61.9 million charge for a fair value write-up resulting from the sale of acquired CMC Materials inventory that was recorded in the year-ago period, offset by a $15.9 million loss on goodwill impairment related to the EC reporting unit, lower sales volume and increased operating expenses.

For the nine months ended September 30, 2023, MS net sales increased to ~~$200.1~~$1,324.5 million, up ~~12%~~44% compared to ~~$179.4~~$922.2 million in the comparable period last year. The sales increase primarily reflects the inclusion of sales of ~~$48.3~~$537.8 million from the inclusion of certain product lines from the acquisition of CMC Materials, partially offset by a sales decline seen across most other product lines which was primarily driven by ~~the softening~~a decline in demand across the semiconductor market. ~~SCEM~~MS reported a segment profit of ~~$173.3~~$243.2 million in the ~~second quarter of~~nine months ended September 30, 2023, up ~~388%~~65% from ~~$35.5~~$147.7 million in the year-ago period. The segment profit increase was primarily associated with a gain of $154.8 million resulting from the termination of the alliance agreement with MacDermid Enthone ~~and segment profit attributed to the CMC Materials acquisition. See~~(see Note 5 to our condensed consolidated financial statements for further ~~discussion on~~discussion), the ~~termination~~absence of ~~the alliance agreement.~~

~~For the six months ended July 1, 2023, SCEM net sales increased to $398.1~~a $61.9 million ~~up 15% compared to $345.2 million in the comparable period last year. The sales increase primarily reflects the inclusion of sales of $98.1 million~~charge for a fair value write-up resulting from the ~~inclusion~~sale of ~~certain product lines from the acquisition of~~acquired CMC Materials ~~partially offset by a sales decline seen across most other product lines which~~inventory that was ~~primarily driven by the softening in the semiconductor market. SCEM reported a segment profit of $176.6 million in the six months ended July 1, 2023, up 141% from $73.2 million~~recorded in the year-ago ~~period. The segment profit increase was primarily associated with a gain of $154.8 million resulting from the termination of the alliance agreement with MacDermid Enthone,~~period and segment profit attributed to the CMC Materials acquisition, partially offset by a ~~$14.9 million loss on the sale of QED business. See Note 5 to our condensed consolidated financial statements for further discussion on the termination of the alliance agreement.~~

~~Advanced Planarization Solutions (APS)~~

For the second quarter of 2023, APS net sales increased to $240.6 million, compared to $28.3 million in the comparable period last year. The sales increase was mainly due to sales attributed to the CMC Materials acquisition. APS reported a segment profit of $42.4 million in the second quarter of 2023, compared to segment profit of $10.2 million in the year-ago period. The segment profit increase was primarily due to the segment profit attributed to the CMC Materials acquisition, partially offset by $13.6 million loss on asset held for sale related to EC reporting unit.

For the six months ended July 1, 2023, APS net sales increased to $490.9 million, compared to $59.0 million in the comparable period last year. The sales increase was mainly due to sales attributed to the CMC Materials acquisition. APS reported a segment profit of $9.6 million in the six months ended July 1, 2023, down from $21.3 million in the year-ago period. The segment profit decrease was primarily due to goodwill impairment charge of ~~$88.9~~$104.8 million related to the EC reporting unit (see

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Note 3 to our condensed consolidated financial statements for further discussion) ~~and~~, a $13.6 million loss on asset held for sale related to the EC reporting unit ~~partially offset by~~and a $14.9 million loss on the ~~segment profit attributed to the CMC Materials acquisition.~~sale of QED.

Microcontamination Control (MC)

For the ~~second~~third quarter of 2023, MC net sales increased to ~~$283.6~~$286.2 million, up 3%2% compared to ~~$274.1~~$280.6 million in the comparable period last year. The sales increase was mainly due to improved sales from liquid filtration ~~and gas purification~~ products. MC reported a segment profit of ~~$100.7~~$101.1 million in the ~~second~~third quarter of 2023, ~~up 1%~~down 4% from ~~$100.1~~$105.3 million in the year-ago period. The segment profit ~~increase~~decrease was primarily due to anlower factory utilization and increased costs associated with the ramp up of our new facility in Taiwan.

For the nine months ended September 30, 2023, MC net sales ~~volume, partially offset by~~increased to $839.1 million, up 2% compared to $821.3 million in the comparable period last year. The sales increase was mainly due to improved sales from liquid filtration products. MC reported a segment profit of $297.8 million in the nine months ended September 30, 2023, down 2% from $304.1 million in the year-ago period. The segment profit decrease was primarily due to increased costs associated with the ramp up of our new facility in Taiwan and increased investment in research and development.

For the six months ended July 1, 2023, MC net sales increased to $552.9 million, up 2% compared to $540.8 million in the comparable period last year. The sales increase was mainly due to improved sales from liquid filtration and gas purification products. MC reported a segment profit

Table of $196.7 million in the six months ended July 1, 2023, down 1% from $198.7 million in the year-ago period. The segment profit decline was primarily due to increased costs associated with the ramp up of our new facility in Taiwan, increased investment in research and development, and higher compensation costs.Contents

Advanced Materials Handling (AMH)

For the ~~second~~third quarter of 2023, AMH net sales decreased to ~~$190.4~~$180.2 million, down ~~15%~~14% compared to ~~$224.1~~$210.4 million in the comparable period last year. The sales decrease was mainly due to lower sales of our microenvironment solution ~~products.~~products related to semiconductor market declines. AMH reported a segment profit of ~~$35.8~~$31.6 million in the ~~second~~third quarter of 2023, down ~~24%~~25% from ~~$46.9~~$42.1 million in the year-ago period. The segment profit decrease was primarily due to lower sales volume and ~~lower~~ factory ~~utilization and higher project costs.~~utilization.

For the ~~six~~nine months ended ~~July 1,~~September 30, 2023, AMH net sales decreased to ~~$409.2~~$589.5 million, down 3%7% compared to ~~$422.2~~$632.6 million in the comparable period last year. The sales decrease was mainly due to lower sales from our microenvironment solution products. AMH reported a segment profit of ~~$84.0~~$115.6 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, down ~~10%~~15% from ~~$93.6~~$135.7 million in the year-ago period. The segment profit decrease was primarily due to lower sales volume and lower factory ~~utilization and higher compensation costs.~~utilization.

Unallocated general and administrative expenses

Unallocated general and administrative expenses totaled ~~$29.9~~$21.4 million in the ~~second~~third quarter of 2023, compared to ~~$22.3~~$120.3 million in the comparable period last year. The ~~$7.6~~$98.9 million ~~increase~~decrease is primarily due to a ~~$8.3~~$100.7 million ~~increase~~decrease in deal, transaction and integration costs related to the acquisition of CMC Materials.

Unallocated general and administrative expenses for the ~~six~~nine months ended ~~July 1,~~September 30, 2023 totaled ~~$73.5~~$95.0 million, updown from ~~$40.4~~$160.8 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The ~~$33.1~~$65.8 million ~~increase~~decrease is primarily due to a ~~$24.0~~$81.2 million ~~increase resulting from~~decrease in deal, transaction and integration costs, ~~and a $14.5 million~~partially offset by an increase in employee related costs ~~driven by higher stock based compensation costs.~~of $14.7 million.

Liquidity and Capital Resources

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


In thousands	In thousands	July 1, 2023		December 31, 2022		In thousands	September 30, 2023		December 31, 2022
Cash and cash equivalents including restricted cash	Cash and cash equivalents including restricted cash	$	567,017	$	563,439	Cash and cash equivalents including restricted cash	$	594,020	$	563.439
Working capital	Working capital	2,322,259		1,573,254		Working capital	2,260,401		1,573,254
Total debt, net of unamortized discount and debt issuance costs	Total debt, net of unamortized discount and debt issuance costs	5,492,011		5,784,893		Total debt, net of unamortized discount and debt issuance costs	5,425,496		5,784,893

The Company has historically financed its operations and capital requirements through cash flow from its operating activities, long-term debt, lease financing, revolving credit facility and borrowings under domestic and international short-term lines of credit.

Based on our analysis, we believe our existing balances of domestic cash and cash equivalents and our currently anticipated operating cash flows will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months and for the longer term.

We may seek to take advantage of opportunities to raise additional capital through additional debt financing or through public or private sales of securities. If in the future our available liquidity is not sufficient to meet the Company’s operating and debt 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 2023, we have not experienced difficulty accessing

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capital and credit markets, but future volatility in the capital and credit markets may increase costs associated with issuing debt instruments or affect our ability to access those markets. In addition, it is possible that our ability to access the capital and credit markets could be limited at a time when we would like, or need, to do so, which could have an adverse impact on our ability to refinance maturing debt and/or react to changing economic and business conditions.

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


		Six months ended					Nine months ended
(in thousands)	(in thousands)	July 1, 2023		July 2, 2022		(in thousands)	September 30, 2023		October 1, 2022
Net cash provided by operating activities	Net cash provided by operating activities	$	278,889	$	174,698	Net cash provided by operating activities	$	478,912	$	320,230
Net cash provided by (used in) investing activities		53,860		(190,974)
Net cash used in investing activities						Net cash used in investing activities	(22,726)		(4,792,637)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(318,583)		2,367,324		Net cash (used in) provided by financing activities	(410,008)		4,846,009
Increase in cash, cash equivalents and restricted cash	Increase in cash, cash equivalents and restricted cash	3,578		2,340,666		Increase in cash, cash equivalents and restricted cash	30,581		352,102

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Operating activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities totaled ~~$278.9~~$478.9 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$174.7~~$320.2 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The increase was driven by a ~~$123.9~~$164.5 million ~~of changes~~change in operating assets and liabilities, partially offset by ~~$19.7~~$5.8 million decrease of net income adjusted for non-cash reconciling items.

Changes in operating assets and liabilities for the ~~six~~nine months ended ~~July 1,~~September 30, 2023 were driven by changes in ~~accounts payable and accrued liabilities,~~ trade accounts and notes receivable, inventories, accounts payable and accrued liabilities, income taxes payable and refundable income taxes. The change for trade receivables was mainly due to lower sales. The change for ~~accounts payable and accrued liabilities was driven by lower vendor purchases. The change for~~ inventory was driven by a management initiative to reduce inventory. The change for accounts payable and accrued liabilities was driven by a lower change in interest payable and lower vendor purchases. The change for income taxes payable and refundable income taxes iswas due to larger tax payments paid compared to the previous year.

Investing activities Cash flows ~~provided by~~used in investing activities totaled ~~$53.9~~$22.7 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to cash flows used in investing activities of ~~$191.0~~$4,792.6 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The ~~change~~decrease resulted primarily from the acquisition of CMC Materials in the previous year, partially offset by proceeds from the sale of the QED business of $134.3 million and net proceeds from the termination of the alliance agreement with MacDermid Enthone of $169.3 million ~~partially offset by higher cash paid for acquisition of property, plant and equipment.~~in the current year.

Financing activities Cash used in financing activities totaled ~~$318.6~~$410.0 million during the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to cash provided by financing activities of ~~$2,367.3~~$4,846.0 million during the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The ~~change~~decrease was primarily due to the net debt activity, which was a use of cash of ~~315.0~~390.0 million in 2023 compared to a source of cash of ~~$2,402.7~~$4,901.3 million in 2022. The net debt activity in 2022 primarily related to ~~the preliminary~~ financing obtained for the CMC Materials acquisition.

Our total dividend payments were ~~$30.2~~$45.2 million in the ~~six~~nine months ended ~~July 1,~~September 30, 2023, compared to ~~$27.5~~$42.4 million in the ~~six~~nine months ended ~~July 2,~~October 1, 2022. We have paid a cash dividend in each quarter since the fourth quarter of 2017. On ~~July 19,~~October 18, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share to be paid on ~~August 23,~~November 22, 2023 to shareholders of record on the close of business on ~~August 2,~~November 1, 2023.

Other Liquidity and Capital Resources Considerations

Debt

(In thousands) July 1, 2023 December 31, 2022
Senior secured term loan facility due 2029 $ 2,318,499 $ 2,495,000
Senior secured notes due 2029 at 4.75% 1,600,000 1,600,000
Senior unsecured notes due 2030 at 5.95% 895,000 895,000
Senior unsecured notes due 2029 at 3.625% 400,000 400,000
Senior unsecured notes due 2028 at 4.375% 400,000 400,000
Bridge credit facility due 2023 — 135,000
Revolving facility due 2027 — —
Total debt (par value) $ 5,613,499 $ 5,925,000

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(In thousands)	September 30, 2023		December 31, 2022
Senior secured term loan facility due 2029	$	2,243,499	$	2,495,000
Senior secured notes due 2029 at 4.75%	1,600,000		1,600,000
Senior unsecured notes due 2030 at 5.95%	895,000		895,000
Senior unsecured notes due 2029 at 3.625%	400,000		400,000
Senior unsecured notes due 2028 at 4.375%	400,000		400,000
Bridge credit facility due 2023	—		135,000
Revolving facility due 2027	—		—
Total debt (par value)	$	5,538,499	$	5,925,000

On March 10, 2023, and September 11, 2023, the Company amended its ~~Amended~~Existing Credit Agreement. The ~~amendment~~First Amendment, dated March 10, 2023, provides for, among other things, the refinancing of the Company’s outstanding term B loans under the ~~Existing Credit Agreement~~senior secured term loan facility due 2029 in an aggregate principal amount of $2.495 billion ~~(the “Original Tranche B Term Loans”)~~ with a new tranche of term B loans ~~under the Amended Credit Agreement~~ in an aggregate principal amount of $2.495 ~~billion (the “New Tranche B Term Loans”).~~billion. The ~~New Tranche B Term Loans~~amended loans will bear interest ~~under the Amended Credit Agreement,~~ at a rate per annum equal to atthe Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.75% which is a reduction from the applicable margin of 3.00% prior to the amendment. The Second Amendment, dated September 11, 2023, provides for, among other things, the refinancing of the Company’s ~~option, either (i) Term~~outstanding term B loans under the senior secured term loan facility due 2029 in an aggregate principal amount of $2.318 billion with a new tranche of term B loans in an aggregate principal amount of $2.318 billion. The outstanding term B loans under the amended senior secured term loan facility due 2029 will bear interest, at a rate per annum equal to the SOFR plus an applicable margin of ~~2.75% or (ii)~~2.50% which is a ~~base rate plus an~~reduction from the applicable margin of ~~1.75%. Consistent with the Original Tranche B Term Loans, the new Tranche B Term Loans will mature on July 6, 2029.~~2.75% prior to this amendment. See Note 9 to our condensed consolidated financial statements for further discussion.

As of ~~July 1,~~September 30, 2023, during the fiscal year 2023, the Company has repaid ~~$176.5~~$251.5 million of the outstanding borrowings under the New Tranche B Term Loan and $135.0 million in full repayment of all outstanding borrowings under the bridge credit facility.

Through ~~July 1,~~September 30, 2023, the Company was in compliance with the financial covenants under its debt arrangements.

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The Company has commitments under the Revolving Facility of $575.0 million. 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 SOFR, plus, in each case, an applicable margin. During the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, there were no borrowings under this Revolving Facility and no balance was outstanding at ~~July 1,~~September 30, 2023.

The Company also has a line of credit with one bank that provides for borrowings in Japanese yen for the Company’s Japanese subsidiaries, equivalent to an aggregate of approximately ~~$6.9~~$6.7 million. During the three and ~~six~~nine months ended ~~July 1,~~September 30, 2023, there were no borrowings under this line of credit and no balance was outstanding at ~~July 1,~~September 30, 2023.

Cash, cash equivalents and restricted cash and cash requirements


(In thousands)	(In thousands)	July 1, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
U.S.	U.S.	$	189,164	$	136,262	U.S.	$	236,223	$	136,262
Non-U.S.	Non-U.S.	376,714		425,297		Non-U.S.	357,797		425,297
Cash and cash equivalents	Cash and cash equivalents	565,878		561,559		Cash and cash equivalents	594,020		561,559
Restricted cash - U.S.	Restricted cash - U.S.	1,139		1,880		Restricted cash - U.S.	—		1,880
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	567,017	$	563,439	Cash, cash equivalents and restricted cash	$	594,020	$	563,439

Our cash and cash equivalents include cash on hand and highly liquid debt securities with original maturities of three months or less, which are valued at cost and approximate fair value. We utilize a variety of funding strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We have accrued taxes on any earnings that are not indefinitely reinvested. No additional withholding taxes have been accrued for any indefinitely reinvested earnings.

Our restricted cash represents cash held in a “Rabbi” trust and is not available for general corporate purposes. See Note 6 to the condensed consolidated financial statements for additional information. The Company had no restricted cash as of September 30, 2023.

Cash requirements

We have cash requirements to support working capital needs, capital expenditures, business acquisitions, contractual obligations, commitments, principal and interest payments on debt and other liquidity requirements associated with our operations. We generally intend to use available cash and funds generated from our operations to meet these cash requirements, but in the event that additional liquidity is required we may also borrow under our Revolving Facility.

There were no material changes to the cash requirements from our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 that were outside the ordinary course of business except for the principal repayments of ~~$311.5~~$386.5 million made on the senior secured term loan facility and bridge credit facility as discussed above.

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

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

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

The Company also utilizes certain non-GAAP financial measures as a complement to financial measures provided in accordance with GAAP in order to better assess and reflect trends affecting the Company’s business and results of operations. These non-GAAP financial measures include adjusted EBITDA and adjusted operating income, together with related measures

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thereof, and non-GAAP earnings per share, as well as certain other supplemental non-GAAP financial measures included in the discussion of the Company’s financial results.

Adjusted EBITDA is defined by the Company as net income (loss) ~~income~~ before, as applicable, (1) income tax (benefit) expense, (2) interest expense, (3) interest income, (4) other ~~(income)~~ expense, net, (5) goodwill impairment, (6) deal and transaction costs, (7) integration costs, (8) contractual costs and non-cash integration costs, (9) restructuring costs, ~~(9)~~(10) loss on sale of business and held for sales assets, ~~(10)~~(11) charge for fair value write-up of acquired inventory sold, (12) gain on termination of the Alliance Agreement, ~~(11)~~(13) amortization of intangible assets and ~~(12)~~(14) depreciation. Adjusted operating income 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.

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Non-GAAP Net Income is defined by the Company as net (loss) income before, as applicable, (1) goodwill impairment, (2) deal and transaction costs, (3) integration costs,(4) contractual costs and non-cash integration costs, (5) restructuring costs, ~~(5)~~(6) loss on extinguishment of debt and modification, ~~(6)~~(7) loss on sale of business and held for sales assets, ~~(7)~~(8) charge for fair value write-up of sale of acquired inventory, (9) gain on termination of the Alliance Agreement, ~~(8)~~(10) Infineum termination fee, net, ~~(9)~~(11) Interest expense, net, ~~(10)~~(12) amortization of intangible assets, ~~(11)~~(13) the tax effect of the foregoing adjustments to net income, stated on a per share basis. Non-GAAP EPS is defined as our Non-GAAP Net Income divided by our diluted weighted-average shares outstanding.

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

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

Management uses adjusted 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 our business.

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

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, 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.

Third, there is no assurance that the Company will not have future charges for goodwill impairment, restructuring activities, deal costs, integration costs, or similar items and, therefore, may need to record additional charges (or credits) associated with

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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 (Loss) to Adjusted Operating Income and Adjusted EBITDA


		Three months ended						Six months ended							Three months ended						Nine months ended
(In thousands)	(In thousands)	July 1, 2023			July 2, 2022			July 1, 2023			July 2, 2022			(In thousands)	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Net sales	Net sales	$	901,000		$	692,489		$	1,823,396		$	1,342,135		Net sales	$	888,239		$	993,828		$	2,711,635		$	2,335,963
Net income		$	197,646		$	99,491		$	109,480		$	225,196
Net income - as a % of net sales		21.9		%	14.4		%	6.0		%	16.8		%
Adjustments to net income
Net income (loss)														Net income (loss)	$	33,212		$	(73,703)		$	142,692		$	151,493
Net income (loss) - as a % of net sales														Net income (loss) - as a % of net sales	3.7		%	(7.4		%)	5.3		%	6.5		%
Adjustments to net income (loss):														Adjustments to net income (loss):
Equity in net loss of affiliates	Equity in net loss of affiliates	130			—			130			—			Equity in net loss of affiliates	139			—			269			—
Income tax (benefit) expense	Income tax (benefit) expense	(16,491)			17,517			4,978			37,392			Income tax (benefit) expense	(2,127)			(7,015)			2,851			30,377
Interest expense	Interest expense	80,908			32,001			167,054			44,877			Interest expense	77,820			84,150			244,874			129,027
Interest income	Interest income	(2,303)			(658)			(3,628)			(670)			Interest income	(2,226)			(1,395)			(5,854)			(2,065)
Other expense, net	Other expense, net	7,724			9,619			3,066			14,521			Other expense, net	10,243			12,852			13,309			27,373
GAAP – Operating income	GAAP – Operating income	267,614			157,970			281,080			321,316			GAAP – Operating income	117,061			14,889			398,141			336,205
Operating margin - as a % of net sales	Operating margin - as a % of net sales	29.7		%	22.8		%	15.4		%	23.9		%	Operating margin - as a % of net sales	13.2		%	1.5		%	14.7		%	14.4		%

Goodwill impairment 1	Goodwill impairment 1	—			—			88,872			—			Goodwill impairment 1	15,913			—			104,785			—
Deal and transaction costs 2	Deal and transaction costs 2	—			2,410			3,001			7,418			Deal and transaction costs 2	—			31,867			3,001			39,285
Integration costs:	Integration costs:													Integration costs:
Professional fees 3	Professional fees 3	13,324			9,525			25,312			10,321			Professional fees 3	6,756			11,377			32,068			21,698
Severance costs 4	Severance costs 4	965			—			2,327			—			Severance costs 4	(454)			3,996			1,873			3,996
Retention costs 5	Retention costs 5	362			—			1,642			—			Retention costs 5	45			1,530			1,687			1,530
Other costs 6	Other costs 6	3,789			640			6,134			1,090			Other costs 6	3,953			3,859			10,087			4,949
Restructuring costs 7		—			—			11,242			—
Loss on sale of business and held for sale assets 8		14,937			—			28,579			—
Gain on termination of alliance agreement 9		(154,754)			—			(154,754)			—
Amortization of intangible assets 10		54,680			12,494			112,254			25,145
Contractual and non-cash integration costs:														Contractual and non-cash integration costs:
CMC Materials Retention 7														CMC Materials Retention 7	—			14,477			—			14,477
Stock-based compensation alignment 8														Stock-based compensation alignment 8	—			21,584			—			21,584
Change in control costs 9														Change in control costs 9	—			22,350			—			22,350
Restructuring costs 10														Restructuring costs 10	1,202			—			12,444			—
Loss on sale of business and held for sale assets 11														Loss on sale of business and held for sale assets 11	—			—			28,579			—
Charge for fair value write-up of acquired inventory sold 12														Charge for fair value write-up of acquired inventory sold 12	—			61,932			—			61,932
Gain on termination of alliance agreement 13														Gain on termination of alliance agreement 13	—			—			(154,754)			—
Amortization of intangible assets 14														Amortization of intangible assets 14	51,239			65,346			163,493			90,491
Adjusted operating income	Adjusted operating income	200,917			183,039			405,689			365,290			Adjusted operating income	195,715			253,207			601,404			618,497
Adjusted operating margin - as a % of net sales	Adjusted operating margin - as a % of net sales	22.3		%	26.4		%	22.2		%	27.2		%	Adjusted operating margin - as a % of net sales	22.0		%	25.5		%	22.2		%	26.5		%
Depreciation	Depreciation	43,719			24,381			90,494			48,286			Depreciation	39,631			45,203			130,125			93,489
Adjusted EBITDA	Adjusted EBITDA	$	244,636		$	207,420		$	496,183		$	413,576		Adjusted EBITDA	$	235,346		$	298,410		$	731,529		$	711,986

Adjusted EBITDA – as a % of net sales	Adjusted EBITDA – as a % of net sales	27.2		%	30.0		%	27.2		%	30.8		%	Adjusted EBITDA – as a % of net sales	26.5		%	30.0		%	27.0		%	30.5		%

1 Non-cash impairment charges associated with goodwill.

2 Deal and transaction costs associated with CMC Materials acquisition and completed and announced divestitures.

3 Represents professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers and other ~~vendors~~third-party service providers to assist us in integrating ~~recently acquired~~ CMC Materials into our operations.

4 Represent severance charges related to the integration of the CMC Materials acquisition

5 Represents retention charges related directly to the CMC Materials acquisition and completed and announced divestitures, and are not part of our normal, recurring cash operating expenses.

6 Represents other employee related costs and other costs incurred relating to the CMC Materials acquisition and the completed and announced divestitures. These costs arise outside of the ordinary course of our continuing operations.

7~~Restructuring charges resulting from cost saving initiatives.~~

8 ~~Loss from~~Represents non-recurring costs associated with the ~~sale of QED~~CMC Materials retention program that was agreed upon and ~~held for sales assets of EC.~~set forth in the definitive acquisition agreement.

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8 Represents the non-cash incremental expense associated with adopting retirement vesting obligations on Entegris equity awards, similar to those of CMC Materials equity awards.

9 Relates to the change in control agreements that were in place with management of CMC Materials prior to the acquisition and the associated expense post-acquisition.

10 Restructuring charges resulting from cost saving initiatives.

11 Loss from the sale of QED and held-for-sale assets of EC.

12 Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to CMC Materials acquisition.

13 Gain on termination of the alliance agreement with MacDermid Enthone.

1014 Non-cash amortization expense associated with intangibles acquired in acquisitions.

Reconciliation of GAAP Net Income (Loss) and Earnings (Loss) per Share to Non-GAAP Net Income and Earnings per Share
Three months ended Six months ended
(In thousands, except per share data) July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022
Net income $ 197,646 $ 99,491 $ 109,480 $ 225,196
Adjustments to net income
   Goodwill impairment 1
— — 88,872 —
   Deal and transaction costs 2
— 2,410 3,001 7,418
   Integration costs:
            Professional fees 3
13,324 9,525 25,312 10,321
            Severance costs 4
965 — 2,327 —
            Retention costs 5
362 — 1,642 —
            Other costs 6
3,789 640 6,134 1,090
   Restructuring costs 7
— — 11,242 —
   Loss on extinguishment of debt and modification 8
4,481 — 8,361 —
   Loss on sale of business and held for sale assets 9
14,937 — 28,579 —
   Gain on termination of alliance agreement 10

(154,754) — (154,754) —
   Infineum termination fee, net 11
— — (10,877) —
   Interest expense, net 12
— 22,742 — 27,425
   Amortization of intangible assets 13
54,680 12,494 112,254 25,145
   Tax effect of adjustments to net income and discrete tax items14
(35,825) (10,486) (34,186) (14,646)
Non-GAAP net income $ 99,605 $ 136,816 $ 197,387 $ 281,949
Diluted earnings per common share $ 1.31 $ 0.73 $ 0.73 $ 1.65
Effect of adjustments to net income (0.65) 0.27 0.58 0.42
Diluted non-GAAP earnings per common share $ 0.66 $ 1.00 $ 1.31 $ 2.07
Diluted weighted averages shares outstanding 150,837 136,454 150,609 136,503


	Three months ended				Nine months ended
(In thousands, except per share data)	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net income (loss)	$	33,212	$	(73,703)	$	142,692	$	151,493
Adjustments to net income (loss):
Goodwill impairment 1	15,913		—		104,785		—
Deal and transaction costs 2	—		31,867		3,001		39,285
Integration costs:
Professional fees 3	6,756		11,377		32,068		21,698
Severance costs 4	(454)		3,996		1,873		3,996
Retention costs 5	45		1,530		1,687		1,530
Other costs 6	3,953		3,859		10,087		4,949
Contractual and non-cash integration costs:
CMC Materials Retention 7	—		14,477		—		14,477
Stock-based compensation alignment 8	—		21,584		—		21,584
Change in control costs 9	—		22,350		—		22,350
Restructuring costs 10	1,202		—		12,444		—
Loss on extinguishment of debt and modification 11	4,532		2,235		12,893		2,235
Loss on sale of business and held for sale assets 12	—		—		28,579		—
Gain on termination of alliance agreement 13	—		—		(154,754)		—
Infineum termination fee, net 14	—		—		(10,877)		—
Charge for fair value write-up of acquired inventory sold 15	—		61,932		—		61,932
Interest expense, net 16	—		2,397		—		29,822
Amortization of intangible assets 17	51,239		65,346		163,493		90,491
Tax effect of adjustments to net income and discrete tax items18	(12,810)		(41,477)		(46,996)		(56,123)
Non-GAAP net income	$	103,588	$	127,770	$	300,975	$	409,719

Diluted earnings (loss) per common share	$	0.22	$	(0.50)	$	0.95	$	1.08
Effect of adjustments to net income (loss)	0.46		1.35		1.05		1.83
Diluted non-GAAP earnings per common share	$	0.68	$	0.85	$	2.00	$	2.91

Diluted weighted averages shares outstanding	151,229		148,570		150,816		140,892
Effect of adjustment to diluted weighted average shares outstanding	—		1,099		—		—
Diluted non-GAAP weighted average shares outstanding	151,229		149,669		150,816		140,892

1 Non-cash impairment charges associated with goodwill.

2 Deal and transaction costs associated with the CMC Materials acquisition and completed and announced divestitures

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3 Represents professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers and other ~~vendors~~third-party service providers to assist us in integrating ~~the recently acquired~~ CMC Materials into our operations. These fees arise outside of the ordinary course of our continuing operations.

4 Represent severance charges related to the integration of ~~the~~ CMC ~~acquisition.~~Materials.

5 Represents retention charges related directly to the CMC Materials acquisition and completed and announced divestitures, and are not part of our normal, recurring cash operating expenses.

6 Represents other ~~employee related~~employee-related costs and other costs incurred relating to the CMC Materials acquisition and completed and announced divestitures. These costs arise outside of the ordinary course of our continuing operations.

7Represents non-recurring costs associated with the CMC retention program that was agreed upon and set forth in the definitive acquisition agreement.

8Represents the non-cash incremental expense associated with adopting retirement vesting obligations on Entegris equity awards, similar to those of CMC Materials equity awards.

9 Relates to the change in control agreements that were in place with management of CMC Materials prior to the acquisition and the associated expense post-acquisition.

10 Restructuring charges resulting from cost saving initiatives.

811 Non-recurring loss on extinguishment of debt and modification of our Credit Amendment.

912 Loss from the sale of QED and held for sales assets of EC.

1013 Gain on termination of the alliance agreement with MacDermid Enthone.

1114 Non-recurring gain from the termination fee with Infineum.

1215 Represents the additional cost of goods sold recognized in connection with the step-up of inventory valuation related to the CMC Materials acquisition.

16 Non-recurring interest costs related to the financing of the CMC Materials acquisition.

1317 Non-cash amortization expense associated with intangibles acquired in acquisitions.

1418 The 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, cash equivalents, restricted cash 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 ~~$0.8 million~~$0.4 thousand and ~~$20.1~~$16.8 million as of ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, respectively. On July 28, 2022, the Company entered into a floating-to-fixed interest rate swap agreement to hedge the variability in SOFR-based interest payments associated with $1.95 billion of its $2.495 billion Initial Term Loan Facility. The notional amount is $1.65 billion at ~~July 1,~~September 30, 2023 and is scheduled to decrease quarterly and will expire on December 30, 2025.

The cash flows and results of operations of the Company’s foreign-based operations are subject to fluctuations in foreign exchange rates. We have sales denominated in the South Korean Won, New Taiwan Dollar, Chinese Renminbi, Malaysian Ringgit, Canadian Dollar, Great British Pound, Euro, Singapore Dollar, Israeli Shekel and the Japanese Yen. Approximately ~~24.8%~~21.5% and ~~22.3%~~22.9% of the Company’s sales for the quarters ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, respectively, are denominated in these currencies. Financial results therefore can be and have been affected by changes in currency exchange rates, as seen in the Company’s results in this quarter. If all foreign currencies had experienced a 10% reduction versus the U.S. dollar during the three months ended ~~July 1,~~September 30, 2023 and ~~July 2,~~October 1, 2022, revenue for the quarters would have been negatively impacted by approximately ~~$20.0~~$16.8 million and ~~$8.9~~$18.6 million, respectively.

The Company occasionally uses derivative financial instruments to manage the foreign currency exchange rate risks associated with its foreign-based operations. However, we are unlikely to be able to hedge these exposures completely. We do not enter into forward contracts or other derivative instruments for speculative or trading purposes. At ~~July 1,~~September 30, 2023, the Company had no material net exposure to any foreign currency forward contracts.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The Company’s management, including the Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, or the Exchange Act) as of ~~July 1,~~September 30, 2023. The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on management’s evaluation (with the participation of the Company’s CEO and CFO), as of ~~July 1,~~September 30, 2023, the Company’s CEO and CFO have concluded that the disclosure controls and procedures used by the Company were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There have been no significant changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the foregoing evaluation of disclosure controls and procedures that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial ~~reporting, except that~~reporting. The Company completed the ~~Company is continuing to migrate~~integration of the former CMC Materials financial system operations onto the Company’s SAP enterprise resource planning (ERP) platform during the quarter ended September 30, 2023, except for those systems used in ~~fiscal 2023.~~businesses held for sale. The Company will continue to monitor and test these systems as part of management’s annual evaluation of internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

As of ~~July 1,~~September 30, 2023, 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

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described in Part I, Item 1A. “Risk Factors” in our Annual Report, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the Annual Report.

Item 2. Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds, and Issuer Purchases of Equity Securities.

Issuer Purchases of Equity Securities

The Company did not purchase any of its equity securities during the quarter ended ~~July 1,~~September 30, 2023 under an authorized company stock repurchase plan.

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.

Item 5. Other Information

Rule 10b5-1 Trading Plan Arrangements

On ~~May 19,~~August 25, 2023, ~~James A. O’Neill,~~Joseph M. Colella, our Senior Vice President, General Counsel and ~~Chief Technology Officer,~~Secretary, entered into a Rule 10b5-1 Plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. ~~O’Neill’s~~Colella’s plan provides for the sale of up to ~~1,918~~5,461 shares of the Company’s common stock. The plan expires on ~~May 17,~~August 23, 2024, or upon the earlier completion of all authorized transactions under the plan.

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Item 6. Exhibits

EXHIBIT INDEX

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

Reg. S-K Item 601(b) Reference

Document Incorporates

Referenced Document on file with the Commission

(4)

Amendment No. 2, dated as of September 11, 2023, among Entegris, as borrower, the other credit parties party thereto, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent.

Exhibit 10.1 to Entegris, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2023

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


Reg. S-K Item 601(b) Reference	Exhibit No.	Document Filed Herewith
(31)	31.1	Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a).
(31)	31.2	Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a).
(32)	32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(101)	101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
(101)	101.SCH	XBRL Taxonomy Extension Schema Document
(101)	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
(101)	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
(101)	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
(101)	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
(104)	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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: ~~August 3,~~November 2, 2023						/s/ Linda LaGorga
						Linda LaGorga
						Senior Vice President and Chief Financial
						Officer (on behalf of the registrant and as
						principal financial officer)

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