Entegris(ENTG) - 2023 Q4 - Annual Report

Business Segments and Divestitures - In Q3 2023, the Company realigned its segments into three reportable segments to enhance its capabilities in the semiconductor manufacturing ecosystem [205]. - The Company completed the divestiture of the Electronic Chemicals business on October 2, 2023, receiving cash proceeds of $737.1 million, or net proceeds of$675.2 million [214]. - The Company received proceeds of $134.3 million from the divestiture of the QED business on March 1, 2023 [211]. - The Company terminated the definitive agreement with Infineum to sell its PIM business, receiving a$12.0 million termination fee in Q1 2023 [210]. - The Company announced a termination of the Alliance Agreement with MacDermid Enthone, resulting in net proceeds of $191.2 million in 2023 [213]. Financial Performance - Net sales for 2023 were$3,523.9 million, an increase of $241.9 million, or 7$537.8 million from the acquisition of CMC Materials, offset by a $116.2 million decrease from divestitures and a$146.5 million decrease in semiconductor market demand [224]. - Gross profit margin remained unchanged at 42.5% for both 2023 and 2022 [227]. - Net income for 2023 was $180.7 million, or$1.20 per diluted share, compared to $208.9 million, or$1.46 per diluted share, in 2022 [239]. - Adjusted EBITDA decreased to $942.4 million in 2023, down from$973.2 million in 2022, with a margin of 26.7% [242]. - Non-GAAP net income for 2023 was $398,918,000, down 25.4$534,170,000 in 2022 [299]. - Diluted non-GAAP earnings per share decreased to $2.64 in 2023 from$3.73 in 2022, reflecting a decline of 29.4% [299]. Expenses and Costs - Selling, general and administrative (SG&A) expenses increased by $32.7 million, or 6$576.2 million in 2023 [228]. - Engineering, research and development (ER&D) expenses rose to $277.3 million in 2023, up from$229.0 million in 2022 [230]. - Interest expense increased to $312.4 million in 2023 from$212.7 million in 2022, primarily due to the CMC Materials acquisition [234]. - The Company recorded a goodwill impairment charge of $115.2 million in 2023 [232]. - Unallocated general and administrative expenses for 2023 totaled$114.2 million, down from $190.5 million in 2022, mainly due to a decrease in deal and integration costs related to CMC Materials [256]. Cash Flow and Debt - Cash provided by operating activities increased by$277.3 million in 2023, totaling $629.6 million, driven by changes in operating assets and liabilities [261]. - In 2023, cash provided by investing activities was$553.1 million, a significant improvement from $4,945.7 million cash used in 2022, primarily due to the absence of the prior-year acquisition of CMC Materials [264]. - Total debt decreased to$4,577.1 million in 2023 from $5,784.9 million in 2022, reflecting repayments and refinancing activities [257]. - The Company declared a quarterly cash dividend of$0.10 per share to be paid on February 21, 2024, totaling $60.2 million in dividend payments for 2023, compared to$57.3 million in 2022 [269]. Strategic Focus and Market Conditions - The Company is focused on developing new products and solutions to meet rapidly changing customer requirements in the semiconductor industry [201]. - The updated U.S. export control regulations may impact the Company's operations and competitiveness, particularly concerning sales to certain countries, including China [207]. - The Company has not experienced significant revenue from regions affected by the ongoing military conflicts in the Middle East, but uncertainties remain regarding global supply chains and pricing [208]. - The company is focused on expanding its manufacturing presence in Taiwan and Colorado Springs as part of its growth strategy [201]. - The company is positioned to leverage the acquisition of CMC Materials to enhance its product offerings and address complex manufacturing challenges [206]. Segment Performance - Materials Solutions segment net sales increased by 22% to $1,689.5 million in 2023, reflecting the impact of the CMC Materials acquisition [246]. - MC net sales for 2023 increased to$1,127.6 million, up 2% from $1,106.0 million in 2022, primarily due to improved sales from liquid filtration products [250]. - AMH net sales decreased 10$758.6 million in 2023 from $846.5 million in 2022, primarily due to lower sales from microenvironment solutions products [254]. Accounting and Tax - The Company’s critical accounting policies involve significant estimates related to business acquisitions, goodwill impairment, and fair value assessments [215]. - Income tax liabilities include$267,545,000, with $67,700,000 related to uncertain tax positions [282]. - The effective tax rate decreased to (4.9)% in 2023 from 15.4% in 2022, influenced by a tax benefit related to divestiture and impairment activity [238].