ENTEGRIS INC

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 Company’s financial position as of June 29, 2024 and December 31, 2023, the results of operations and comprehensive income for the three and six months ended June 29, 2024 and July 1, 2023, the equity statements as of and for the three and six months ended June 29, 2024 and July 1, 2023, and cash flows for the six months ended June 29, 2024 and July 1, 2023.

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 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, 2023. The results of operations for the three and six months ended June 29, 2024 are not necessarily indicative of the results to be expected for the full year.

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

Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The updated standard is effective for our annual periods beginning in fiscal year 2024 and interim periods beginning in the first quarter of fiscal year 2025. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance is effective for our annual periods beginning in fiscal year 2025. The guidance does not affect recognition or measurement in our condensed consolidated financial statements.

2. REVENUES

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

3. GOODWILL AND LONG-LIVED ASSET IMPAIRMENT

Electronic Chemicals

During the first quarter of 2023, while the criteria to classify the reporting unit as held-for-sale had not been met, the Company was exploring market interest in a potential sale of the Electronic Chemicals (“EC”) reporting unit within the Materials Solutions (“MS”) segment. 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 ended April 1, 2023. The Company completed the divestiture of the EC business on October 2, 2023.

Long-lived assets, including finite-lived intangible assets

During the first quarter of 2023, 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 were expected to exceed the carrying value on a held and used basis. Therefore, no impairment was recorded on the long-lived assets 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 determined no modification to the useful life of the assets was 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 quarter ended April 1, 2023. The impairment was classified as Goodwill impairment in the Company’s condensed consolidated statements of operations. The goodwill impairment was 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. We consider this a Level 3 measurement in the fair value hierarchy. There was no goodwill impairment charge recorded during the three and six months ended June 29, 2024.

Other business

The Company recorded an impairment charge of $13.0 million related to the long-lived assets of a small, industrial specialty chemicals business that reports within the MS segment due to a change in the fair value of the reporting unit for the three months ended March 30, 2024. The impairment is classified as Selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. No further impairment charge was recorded in the three months ended June 29, 2024. The fair value of the reporting unit was determined using a market-based approach. We consider this a Level 3 measurement in the fair value hierarchy. This business remains classified as an asset held-for-sale as of June 29, 2024; see Note 4 for further discussion.

4. ASSET HELD-FOR-SALE AND DIVESTITURE

Asset Held-For-Sale - Other

During the fourth quarter of 2023, the Company began the process to sell a small, industrial specialty chemicals business that reports within the MS segment. The related assets and liabilities of the business were classified as held-for-sale in the Company’s condensed consolidated balance sheets and measured at the lower of their carrying amount or fair value less cost to sell. The assets and liabilities continue to be marketed for sale and are classified as held-for-sale at June 29, 2024.

The proposed disposition of the 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.

Assets held-for-sale and liabilities held-for-sale recorded on the balance sheet were $6.2 million and $0.7 million, respectively, as of June 29, 2024. The loss before income taxes attributable to the business was not significant for the three and six months ended June 29, 2024, respectively, except for the impairment charge of $13.0 million as noted in Note 3 for the six months ended June 29, 2024.

Divestiture - Pipeline and Industrial Materials

During the first quarter of 2024, the Company completed the sale of its Pipeline and Industrial Materials (“PIM”) business, which became part of the Company with the acquisition of CMC Materials, to SCF Partners, Inc. The PIM business specializes in the manufacture and sale of drag reducing agents and a range of valve maintenance products and services for the oil and gas industry, and reported into the MS segment of the Company.

The Company received gross cash proceeds of $263.2 million, or expected net proceeds of $256.2 million, which remains subject to customary final post-closing adjustment and up to $25.0 million in cash earn-out payments contingent upon the performance of the PIM business in 2025 and 2026.

The Company’s policy is to account for the contingent consideration arrangement in accordance with ASC 450, Contingencies (Subtopic 450-30). Under this approach, the Company recognizes the contingent consideration receivable in earnings after the contingency is resolved. Accordingly, to determine the initial gain on the sale of the PIM business, the Company did not include an amount related to the contingent consideration arrangement as part of the consideration received.

The following table summarizes the fair value of the sale proceeds received in connection with the divestiture, which are subject to final post-closing adjustment:

The 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.

The carrying amount of net assets associated with the PIM business was approximately $252.8 million. The major classes of assets and liabilities sold consisted of the following:

As a result of the sale of the PIM business, the Company recognized a pre-tax loss (gain) of $0.5 million and $(4.3) million, inclusive of a $1.0 million gain reclassified from Accumulated other comprehensive loss for foreign currency translation, presented in Selling, general and administrative expenses in the condensed consolidated statements of operations for the three and six months ended June 29, 2024, respectively. The Company recorded an income tax (benefit) expense associated with the PIM divestiture of approximately $(0.1) million and $1.0 million for the three and six months ended June 29, 2024, respectively.

5. INVENTORIES

Inventories consisted of the following:

(1)Includes consignment inventories held by customers of $22.7 million and $20.8 million at June 29, 2024 and December 31, 2023, respectively.

6. GOODWILL AND INTANGIBLE ASSETS

Goodwill activity for each of the Company’s reportable segments that carry goodwill, Material Solutions (“MS”), Microcontamination Control (“MC”), and Advanced Materials Handling (“AMH”), was as follows at June 29, 2024 and December 31, 2023:

Identifiable intangible assets at June 29, 2024 and December 31, 2023 consisted of the following:

(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 June 29, 2024:

7. DEBT

The Company’s debt as of June 29, 2024 and December 31, 2023 consisted of the following:

Annual maturities of long-term debt, excluding unamortized discount and debt issuance costs, due as of June 29, 2024 were as follows:

• Senior secured term loans B subject to Excess Cash Flow payments to the lenders.

(1) The Company entered into a floating-to-fixed swap contract on its variable rate debt under our senior secured term loan facility due 2029. The effective interest rate after consideration of this floating-to-fixed swap contract was 4.71%. Refer to Note 9 for a description of our interest rate swap contract.

(2)Our senior secured revolving credit facility due 2027 (the “Revolving Facility”) bears interest at a rate per annum equal to SOFR, plus an applicable margin of 1.75%. The Revolving Facility has commitments of $575.0 million.

Senior secured term loans B due 2029

On March 28, 2024, the Company and certain of its subsidiaries entered into Amendment No. 3 (the “Third Amendment”), 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 subsequently amended on each of March 10, 2023 and September 11, 2023, the “Existing Credit Agreement” and, the Existing Credit Agreement as amended by the Third 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 Third Amendment provides for, among other things, the reduction of the applicable rate of the Company’s outstanding senior secured term loans B under the Existing Credit Agreement. After giving effect to the Third Amendment, such outstanding term loans B bear interest, at a rate per annum equal to, at the Company’s option, either (i) Term SOFR plus an applicable margin of 1.75% or (ii) a base rate plus an applicable margin of 0.75%. Other than as described herein (and more fully described in the Third Amendment), the terms of the Amended Credit Agreement are substantially similar to the terms of the Existing Credit Agreement. In connection with the Third Amendment, the Company made a prepayment of $354.5 million on the term loans B.

During the three and six months ended June 29, 2024, the Company repaid a total of $55.0 million and $473.8 million of the outstanding borrowings under the term loans B. In connection with these repayments and entry into the Third Amendment, the Company incurred a pre-tax loss on extinguishment and modification of debt of $0.8 million and $12.3 million for the three and six months ended June 29, 2024, respectively, which is included in Other expense, net in the condensed consolidated statements of operations.

8. 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:

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.

Level 2 Derivative financial instruments include an interest rate swap contract. 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. The fair value of our debt is estimated

based on independent broker/dealer bids or by comparison to other debt securities having similar durations, yields and credit

ratings.

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 7 to our condensed consolidated financial statements 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.

Other Fair Value Disclosures

The estimated fair value and carrying value of our debt as of June 29, 2024 and December 31, 2023 were as follows:

9. 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 our senior secured term loan facility due 2029 (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 with 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 the underlying exposures being hedged. The effective portion is recorded as a component of Accumulated other comprehensive loss in the condensed consolidated balance sheets 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 expense in the condensed consolidated statements of operations.

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 statements of operations.

The notional amounts of our derivative instruments were as follows:

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

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

The following table summarizes the effects of our derivative instruments on Accumulated other comprehensive loss:

We expect approximately $16.6 million to be reclassified from Accumulated other comprehensive loss 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 June 29, 2024.

10. 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 updates an estimate of the annual effective tax rate, and if the estimated tax rate changes, we make a cumulative adjustment.

Income tax expense was $6.7 million and $10.1 million in the three and six months ended June 29, 2024, respectively, compared to income tax (benefit) expense of $(16.5) million and $5.0 million in the three and six months ended July 1, 2023, respectively. The Company’s year-to-date effective income tax rate was 9.0% and 8.2% for the three and six months ended June 29, 2024, respectively, compared to (9.1)% and 4.3% for the three and six months ended July 1, 2023, respectively.

The changes in the effective tax rate for the three months ended June 29, 2024 compared to the prior year primarily relate to discrete divestiture activity recorded during the quarter ended July 1, 2023 and the integration of the CMC Materials acquisition. The year-to-date income tax expense in 2024 and 2023 included a discrete benefit of $3.1 million and discrete expense of $0.3 million, respectively, recorded in connection with share-based compensation.

The Organization for Economic Co-operation and Development introduced Base Erosion and Profit Shifting Pillar 2 rules that seek to impose a global minimum income tax rate of 15%. Numerous countries have enacted legislation in connection therewith that is effective on January 1, 2024. We have evaluated the impact of this legislation based on Entegris’ current global operations and it is not expected to have a material impact on the annual effective tax rate and there was not a material impact to the three and six months ended June 29, 2024. We will continue to update our analysis and monitor the ongoing legislation throughout the year.

11. 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 EPS 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 EPS:

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 months ended June 29, 2024 and July 1, 2023:

12. OTHER EXPENSE, NET

Other expense, net for the three and six months ended June 29, 2024 and July 1, 2023 consisted of the following:

Infineum termination fee, net

On October 11, 2022, the Company and Infineum USA L.P. (“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.

13. SEGMENT REPORTING

The Company’s financial segment reporting reflects an organizational alignment intended toalign with the key elements of the advanced semiconductor manufacturing ecosystem. While these segments have separate products and technical know-how, they share common business systems and processes, technology centers and technology roadmaps. With the complementary capabilities across these segments, the Company believes it is uniquely positioned to create new, co-optimized and increasingly integrated solutions for its customers, which should translate into improved device performance, lower cost of ownership and faster time to market. The Company reports its financial performance in the following segments:

•Materials Solutions: MS provides materials-based solutions, such as chemical mechanical planarization slurries and pads, deposition materials, process chemistries and gases, formulated cleans, etchants and other specialty materials that enable our customers to achieve better device performance and faster time to yield, while providing for lower total cost of ownership.

•Microcontamination Control: MC offers advanced solutions that improve customers’ yield, device reliability and cost by filtering and purifying critical liquid chemistries and gases used in semiconductor manufacturing processes and other high-technology industries.

•Advanced Materials Handling: AMH develops solutions that improve customers’ yields by protecting critical materials during manufacturing, transportation, and storage, including products that monitor, protect, transport and deliver critical liquid chemistries, wafers, and other substrates for a broad set of applications in the semiconductor, life sciences and other high-technology industries.

The Company accounts for inter-segment sales similar to third-party transactions and the sales price reflects current market prices. Inter-segment sales are eliminated in consolidation and are not included in consolidated sales on the financial statements.

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. All prior period amounts related to the segment change have been recast for comparability.

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

(1) MS segment profit is inclusive of a $154.8 million gain, net on termination of alliance agreement for the three and six months ended July 1, 2023, a $14.9 million and $28.6 million loss on sale of business and held-for-sale assets for the three and six months ended July 1, 2023, respectively, a $88.9 million goodwill impairment charge relating to the EC reporting unit for the six months ended July 1, 2023 and a $13.0 million long-lived asset impairment charge for the six months ended June 29, 2024.

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

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 months ended June 29, 2024 and July 1, 2023, respectively.

14. SUBSEQUENT EVENTS

Dividend

On July 17, 2024, the Company’s board of directors declared a quarterly cash dividend of $0.10 per share to be paid on August 21, 2024 to shareholders of record on the close of business on July 31, 2024.