10-QPeriod: Q1 FY2002

ENTEGRIS INC Quarterly Report for Q1 Ended Mar 2, 2002

Filed April 16, 2002For Securities:ENTG

Summary

Entegris Inc. (ENTG) reported a net loss of $1.4 million for the second quarter of fiscal year 2002, a significant decline from the $13.8 million net income reported in the same period of the prior year. This downturn is attributed to a severe slowdown in the semiconductor industry, which began in the latter half of fiscal year 2001. Net sales for the quarter decreased by 52% year-over-year to $50.7 million. Despite the challenging market conditions, the company saw sequential sales improvement of 11% from the first quarter of fiscal 2002, driven by early signs of recovery in unit-driven product sales, such as chemical containers and wafer shipping products. Management expects a gradual recovery in the third quarter of fiscal 2002, with sales projected to improve by approximately 10% from the second quarter levels. The company's liquidity position remains stable, with $106.4 million in cash, cash equivalents, and short-term investments as of March 2, 2002. However, the company's profitability has been significantly impacted by lower sales volumes, leading to reduced gross margins. The company is also navigating changes in accounting standards, notably the adoption of SFAS No. 142 concerning goodwill and other intangible assets, which is expected to eliminate amortization of goodwill.

Key Highlights

  • 1Reported a net loss of $1.4 million for the second quarter of fiscal 2002, compared to a net income of $13.8 million in the prior year's quarter, reflecting industry-wide semiconductor downturn.
  • 2Net sales declined 52% year-over-year to $50.7 million, but showed a sequential increase of 11% from the prior quarter, indicating early signs of market stabilization.
  • 3Gross profit margins significantly compressed to 33.4% from 50.7% year-over-year due to lower sales volumes and reduced factory utilization.
  • 4Selling, General, and Administrative (SG&A) expenses decreased by 13% year-over-year due to lower bonus and charitable contribution accruals, but increased as a percentage of sales.
  • 5Engineering, Research, and Development (ER&D) expenses increased both in absolute terms and as a percentage of sales, as the company continues to invest in new technologies and products.
  • 6The company maintains a solid liquidity position with $106.4 million in cash, cash equivalents, and short-term investments, and expects sufficient resources to meet working capital needs for the next twelve months.
  • 7Adoption of SFAS No. 142 eliminates goodwill amortization, though the company recorded no transitional impairment loss.

Frequently Asked Questions

The primary reason for the sharp decline in net income is the severe downturn in the semiconductor industry that began in the second half of fiscal year 2001, leading to a substantial decrease in net sales and thus profitability.

Based on current order rates, management expects sales for the third quarter of fiscal 2002 to improve by approximately 10% compared to the second quarter.

The company's liquidity remains strong. As of March 2, 2002, Entegris held $106.4 million in cash, cash equivalents, and short-term investments. The company believes this, along with available credit facilities, will be sufficient to meet its working capital and investment requirements for the next twelve months.

SFAS No. 142 requires that goodwill no longer be amortized but tested annually for impairment. Entegris adopted this standard as of August 26, 2001, and performed an impairment assessment, finding no indication of impairment at that time. This change eliminates goodwill amortization expense from the income statement.