10-Q/APeriod: Q1 FY2003

ENTEGRIS INC Quarterly Report (Amendment) for Q1 Ended Mar 1, 2003

Filed July 21, 2003For Securities:ENTG

Summary

Entegris, Inc. (ENTG) has released its amended quarterly report for the period ending March 1, 2003. The company shows a mixed financial performance with a slight increase in net sales for the quarter and year-to-date, driven by acquisitions and improved gross margins. However, a significant net loss was recorded for the six-month period, largely due to an impairment charge on an investment and costs associated with recent acquisitions. The company's liquidity remains stable with sufficient cash and credit facilities, though future growth may necessitate additional capital. Investors should note the ongoing integration of recent acquisitions and the volatility associated with capital spending-driven product lines within the semiconductor industry. Key developments include two significant acquisitions in the second quarter, increasing intangible assets and impacting revenue and expenses. The company also managed a nonrecurring charge related to operational relocation and workforce reductions in the prior quarter. Despite operational challenges and market uncertainties, Entegris is focused on cost management and manufacturing efficiency, leading to improved gross margins. The company projects sales growth in the upcoming quarter, largely attributable to its recent acquisitions.

Key Highlights

  • 1Net sales increased by 7% to $54.1 million for the three months ended March 1, 2003, compared to $50.7 million in the prior year period.
  • 2Gross profit improved significantly, up 33% to $22.6 million, with gross margins expanding to 41.7% from 33.4% year-over-year, driven by increased sales and cost-saving initiatives.
  • 3The company recorded a net loss of $5.0 million for the six months ended March 1, 2003, compared to a net loss of $7.3 million in the prior year period.
  • 4Two significant acquisitions were completed in the second fiscal quarter of 2003, totaling $43.5 million, leading to a substantial increase in intangible assets.
  • 5An impairment loss of $4.5 million was recorded in the first quarter of fiscal 2003 related to an investment in Metron Technology N.V.
  • 6Operating cash flow was strong at $17.3 million for the six months ended March 1, 2003, despite the net loss, driven by non-cash charges like depreciation and amortization.
  • 7The company projects a 10-15% increase in net sales for the third quarter of fiscal 2003, primarily due to the impact of recent acquisitions.

Frequently Asked Questions

The significant increase in intangible assets is primarily due to two acquisitions made during the second quarter of fiscal 2003. The acquisition of Electrol Specialties Company (ESC) contributed $2.4 million in intangible assets, while the acquisition of the wafer and reticle carrier (WRC) product lines from Asyst Technologies, Inc. accounted for approximately $33.8 million in intangible assets.

The impairment loss of $4.5 million recorded in the first quarter of fiscal 2003 significantly contributed to the company's 'Other expense' and increased the net loss for the six-month period. This charge was due to a decline in the fair value of Entegris's equity investment in Metron Technology N.V. that was determined to be other-than-temporary.

Entegris estimates that sales for its third quarter will increase by 10-15% from second quarter 2003 levels. This projected growth is largely attributed to the integration of its two recent acquisitions. However, the company anticipates some reduced shipping volume during the integration of the WRC manufacturing line and notes that WRC product sales are more volatile due to their dependence on capital spending.

Entegris reported a positive cash flow from operating activities of $17.3 million for the first six months of fiscal 2003. At March 1, 2003, the company had $102.6 million in cash, cash equivalents, and short-term investments, along with available credit facilities totaling approximately $61 million. Management believes these resources are sufficient for the next 12 months, but acknowledges that future growth, including potential acquisitions, may require additional funding.