10-QPeriod: Q1 FY2005

ENTEGRIS INC Quarterly Report for Q1 Ended Feb 26, 2005

Filed April 7, 2005For Securities:ENTG

Summary

Entegris, Inc. reported a net sales increase of 6% year-over-year for the second quarter of fiscal 2005, reaching $85.1 million, driven primarily by the semiconductor and data storage sectors. While gross profits remained flat due to a shift in product mix and rising raw material costs, the company managed to control operating expenses, leading to a slight sequential decrease in SG&A and ER&D. Despite a 11% reduction in net income compared to the prior year's second quarter, the six-month performance showed significant improvement with net income up 53% to $10.2 million. A notable development is the pending merger with Mykrolis Corporation, announced in March 2005, which is expected to close in the third calendar quarter of 2005. This strategic move aims to enhance Entegris's position in the semiconductor materials integrity management market. The company also continues to manage its cash flow effectively, with strong operating cash flow and sufficient liquidity to meet its obligations. Investors should monitor the integration of Mykrolis and the evolving semiconductor market dynamics.

Key Highlights

  • 1Net sales increased by 6% year-over-year to $85.1 million for the second quarter of fiscal 2005.
  • 2Six-month net income increased by 53% to $10.2 million compared to the prior year.
  • 3Announced a merger agreement with Mykrolis Corporation, expected to close in Q3 2005.
  • 4Gross profit margin slightly decreased to 40.9% due to product mix and raw material costs.
  • 5Operating cash flow was strong at $23.0 million for the first six months of fiscal 2005.
  • 6Company anticipates third-quarter net income to be in the range of $5.0 million to $6.0 million.
  • 7Effective tax rate for the first six months of fiscal 2005 was 26.4%, down from 31.1% in the prior year, partly due to a tax benefit from a resolved tax refund claim.

Frequently Asked Questions

The year-over-year sales growth was primarily driven by a 6% increase in net sales to $85.1 million, with notable contributions from the semiconductor market (up 3%) and the data storage market (up 10%). The services sector also saw significant growth (up 58%).

The merger with Mykrolis Corporation, expected to close in Q3 2005, is a significant strategic move designed to strengthen Entegris's position in the semiconductor industry by combining their complementary product offerings. This transaction is structured as a tax-free reorganization and will result in Entegris reincorporating in Delaware. The combined entity is expected to have substantial market presence.

Entegris is experiencing pressure from rising polymer prices, which constitute about 30% of its cost of goods sold. The company is actively managing this by utilizing long-term contracts for some polymers, implementing price increases to customers, and closely monitoring the situation. The margin impact from these price increases was less than 50 basis points year-to-date.

Entegris anticipates net income for the third quarter of fiscal 2005 to be in the range of $5.0 million to $6.0 million, or $0.07 to $0.08 per diluted share. This projection includes an expected gain from the liquidation of their investment in Nortem N.V. The company expects sales to be flat to slightly up sequentially from the second quarter.