10-QPeriod: Q3 FY2006

ENTEGRIS INC Quarterly Report for Q3 Ended Jul 1, 2006

Filed August 8, 2006For Securities:ENTG

Summary

Entegris Inc.'s (ENTG) Q2 2006 filing shows significant year-over-year growth driven by the acquisition of Mykrolis Corporation. Net sales more than doubled, reaching $180.7 million for the quarter, primarily due to the integration of Mykrolis's complementary product lines in filters and delivery systems for the semiconductor industry. This strong sales performance translated into improved gross margins and a substantial increase in net income, rising to $18.2 million from $5.7 million in the prior year's comparable quarter. Operationally, the company is focused on integrating the Mykrolis business, which is expected to yield annualized cost savings. While selling, general, and administrative (SG&A) expenses increased significantly due to merger-related integration costs, engineering, research, and development (ER&D) also grew with the combined entity. The company maintains a healthy liquidity position with $311 million in cash, cash equivalents, and short-term investments, and expects its current resources and operational cash flow to meet its needs for the next 12 months.

Key Highlights

  • 1Net sales surged by 104% to $180.7 million in Q2 2006, primarily driven by the acquisition of Mykrolis Corporation.
  • 2Gross profit increased by 144% to $87.1 million, with gross margin improving to 48.2% from 40.1% year-over-year.
  • 3Net income grew to $18.2 million ($0.13 per diluted share) from $5.7 million ($0.07 per diluted share) in the prior year's quarter.
  • 4SG&A expenses increased significantly due to merger integration costs, but the company expects these costs to decline in the latter half of 2006.
  • 5The company generated $26.9 million in cash from operations for the first six months of 2006.
  • 6Total cash, cash equivalents, and short-term investments stood at $311.3 million as of July 1, 2006.
  • 7Entegris is undergoing restructuring, including closing its German manufacturing plant, with anticipated charges of $6.6 million.

Frequently Asked Questions

The primary driver of Entegris's substantial revenue increase in Q2 2006 was the acquisition of Mykrolis Corporation. The integration of Mykrolis's business, which offers complementary products for the semiconductor industry, significantly boosted net sales by 104% compared to the prior year's period.

The Mykrolis acquisition had a positive impact on profitability. Gross profit more than doubled, and the gross margin percentage improved due to the inclusion of higher-margin products from Mykrolis and better utilization of manufacturing facilities. While SG&A expenses rose due to integration costs, the company's net income also saw a significant increase.

Entegris reported strong liquidity with $311.3 million in cash, cash equivalents, and short-term investments as of July 1, 2006. The company expects its current resources and operational cash flow to be sufficient for its needs over the next 12 months. However, future growth, including potential acquisitions, may necessitate raising additional capital through debt or equity financing.

Entegris is undertaking restructuring, including the closure of its manufacturing plant in Bad Rappenau, Germany, and relocation of production. The company anticipates approximately $6.6 million in charges related to employee severance, retention costs, and asset impairment for these actions. A portion of these costs has already been incurred.