10-QPeriod: Q2 FY2007

ENTEGRIS INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 3, 2007For Securities:ENTG

Summary

Entegris Inc. reported a decrease in net sales for the second quarter and the first six months of 2007 compared to the prior year, primarily attributed to lower demand in the semiconductor industry. Despite the revenue decline, the company managed its expenses effectively, leading to a reduction in SG&A costs. The company also completed a significant share repurchase program during the quarter, reducing outstanding shares. This period saw the company actively managing its assets, including the divestiture of its cleaning equipment business and the sale of an equity investment. Key financial shifts include a notable decrease in cash and short-term investments due to the share buyback. While operating activities generated positive cash flow, the overall liquidity was impacted by financing activities. Investors should note the ongoing legal disputes with Pall Corporation, which represent a potential area of future financial impact. The company is also addressing a previously identified material weakness in internal controls related to income taxes.

Key Highlights

  • 1Net sales declined by 14% year-over-year for the three months ended June 30, 2007, and 7% for the six-month period, driven by lower semiconductor industry demand.
  • 2Gross profit margin decreased to 42.7% in Q2 2007 from 48.5% in Q2 2006, primarily due to lower production facility utilization.
  • 3Selling, General, and Administrative (SG&A) expenses decreased by 14% year-over-year for the quarter, benefiting from post-merger integration cost reductions and other realignments.
  • 4The company repurchased approximately 21.1 million shares of its common stock for $251.4 million in June 2007, significantly reducing outstanding shares.
  • 5A gain of $6.1 million was recognized from the sale of an equity investment during the second quarter.
  • 6The company announced its intent to divest its cleaning equipment business, leading to the classification of its assets and liabilities as discontinued operations and an impairment charge of $2.4 million.
  • 7Effective tax rate for the first six months of 2007 was 25.2%, down from 33.6% in the prior year, partly due to German tax legislation.

Frequently Asked Questions

The primary reason for the decrease in net sales is lower demand within the semiconductor industry, which directly impacts the company's product sales.

Liquidity decreased significantly, with cash and cash equivalents and short-term investments falling from $275.0 million at the end of 2006 to $138.5 million at June 30, 2007. The primary driver for this reduction was the substantial share repurchase program, which used $251.4 million in cash.

Entegris announced its intent to divest its cleaning equipment business in June 2007. Consequently, the assets and liabilities of this business have been classified as assets and liabilities of discontinued operations. An impairment charge of $2.4 million was recorded due to the testing of these assets for impairment.

Yes, Entegris is involved in ongoing patent infringement lawsuits with Pall Corporation. While the company intends to defend itself vigorously and believes it will prevail, these legal disputes represent potential financial risks.