10-QPeriod: Q3 FY2007

ENTEGRIS INC Quarterly Report for Q3 Ended Sep 29, 2007

Filed November 1, 2007For Securities:ENTG

Summary

Entegris, Inc. reported a notable decline in net sales for the third quarter and first nine months of 2007, down 11% and 8% year-over-year, respectively. This decrease is primarily attributed to softer demand within the semiconductor industry, impacting both unit-driven and capital-driven product segments. While gross margins also declined due to lower production utilization, the company managed SG&A expenses effectively, particularly due to reduced integration costs from the Mykrolis merger. The company completed a significant share repurchase program, spending approximately $251.4 million, which impacted cash reserves and net income per share, alongside a strategic acquisition of a specialty coatings business for $41.8 million. Operationally, Entegris is focusing on divesting its cleaning equipment business and is navigating ongoing legal disputes with Pall Corporation regarding patent infringements. The company ended the period with $125.9 million in cash and cash equivalents. Looking ahead, management anticipates sufficient liquidity for the next 12 months. A potential positive development is the expected U.S. tax benefit of approximately $10 million in the fourth quarter related to its Japanese subsidiary's dividend and loan transactions.

Key Highlights

  • 1Net sales declined 11% year-over-year for the third quarter and 8% for the nine-month period, driven by lower demand in the semiconductor industry.
  • 2Gross profit decreased by 14% for the quarter and 15% year-to-date, with gross margin falling to 43.2% (Q3 2007) from 44.6% (Q3 2006).
  • 3Significant share repurchases were completed, with $251.4 million spent on a Dutch auction tender offer and $100 million under Accelerated Share Repurchase agreements in prior periods.
  • 4The company acquired a specialty coatings business from Surmet Corporation for $41.8 million, adding $13.57 million in goodwill and $26.2 million in intangible assets.
  • 5Net income for the quarter was $8.4 million ($0.07 diluted EPS), down from $17.8 million ($0.13 diluted EPS) in the prior year period.
  • 6The company is actively divesting its cleaning equipment business, which is now classified under discontinued operations.
  • 7Entegris is involved in multiple ongoing patent infringement lawsuits with Pall Corporation.

Frequently Asked Questions

The primary reason for the year-over-year decline in Entegris' sales is lower demand within the semiconductor industry, which impacts both unit-driven and capital-driven product segments.

Entegris completed a substantial share repurchase program via a Dutch auction tender offer, spending approximately $251.4 million. Additionally, the company acquired a specialty coatings business for $41.8 million.

Entegris ended the period with $125.9 million in cash and cash equivalents. The company believes its current cash, operating cash flow, and available credit facilities are sufficient to meet its working capital and investment requirements for the next 12 months. However, a new credit agreement prohibits cash dividends.

The company is divesting its cleaning equipment business, which is now classified under discontinued operations. For the nine months ended September 29, 2007, these operations recorded a net loss of $1.6 million and included a $2.4 million impairment charge.