10-QPeriod: Q1 FY2008

ENTEGRIS INC Quarterly Report for Q1 Ended Mar 29, 2008

Filed May 5, 2008For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported a significant decrease in net sales for the first quarter of 2008 compared to the same period in the previous year, with sales falling 7% to $148.2 million. This decline is primarily attributed to reduced capital spending within the semiconductor industry, though this was partially offset by favorable foreign currency movements. The company experienced lower gross profits and a reduced gross margin due to decreased production facility utilization. Operating income also saw a substantial decrease, impacted by increased Selling, General, and Administrative (SG&A) expenses, which were higher year-over-year due to severance costs related to workforce reductions and foreign currency translation effects. Net income for the quarter was $1.1 million, or $0.01 per diluted share, a sharp decline from $10.4 million, or $0.08 per diluted share, in the first quarter of 2007. The company reported $138.9 million in cash, cash equivalents, and short-term investments at the end of the quarter, and believes it has sufficient liquidity to meet its needs for the next 12 months.

Key Highlights

  • 1Net sales decreased by 7% to $148.2 million for the three months ended March 29, 2008, compared to $159.6 million in the prior year's comparable period, largely due to lower semiconductor industry capital spending.
  • 2Gross margin decreased to 41.5% from 42.9% year-over-year, primarily due to lower utilization of production facilities.
  • 3Selling, General, and Administrative (SG&A) expenses increased by 5% to $43.3 million, driven by severance costs and foreign currency impacts, causing SG&A as a percentage of sales to rise from 26.0% to 29.2%.
  • 4Operating income declined significantly to $2.6 million from $12.0 million in the prior year's comparable period.
  • 5Net income fell to $1.1 million ($0.01 per diluted share) from $10.4 million ($0.08 per diluted share) year-over-year.
  • 6Cash, cash equivalents, and short-term investments decreased to $138.9 million from $160.7 million sequentially.
  • 7The company entered into a new $230 million revolving credit facility in February 2008, with no borrowings outstanding as of March 29, 2008.

Frequently Asked Questions

The primary driver of the sales decline was lower capital spending within the semiconductor industry. This led to an 8% sequential decrease in sales and a 7% year-over-year decrease.

Accounts receivable, net of foreign currency translation adjustments, decreased by $2.6 million. However, days sales outstanding increased to 72 days from 63 days due to lower sales and an increase in accounts receivable balances from foreign currency translation. Inventories at the end of the quarter were relatively unchanged from the prior year-end after accounting for foreign currency translation adjustments.

Goodwill increased by approximately $11.8 million to $413.9 million primarily due to foreign currency translation and an adjustment related to the purchase price allocation of the specialty coatings business acquired in August 2007. Other intangible assets, net of amortization, were $71.2 million.

The company believes its cash and cash equivalents ($138.9 million), cash flow from operations, and available credit facilities (including a $230 million revolving credit facility with no outstanding borrowings) will be sufficient to meet its working capital and investment requirements for the next 12 months.