10-Q/APeriod: Q1 FY2008

ENTEGRIS INC Quarterly Report (Amendment) for Q1 Ended Mar 29, 2008

Filed August 7, 2008For Securities:ENTG

Summary

Entegris Inc. (ENTG) filed an amendment to its Form 10-Q for the quarter ended March 29, 2008, to restate its financial statements due to accounting errors. The primary errors related to inventory valuation, specifically foreign exchange impacts on intercompany profit elimination and an incorrect journal entry for manufacturing variances. These errors led to an understatement of gross profit and net income in the original filing. The restatement resulted in an increase in net income of $1.7 million, or $0.02 per diluted share, for the quarter. Total assets were increased by $1.3 million, primarily due to higher inventory levels. While the restatement corrects prior period inaccuracies, investors should note the underlying operational challenges that led to these errors, particularly concerning inventory accounting and foreign currency impacts. The company's revenue decreased year-over-year, impacted by semiconductor industry spending and the shift in product mix towards more unit-driven products.

Key Highlights

  • 1The company restated its financial statements for the quarter ended March 29, 2008, due to accounting errors related to inventory valuation, foreign exchange impacts, and journal entries.
  • 2The restatement increased net income by $1.7 million ($0.02 per diluted share) and increased total assets by $1.3 million (primarily inventories).
  • 3Net sales for the quarter decreased by 7% year-over-year to $148.2 million, attributed to lower semiconductor industry capital spending.
  • 4Gross margin remained relatively stable at 43.2% compared to 42.9% in the prior year, despite lower sales, though it was impacted by lower production facility utilization.
  • 5Selling, General, and Administrative (SG&A) expenses increased by 5% year-over-year to $43.3 million, partly due to severance costs and foreign currency translation.
  • 6The company reported a net income of $2.9 million ($0.02 per diluted share) for the quarter, down from $10.4 million ($0.08 per diluted share) in the prior year.
  • 7Cash used in operating activities was $0.4 million, with the company holding $138.9 million in cash, cash equivalents, and short-term investments at quarter-end.

Frequently Asked Questions

Entegris restated its financial statements because it identified accounting errors related to inventory valuation. Specifically, there were issues with accounting for the impact of foreign exchange rates on intercompany profit elimination and an incorrect journal entry for manufacturing variances. These errors resulted in an understatement of gross profit and net income in the original filing.

The restatement increased net income by $1.7 million, or $0.02 per diluted share, for the three months ended March 29, 2008. It also increased inventories and current assets by $1.3 million and increased income taxes payable and current liabilities by $0.8 million. Shareholders' equity increased by $0.5 million.

Net sales decreased by 7% to $148.2 million for the three months ended March 29, 2008, compared to $159.6 million in the same period of the prior year. This decline was primarily due to lower capital spending in the semiconductor industry, although this was partially offset by favorable foreign currency movements.

Entegris identified material weaknesses in its internal control over financial reporting. These include issues related to the accounting for income taxes and the accounting for intercompany profit elimination and inventory variances. The company is implementing remediation steps but has not yet considered these weaknesses fully remediated.