10-QPeriod: Q3 FY2008

ENTEGRIS INC Quarterly Report for Q3 Ended Sep 27, 2008

Filed November 6, 2008For Securities:ENTG

Summary

Entegris, Inc. reported a significant net loss for the nine months ended September 27, 2008, largely driven by a substantial goodwill impairment charge of $379.8 million. This impairment significantly reduced goodwill on the balance sheet from $402.1 million to $93.9 million. Revenue for the period declined by 5% year-over-year, impacted by a slowdown in the semiconductor industry, though this was partially offset by the acquisition of Poco Graphite, Inc. in August 2008 and favorable currency movements. The company's liquidity remains a key concern, with cash and cash equivalents decreasing to $73.96 million from $160.65 million at the end of 2007. Despite this decrease, management believes existing cash, operating cash flow, and available credit facilities are sufficient for the next 12 months. The company also faces ongoing litigation, primarily with Pall Corporation, concerning patent infringement claims.

Key Highlights

  • 1Reported a net loss of $385.2 million for the nine months ended September 27, 2008, compared to a net income of $33.6 million in the prior year period.
  • 2Recorded a significant goodwill impairment charge of $379.8 million in the third quarter of 2008, reducing goodwill on the balance sheet.
  • 3Acquired Poco Graphite, Inc. on August 11, 2008, for $162.0 million in cash, diversifying product offerings.
  • 4Net sales decreased by 5% to $442.0 million for the nine months ended September 27, 2008, reflecting a challenging semiconductor market.
  • 5Cash and cash equivalents decreased significantly to $73.96 million as of September 27, 2008, from $160.65 million at December 31, 2007.
  • 6Implemented a deferred tax asset valuation allowance of $26.9 million in the third quarter of 2008 due to uncertainties in future taxable income.
  • 7Continuing legal proceedings with Pall Corporation regarding patent infringement claims.

Frequently Asked Questions

The primary driver of the substantial net loss was a goodwill impairment charge of $379.8 million recorded in the third quarter of 2008. This non-cash charge reflects the decline in the company's market capitalization and business environment, impacting the carrying value of goodwill.

The acquisition of Poco Graphite, Inc. for $162.0 million in August 2008 expanded Entegris' product portfolio and contributed $9.8 million in sales during the reporting period. However, it also added $65.3 million in goodwill and led to an increase in inventory valuation by $17.6 million due to the fair value adjustment, which will impact future cost of goods sold.

Cash and cash equivalents decreased substantially to $73.96 million as of September 27, 2008, down from $160.65 million at the end of 2007. This decline is due to operating activities, investing in acquisitions, and financing activities. Management believes that current cash, cash flow from operations, and available credit facilities totaling $230 million (with $104 million drawn) will be sufficient to meet working capital and investment needs for the next 12 months.

Key risks include the cyclical nature of the semiconductor industry impacting sales, the potential for further impairments of goodwill and other assets due to economic conditions, ongoing litigation with Pall Corporation which could result in material costs or damages, and the need to manage working capital effectively given the decrease in cash reserves.