10-QPeriod: Q1 FY2009

ENTEGRIS INC Quarterly Report for Q1 Ended Mar 28, 2009

Filed May 6, 2009For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported a significant downturn in its financial performance for the first quarter of 2009, reflecting the severe recession impacting the semiconductor industry. Net sales plummeted by 60% year-over-year to $59.0 million, driven by a sharp decline in both capital and unit-driven segments. This resulted in a substantial operating loss of $43.2 million and a net loss of $37.7 million, a stark contrast to the profitable period in the prior year. The company also experienced a significant contraction in its gross margin to 8.5% from 43.2%, attributed to lower factory utilization and an $8.1 million period expense. To navigate these challenging conditions, Entegris has undertaken cost reduction initiatives, including restructuring charges of $4.6 million, and amended its revolving credit facility to $150 million, though it faces strict covenants and requires careful management to avoid potential violations. The company's liquidity remains a key focus, with cash and cash equivalents declining and an ongoing need to manage working capital effectively.

Key Highlights

  • 1Net sales decreased by 60% to $59.0 million in Q1 2009 compared to $148.2 million in Q1 2008, reflecting a severe downturn in the semiconductor industry.
  • 2Gross margin significantly compressed to 8.5% from 43.2% year-over-year, impacted by lower factory utilization and an $8.1 million period expense.
  • 3The company reported a net loss of $37.7 million ($0.34 per share) for the quarter, a reversal from a net income of $2.9 million ($0.02 per share) in the prior year.
  • 4Operating loss widened considerably to $43.2 million compared to an operating income of $5.1 million in the prior year.
  • 5Restructuring charges of $4.6 million were incurred in the quarter as part of cost reduction efforts.
  • 6The company amended its revolving credit facility to $150 million, with $136.2 million drawn as of March 28, 2009, and faces stringent covenants.
  • 7Cash used in operating activities was $9.5 million, leading to a decrease in cash and cash equivalents to $95.5 million from $115.0 million at year-end 2008.

Frequently Asked Questions

The primary driver is the severe downturn in both the capital and unit-driven segments of the semiconductor industry, which began in the second half of 2008 and continued into the first quarter of 2009. This economic recession significantly reduced customer demand for Entegris' products.

Entegris amended its revolving credit facility on March 2, 2009, reducing the total capacity to $150 million. While they had $136.2 million drawn as of March 28, 2009, the company is operating under strict financial covenants. Management is actively implementing cost-reduction measures and managing working capital to ensure sufficient liquidity, but acknowledges that further actions may be necessary if revenue levels do not improve.

All segments have been negatively affected. Contamination Control Solutions (CCS) and Microenvironments (ME) experienced significant sales declines (64% and 71% respectively). Entegris Specialty Materials (ESM) saw its sales nearly triple due to the recent acquisition of Poco Graphite, but excluding POCO, sales also fell sharply (75%). Both CCS and ME reported segment losses in the first quarter of 2009.

The company incurred $4.6 million in restructuring charges. Additionally, a $4.1 million charge related to the fair market value write-up of inventory acquired in the POCO acquisition and an $8.1 million period expense due to low factory utilization, impacting cost of sales, contributed to the significant net loss.