10-QPeriod: Q2 FY2009

ENTEGRIS INC Quarterly Report for Q2 Ended Jun 27, 2009

Filed July 24, 2009For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported a significant decline in net sales for the second quarter and first half of 2009 compared to the prior year, reflecting the severe downturn in the semiconductor industry. Net sales for the second quarter were $82.6 million, down 44% year-over-year, while the first half sales were $141.6 million, down 52%. This revenue drop led to a substantial net loss of $22.5 million in the second quarter and a year-to-date net loss of $60.2 million, a stark contrast to the profits reported in the same periods of 2008. The company is facing liquidity challenges and has amended its revolving credit facility to provide $150 million in borrowing capacity. However, it has had to reduce outstanding borrowings to comply with covenant limitations. Management is actively implementing contingency plans, including further cost reductions, to maintain compliance with debt covenants if revenue levels do not improve. Despite these challenges, the company believes its existing cash and credit facilities are sufficient for the next twelve months, though it acknowledges uncertainty regarding future financing availability.

Key Highlights

  • 1Significant revenue decline of 44% year-over-year in Q2 2009, reaching $82.6 million, driven by the semiconductor industry downturn.
  • 2Net loss widened to $22.5 million in Q2 2009 from a net income of $4.9 million in Q2 2008, with a year-to-date net loss of $60.2 million.
  • 3Gross margin significantly compressed to 28.7% in Q2 2009 from 40.5% in Q2 2008 due to lower factory utilization and higher period costs.
  • 4Operating expenses (SG&A and R&D) were reduced year-over-year, but as a percentage of sales, they increased due to lower revenue.
  • 5The company amended its revolving credit facility to $150 million and is managing its borrowings closely to comply with covenants.
  • 6Restructuring charges of $5.5 million were incurred in Q2 2009 related to global cost reduction initiatives.
  • 7The company is concerned about its ability to meet debt covenants if revenue does not improve and has contingency plans in place.

Frequently Asked Questions

The primary reason for the significant drop in Entegris' revenue 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 through the first half of 2009.

Entegris amended its revolving credit facility to provide $150 million in borrowing capacity and is closely managing its outstanding borrowings to comply with covenant limitations. The company has also implemented contingency plans for further cost reductions to avoid violating debt covenants and believes its current cash and credit facilities are sufficient for the next twelve months, though it notes uncertainty in future financing.

The industry downturn has severely impacted Entegris' profitability, leading to a significant net loss of $22.5 million in the second quarter of 2009 and a $60.2 million net loss for the first six months of the year. This is largely due to lower factory utilization, which compressed gross margins, and the fixed nature of some operating expenses, which increased as a percentage of the reduced sales.

Yes, Entegris has undertaken global restructuring and cost reduction initiatives, including workforce reductions, closing a manufacturing facility, and reducing selling, general, and administrative (SG&A) and engineering, research, and development (ER&D) expenses. These actions resulted in restructuring charges of $5.5 million in the second quarter of 2009.