10-QPeriod: Q3 FY2009

ENTEGRIS INC Quarterly Report for Q3 Ended Sep 26, 2009

Filed October 27, 2009For Securities:ENTG

Summary

Entegris, Inc. (ENTG) reported its third-quarter and year-to-date financial results for the period ending September 26, 2009. The company experienced a significant decline in net sales compared to the previous year, with Q3 sales down 24% and year-to-date sales down 43%. This was primarily attributed to the severe downturn in the semiconductor industry. Despite the challenging revenue environment, the company saw a sequential increase in sales from the second quarter, indicating a modest upturn in demand, particularly from Asian foundry customers. Financially, Entegris reported a net loss from continuing operations of $7.6 million for the quarter, a significant improvement from the $392.9 million loss in the prior year, largely due to the absence of a substantial goodwill impairment charge recorded in the previous year. The company's liquidity remains a key focus, with cash and cash equivalents at $78.4 million and availability under its credit facilities. Entegris has been proactive in managing its debt, including amending its credit agreement and using proceeds from a recent equity offering to reduce outstanding debt.

Key Highlights

  • 1Net sales for the three months ended September 26, 2009, decreased 24% to $110.7 million compared to the prior year's third quarter, driven by a severe downturn in the semiconductor industry.
  • 2The company reported a net loss from continuing operations of $7.6 million ($0.07 per diluted share) for the third quarter, an improvement from a $392.9 million loss ($3.51 per diluted share) in the same period last year.
  • 3Gross profit margin improved to 40.4% in Q3 2009 from 38.0% in Q3 2008, partly due to the absence of a prior year charge for the fair market value write-up of acquired inventory.
  • 4Selling, General, and Administrative (SG&A) expenses decreased by 18% year-over-year, reflecting cost-saving measures such as headcount reductions.
  • 5Cash and cash equivalents stood at $78.4 million as of September 26, 2009, a decrease from $115.0 million at the end of 2008, with the company actively managing its credit facilities.
  • 6The company issued 16.1 million shares of common stock in a public offering on September 16, 2009, raising $56.7 million in net proceeds, which were used to reduce outstanding debt.
  • 7Restructuring charges were $2.4 million for the quarter, related to business restructuring and actions in response to the industry downturn.

Frequently Asked Questions

The primary driver of Entegris' revenue decline 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 reporting period.

Entegris amended and restated its revolving credit facility in March 2009 and further amended it in July and August. The company also conducted a public offering of common stock in September 2009, raising $56.7 million in net proceeds, which were entirely used to pay down outstanding debt under its credit facility. As of September 26, 2009, the company had $67.4 million in borrowings and $1.3 million in undrawn letters of credit outstanding, with a borrowing base supporting $106.5 million in total availability.

The company believes the business and industry downturn reached a trough in the first quarter of 2009 and saw a modest upturn in bookings and sales in the second and third quarters, primarily driven by Asian foundry customers. Entegris expects the upturn in consumable products to continue through the remainder of 2009 and into 2010, with a modest increase in volume for its capital-driven product lines. However, the company acknowledges the global economic environment and does not expect a full return to pre-recessionary levels in the near term.

Profitability is significantly impacted by the level of sales due to the company's relatively fixed cost structure. Lower sales lead to lower factory utilization and increased per-unit costs. While SG&A and R&D expenses have been reduced through cost-saving measures, gross profit is sensitive to sales volume and factory utilization rates.