10-QPeriod: Q3 FY2011

ENTEGRIS INC Quarterly Report for Q3 Ended Oct 1, 2011

Filed October 28, 2011For Securities:ENTG

Summary

Entegris, Inc. reported mixed financial results for the nine months ended October 1, 2011, with net sales increasing by 16% year-over-year to $585.3 million, primarily driven by strong performance in the Contamination Control Solutions (CCS) segment and favorable foreign currency translation effects. However, net sales for the third quarter of 2011 saw a 3% decline compared to the prior year and a significant 17% sequential drop from the second quarter, attributed to a slowdown in global semiconductor production and capital investment. Despite the sequential sales decline, the company maintained a solid gross margin and reported a significant increase in net income attributable to Entegris, Inc. for the nine-month period, reaching $83.7 million ($0.62 per diluted share), up from $57.4 million ($0.43 per diluted share) in the same period last year. The company ended the quarter with a strong liquidity position, evidenced by $227.0 million in cash and cash equivalents and no outstanding debt.

Key Highlights

  • 1Net sales for the nine months ended October 1, 2011 increased 16% year-over-year to $585.3 million, driven by growth in the CCS segment and currency tailwinds.
  • 2Third-quarter 2011 net sales declined 3% year-over-year to $173.0 million and fell 17% sequentially from the second quarter, reflecting a slowdown in the semiconductor industry.
  • 3Net income attributable to Entegris, Inc. for the nine months of 2011 surged to $83.7 million ($0.62/share), a significant increase from $57.4 million ($0.43/share) in the prior year.
  • 4Gross profit for the nine months increased to $258.3 million, although the gross margin rate slightly decreased to 44.1% from 45.5% year-over-year.
  • 5The company reported a strong operating cash flow of $112.8 million for the nine-month period.
  • 6Entegris ended the quarter with $227.0 million in cash and cash equivalents and no outstanding debt, indicating a healthy liquidity position.
  • 7The company's effective tax rate for the nine months was 21.2%, benefiting from a decrease in the U.S. deferred tax asset valuation allowance and tax holidays in Malaysia.

Frequently Asked Questions

Entegris experienced strong top-line growth for the nine months ended October 1, 2011, with net sales increasing by 16% to $585.3 million, compared to $506.3 million in the prior year. This growth was accompanied by a significant increase in net income attributable to Entegris, Inc. to $83.7 million ($0.62 per diluted share) from $57.4 million ($0.43 per diluted share) in the prior year. The company also generated substantial operating cash flow of $112.8 million.

The decline in net sales for the third quarter of 2011, both sequentially (down 17%) and year-over-year (down 3%), was attributed to a slowdown in global semiconductor production and capital investment. This led to reduced demand from customers in the semiconductor and related industries. The company noted that sales were primarily volume-driven.

Entegris maintained a strong liquidity position at the end of the third quarter of 2011. Cash and cash equivalents totaled $227.0 million, and short-term investments added another $2.0 million, bringing total cash and investments to $229.1 million. Importantly, the company had no outstanding short-term bank borrowings or long-term debt, and had a $30 million revolving credit facility available.

The company's year-to-date effective tax rate was 21.2% for the nine months ended October 1, 2011, compared to 20.8% in the prior year. Key factors contributing to the rate in 2011 included a significant $14.9 million decrease in the U.S. deferred tax asset valuation allowance, as management concluded certain deferred tax assets would be realized. Additionally, tax holidays in Malaysia and lower tax rates in other jurisdictions positively impacted the effective tax rate.