10-QPeriod: Q1 FY2014

ENTEGRIS INC Quarterly Report for Q1 Ended Mar 29, 2014

Filed May 5, 2014For Securities:ENTG

Summary

Entegris Inc. (ENTG) reported a slight increase in net sales for the first quarter of 2014, reaching $165.8 million, a marginal rise from $165.1 million in the prior year period. Despite this modest revenue growth, net income declined to $14.3 million ($0.10 per diluted share) from $16.4 million ($0.12 per diluted share) in the first quarter of 2013. This decrease in profitability was primarily driven by increased operating expenses, specifically in Selling, General & Administrative (SG&A) and Engineering, Research & Development (ER&D), which outpaced the growth in gross profit. The company's gross margin did improve year-over-year to 43.0% from 40.7%, attributed to a more favorable sales mix. A significant development highlighted in this filing is the announcement of Entegris' acquisition of ATMI, Inc. for approximately $1.2 billion, which occurred shortly after the quarter ended on April 30, 2014. This strategic move, funded by existing cash and new debt issuance, is poised to reshape the company's future operations and market position. Despite the near-term pressures on profitability due to increased operating expenses, the company maintains a strong liquidity position with $381.7 million in cash and cash equivalents at the end of the quarter and no outstanding debt prior to the ATMI acquisition financing.

Financial Highlights

46 data points
Beta

Revenue

$165.80M

43.0% Gross Margin

Net Income

$14.31M

8.6% Net Margin

EPS (Diluted)

$0.10

Total Assets

$883.50M

Cash & Equivalents

$381.66M

Free Cash Flow

-$1.37M

Financial Statements
Beta
Revenue$165.80M
Cost of Revenue$94.45M
Gross Profit$71.35M
R&D Expenses$15.69M
SG&A Expenses$34.79M
Operating Income$18.54M
Interest Expense$29K
Net Income$14.31M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)138.93M
Shares Outstanding (Diluted)139.71M

Key Highlights

  • 1Net sales for Q1 2014 were $165.8 million, a slight increase from $165.1 million in Q1 2013, indicating stable top-line performance.
  • 2Net income decreased to $14.3 million ($0.10/share) in Q1 2014 from $16.4 million ($0.12/share) in Q1 2013, largely due to higher operating expenses.
  • 3Gross margin improved to 43.0% in Q1 2014 from 40.7% in Q1 2013, driven by a more favorable sales mix.
  • 4Operating expenses, specifically SG&A and ER&D, increased by 7% and 34% respectively year-over-year, impacting profitability.
  • 5The company announced the significant acquisition of ATMI, Inc. for $1.2 billion, which closed shortly after the reporting period.
  • 6Entegris maintained a strong cash position, ending the quarter with $381.7 million in cash and cash equivalents.
  • 7The company had no outstanding debt prior to the financing for the ATMI acquisition.

Frequently Asked Questions

The most significant event is the announcement and subsequent completion of the acquisition of ATMI, Inc. for approximately $1.2 billion shortly after the quarter ended. This acquisition is expected to significantly impact the company's scale, market position, and future financial performance.

The decrease in net income was primarily due to a significant increase in operating expenses, particularly Selling, General & Administrative (SG&A) expenses and Engineering, Research & Development (ER&D) expenses. These higher costs more than offset the modest increase in gross profit resulting from improved margins.

The acquisition of ATMI was financed through a combination of existing cash balances and new debt. The company issued a senior secured term loan of $460 million and senior unsecured notes totaling $360 million to fund a portion of the $1.2 billion purchase price.

As of March 29, 2014, Entegris had a strong liquidity position with $381.7 million in cash and cash equivalents. Importantly, the company had no outstanding debt prior to the financing arranged for the ATMI acquisition, indicating a healthy balance sheet before the significant leverage taken on for the acquisition.