News Release Details
Entegris Reports Third Quarter Loss Due to Non-Cash Charges
* Sales of $145.8 million
* GAAP loss per share of $3.68 reflecting non-cash charges
* Non-GAAP EPS from continuing operations of $0.06
* Non-GAAP gross margin of 42 percent
* Cash from operations of $11.7 million
Entegris' third-quarter sales were $145.8 million, versus $151.8 million for the same period a year ago and $147.9 million for the second quarter of fiscal 2008. Poco Graphite, which was acquired on August 11, 2008, contributed approximately $10 million to sales in the third quarter.
The Company reported a third-quarter net loss of $411.4 million, or $3.68 per diluted share, which compared to net income of $8.4 million, or $0.07 per diluted share, for the same quarter a year ago. On a non-GAAP basis, third-quarter net income from continuing operations was $6.2 million, or $0.06 per diluted share.
The third-quarter results reflected the following non-cash charges:
* A write-down of $395.3 million, or $379.8 million net of tax,
related to impairment of goodwill triggered by the decline in the
Company's market capitalization. The write-down was made in
accordance with the requirements of FASB Statements No. 142
"Goodwill and Other Intangible Assets." The write-down represents
management's best estimate based on the facts and circumstances as
of September 27, 2008 and may be revised in the fourth quarter.
* Purchase accounting adjustments of $5.7 million to cost of sales,
as a result of adjusting acquired Poco Graphite inventory to fair
market value.
* A valuation allowance of $30.7 million for the Company's deferred
tax assets.
Sales for the nine months ended September 27, 2008 were $442.0 million. The nine-month net loss was $403.5 million, or $3.57 per diluted share. Nine-month net income from continuing operations on a non-GAAP basis was $14.9 million, or $0.13 per diluted share.
Gideon Argov, president and chief executive officer, said: "The global economic turmoil has exacerbated the cyclical downturn in the semiconductor industry. Despite market conditions softening, we generated $11.7 million of cash from operations and achieved earnings of $0.06 per share from continuing operations on a non-GAAP basis due to stable margins and control of operating expenses. We completed the acquisition of Poco Graphite in the quarter which adds to our consumable product revenues, provides synergies with our existing customers, and represents further expansion into markets outside of the semiconductor industry."
As part of its long-term strategy to align manufacturing operations, the Company announced it will close the larger of its two manufacturing facilities in Chaska, Minnesota and will transfer production to its other existing facilities. This closure, which will impact approximately 200 jobs or approximately 7 percent of the Company's worldwide headcount, is expected to be completed in 2009 and to result in annual cost and tax savings of approximately $6 to $8 million beginning in 2010. The Company expects to incur charges of approximately $15 million related to the facility closure over the next four quarters.
In addition to the facility closure, the Company is taking steps to reduce its operating expenses which include the streamlining of its management structure. These actions are expected to yield in excess of $12 million in annual cost savings. Thus far, these steps have resulted in a restructuring charge of $3.3 million in the third quarter.
Argov continued: "We are using the slowdown in the economy and our industry to optimize our manufacturing operations and to streamline the Company. These measures will lower our break-even point further so that we can remain profitable on an operating basis during this turbulent period, and will position us for maximum operating leverage and improved profitability when our markets recover."
Third-Quarter Results Conference Call Details
Entegris will hold a conference call to discuss its results for the third quarter on Tuesday, November 4, 2008, at 10:00 a.m. Eastern Time. Participants should dial 1-866-409-1560 (for domestic callers) or 1-913-312-1300 (for callers outside the U.S.). A replay of the call can be accessed at 1-719-457-0820 using passcode 3654556. A webcast of the call can also be accessed from the investor relations section of Entegris' website at www.entegris.com.
Non-GAAP Information
In addition to reporting results that are determined in accordance with generally accepted accounting principles in the U.S. (GAAP), the Company also reports non-GAAP results of operations that exclude certain expenses and charges. These non-GAAP results are provided as a complement to results provided in accordance with GAAP in order to provide investors with relevant and useful information about the Company's ongoing operations. As such, non-GAAP information primarily excludes expenses and charges resulting from goodwill impairment under FASB Statement No. 142, a valuation allowance for deferred tax assets under FASB Statement No. 109, and purchase accounting adjustments related to inventory associated with the Company's August 2008 acquisition of Poco Graphite. A reconciliation of GAAP to non-GAAP financial information discussed in this release is contained in the attached exhibits and on the Company's website at www.entegris.com.
About Entegris
Entegris is a leading provider of a wide range of products for purifying, protecting and transporting critical materials used in processing and manufacturing in the semiconductor and other high-tech industries. Entegris is ISO 9001 certified and has manufacturing, customer service and/or research facilities in the United States, China, France, Germany, India, Israel, Japan, Malaysia, Singapore, South Korea and Taiwan. Additional information can be found at www.entegris.com.
Forward-Looking Statements
Certain information contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current management expectations only as of the date of this press release, and involve substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Statements that include such words as "anticipate," "believe," "estimate," "expect," "forecast," "may," "will," "should" or the negative thereof and similar expressions as they relate to Entegris or our management are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks include, but are not limited to, fluctuations in the market price of Entegris' stock, Entegris' future operating results, other acquisition and investment opportunities available to Entegris, general business and market conditions and other factors. Additional information concerning these and other risk factors may be found in previous financial press releases issued by Entegris and Entegris' periodic public filings with the Securities and Exchange Commission, including discussions appearing under the headings "Risks Relating to our Business and Industry," "Manufacturing Risks," "International Risks," and "Risks Related to Securities Markets and Ownership of Our Securities" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as well as other matters and important factors disclosed previously and from time to time in the filings of Entegris with the U.S. Securities and Exchange Commission. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we undertake no obligation to update publicly any forward-looking statements contained herein.
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
---------------------------- ------------------
Sept. 27, June 28, Sept. 29, Sept. 27, Sept. 29,
2008 2008 2007 2008 2007
---------------------------- ------------------
Net sales $145,789 $147,947 $151,811 $441,963 $464,890
Cost of sales 90,391 88,060 86,301 262,690 265,378
---------------------------- ------------------
Gross profit 55,398 59,887 65,510 179,273 199,512
Selling, general
and administrative
expenses 35,373 37,105 39,267 115,800 120,542
Engineering,
research and
development
expenses 10,284 10,362 9,409 31,147 29,622
Amortization of
intangible assets 4,858 4,552 4,716 14,497 13,702
Impairment of
goodwill 395,261 -- -- 395,261 --
Restructuring
charges 3,332 -- -- 3,332 --
---------------------------- ------------------
Operating (loss)
income (393,710) 7,868 12,118 (380,764) 35,646
Interest expense
(income), net 614 81 (140) 682 (5,516)
Other expense
(income), net 947 249 53 1,823 (5,997)
---------------------------- ------------------
(Loss) income
before income
taxes (395,271) 7,538 12,205 (383,269) 47,159
Income tax expense 15,837 2,021 3,156 19,252 11,970
Equity in net loss
(earnings) of
affiliates 195 (8) 96 49 (8)
---------------------------- ------------------
(Loss) income
from continuing
operations (411,303) 5,525 8,953 (402,570) 35,197
Loss from
discontinued
operations, net
of taxes (90) (592) (536) (1,025) (1,620)
---------------------------- ------------------
Net (loss)
income ($411,393) $ 4,933 $ 8,417 ($403,595) $ 33,577
============================ ==================
Basic (loss) income
per common share:
Continuing
operations ($3.68) $ 0.05 $ 0.08 ($3.56) $ 0.28
Discontinued
operations ($0.00) ($0.01) ($0.00) ($0.01) ($0.01)
Net (loss) income
per common share ($3.68) $ 0.04 $ 0.07 ($3.57) $ 0.27
Diluted (loss)
income per common
share:
Continuing
operations ($3.68) $ 0.05 $ 0.08 ($3.56) $ 0.28
Discontinued
operations ($0.00) ($0.01) ($0.00) ($0.01) ($0.01)
Net (loss) income
per common share ($3.68) $ 0.04 $ 0.07 ($3.57) $ 0.26
Weighted average
shares outstanding:
Basic 111,796 112,870 114,333 112,942 125,251
Diluted 111,796 113,581 116,415 112,942 127,980
Entegris, Inc. and Subsidiaries
GAAP to Non-GAAP Reconciliation of Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 27, 2008 September 27, 2008
---------------------------- ----------------------------
U.S. Adjust- U.S. Adjust-
GAAP ments Non-GAAP GAAP ments Non-GAAP
---------------------------- ----------------------------
Net sales $145,789 $ -- $145,789 $441,963 $ -- $441,963
Cost of
sales(a) 90,391 (5,718) 84,673 262,690 (5,718) 256,972
---------------------------- ----------------------------
Gross
profit 55,398 5,718 61,116 179,273 5,718 184,991
Selling,
general
and admin-
istrative
expenses 35,373 -- 35,373 115,800 -- 115,800
Engineering,
research
and
development
expenses 10,284 -- 10,284 31,147 -- 31,147
Amortiza-
tion of
intangible
assets 4,858 -- 4,858 14,497 -- 14,497
Impairment
of good-
will (b) 395,261 (395,261) -- 395,261 (395,261) --
Restructur-
ing charges 3,332 -- 3,332 3,332 -- 3,332
---------------------------- ----------------------------
Operating
(loss)
income (393,710) 400,979 7,269 (380,764) 400,979 20,215
Interest
expense,
net 614 -- 614 682 -- 682
Other
expense,
net 947 -- 947 1,823 -- 1,823
---------------------------- ----------------------------
(Loss)
income
before
income
taxes (395,271) 400,979 5,708 (383,269) 400,979 17,710
Income tax
(benefit)
expense
(c) 15,837 (16,498) (661) 19,252 (16,498) 2,754
Equity in
net loss
of affil-
iates 195 -- 195 49 -- 49
---------------------------- ----------------------------
(Loss)
income
from
contin-
uing
opera-
tions (411,303) 417,477 6,174 (402,570) 417,477 14,907
Loss from
discontinued
operations,
net of
taxes (90) -- (90) (1,025) -- (1,025)
---------------------------- ----------------------------
Net (loss)
income ($411,393) $417,477 $ 6,084 ($403,595) $417,477 $ 13,882
============================ ============================
Basic (loss)
income per
common
share:
Continuing
opera-
tions ($3.68) $ 3.73 $ 0.06 ($3.56) $ 3.70 $ 0.13
Discontinued
opera-
tions ($0.00) $ 0.00 ($0.00) ($0.01) $ 0.00 ($0.01)
Net (loss)
income
per
common
share ($3.68) $ 3.73 $ 0.05 ($3.57) $ 3.70 $ 0.12
Diluted
(loss)
income per
common
share:
Continuing
opera-
tions ($3.68) $ 3.73 $ 0.06 ($3.56) $ 3.70 $ 0.13
Discontinued
opera-
tions ($0.00) $ 0.00 ($0.00) ($0.01) $ 0.00 ($0.01)
Net (loss)
income
per
common
share ($3.68) $ 3.73 $ 0.05 ($3.57) $ 3.70 $ 0.12
Weighted
average
shares
outstand-
ing:
Basic 111,796 111,796 111,796 112,942 112,942 112,942
Diluted 111,796 111,796 111,993 112,942 112,942 113,510
(a) Non-GAAP cost of sales for the three months ended
September 27, 2008 is adjusted for $5.7 million charge for fair
value mark-up of acquired inventory sold related to the POCO
Graphite, Inc. acquisition.
(b) Non-GAAP impairment of goodwill for the three months ended
September 27, 2008 is adjusted for $395.3 million of impairment
charges related to goodwill.
(c) Non-GAAP Income tax expense for the three months ended
September 27, 2008 is adjusted for $31.9 million primarily
related to the increase in the valuation allowance related to
the U.S. tax credit carryforwards, offset by an adjustment of
$15.5 million for the tax benefit associated with the goodwill
impairment charges as noted in (b) above.
Entegris, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
Sept. 27, Dec. 31,
2008 2007
---------- ----------
ASSETS
Cash, cash equivalents and short-term
investments $ 73,961 $ 160,655
Accounts receivable 107,928 112,053
Inventories 107,899 73,120
Deferred tax assets, deferred tax charges
and refundable income taxes 28,731 23,238
Other current assets and assets held for sale 13,436 13,555
---------- ----------
Total current assets 331,955 382,621
Property, plant and equipment, net 154,043 121,157
Intangible assets and goodwill 176,690 478,495
Deferred tax asset - non-current 32,214 35,323
Other assets 27,329 17,645
---------- ----------
Total assets $ 722,231 $1,035,241
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 11,562 $ 9,310
Short-term borrowings 4,728 17,802
Accounts payable 28,254 24,260
Accrued liabilities 55,334 61,884
Income tax payable 4,123 12,493
---------- ----------
Total current liabilities 104,001 125,749
Long-term debt, less current maturities 118,742 20,373
Other liabilities 63,281 36,810
Shareholders' equity 436,207 852,309
---------- ----------
Total liabilities and shareholders'
equity $ 722,231 $1,035,241
========== ==========
Entegris, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
---------------------------------------------------------------------
Sept. 27, Sept. 29,
2008 2007
---------------------------------------------------------------------
Operating activities:
Net (loss) income ($411,393) $ 8,417
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss from discontinued operations 90 536
Depreciation 6,476 6,351
Amortization 4,858 4,716
Deferred tax valuation allowance 30,660 --
Provision for deferred taxes (15,524) --
Share-based compensation expense 1,335 2,700
Impairment of goodwill assets 395,261 --
Charge for fair market value mark-up of
acquired inventory 5,718 736
Other 848 (680)
Changes in operating assets and liabilities,
excluding effects of acquisitions:
Trade accounts receivable and notes
receivable 6,039 1,940
Inventories (464) 2,122
Accounts payable and accrued liabilities (5,632) 917
Income taxes payable (10,051) (2,205)
Other 3,524 (416)
---------------------------------------------------------------------
Net cash provided by operating activities 11,745 25,134
---------------------------------------------------------------------
Investing activities:
Acquisition of property and equipment (7,399) (6,253)
Acquisition of businesses (161,973) (41,844)
Other 110 (2,136)
---------------------------------------------------------------------
Net cash used in investing activities (169,262) (50,233)
---------------------------------------------------------------------
Financing activities:
Principal payments on short-term borrowings
and long-term debt (29,108) (27,127)
Proceeds from short-term and long-term
borrowings 133,000 37,000
Issuance of common stock 902 1,401
Repurchase and retirement of common stock (4,492) (605)
Other -- 420
---------------------------------------------------------------------
Net cash provided by financing activities 100,302 11,089
---------------------------------------------------------------------
Net cash used in discontinued operations (2) (784)
---------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (1,230) 4,132
---------------------------------------------------------------------
Decrease in cash and cash equivalents (58,447) (10,662)
Cash and cash equivalents at beginning of
period 132,408 136,535
---------------------------------------------------------------------
Cash and cash equivalents at end of period $ 73,961 $125,873
=====================================================================
SOURCE: Entegris, Inc.
Entegris, Inc.
Steve Cantor, VP of Corporate Relations
978-436-6750
irelations@entegris.com