UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended February 24, 2001 Commission File Number 000-30789 ------------------- ----------- ENTEGRIS, INC. -------------- (Exact name of registrant as specified in charter) Minnesota 41-1941551 --------- ---------- (State or other jurisdiction of incorporation) (IRS Employer ID No.) 3500 Lyman Boulevard, Chaska, Minnesota 55318 ---------------------------------------------- (Address of Principal Executive Offices) Registrant's Telephone Number (952) 556-3131 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _______ ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. Class Outstanding at March 31, 2001 - ----------------------------- ----------------------------- Common Stock, $0.01 Par Value 68,652,833
ENTEGRIS, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS FOR THE QUARTER ENDED FEBRUARY 24, 2001 Description Page ----------- ---- PART I - ------ Item 1. Unaudited Consolidated Financial Statements Consolidated Balance Sheets as of February 24, 2001 and August 26, 2000 3 Consolidated Statements of Operations for the Three Months and Six Months Ended February 24, 2001 and February 26, 2000 4 Consolidated Statements of Cash Flows for the Six Months Ended February 24, 2001 and February 26, 2000 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II Other Information - ------- Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 2
Item 1. Financial Statements - ----------------------------- ENTEGRIS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) August 26, 2000 - As February 24, adjusted - See 2001 Note 5 ------------ -------------- ASSETS Current assets Cash and cash equivalents $119,573 $102,973 Trade accounts receivable, net of allowance for doubtful accounts 48,686 41,325 Trade accounts receivable due from affiliates 26,323 22,803 Inventories 51,527 41,976 Deferred tax assets and refundable income taxes 11,107 7,996 Other current assets 5,151 4,341 ------------ -------------- Total current assets 262,367 221,414 ------------ -------------- Property, plant and equipment, net 102,935 107,733 Other assets Investments in affiliates 15,318 14,452 Intangible assets 6,685 7,162 Investment in marketable securities 764 1,288 Other 1,398 1,319 ------------ -------------- Total assets $389,467 $353,368 ============ ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 1,466 $ 1,828 Short-term borrowings 9,605 8,311 Accounts payable 21,920 21,849 Accrued liabilities 35,860 30,556 ------------ --------------- Total current liabilities 68,851 62,544 ------------ --------------- Long-term debt, less current maturities 9,992 10,822 Deferred tax liabilities 7,858 9,146 Minority interest in subsidiaries 5,041 4,012 Commitments and contingencies - - Shareholders' equity Common stock, $0.01 par value; 200,000,000 authorized; issued and outstanding shares: 68,613,679 and 68,317,183, respectively 686 683 Additional paid-in capital 114,797 114,003 Retained earnings 183,496 152,091 Accumulated other comprehensive (loss) income (1,254) 67 ------------ --------------- Total shareholders' equity 297,725 266,844 ------------ --------------- Total liabilities and shareholders' equity $389,467 $353,368 ============ =============== See accompanying notes to consolidated financial statements. 3
ENTEGRIS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended ------------------------------------------------------------------ February 26, February 26, 2000-As 2000-As February 24, adjusted -See February 24, adjusted -See 2001 Note 5 2001 Note 5 ------------------------------------------------------------------ Sales to non-affiliates $ 70,515 $ 55,110 $ 139,117 $ 110,113 Sales to affiliates 35,197 29,736 69,234 46,549 ------------------------------------------------------------------ Net sales 105,712 84,846 208,351 156,662 Cost of sales 52,111 46,688 102,198 86,823 ------------------------------------------------------------------ Gross profit 53,601 38,158 106,153 69,839 Selling, general and administrative expenses 19,727 18,631 40,962 33,665 Distribution agreement termination 8,210 - 8,210 - Engineering, research and development expenses 4,035 3,642 7,568 7,145 ------------------------------------------------------------------ Operating profit 21,629 15,885 49,413 29,029 Interest (income) expense, net (1,408) 935 (2,867) 2,020 Other expense (income), net 934 (184) 1,014 (6,282) ------------------------------------------------------------------ Income before income taxes and other items below 22,103 15,134 51,266 33,291 Income tax expense 8,402 4,960 19,483 11,141 Equity in net income of affiliates (750) (286) (1,488) (582) Minority interest in subsidiaries' net income 667 130 1,375 348 ------------------------------------------------------------------ Net income 13,784 10,330 31,896 22,384 Market value adjustment to redeemable common stock - (32,795) - (65,589) ------------------------------------------------------------------ Net income (loss) applicable to nonredeemable common shareholders $ 13,784 $ (22,465) $ 31,896 $ (43,205) ================================================================== Earnings (loss) per nonredeemable common share Basic $ 0.20 $ (0.60) $ 0.47 $ (1.16) Diluted $ 0.19 $ (0.60) $ 0.44 $ (1.16) Weighted shares outstanding: Basic 68,526 37,338 68,444 37,187 Diluted 72,554 37,338 72,696 37,187 4
ENTEGRIS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Six months ended --------------------------------- February 26, 2000-As February 24, adjusted -See 2001 Note 5 --------------------------------- OPERATING ACTIVITIES Net income $ 31,896 $ 22,384 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,992 13,369 Asset impairment 3,400 1,287 Provision for doubtful accounts 716 106 Provision for deferred income taxes (2,694) 2,879 Stock option compensation expense (150) - Equity in net income of affiliates (1,488) (582) Loss on sale of property and equipment 181 611 Gain on sale of investment in affiliate - (5,468) Minority interest in subsidiaries' net income 1,375 348 Changes in operating assets and liabilities: Trade accounts receivable (8,077) (4,992) Trade accounts receivable due from affiliates (3,520) (9,316) Inventories (9,550) 1,092 Accounts payable and accrued liabilities 5,375 5,217 Other current assets (809) (1,067) Accrued income taxes (1,705) (1,567) Other (856) (139) --------------------------------- Net cash provided by operating activities 26,084 24,162 --------------------------------- INVESTING ACTIVITIES Acquisition of property and equipment (11,615) (7,323) Purchases of intangible assets (38) (2,013) Proceeds from sales of property and equipment 119 290 Proceeds from sale of investment in affiliate - 7,399 Decrease in investment in affiliate 1,486 (1,840) --------------------------------- Net cash used in investing activities (10,048) (3,487) --------------------------------- FINANCING ACTIVITIES Principal payments on short-term borrowings and long-term debt (1,049) (6,155) Proceeds from issuance of debt 1,151 2,312 Issuance of common stock 1,424 80 Repurchase of common stock (722) (8,268) --------------------------------- Net cash provided by (used in) financing activities 804 (12,031) --------------------------------- Effect of exchange rate changes on cash and cash equivalents (240) (26) --------------------------------- Increase in cash and cash equivalents 16,600 8,618 Cash and cash equivalents at beginning of period 102,973 16,411 --------------------------------- Cash and cash equivalents at end of period $ 119,573 $ 25,029 ================================= See accompanying notes to consolidated financial statements. 5
ENTEGRIS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) 1. Summary of Significant Accounting Policies ------------------------------------------ In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of February 24, 2001 and August 26, 2000, the results of operations for the three months and six months ended February 24, 2001 and February 26, 2000 and cash flows for the six months ended February 24, 2001 and February 26, 2000. Certain prior year amounts have been reclassified to conform to the current period presentation. The financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and financial statements and notes thereto included in the Company's Form 10-K for the year ended August 26, 2000. The results of operations for the three months and six months ended February 24, 2001 and February 26, 2000 are not necessarily indicative of the results to be expected for the full year. The Company's fiscal year ends on the last Saturday of August. Each interim quarter ends on the last Saturday of the months of November, February and May. 2. Earnings per share ------------------ The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share. Three Months Ended Six Months Ended ---------------------------------------------------------------- February 24, February 26, February 24, February 26, 2001 2000 2001 2000 ---------------------------------------------------------------- Basic earnings per share-weighted common shares outstanding 68,526,000 37,338,000 68,444,000 37,187,000 Weighted common shares assumed upon exercise of stock options 4,028,000 - 4,252,000 - ---------------------------------------------------------------- Diluted earnings per share-weighted common shares and common shares equivalent outstanding 72,554,000 37,338,000 72,696,000 37,187,000 ================================================================ The effect of the inclusion of redeemable common shares and stock options for the three month and six month periods ended February 26, 2000 is anti- dilutive. 3. Inventories ----------- Inventories consist of the following: February 24, 2001 August 26, 2000 ------------------------ ----------------------- Raw materials $15,406 $12,677 Work-in process 3,770 3,280 Finished goods 31,688 25,794 Supplies 663 225 ------------------------ ----------------------- Total inventories $51,527 $41,976 ======================== ======================= 6
4. Comprehensive Income -------------------- For the three months and six months ended February 24, 2001 and February 26, 2000 net income, items of other comprehensive income and comprehensive income are as follows: Three months ended Six months ended ----------------------------------------------------------------------- February 26, February 26, 2000-As 2000-As February 24, adjusted -See February 24, adjusted -See 2001 Note 5 2001 Note 5 ----------------------------------------------------------------------- Net income $13,784 $10,330 $31,896 $22,384 Items of other comprehensive income (loss) Foreign currency translation (291) (208) (892) (138) Unrealized gain (loss) in marketable securities (86) 22 (429) (24) ----------------------------------------------------------------------- Comprehensive income $13,407 $10,144 $30,575 $22,222 ======================================================================= 5. Change in Method of Accounting for Inventories ----------------------------------------------- Effective August 27, 2000, the Company changed its method of accounting for its domestic inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. Management believes that the accounting change is preferable in the circumstances because the accounting change provides a better matching of costs and revenues in periods when the cost of goods and services are declining. In accordance with accounting principles generally accepted in the United States of America, the financial statements of prior periods have been restated to apply the new method retroactively. Accordingly, retained earnings at August 26, 2000 on the accompanying balance sheet has been adjusted for the effect (net of income taxes) of applying retroactively the new method of accounting. The effect of the accounting change on income for the three months and six months ended February 24, 2001 and February 26, 2000 is shown below: Increase (decrease) Three months ended Six months ended - --------------------------------------- --------------------------------------------------------------------- February 24, February 26, February 24, February 26, Effect on: 2001 2000 2001 2000 --------------------------------------------------------------------- Net income - $ 738 $ (404) $ 729 Basic earnings per common share - $0.02 $(0.01) $0.02 Diluted earnings per common share - $0.02 $(0.01) $0.02 6. Distribution Agreement Termination ---------------------------------- During the second quarter of fiscal 2001, the Company recorded a one-time charge of $8.2 million related to the early termination of a distribution agreement for the Microelectronics Group with its affiliate, Metron Technology N.V. (Metron). Pursuant to the termination agreement, the Company will assume direct sales responsibility for Microelectronics Group product sales in Europe and Asia, and agreed to transfer to Metron 1.125 million shares of Metron stock and to make cash payments totaling $1.75 million over a 15-month period. Entegris will also buy back certain microelectronics product inventory, to be determined at a later date, from Metron, which will be accounted for if and when such inventory is transferred from Metron. The Company and Metron also executed a new distribution agreement for Entegris' Fluid Handling Group products, which now runs through August 31, 2005. 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- Three Months and Six Months Ended February 24, 2001 Compared to Three Months and Six Months Ended February 26, 2000 The following table compares quarterly results with year-ago results, as a percentage of sales, for each caption. Three Months Ended Six Months Ended -------------------------------------------------------------- February 26, February 26, 2000-As 2000-As February 24, adjusted -See February 24, adjusted -See 2001 Note 5 2001 Note 5 --------------------------------------------------------------- Net sales 100.0 100.0 100.0 100.0 Cost of sales 49.3 55.0 49.1 55.4 --------------------------------------------------------------- Gross profit 50.7 45.0 50.9 44.6 Selling, general and administrative expenses 18.7 22.0 19.7 21.5 Distribution agreement termination 7.8 - 3.9 Engineering, research and development expenses 3.8 4.3 3.6 4.6 --------------------------------------------------------------- Operating profit 20.5 18.7 23.7 18.5 Interest (income) expense, net (1.3) 1.1 (1.4) 1.3 Other expense (income), net 0.9 (0.2) 0.5 (4.0) --------------------------------------------------------------- Income before income taxes and other items below 20.9 17.8 24.6 21.3 Income taxes 7.9 5.8 9.4 7.1 Equity in net earnings of affiliated companies (0.7) (0.3) (0.7) (0.4) Minority interest in subsidiaries' net income 0.6 0.2 0.7 0.2 --------------------------------------------------------------- Net income 13.0 12.2 15.3 14.3 =============================================================== Effective tax rate 38.0% 32.8% 38.0% 33.5% Net sales Net sales increased 25% to $105.7 million in the second quarter of fiscal 2001, compared to $84.8 million in the first quarter of fiscal 2000. The improvement reflects the continuation of the sustained recovery in the semiconductor industry that began in the second half of fiscal 1999. Revenue gains were recorded in North America, Japan and Europe, while revenues in the Asia Pacific region were flat. International sales accounted for approximately 49% of net sales, essentially unchanged from fiscal 2000 and first quarter fiscal 2001 levels. Sales of fluid handling products, which made up 34 percent of total sales for the quarter, increased 67 percent, while microelectronics product sales, 66% of total sales, grew 18%. Net sales for the first six months of fiscal 2001 were $208.4 million, up 33% from $156.7 million in the comparable year-ago period. Revenue gains were recorded in all geographic regions, most notably in Japan. Fluid handling product and microelectronics sales increased 75% and 24%, respectively, compared to first six months of fiscal 2000. Incoming order rates began to decline late in the quarter, particularly for fluid handling products, which are dependent on capital spending levels in the semiconductor industry. There was also some weakness in orders for microelectronics products as manufacturing utilization of wafer manufacturers and semiconductor manufacturers started to decline. A clear trend has not yet been established, but the company is preparing for the possibility of a significant industry slowdown. Currently, management expects that sales for the third quarter of fiscal 2001 will decrease by about 15-20% from the sales levels experienced in the second quarter of fiscal 2001. 8
Gross profit Gross profit in the second quarter of fiscal 2001 increased 40% to $53.6 million, compared to $38.1 million reported in the second quarter of fiscal 2000. For the first six months of fiscal 2001, gross profit was $106.2 million, up 52% from $69.8 million recorded in the first six months of fiscal 2000. As a percentage of net sales, gross margins for the second quarter and first six months of the fiscal year were 50.7% and 50.9%, respectively, compared to 45.0% and 44.6%, respectively, in the comparable periods a year ago. The gross profit and gross margin improvements in fiscal 2001 reflected improved utilization of our production capacity associated with the higher sales levels noted above and the successful management of manufacturing costs. Gross profit and gross margin gains were reported by both domestic and international operations. Partly offsetting the gross profit and gross margin improvements were asset impairment charges of $2.7 million and $3.4 million recorded in the second quarter and first six months of fiscal 2001, respectively, mainly for asset write-offs of molds that were determined to have no future use. As noted in Note 5 to the accompanying consolidated financial statements, the Company changed its method of accounting for inventories from LIFO to FIFO in the first quarter of fiscal 2001. As discussed above, management expects sales levels to decline in the third quarter. The corresponding reduction in our factory utilization would result in lower gross profits with an expected gross margin in mid-40% range. Selling, general and administrative expenses Selling, general and administrative (SG&A) expenses increased 6% to $19.7 million in the second quarter of fiscal 2001 from $18.6 million in the second quarter of fiscal 2000. SG&A expenses grew 22% to $41.0 million in the first six months of fiscal 2001 compared to $33.7 million in the first six months a year earlier. The increases reflect higher commissions, incentive compensation, charitable contributions, and personnel and information systems costs. On a year-to-date basis, SG&A costs, as a percent of net sales, decreased slightly to 19.7% from 21.5% a year ago. Distribution termination agreement During the second quarter of fiscal 2001, the Company recorded a one-time charge of $8.2 million related to the early termination of a distribution agreement for the Microelectronics Group with its affiliate Metron Technology N.V. (Metron). Pursuant to the termination agreement, the Company will assume direct sales responsibility for Microelectronics Group product sales in Europe and Asia, and agreed to transfer to Metron 1.125 million shares of Metron stock and to make cash payments totaling $1.75 million over a 15-month period. Entegris will also buy back certain microelectronics product inventory, to be determined at a later date, from Metron, which will be accounted for if and when such inventory is transferred from Metron. The Company and Metron also executed a new distribution agreement for Entegris' Fluid Handling Group products, which now runs through August 31, 2005. Engineering, research and development expenses Engineering, research and development (ER&D) expenses increased 11% to $4.0 million, or 3.8% of net sales, in the second quarter of fiscal 2001as compared to $3.6 million, or 4.3% of net sales, for the same period in fiscal 2000. ER&D expenses increased 6% to $7.6 million, or 3.6% of net sales, in the first six months of fiscal 2001 as compared to $7.1 million, or 4.6% of net sales, a year-ago period. A major element of ER&D expenses relates to the continued development of next generation 300mm products. Interest (income) expense Net interest income was $1.4 million in the second quarter of fiscal 2001 compared to net interest expense of $0.9 million in the year-ago period. Net interest income was $2.9 million in the first half of fiscal 2001 compared to net interest expense of $2.0 million for the same period in fiscal 2000. The variance reflected the elimination of domestic bank borrowings and capital lease obligations, as well as the short-term investment of sizable available cash balances, made possible by the receipt of net proceeds of $99.0 million from the Company's initial public offering in the fourth quarter of fiscal 2000, $42 million of which was used to retire long-term debt and capital lease obligations. 9
Other expense (income) Other expense was $0.9 million in the second quarter of fiscal 2001 as compared to other income of $0.2 million a year ago. Other expense was $1.0 million in the first half of fiscal 2001 compared to other income of $6.3 million in the first half of fiscal 2000. The main factor underlying the year-to-year variance is the first quarter fiscal 2000 $5.5 million pre-tax gain recognized on the sale of approximately 612,000 common shares of the Company's investment in Metron as part of Metron's initial public offering in November 1999. The recording of translation losses in the fiscal 2001 periods compared to translation gains in fiscal 2000 also contributed to the change. Income tax expense Income tax expense of $19.5 million was significantly higher in the first half of fiscal 2001 compared to $11.1 million in income tax expense reported a year earlier, primarily reflecting higher pre-tax income. The effective tax rate thus far in fiscal 2001 is 38.0% compared to 33.5% in fiscal 2000, and primarily reflects the higher income levels earned by the Company. Equity in net income of affiliates Equity in the net income of affiliates was $0.8 million in the second quarter of fiscal 2001 compared to $0.3 million in the second quarter a year earlier, while equity in the net income of affiliates was $1.5 million in the first half of fiscal 2001 compared to $0.6 million for the same period a year ago. These improvements primarily reflect the operating results of Metron, which also benefited from the favorable industry conditions affecting our results. During March 2001, we surrendered ownership of 1.125 million shares of our investment in Metron in connection with the charge described above under the caption "Distribution Agreement Termination". As a result, our percentage ownership in Metron will be approximately 12%. Accordingly, the Company will discontinue application of the equity method to account for its investment in Metron. Instead, the Company's remaining investment will be accounted for as an "available-for-sale security" under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115 - Accounting for Certain Investments in Debt and Equity Securities. Minority interest For the six months ended February 24, 2001, minority interest in subsidiaries' net income line nearly quadrupled over a year ago. This increased charge to earnings reflects the improved financial performance at our 51% owned Japanese subsidiaries. Net income Net income increased 33% to $13.8 million in the second quarter of fiscal 2001, compared to net income of $10.3 million in the year-ago period. Net income applicable to nonredeemable common shareholders was $13.8 million, or $0.19 per diluted share, for the quarter, compared to a net loss applicable to nonredeemable common shareholders of $22.5 million, or $0.60 per share diluted, in the second quarter of fiscal 2000. Excluding the effect of the market value adjustment related to redeemable common stock, pro forma earnings per diluted share were $0.16 per share in the second quarter of fiscal 2000. Net income increased to $31.9 million in the first half of fiscal 2001, compared to net income of $22.4 million in the comparable year-ago period. Net income applicable to nonredeemable common shareholders was $31.9 million, or $0.44 per diluted share, in the half quarter of fiscal 2001. After the market value adjustment related to redeemable common stock, the net loss applicable to nonredeemable common shareholders was $43.2 million, or $1.16 per share diluted, in the first half quarter of fiscal 2000. Excluding the effect of the market value adjustment related to redeemable common stock, pro forma earnings per diluted share were $0.35 per share in the first half of fiscal 2000. Liquidity and Capital Resources Operating activities Cash flow provided by operating activities totaled $26.1 million in the first half of fiscal 2001. Net income and noncash charges, such as depreciation and amortization, totaled nearly $45 million, accounting for the strong cash flow generated by operations, which was partly offset by higher working capital requirements, principally related to higher accounts receivable ($11.6 million) and inventories ($9.6 million). Working capital at February 24, 2001 stood at $193.5 million, including $119.6 million in cash and cash equivalents. 10
The growth in accounts receivables primarily reflected the increase in net sales. Inventories rose because the Company increased the safety stock of certain critical resins where the supplier had indicated possible delivery issues and built up the supply of fluid handling components used in the production of fluid handling products because of strong customer demand. The company has started to decrease its safety stock inventories and adjusted its raw material requirements based on projected business levels. Accordingly, inventory levels are expected to moderate or decline in the upcoming quarter based on these actions. Investing activities Cash flow used in investing activities totaled $10.0 million in the first half of fiscal 2001. Acquisition of property and equipment totaled $11.6 million, primarily related to increasing our manufacturing capabilities for 300mm products, tooling for new products, and investments in our e-business initiatives. The Company expects capital expenditures of approximately $30 million during fiscal 2001, consisting mainly of spending on manufacturing equipment and information systems. In the first quarter of fiscal 2000, we received $7.4 million from the sale of 612,000 shares of our investment in Metron Technology N.V. (Metron). Financing activities Cash provided by financing activities totaled $0.8 million during the first half of fiscal 2001. Short-term borrowings by international operations rose by $1.2 million, while scheduled payments of $1.0 million were made on outstanding borrowings. We repurchased common shares for $0.7 million in the first half of fiscal 2001. These shares were acquired in connection with the redemption of common stock from the Company's Employee Stock Ownership Plan and the repurchase of 55,000 common shares as part of the 500,000 shares authorized for repurchase by the Company's Board of Directors in the first quarter of fiscal 2001. At February 24, 2001, the Company's shareholders' equity stood at $297.7 million. Book value per share was $4.34, up from $3.91 per share at the end of fiscal 2000. Net earnings accounted for the increase. As of February 24, 2001, our sources of available funds comprised $119.6 million in cash and cash equivalents, and various credit facilities. We have unsecured revolving commitments with two commercial banks with aggregate borrowing capacity of $30.0 million, with no borrowings outstanding at February 24, 2001. We also have lines of credit, equivalent to an aggregate of approximately $12 million with six international banks, which provide for borrowings of German deutsche marks, Malaysian ringgits and Japanese yen for our overseas subsidiaries. Borrowings outstanding on these lines of credit were $9.6 million at February 24, 2001. The Company believes that its cash and cash equivalents, cash flow from operations and available credit facilities will be sufficient to meet our working capital and investment requirements for the next twelve months. However, future growth, including potential acquisitions, may require additional funding, and from time to time we may need to raise capital through additional equity or debt financing. Subsequent Event During the quarter, the Company agreed to acquire the fluid handling component product line of a Japanese company for $10.4 million, including an estimated $8.0 million to be recorded as goodwill. The purchase was consummated in March 2001 and will be accounted for by the purchase method. Accordingly, the Company's consolidated financial statements will include the net assets and results of operations from the date of acquisition. Cautionary Statements Certain information in this report does not relate to historical financial information and may be deemed to constitute "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include forward-looking statements which reflect the Company's current views with respect to future events and financial performance. The words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "should" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause the company's actual results in the future to differ materially from its historical results and those presently anticipated or projected. 11
Among these risks and uncertainties are general economic conditions, cyclical nature of the semiconductor industry, risks associated with the acceptance of new products and the successful transition to a direct sales model for Microelectronic Group products. Other factors that could cause the company's results to differ materially from those contained in its forward looking statements are included in the Form 10K filed in November 2000 and other documents filed by the company with the Securities and Exchange Commission. Item 3: Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- Our principal market risks are sensitivities to interest rates and foreign currency exchange rates. Our exposure to interest rate fluctuations is not significant. Most of our outstanding debt at February 24, 2001 carried fixed rates of interest. Most of our short-term investments are debt instruments that mature in three months or less. We use derivative financial instruments to manage foreign currency exchange rate risk associated with the sale of products from the United States when such sales are denominated in currencies other than the U.S. dollar. The cash flows and earnings of our foreign-based operations are also subject to fluctuations in foreign exchange rates. A hypothetical 10% change in certain foreign currency exchange rates would increase or decrease our net income by approximately $2 million. Our cash flows and earnings are also subject to fluctuations in foreign exchange rates due to investments in foreign-based affiliates. Investments in affiliates includes our interest in Metron. Metron attempts to limit its exposure to changing foreign currency exchange rates through operational and financial market actions. Products are sold in a number of countries throughout the world resulting in a diverse portfolio of transactions denominated in foreign currencies. Metron manages certain short-term foreign currency exposures by the purchase of forward contracts to offset the earnings and cash flow impact of foreign currency denominated receivables and payables. Our investment in Metron is accounted for by the equity method of accounting and has a carrying value on the balance sheet of approximately $15.3 million. The fair value of Metron is subject to stock market fluctuations. Based on the closing stock price of Metron at February 24, 2001, the fair value of our investment in Metron was approximately $14.8 million. As described above, we surrendered ownership of 1.125 million shares of Metron in March 2001 in connection with the charge described above under the caption "Distribution Agreement Termination". As a result, our percentage ownership in Metron will decrease to approximately 12%. Accordingly, the Company will discontinue application of the equity method to account for its investment in Metron, with the Company's remaining investment to be accounted for as an "available-for-sale security" under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115. 12
PART II OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Entegris, Inc. Annual Meeting of Shareholders was held on January 23, 2001. There were 68,424,736 outstanding shares of common stock on the record date for the Annual Meeting. 64,322,753, or 94.0%, of the outstanding shares were represented in person or by proxy at the meeting. The three candidates for election as Class I directors listed in the proxy statement were elected to serve three-year terms, expiring at the 2004 Annual Meeting of Shareholders. The proposal to approve the amendment to the Entegris, Inc. Outside Directors' Option Plan was also approved. The results of these matters voted upon by the shareholders are listed below. Number of Shares --------------------------------------------------------------------- In Favor Withheld/Against Abstained/Unvoted --------------------------------------------------------------------- Election of Class II Directors: Robert J. Boehlke 63,832,701 490,052 -- Gary F. Klingl 63,784,137 538,616 -- Roger D. McDaniel 63,680,125 642,628 -- Approval of the amendment to the Entegris, Inc. Outside Directors' Option Plan 56,400,864 7,553,341 368,548 [CAPTION] ITEM 6. Exhibits and Reports on Form 8-K - ------------------------------------------- (a) Exhibits: None (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K, dated and filed January 8, 2001, concerning first quarter fiscal 2001 results including restated financial information reflecting the Company's change in accounting for its inventories. 13
CONFORMED COPY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENTEGRIS, INC. Date: April 10, 2001 /s/ James E. Dauwalter James E. Dauwalter President and Chief Executive Officer Date: April 10, 2001 /s/ John D. Villas John D. Villas Executive Vice President and Chief Financial Officer 14