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
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ENTEGRIS, INC.
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(Exact name of registrant as specified in charter)
Minnesota 41-1941551
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(State or other jurisdiction of incorporation) (IRS Employer ID No.)
3500 Lyman Boulevard, Chaska, Minnesota 55318
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(Address of Principal Executive Offices)
Registrant's Telephone Number (952) 556-3131
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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 _______
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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
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PART I
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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
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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
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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
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Total current assets 262,367 221,414
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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
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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
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Total current liabilities 68,851 62,544
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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
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Total shareholders' equity 297,725 266,844
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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
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Sales to non-affiliates $ 70,515 $ 55,110 $ 139,117 $ 110,113
Sales to affiliates 35,197 29,736 69,234 46,549
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Net sales 105,712 84,846 208,351 156,662
Cost of sales 52,111 46,688 102,198 86,823
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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
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Net income 13,784 10,330 31,896 22,384
Market value adjustment to redeemable common
stock - (32,795) - (65,589)
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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)
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Net cash provided by operating activities 26,084 24,162
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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)
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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)
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Net cash provided by (used in) financing activities 804 (12,031)
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Effect of exchange rate changes on cash and cash equivalents (240) (26)
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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
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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
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February 24, February 26, February 24, February 26,
2001 2000 2001 2000
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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
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Inventories consist of the following:
February 24, 2001 August 26, 2000
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Raw materials $15,406 $12,677
Work-in process 3,770 3,280
Finished goods 31,688 25,794
Supplies 663 225
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Total inventories $51,527 $41,976
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6
4. Comprehensive Income
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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
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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)
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Comprehensive income $13,407 $10,144 $30,575 $22,222
=======================================================================
5. Change in Method of Accounting for Inventories
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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
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of Operations
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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
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February 26, February 26,
2000-As 2000-As
February 24, adjusted -See February 24, adjusted -See
2001 Note 5 2001 Note 5
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Net sales 100.0 100.0 100.0 100.0
Cost of sales 49.3 55.0 49.1 55.4
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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