Entegris, Inc. Q1 2010 Earnings Call Transcript

Entegris, Inc. Q1 2010 Earnings Call Transcript
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Entegris, Inc. (ENTG)

Q1 2010 Earnings Call Transcript

April 27, 2010 10:00 am ET

Executives

Steve Cantor – VP, Corporate Relations

Gideon Argov – President and CEO

Greg Graves – EVP and CFO

Bertrand Loy – EVP and COO

Analysts

Krish Sankar – Bank of America/Merrill Lynch

Christian Schwab – Craig-Hallum Capital Group

Avinash Kant – DA Davidson

Dick Ryan – Dougherty

James Gentile – Newland

Steve Schwartz – First Analysis

Presentation

Operator

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Good day everyone and welcome to the Entegris first quarter 2010 earnings release conference call. Today's call is being recorded. At this time, for opening remarks and introduction, I would like to turn call over to Mr Steve Cantor, Vice President of Corporate Relations. Please go ahead sir.

Steve Cantor

Good morning, and thank you all for joining our call. Earlier this morning, we announced the financial results for our first quarter ended April 03, 2010. You can access a copy of our press release on our Web site,

www.entegris.com

.

Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, which are outlined in detail in our reports, and filings with the SEC. On this call, we will also refer to non-GAAP financial measures, as defined by the SEC in Regulation G. You can find a reconciliation table on today's press release as well as on our Web site.

On the call today are Gideon Argov, President and CEO; Bertrand Loy, Chief Operating Officer; and Greg Graves, Chief Financial Officer. Gideon will now begin the call.

Gideon Argov

Thank you Steve and good morning. Thanks for joining the call this morning. I will provide an overview of the first quarter, and then Greg will provide some detail on the financial results.

In our last quarter’s conference call, I described the emergence of what we call Entegris 2.0, which is a reflection of the significant changes we put in place over the past 18 months. Our first quarter results not only represented another quarter of very positive trends, but also clearly demonstrated the impact of these transformational changes. Let me highlight a few key items.

First, our Q1 sales grew 10% sequentially to $160.5 million reflecting solid growth in both our capital equipment and unit driven businesses and across our product lines. We are clearly benefitting from the upturn in the semiconductor industry, but we are also seeing the benefit from our renewed focus on key customers, and from the increased applications for our technologies as customers move down their technology road maps.

Second, we reported non-GAAP EPS of $0.15 and a non-GAAP operating margin of 16.5%, which exceeded our target model for this revenue level. We were able to achieve this with a much leaner cost structure and with excellent execution in our manufacturing and supply chain organization.

Third, we generated $28 million in cash from operations and reduced our debt by $20 million. Our balance sheet is now net of cash positive for the first time since the second quarter of 2008. In terms of the revenue trends by market, we continued to benefit from the rebound of the semiconductor industry. Sales to semiconductor customers were up 12% from the fourth quarter and represented 72% of Q1 sales. Outside of semi, we saw strength in TFT [ph], LCD and LED as well as steady but modest improvement in some of our other industrial markets.

The robust industry capital spending, our new tools and technology enhancements continued to drive demand for our capital driven products, shifting our unit driven to capital expenditure driven mix in the first quarter to 63% unit driven to 37% capital expenditure driven. Nonetheless, our unit driven sales expanded 6% sequentially as utilization rates at our fab customers remained at levels near 90% and even higher levels for advanced devices.

We had excellent performance across each of our division, sales for Contamination Control Solutions grew 8% sequentially exceeding $100 million, which is above levels achieved in the prior 2007 peak. Sales of liquid filtration products rose modestly reflecting high but stable fab utilization rates particularly at foundry and memory customers. Demand for our gas purification products continued to be very strong and these products were on track for a record year. This growth is being driven by the need for systems that are used to control contamination in the LED manufacturing environment as well as filter products used in vacuum tools and applications. The CCS division not only provided healthy growth in Q1, it also generated $28 million in operating income, excluding corporate costs. That is a 28% operating margin for this division for the quarter.

Sales in our Microenvironments segment grew 10% led by the process side of the business, as we saw strong CapEx driven 300 millimeter FOUP [ph] and 200-millimeter pod and carrier sales. Sales of the shipping side of the ME business were in line with industry trends. On an operating basis, Microenvironments division reported operating income of $9 million or 21% of sales excluding corporate cost.

Sales in our Specialty Materials segment rose 23% from the fourth quarter to $18 million. This growth is driven by demand for our coatings product as well as Poco’s specialized graphite used in semiconductor and microelectronics applications. Sales to other industrial markets continued to improve and those markets recovered with general economy. Operating margin for the Specialty Materials division was 13% in Q1, excluding corporate costs.

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