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Original Source: FD (FAIR DISCLOSURE) WIRE
. Heide Erickson, Entegris, Inc., Director, IR . John Villas, Entegris, Inc., CFO . Jim Dauwalter, Entegris, Inc., President & CEO
ENTG reported annual revenues of $347m, the highest level ever. ENTG ended the year with a record $133m in cash and investments. For 4Q04, ENTG reported sales of $99.5m, about flat sequentially with 3Q04, but up 39% vs. 4Q03. ENTG reported net income of $8.9m for 4Q04. ENTG's Board of Directors has authorized the Co. to use up to $25m of current cash on hand to repurchase ENTG stock. Q&A Focus: Financials, guidance, and markets.
A. Key Data From Call 1. FY04 revenue = $347m. 2. FY04 cash & investments = $133m. 3. FY04 cash flow from operations = $48m. 4. FY04 free cash flow = $27m. 5. 4Q04 sales = $99.5m. 6. 4Q04 EPS = $0.12.
7. 4Q04 net income = $8.9m. 8. FY04 earnings = $24.8m or $0.32 per share.
S1. Financial Review (J.V.) 1. FY04 Highlights: 1. ENTG wrapped up a very successful FY04, which ended on 08/28/04. 2. ENTG passed some significant milestones and achieved many goals it set for itself. 3. ENTG reported annual revenues of $347m, the highest level ever. 4. ENTG ended the year with a record $133m in cash and investments; achieved through its ability to generate cash. 5. The Co. delivered cash flow from operations of $48m and free cash flow of $27m for the year and invested $20m in ER&D; the majority being used to maintain and grow its leadership position in existing markets. 6. These are substantial achievements which the Co. plans to build on in 2005 and all of which led to an unprecedented 38th year of annual profitability, unmatched by any other publicly traded company in the semiconductor equipment and material space. 2. 4Q04 Highlights: 1. In 4Q04, ENTG executed well, even with the softening in market conditions, and reported 4Q04 sales within its guidance range. 2. News from the semiconductor market over the last several weeks
has been more cautious because of concerns of an inventory
absorption period and the resulting lower anticipated near
term capital spending. 3. With its short lead times of generally four weeks or fewer, this started to impact the Co. late in 4Q04. 4. For 4Q04, ENTG reported sales of $99.5m, about flat
sequentially with 3Q04, but up 39% vs. 4Q03. 5. A per diluted share profit of $0.12, even with 3Q04 sequentially, but a $0.09 increase over $0.03 reported in 4Q03. 6. Generated $21m in cash from operations and just over $10m in free cash flow.
7. ENTG now has $133m in cash and short-term investments. 3. Sales: 1. Sales in all markets for 4Q04 were comparable with 3Q04.
2. Semiconductor sales were up 1% and data storage up 3.5% and
services down just over 1%. 3. Fuel cell recorded a very strong sales increase, but on a dollar basis it's still not a large figure. 4. The gains were offset somewhat by a sales decline of 6% in the life sciences market. 5. As a percent of sales, semiconductor accounted for 81% of the total in 4Q04, data storage and services 7%, life sciences 4%, and fuel cell 1%. 1. These percentages are similar to what ENTG reported in 3Q04. 6. On an annual basis, total sales for FY03 to FY04 grew by 38%. 7. Annual sales for all markets rose YoverY. 8. The most improved on a percentage basis was fuel cell followed by life sciences, which more than doubled. 9. Semiconductor annual sales improved by 43% which is above current industry growth rates. 10. Services sales rose 15% and data storage posted YoverY annual
sales growth of 5%. 11. ENTG is pleased with these sales gains, particularly because the Co. believes it maintained or strengthened its position in the markets and the customers it serves in almost all major offerings. 4. Markets: 1. In the semiconductor market, ENTG's material consumption driven product sales increased in the low-single digit percentage range after the very strong 3Q04 where the Co. recorded double-digit percentage increases, 4Q04 sales were slightly weaker than anticipated primarily due to inventory builds by some semiconductor manufacturers. 2. However, mid single digit growth is generally where the average QtoQ market growth for materials driven product has been. 3. Fluid handling sales, which primarily stem from demand from the OEM community, were up nicely across all product lines.
4. The Co. continues to see expedited requests from its customers, reflecting strong demand for fluid handling solutions.
5. Historically the Co. still sees one or two quarters of
strength in this product offering even after the OEM community
announced its order slow down. 6. Sales improvements were offset by declines in its wafer carrier product. 7. During 3Q04, customers requested accelerated 300 mm product shipments.
1. This shifted sales from 4Q04 to 3Q04. 8. Wafer carrier product sales can result in significant QtoQ fluctuations because orders generally are larger than average order size, particularly as new fabs are being built out. 9. All combined, this translated to similar semiconductor sales levels sequentially from 3Q04 to 4Q04. 5. Geographic Results: 1. ENTG's 4Q04 sales in North America totaled 39%, in Asia-Pacific 30%, in Europe 15%, and in Japan 16%. 2. From 3Q04 to 4Q04, sales in Japan increased by 20% primarily because of stronger demand for wafer shippers and data storage products. 3. North American sales were up by 6% mainly due to strong fluid handling product demand for semiconductor capital equipment applications. 4. Sales in Europe decreased by 9% and Asia-Pacific by 7% from 3Q04 to 4Q04 largely because of softer demand for wafer process handling products in those geographies. 5. On an annual basis, ENTG sales in North America accounted for 38% of the total; Asia-Pacific for 30%; and Europe and Japan both were 16%. 6. Sales from FY03 to FY04 increased in all geographic regions. 7. Asia-Pacific sales rose by 64%, Japan by 44%, North America and Europe both grew by 28%. 1. The shift of overall sales into the Asian region is accelerating. 2. Many customers' semiconductor manufacturing facilities last year were built in Asia. 6. Other Financials:
1. Gross margins during 4Q04 were 44.4% vs. 45% during 3Q04, but
up from 33.3% vs. 4Q03. 2. Product mix across multiple markets resulted in slightly lower gross margins during 4Q04 vs. 3Q04.
3. SG&A expenses were $26.3m in 4Q04, up slightly sequentially
from the $25.5m reported in 3Q04 and $21.3m during 4Q03. 4. Some SG&A increases from 3Q04 to 4Q04 are typical since the
largest semiconductor trade show …