Entourage Health
Annual Report 2005

Plain-text annual report

growth is our future. ENTEGRIS ANNUAL REPORT 2005 Sales by Geography Annualized based on three months ended November 2005 EUROPE 13% NORTH AMERICA 32% JAPAN 22% ASIA 33% Entegris purifies, protects and transports critical materials essential to advanced technological products. Its broad and diverse products are sold worldwide to semiconductor manufacturers and equipment suppliers, as well as other high-tech manufacturers including makers of data storage components and flat panel displays. The Company's products, which are used to control micro and molecular contamination in the manufacturing process, include wafer shippers and carriers, liquid and gas filters, liquid delivery systems and con- tainers, and data storage shippers and carriers. growth is our future When global technologies converge, new inno- vations emerge – innovations that provide the ultimate protection of the delicate, specialized materials needed for high-tech manufacturing processes – processes that make today’s elec- tronic products better, smaller, faster, flashier and more affordable. By managing the integrity of critical materials, Entegris enables the manu- facturers of these devices to build them more efficiently and turn their leading-edge technol- ogy into mainstream consumer devices. Virtually every semiconductor maker and a long list of manufacturers of data storage products, flat panel displays and fuel cells rely on Entegris to purify, protect and transport key materials used in their manufacturing processes. Today’s semi- conductor manufacturing facility can cost over $3 billion. Reducing the time to ramp to maxi- mum production efficiency is paramount. Entegris focuses on helping our customers reduce this “time to yield” with innovative wafer handling, fluid han- dling and contamination control technologies. Growing by protecting the wafer Nearly every semiconductor begins as a silicon wafer. At Entegris, we protect wafers from damage and contamination throughout the manufacturing process. With shrinking geometries and increas- ingly complex processes our customers rely upon our contamination control technologies to move them forward on the technology roadmap. Growing by increasing our share of fab spending Entegris focuses on surrounding key process steps and equipment in the most rapidly evolving areas of the fab, such as photolithography. By virtue of an increasing need for contamination control and key new products in our new product portfolio, we see our markets growing. Growing by innovating The Entegris-Mykrolis merger brings together a number of core fluid handling and contamination control technologies – from handling to sensing and control to filtration. Using these technologies, Entegris develops integrated systems addressing the many technology changes from larger wafer sizes or heightened requirements for contamina- tion control. Growing by true market leadership Entegris’ 40 years of market leadership is based on providing components and technologies in truly innovative ways. We continue this leader- ship by being close to the customer with a strong base of field service including product and appli- cations support. We expand this leadership in growing high-tech markets such as data storage and flat panel display. Sales As Reported* In millions * As reported for fiscal years ended August. Not adjusted for discontinued operations. ** Includes Mykrolis sales from August 9, 2005 to August 27, 2005. Sales Pro Forma*** In millions ***Pro forma for the impact of the Entegris-Mykrolis merger for fiscal years ended August. Includes discontinued operations. ***Pro forma for the impact of the Entegris-Mykrolis merger for fiscal years ended August. Includes discontinued operations. a letter to our shareholders Entegris redefined itself in 2005. From the outset, the merger of Mykrolis and Entegris which we completed in August 2005 is an opportunity to create a new kind of company. Our vision is to create a materials integrity management company – a company whose products purify, protect and transport the critical materials that are essential to manufacturing electronic components and devices, from cell phones to laptops. We are setting out to build a company that can thrive in the shifting landscape of the semiconductor and microelec- tronics industries, deliver superior operating returns and build value for its shareholders over the long term. In the first nine months following the merger, we accom- plished the initial steps necessary to achieve that vision. As part of the merger integration process, we unified our field operations, stream- lined our supply chain and manufacturing operations, and inte- grated IT and other critical infrastructure. In addition, we divest- ed three unprofitable product lines allowing us to focus our atten- tion and resources on areas of our business where we are market leaders and have clear pathways for growth. These actions increased our efficiency and improved our cost structure. GROWTH IS OUR FUTURE While the first nine months following the merger were about “setting the table” to position us for con- tinued growth, the next several quarters will be about implementing the strategies and projects aimed at achieving that growth. The most important growth strat- egy resides with our customers, their global presence and their need for comprehensive technology-driven solutions that we can best offer as a combined entity. Meeting that need, we believe, will be the springboard for our future growth. “We are setting out to build a com- pany that can thrive in the shifting landscape of the semiconductor and microelectronics industries, deliver superior operating returns and build value for its shareholders over the long term.” One of our most important contributions to our customers’ manufacturing processes lies in our unique ability to control contamination and protect substrates such as semiconductor wafers. In doing so, we play an important role in helping our customers improve their manufacturing yields, a role which we believe will only increase as the semiconductor industry transitions to smaller and smaller line widths. In order to build smaller and more complex devices to power the next generation of electronic products, the requirements for contamination control and substrate handling will become even more demanding. Our mission at Entegris is to help our customers protect against impurities and contamination that, if present, can impact process yields and result in lower return on investment for fab operators. With a fab today costing $3 billion to construct, even relatively small improvements in manufacturing yields can have a significant financial benefit for our customers. I can report to you that we are on track to substantially complete the integration process by mid-year. I am proud of how Entegris employees – at all levels of the organization – have pushed the integration forward with remarkable skill, determination and cooperation. Those traits will continue to be the key drivers of value creation for our customers and shareholders as we move forward to grow our sales and profits. Gideon Argov President and Chief Executive Officer HOW WILL WE ACHIEVE OUR VISION? We will operate globally. Our customers are in many cases large and global companies. Much of the industry growth now and over the next decade will be in the Asia Pacific region. Entegris has an unmatched presence in these areas, with significant manufacturing operations and sales and service centers in a variety of critical Pacific Rim locations. We will operate close to our customers. We regard customer intimacy as critical to our success. Executing on this requires intense dedication to serving demanding and diverse customers. We believe the technical prowess and high-service orientation of our worldwide sales and technical product and technology specialists are second to none. We will provide an unmatched set of customer tools and solutions – and we will bring these to our cus- tomers in an integrated manner. Over the course of 2006 and into 2007 we will be rolling out a steady stream of new products and product enhancements, many reflecting innovations derived from the combina- tion of Entegris and Mykrolis technologies. These product synergies are expected to begin contributing meaningfully to our revenues in 2007. In addition, we intend to grow our available markets in the semicon- ductor fab by surrounding key fab processes with a suite of products and technology solutions. We see attractive growth opportunities related to lithography, chemical mechanical planarization (CMP) and wet etch and clean processes and tools. We will develop and foster a great team. As a result of the merger, we have an extraordinary group of leaders, managers and employees. This group is passionate about our customers, about what we offer to them, about our future and is dedicated to winning in the marketplace. building new bridges Recently in the south of France, the tallest vehicular bridge in the world, the Millau Viaduct, was opened to traffic. It is a true modern marvel, using technology in an innovative and elegant way to connect two points securely and efficiently. In many respects, the Entegris- Mykrolis merger is enabling us to build or extend a number of bridges to better serve our customers as they move along the technology roadmap. WHAT BRIDGES ARE WE BUILDING? With the merger we connect our respective expertise in materials science and polymer technology to develop new, integral products that purify, protect and transport criti- cal materials. We see excitement from our customers when we demonstrate the power of our technology port- folio to solve complex contamination issues in their manufacturing processes, particularly as the industry moves to 45 nanometer devices and below. Another type of bridge resulting from the merger is an enhanced ability to connect to our customers in different ways. Many companies in our industry talk about having a relationship with a customer that allows the supplier to anticipate the customer’s needs. For us, this customer intimacy is the result of nearly 40 years of developing products for the semiconductor and microelectronics industry and serving our customers, whether they are in the U.S., Japan, Asia or Europe. “With the merger we connect our respective expertise in materials science and polymer technology to develop new, integral products that purify, protect and transport critical materials.” We believe our field operations – field marketing, direct technical sales, and applications support – are unparal- leled in the industry. This enables us to understand our customers’ processes and develop solutions in lockstep with their roadmaps and to deliver those technologies thousands of miles away into completely different cul- tures and geographies. INNOVATIVE SOLUTIONS We are already seeing numerous results from having these bridges in place. For instance, in response to a customer inquiry, we developed and shipped a system for delivering ultrapure water used in liquid immersion for photolithography applications. Liquid immersion uses the refractive qualities of water to achieve finer line widths. By combining several Entegris components and technologies, we now provide ultrapure water to the immersion tool in the right quan- tity, purity, pressure and temperature. Also for the lithography process, we are devel- oping an enhanced solution for protecting the reticle and purify- ing its environment. The reticle is the square quartz plate used to shape desired geometries on the surface of the wafer, costs as much as $100,000 and is critical to the process. By pre- venting defect-causing crystals from forming on the surface of the reticle, our solution helps extend the life and effectiveness of the reticle. For chemical mechanical planarization (CMP) applica- tions, we have a range of solutions including filtration and roller brushes that are used in post-CMP cleaning. We are partnering with the leading slurry manufacturers to develop slurry handling and filtration products that reduce “dishing” and other surface defects that can occur in the CMP process for copper devices. I am pleased with how the new Entegris has evolved since the merger. At many levels in our organization, one can sense a pervasive optimism and excitement about the potential of the new, redefined company. 2006 will be the year to execute, to continue to build bridges for our customers and to create “overpasses” to new technological territories. Jean-Marc Pandraud Executive Vice President and Chief Operating Officer positioned for growth 2005 HIGHLIGHTS FINANCIAL RESULTS Entegris achieved solid financial performance in our fis- cal year ended August 31, 2005, including sales of $367.1 million and net income, after merger- and restructuring- related charges and expenses, of $9.4 million. But these strong numbers are only part of the story. Fiscal 2005 was also a year of extraordinary change and growth for the company. The merger with Mykrolis Corporation, which we com- pleted three weeks before the end of the fiscal year, has established the combined enterprise as one of the largest suppliers to the semiconductor industry. It has given us the global size and scale to serve both the largest semi- conductor and microelectronics manufacturers and the equipment makers that serve them in the key regions of the world. It also gives us a broader technological base and market presence from which to develop and market new product solutions to help our customers improve their manufacturing yields and productivity. IMPROVED COST STRUCTURE The merger has also provided us with an opportunity to improve our cost structure and increase our efficiencies. We expect cost savings from the merger – resulting from the elimination of redundant back-office functions and systems and the consolidation of facilities and offices around the world – to total more than $20 million annu- ally, and to be largely in place by the end of the June 2006 quarter. Other steps, such as a restructuring pro- gram we began in May 2005 to streamline our operations and the closure of our European manufacturing site, are expected to bring additional cost savings. All these actions will result in the closure of three manufacturing facilities. Production at the affected sites is being moved to other existing manufacturing locations as part of a broader strategy to achieve lower-cost production and to be closer to our customers. In addition, we decided during the year to divest three non-core, unprofitable product lines and completed the sale of these product lines, which are treated on our financial statements as discontinued operations. These divestitures will have a positive impact on our profitabil- ity and will allow us to focus our attention and resources on areas of the business with the greatest potential for growth and profitability. Also this year, we changed from an August to a December fiscal year, bringing us in line with the reporting schedules of most other public companies in our sector. As a result of the change, which took effect in January 2006, we reported sales of $202 million from continuing operations for the four-month “stub” period ended on December 31, 2005. These results are for the continuing operations of the combined company. “The merger with Mykrolis Corporation has established the combined enterprise as one of the largest suppliers to the semiconductor industry.” Our financial position remains solid and provides an excellent platform for continued growth. At December 31, 2005, we had on our balance sheet cash, cash equivalents, and short-term invest- ments of $274 million, with long-term debt of $11 million. I am particularly pleased with how suc- cessfully the entire Entegris organization met the challenges of implementing all these changes in an environment of increasing demand. In the year ahead, we will continue to seek ways to deploy our capital more efficiently and to manage our cost structure to take advantage of opportunities as they emerge while adjusting to changes in the industry cycle. John D. Villas Senior Vice President and Chief Financial Officer OFFICERS Gideon Argov John B. Goodman Gregory B. Graves Bertrand Loy President and Chief Executive Officer Senior Vice President, Chief Technology and Innovation Officer Senior Vice President, Strategic Planning and Business Development Executive Vice President and Chief Administrative Officer Senior Vice President, Human Resources John J. Murphy Jean-Marc Pandraud Executive Vice President and Chief John D. Villas Peter W. Walcott Operating Officer Senior Vice President and Chief Financial Officer Senior Vice President and General Counsel BOARD OF DIRECTORS Gideon Argov Michael A. Bradley President and Chief Executive Officer, Entegris, Inc. President and Chief Executive Officer, Teradyne, Inc.; Chairman of the Audit and Finance Committee Independent Business Consultant James E. Dauwalter Michael P. C. Carns Daniel W. Christman Lieutenant General (retired); Senior Vice President International Affairs, U.S. Chamber of Commerce Former Chief Executive Officer, Entegris, Inc.; Chairman of the Board President, Green Giant Worldwide, a division of The Pillsbury Company (retired); Chairman of the Management Development and Compensation Committee Chief Executive Officer, MEMC (retired) Roger D. McDaniel Paul L. H. Olson, Ed.D. Executive Vice President, Bethel Gary F. Klingl CORPORATE WEB SITE www.entegris.com STOCK LISTING Entegris’ common stock is traded on the NASDAQ Stock Market® under the symbol ENTG. ANNUAL MEETING The Annual Meeting of Shareholders will be held: June 14, 2006 – 10:00 a.m. (Central Time) Oak Ridge Conference Center 1 Oak Ridge Drive, Chaska, MN 55318 Tel. 952-368-3100 REGISTRAR AND TRANSFER AGENT Registered shareholders should direct questions regarding stock certificates, name or address changes, notification of lost cer- tificates or stock transfers to: Wells Fargo Bank Minnesota, N.A. Shareowner Services Post Office Box 64854 161 North Concord Exchange Street South St. Paul, MN 55075-1139 USA Tel. 800-468-9716 Fax 651-450-4033 Beneficial shareholders should direct questions regarding all administrative matters to your stockbroker. INVESTOR INFORMATION Copies of the Company’s Annual Report, Proxy Statement, Forms 10-K and10-Q reports filed with the Securities and Exchange Commission can be obtained through one of the following: Internet: www.entegris.com Mail: Entegris, Inc. Investor Relations 3500 Lyman Boulevard Chaska, MN 55318 USA irelations@entegris.com 952-556-8080 952-556-8644 Thomas O. Pyle Brian F. Sullivan University; Chairman of the Governance and Nominating Committee Chairman, PolyMedica Corporation President and Chief Executive Officer, SterilMed, Inc. E-mail: Tel. Fax FORWARD-LOOKING STATEMENTS Certain information contained in this document includes 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 that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Statements which are modified by words such 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 which are difficult to predict. The risks which could cause actual results to differ from those discussed herein include, without limit: (i) the risks described under the headings "Risks Relating to our Business and Industry," "Risks Associated with our Merger," “Manufacturing Risks,” “International Risks” and "Risks Related to Securities Markets and Ownership of Our Securities" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of the Entegris, Inc. Annual Report on Form 10–K for the fiscal year ended August 27, 2005; (ii) risks associated with the challenges of integration, restructur- ing, manufacturing transfers, and achieving anticipated synergies associated with the merger of Entegris with Mykrolis Corporation; (iii) the risk of a disruption in our supply chain so that we will be unable to meet our customers’ demand for product during periods of industry expansion; (iv) 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. The forward-looking statements made in this document relate only to events as of the date on which the statements are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any inten- tion or obligation to update publicly any forward-looking statements contained herein. Entegris’ Board of Directors Back row (L to R): Brian F. Sullivan, Michael P. C. Carns, Roger D. McDaniel; Middle row: Michael A. Bradley, Gary F. Klingl, Thomas O. Pyle; Front row: Paul L. H. Olson, James E. Dauwalter, Daniel W. Christman, Gideon Argov Entegris®, the symbol of the linked rings and the Entegris logotype are registered trademarks of Entegris, Inc. Mykrolis® is a registered trademark of Entegris, Inc. The NASDAQ Stock Market® is a registered trademark of the Nasdaq Stock Market, Inc. The materials integrity management company ENTEGRIS, INC. Corporate Headquarters 3500 Lyman Boulevard Chaska, Minnesota 55318 USA Tel. 952-556-3131 Fax 952-556-1880 www.entegris.com ©2006 Entegris, Inc. Printed in USA 9000-2394MAX-0406 WHAT IS MATERIALS INTEGRITY MANAGEMENT? Materials integrity management is the process of purifying, protecting and transporting critical materials as they go to and through manufacturing to become high-technology products. Entegris delivers these critical materials as pure or purer than when manufactured. This involves materials science, applications experience, market acceptance and a thorough knowledge of the manufacturing process from start to finish. CODE OF CONDUCT You can count on us to: • Behave honestly and ethically • Abide by governing laws and regulations • Lead by example • Communicate respectfully and openly • Support Team Entegris growth is our future. With each generation of semiconductors and electronic devices, the need for Entegris’ materials integrity management products and services increases. The cost, speed, power, functionality and integration required to develop new devices translates to smaller line widths, larger wafers, lower costs and more. Defect-causing contamina- tion, now measured on a molecular level, is a major roadblock. Entegris brings a broad platform of materials science and polymer- based technologies helping customers around the world control contamination and improve manufacturing yields. MISSION Entegris is the global leader in materials integrity management. Its mission is to purify, protect and transport critical materials used in high-technology products, processes and services. The Entegris brand will reflect the value Entegris provides to its key stakeholders including customers, shareholders, employees and the communities in which we live. VALUES Trust, integrity and accountability We will act honestly and consistently with all; accept responsibility to deliver results and commit to openly communicate People and teamwork We will treat people with respect and dignity in a collaborative environment that aligns the organization, achieves high performance and rewards team success Innovation and creativity We are committed to an environment in which people are encouraged to disseminate knowledge, take risks, openly share ideas and turn them into business opportunities Dedicated to excellence We will set high standards for performance and strive to be best in class through out- standing leadership at all levels ABOUT ENTEGRIS Entegris positively affects the lives of billions of people around the world by protecting critical materials essential to advanced technological products. Entegris’ broad and diverse products are sold to semiconductor manufacturers, semiconductor equipment and material suppliers and hard disk drive manufacturers in the United States, Japan, Asia and Europe. Entegris products and services provide micro- contamination control and substrate handling. Its liquid and gas filters, delivery systems, components and consumables precisely measure, deliver, control and purify process liquids, gases and chemicals. Its shippers, carriers and trays protect wafers, reticles, disks and semiconductor devices. < LIQUID MICROCONTAMINATION CONTROL < GAS MICROCONTAMINATION CONTROL FINISHED ELECTRONICS PACKAGING > WAFER HANDLING > LIQUID SYSTEMS > 

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