<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 10, 1997
Date of Report
(Date of earliest event reported)
ATMI, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-22756 06-1481060
(Commission File Number) (IRS Employer Identification No.)
7 Commerce Drive
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip Code)
(203) 794-1100
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- - ------ ------------------------------------
On October 10, 1997, pursuant to an Agreement and Plan of Merger and
Exchange dated April 7, 1997 (the "Merger and Exchange Agreement"), by and among
Advanced Technology Materials, Inc.,a Delaware corporation ("ATMI"), ATMI, Inc.,
formerly named ATMI Holdings, Inc., a Delaware corporation (the "Registrant"),
Alamo Merger, Inc., a Delaware corporation ("Merger Subsidiary"), Advanced
Delivery & Chemical Systems Nevada, Inc., a Nevada corporation ("ADCS Nevada"),
Advanced Delivery & Chemical Systems Manager, Inc., a Delaware corporation
("ADCS Manager"), Advanced Delivery & Chemical Systems Holdings, LLC, a Delaware
limited liability company ("ADCS Holdings"), Advanced Delivery & Chemical
Systems Operating, LLC, a Delaware limited liability company ("ADCS Operating"),
and Advanced Delivery & Chemical Systems, Ltd., a Texas limited partnership
("ADCS LP"), Merger Subsidiary merged with and into ATMI, with ATMI being the
surviving corporation (the "Merger"). As a result of the Merger, ATMI became a
wholly-owned subsidiary of the Registrant. Also pursuant to the Merger and
Exchange Agreement, simultaneously with the consummation of the Merger, the
record and beneficial owners (the "ADCS Holders") of (i) all of the issued and
outstanding shares of capital stock of ADCS Nevada (the "ADCS Nevada Common
Stock") and ADCS Manager (the "ADCS Manager Common Stock") and (ii) the one
percent of the membership interests in ADCS Holdings held by the ADCS Holders
(the "ADCS Holdings Membership Interests," and together with the ADCS Nevada
Common Stock and the ADCS Manager Common Stock, the "ADCS Interests")
transferred all of their ADCS Interests to the Registrant in exchange for shares
of the common stock, par value $.01 per share, of the Registrant ("Registrant
Common Stock") (the "Exchange," and together with the Merger, the
"Reorganization"). ADCS Nevada, ADCS Manager, ADCS Holdings, ADCS Operating and
ADCS LP are referred to collectively as the "ADCS Group."
Pursuant to the Merger, each outstanding share of the common stock, par
value $.01 per share, of ATMI was converted into one share of Registrant Common
Stock. In the Exchange, the ADCS Holders exchanged all of their ADCS Interests
for an aggregate of 5,468,747 shares of Registrant Common Stock, which may be
subject to downward adjustment under certain circumstances (the "Exchange
Consideration"). The amount of Exchange Consideration issued to the ADCS
Holders was determined pursuant to a formula set forth in the Merger and
Exchange Agreement which was established through negotiations among the parties.
The Exchange Consideration was allocated to each ADCS Holder according to the
ADCS Holder's relative pro rata ownership percentages of the ADCS Interests
taken as a whole.
The Reorganization is intended to be a tax-free transaction under the
Internal Revenue Code of 1986, as amended (the "Code"), and will be accounted
for as a pooling of interests. The ADCS Group manufactures, markets and designs
ultrahigh purity specialty thin film materials and related delivery equipment
for the semiconductor and semiconductor equipment manufacturing industries. The
Registrant intends to continue the business currently performed by the ADCS
Group by integrating it with the
- 1 -
<PAGE>
semiconductor thin film and delivery systems product lines of the NovaMOS
division of ATMI.
Also on October 10, 1997, pursuant to an Agreement and Plan of Merger,
dated as of May 17, 1997, as amended by the First Amendment to Agreement and
Plan of Merger, dated as of June 6, 1997, and the Second Amendment to Agreement
and Plan of Merger, dated as of July 30, 1997 (as amended, the "Lawrence Merger
Agreement"), by and among ATMI, Welk Acquisition Corporation, a Delaware
corporation ("Lawrence Merger Subsidiary"), the Registrant, Lawrence
Semiconductor Laboratories, Inc., an Arizona corporation ("LSL"), and Lawrence
Semiconductor Laboratories Marketing and Sales, Inc., an Arizona corporation
("LSLMS"), Lawrence Merger Subsidiary merged with and into LSL, with LSL being
the surviving corporation (the "Lawrence Acquisition"). As a result of the
Lawrence Acquisition, LSL became a wholly-owned subsidiary of the Registrant.
Prior to the consummation of the Lawrence Acquisition, Lamonte H. Lawrence, the
sole stockholder of LSLMS, contributed all of the issued and outstanding shares
of capital stock of LSLMS to LSL, which resulted in LSLMS becoming a wholly-
owned subsidiary of LSL. In connection with the Lawrence Acquisition, the
shares of common stock of LSL ("LSL Common Stock") issued and outstanding
immediately prior to the Lawrence Acquisition were converted into shares of
Registrant Common Stock.
Pursuant to the Lawrence Merger Agreement, the LSL Common Stock was
converted into an aggregate of 3,628,571 shares of Registrant Common Stock,
which may be subject to adjustment under certain circumstances (the "Lawrence
Acquisition Consideration"). The amount of the Lawrence Acquisition
Consideration was determined pursuant to a formula set forth in the Lawrence
Merger Agreement which was established through negotiation among the parties.
The Lawrence Acquisition Consideration was distributed between the two holders
of LSL Common Stock, Lamonte H. Lawrence and The Arizona State University
Foundation, in proportion to their respective holdings of the LSL Common Stock
immediately prior to the consummation of the Lawrence Acquisition.
The Lawrence Acquisition is intended to be a tax-free transaction under the
Code and will be accounted for as a pooling of interests. LSL is an outsourcer
of epitaxial processing of silicon wafers using chemical vapor deposition
technology to meet customer specifications. Epitaxial processing is one of many
steps involved in transforming a silicon wafer into a semiconductor chip, the
primary functional component of most electronic products. The Registrant
intends to continue the business currently performed by LSL by integrating it
with the Epitronics division of ATMI which develops, manufactures, distributes
and sells high performance substrates and thin film deposition services to the
semiconductor industry.
- 2 -
<PAGE>
Item 5. Other Events.
- - ------ ------------
As a result of the Reorganization, pursuant to Rule 12g-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Registrant
Common Stock is deemed to be registered pursuant to Section 12 of the Exchange
Act. As a successor registrant, the Registrant assumes the reporting
obligations of ATMI under Section 13 of the Exchange Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- - ------ ------------------------------------------------------------------
(a) Financial Statements of Business Acquired.
-----------------------------------------
(1) Consolidated financial statements for Advanced Technology
Materials, Inc.
(A) Audited consolidated financial statements for the years
ended December 31, 1994, 1995 and 1996 (incorporated by
reference herein to Advanced Technology Materials, Inc.
Annual Report on Form 10-K for the year ended December 31,
1996, File No. 0-22756).
(B) Unaudited consolidated financial statements for the nine
months ended September 30, 1996 and 1997 (incorporated by
reference herein to ATMI, Inc. Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, File No. 0-22756).
(2) Combined financial statements of Advanced Delivery & Chemical
Systems and affiliates.
(A) Unaudited combined financial statements for the year ended
December 31, 1994 and audited combined financial statements
for the years ended December 31, 1995 and 1996.
(B) Unaudited combined financial statements for the six months
ended June 30, 1996 and 1997.
The foregoing financial statements, together with the Report of
Independent Auditors, are included on pages F-2 through F-17 of
this report.
(3) Combined financial statements of Lawrence Semiconductor
Laboratories, Inc. and affiliate.
(A) Audited combined financial statements for the years ended
December 31, 1994, 1995 and 1996.
(B) Unaudited combined financial statements for the six months
ended June 30, 1996 and 1997.
The foregoing financial statements, together with the Report of
Independent Accountants, are included on pages F-18 through
F-33 of this report.
- 3 -
<PAGE>
(b) Pro Forma Financial Information.
-------------------------------
(1) Unaudited pro forma condensed combined financial statements
introductory statement.
(2) Unaudited pro forma condensed combined balance sheet at
June 30, 1997.
(3) Unaudited pro forma condensed combined statement of
operations for the years ended December 31, 1994, 1995 and
1996.
(4) Unaudited pro forma condensed combined statement of
operations for the six months ended June 30, 1996 and 1997.
(5) Notes to unaudited pro forma condensed combined financial
statements.
The foregoing pro forma financial information is included
on pages P-1 through P-9 of this report.
(c) Exhibits.
--------
2.01 Agreement and Plan of Merger and Exchange by and among
Advanced Technology Materials, Inc., ATMI Holdings, Inc.,
Alamo Merger, Inc., Advanced Delivery & Chemical Systems
Nevada, Inc., Advanced Delivery & Chemical Systems Manager,
Inc., Advanced Delivery & Chemical Systems Holdings, LLC,
Advanced Delivery & Chemical Systems Operating, LLC and
Advanced Delivery & Chemical Systems, Ltd. dated as of April
7, 1997 (Exhibit 2.01 to Advanced Technology Materials, Inc.
Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, File No. 0-22756 ("June 30, 1997 Form 10-Q")). (1)
2.02(a) Agreement and Plan of Merger by and among Advanced Technology
Materials, Inc., ATMI Holdings, Inc., Welk Acquisition
Corporation, Lawrence Semiconductor Laboratories, Inc. and
Lawrence Semiconductor Laboratories Marketing and Sales, Inc.
dated as of May 17, 1997 (Exhibit 2.02(a) to June 30, 1997
Form 10-Q). (1)
(b) First Amendment to Agreement and Plan of Merger dated as of
June 6, 1997 (Exhibit 2.02(b) to June 30, 1997 Form 10-Q).
(1)
(c) Second Amendment to Agreement and Plan of Merger dated as of
July 30, 1997 (Exhibit 2.02(c) to June 30, 1997 Form 10-Q).
(1)
- 4 -
<PAGE>
4.01 Specimen of the Registrant's Common Stock Certificate
(Exhibit 4.01 to the Registrant's registration statement and
amendments thereto on Form S-4, Registration No. 333-35323 ).
(1)
23.01 Consent of Ernst & Young LLP. (2)
23.02 Consent of Ernst & Young LLP. (2)
23.03 Consent of Price Waterhouse LLP. (2)
99.01 Supplemental Consolidated Financial Statements of ATMI, Inc.
for years ended December 31, 1994, 1995 and 1996 (as restated
to reflect the acquisitions of Advanced Delivery & Chemical
Systems and affiliates and Lawrence Semiconductor
Laboratories, Inc. and affiliate, each on October 10, 1997).
(2)
99.02 Supplemental Interim Consolidated Financial Statements of
ATMI, Inc. for the nine months ended September 30, 1996 and
1997 (as restated to reflect the acquisitions of Advanced
Delivery & Chemical Systems and affiliates and Lawrence
Semiconductor Laboratories, Inc. and affiliate, each on
October 10, 1997). (2)
-------------
(1) Incorporated by reference herein.
(2) Filed herewith.
- 5 -
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................... F-2
Unaudited Combined Financial Statements for the year ended December 31,
1994 and Audited Combined Financial Statements for the years ended
December 31, 1995 and 1996
Combined Balance Sheets................................................ F-3
Combined Statements of Operations...................................... F-4
Combined Statements of Stockholders' Equity............................ F-5
Combined Statements of Cash Flows...................................... F-6
Notes to Combined Financial Statements................................. F-7
Unaudited Combined Interim Financial Statements for the six months ended
June 30, 1996 and 1997
Combined Balance Sheet................................................. F-14
Combined Statements of Operations...................................... F-15
Combined Statements of Cash Flows...................................... F-16
Notes to Combined Interim Financial Statements (unaudited)............. F-17
</TABLE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................ F-18
Audited Combined Financial Statements for the years ended December 31,
1994, 1995 and 1996
Combined Balance Sheets................................................ F-19
Combined Statements of Income and Retained Earnings.................... F-20
Combined Statements of Cash Flows...................................... F-21
Notes to Combined Financial Statements................................. F-22
Unaudited Combined Interim Financial Statements for the six months ended
June 30, 1996 and 1997
Combined Balance Sheet................................................. F-30
Combined Statements of Income and Retained Earnings.................... F-31
Combined Statements of Cash Flows...................................... F-32
Notes to Combined Interim Financial Statements (unaudited)............. F-33
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Advanced Delivery & Chemical Systems and Affiliates
We have audited the accompanying combined balance sheets of Advanced
Delivery & Chemical Systems and Affiliates (the "ADCS Group") as of December
31, 1995 and 1996, and the related combined statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the ADCS Group's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the ADCS
Group at December 31, 1995 and 1996, and the combined results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements for 1994 were not audited by us, and,
accordingly, we do not express an opinion on them.
/s/ Ernst & Young LLP
Austin, Texas
May 9, 1997
F-2
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 4,564 $ 3,768
Accounts receivable, less allowance for doubtful accounts
of $0 and $28 at December 31, 1995 and 1996,
respectively.............................................. 2,410 2,690
Inventories................................................ 356 1,616
Prepaid expenses........................................... 228 43
Other current assets....................................... 52 32
------- -------
Total current assets......................................... 7,610 8,149
Property, plant and equipment, net........................... 2,499 4,185
Deferred tax asset........................................... 36 245
Other noncurrent assets...................................... 104 162
------- -------
Total assets................................................. $10,249 $12,741
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 796 $ 621
Income taxes payable....................................... 1,963 411
Accrued liabilities........................................ 7 17
Current portion of long-term debt.......................... 8 8
------- -------
Total current liabilities.................................... 2,774 1,057
Long-term debt............................................... 159 151
Other noncurrent liabilities................................. 5 21
Minority interest............................................ 535 545
------- -------
Total liabilities............................................ 3,473 1,774
Commitments and contingencies (Notes 7, 9, 10 and 12)
Stockholders' equity:
Common stock, 10,000 shares authorized; 605.8308 shares
issued and outstanding at December 31, 1995 and 1996...... 226 227
Cumulative translation adjustment.......................... (10) (55)
Retained earnings.......................................... 6,560 10,795
------- -------
Total stockholders' equity................................... 6,776 10,967
------- -------
Total liabilities and stockholders' equity................... $10,249 $12,741
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Sales:
Chemical................................... $ 6,610 $ 9,194 $ 11,834
Equipment.................................. 1,211 6,521 10,207
--------- --------- ---------
7,821 15,715 22,041
Cost of sales:
Chemical................................... 751 1,264 1,992
Equipment.................................. 1,055 3,596 4,575
--------- --------- ---------
1,806 4,860 6,567
Gross profit................................. 6,015 10,855 15,474
Selling and marketing expenses............... 1,895 2,425 1,542
General and administrative expenses.......... 644 2,982 4,823
Research and development expenses............ 566 1,491 2,212
--------- --------- ---------
Income from operations....................... 2,910 3,957 6,897
Other income (expense):
Interest income............................ 23 85 222
Interest expense........................... -- (31) (12)
Other income (expense)..................... -- (51) 18
Minority interest in net earnings of
consolidated subsidiaries................. 12 10 151
--------- --------- ---------
Income before income taxes................... 2,945 3,970 7,276
Income tax provision:
Current.................................... 970 1,425 1,458
Deferred................................... -- (36) (209)
--------- --------- ---------
970 1,389 1,249
--------- --------- ---------
Net income................................... $ 1,975 $ 2,581 $ 6,027
========= ========= =========
Net income per share (Notes 2, 7 and 12)..... $3,370.31 $4,296.87 $ --
--------- --------- ---------
Weighted average shares outstanding (Notes 2
and 12)..................................... 586.0000 600.6694 --
========= ========= =========
Unaudited pro forma information (Note 13)
Historical income before provision for
income taxes.............................. $ 6,027
Pro forma provision for income taxes "as
if" company were a C-corporation for all
of 1996................................... (1,483)
---------
Pro forma net income......................... $ 4,544
=========
Pro forma net income per share............... $7,500.44
=========
Weighted average shares outstanding.......... 605.8308
=========
</TABLE>
See accompanying notes.
F-4
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE TOTAL
--------------- TRANSLATION RETAINED STOCKHOLDERS'
SHARES AMOUNT ADJUSTMENT EARNINGS EQUITY
-------- ------ ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994
(unaudited).............. 586.0000 $155 -- $ 2,004 $ 2,159
Net income (unaudited).. -- -- -- 1,975 1,975
-------- ---- ---- ------- -------
Balance at December 31,
1994..................... 586.0000 155 -- 3,979 4,134
Additional shares
issued................. 19.8308 71 -- -- 71
Cumulative translation
adjustment............. -- -- $(10) -- (10)
Net income.............. -- -- -- 2,581 2,581
-------- ---- ---- ------- -------
Balance at December 31,
1995..................... 605.8308 226 (10) 6,560 6,776
Cumulative translation
adjustment............. -- -- (45) -- (45)
Net income.............. -- -- -- 6,027 6,027
Distributions........... -- -- -- (1,792) (1,792)
Other................... -- 1 -- -- 1
-------- ---- ---- ------- -------
Balance at December 31,
1996..................... 605.8308 $227 $(55) $10,795 $10,967
======== ==== ==== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 1,975 $ 2,581 $ 6,027
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 146 221 518
Loss on sale of property, plant and
equipment.................................... -- 50 --
Deferred income tax benefit................... -- (36) (209)
Minority interest in net earnings of
consolidated subsidiaries.................... (12) (10) (151)
Changes in assets and liabilities affected by
operations:
Accounts receivable......................... (596) (1,073) (280)
Inventories................................. (10) (333) (1,260)
Prepaid expenses............................ -- (228) 185
Other assets................................ (29) (27) (38)
Accounts payable............................ 209 444 (175)
Accrued liabilities......................... -- 7 10
Other liabilities........................... 5 -- 16
Income taxes payable........................ 627 1,134 (1,552)
------- ------- -------
Net cash provided by operating activities....... 2,315 2,730 3,091
INVESTING ACTIVITIES
Proceeds from sale of equipment................. -- 384 21
Purchases of equipment.......................... (1,052) (1,656) (2,225)
------- ------- -------
Net cash used in investing activities........... (1,052) (1,272) (2,204)
FINANCING ACTIVITIES
Issuance of stock............................... -- 71 --
Distributions to shareholders................... -- -- (1,792)
Proceeds from the issuance of a note............ 402 -- 127
Repayment of amounts borrowed................... -- (235) (135)
Cash contributed by minority partners........... 18 539 161
Other........................................... -- -- 1
------- ------- -------
Net cash (used in) provided by financing
activities..................................... 420 375 (1,638)
Effect of exchange rate changes on cash......... -- (10) (45)
------- ------- -------
Net change in cash and cash equivalents......... 1,683 1,823 (796)
Cash and cash equivalents, beginning of period.. 1,058 2,741 4,564
------- ------- -------
Cash and cash equivalents, end of period........ $ 2,741 $ 4,564 $ 3,768
======= ======= =======
Cash paid for income taxes...................... $ 343 $ 273 $ 3,010
======= ======= =======
Cash paid for interest.......................... $ -- $ 25 $ 12
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS DESCRIPTION
Advanced Delivery & Chemical Systems, Inc. ("ADCS, Inc.") was incorporated
as an Illinois C-corporation on March 29, 1988 to manufacture and market
ultrahigh purity chemicals and their associated delivery equipment for the
semiconductor and related industries and currently sells its products
worldwide.
ADCS, Inc. changed its name to Advanced Chemical & Delivery Systems
Illinois, Inc. ("ADCS Illinois") on January 18, 1996. Effective April 1, 1996,
ADCS Illinois reorganized into the current business structure via a series of
transactions designed to be free of federal income tax consequences. The ADCS
reorganization ("ADCS Restructure") has been accounted for at historical cost
in a manner similar to a pooling of interests. Two new limited liability
companies and a new corporation were formed, ADCS Illinois converted into a
subchapter S-corporation, and operating assets were transferred into a limited
partnership. All of the combined entities are owned directly or indirectly by
the same stockholder group, and in the same proportionate share, as before the
reorganization. Effective June 1996, ADCS Illinois merged into the newly
formed Advanced Delivery & Chemical Systems Nevada Inc., a Nevada corporation
("ADCS Nevada").
Advanced Delivery & Chemical Systems and Affiliates (the "ADCS Group")
includes the combined financial statements of ADCS Nevada, Advanced Delivery &
Chemical Systems Holdings, LLC, Advanced Delivery & Chemical Systems Manager,
Inc. and Advanced Delivery & Chemical Systems Operating, LLC, which
collectively own 100% of Advanced Delivery & Chemical Systems, Ltd., the
operating entity, a Texas limited partnership. All significant intercompany
balances and transactions have been eliminated.
In 1996, the ADCS Group changed its fiscal year end to December 31. Thus,
these financial statements show results for each of the years in the two-year
period ended December 31, 1996.
The 1994 financial information in unaudited.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The ADCS Group recognizes chemical and equipment revenue upon shipment of
products to customers.
Cash and Cash Equivalents
The ADCS Group considers all liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories consist of chemicals and delivery equipment. Inventories are
stated at the lower of cost or market. Cost is determined by the first-in,
first-out ("FIFO") method and market is based on net realizable value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated over the
estimated useful lives of the assets, ranging from 5 to 30 years, using the
straight-line method. Expenditures for maintenance and repairs are charged to
income as incurred; expenditures which increase the value or materially extend
the life of the related assets are capitalized.
F-7
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation
Adjustments relating to the translation of foreign currency to U.S. dollars
are reported as a separate component of stockholders' equity. Gains or losses
resulting from foreign currency transactions are included in other income
(expense) and are immaterial.
Income Taxes
Effective April 1, 1996 the entities included in the combined financial
statements, except those discussed below, are organized as either limited
liability companies, limited partnerships or under Subchapter S of the federal
tax code. As such, the entities are not subject to U.S. Federal taxation;
instead, taxes are paid by the entities' equity holders.
As discussed in Note 7, ADCS Nevada's S-corporation status was terminated in
October 1996, resulting in ADCS Nevada's earnings being subject to federal
income taxation.
Cool Change Holdings, Inc. and ADCS Manager, Inc. are C-corporations and for
all periods presented were subject to federal income taxes. ADCS-Korea is a
chusik hoesa, and as such is subject to Korean corporate income tax (see Notes
3 and 7).
The ADCS Group accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted
rates in effect for the year in which the differences are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments which potentially expose the ADCS Group to
concentrations of credit risk, as defined by SFAS No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk," consist primarily
of cash and accounts receivable. Accounts receivable collectibility is
impacted by economic trends in the ADCS Group's markets. Essentially all of
the ADCS Group's sales are to customers in the semiconductor manufacturing
industry. The ADCS Group does not require collateral from its customers but
does assess the financial strength of its customers to reduce risk of loss.
Since inception, the ADCS Group has experienced minimal losses due to
uncollectible accounts receivable.
Fair Value of Financial Instruments
The ADCS Group's financial instruments as defined by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," include cash and cash
equivalents, accounts receivable, refundable deposits, accounts payable,
accrued expenses, long-term debt and a note payable. All financial instruments
are accounted for on a
F-8
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
historical cost basis which, due to the nature of these instruments,
approximates fair value at the balance sheet dates.
Per Share Data
Net income per share is computed using the treasury stock method based on
the weighted average number of common shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, which is required to be adopted for financial statements issued for
periods ending after December 15, 1997. At that time, the ADCS Group will be
required to change the method currently used to compute earnings per share and
to restate all periods. Under the new requirements, the presentation of
primary earnings per share is replaced with a presentation of basic earnings
per share, the calculation which excludes the dilutive effect of common stock
equivalents. The ADCS Group expects the impact of the adoption of SFAS No. 128
to be immaterial.
3. JOINT VENTURES AND INVESTMENTS
On May 8, 1995, the ADCS Group entered into a joint venture agreement with
K.C. Tech Co., Ltd., an unrelated corporation organized under the laws of the
Republic of Korea, whereby the ADCS Group obtained a 70% interest in a Korean
chusik hoesa, ADCS-Korea Co., Ltd. ("ADCS-Korea"). The purpose of the joint
venture is to manufacture, sell and distribute chemicals to the semiconductor
and related industries in Korea. The financial statements of ADCS-Korea have
been consolidated with those of the ADCS Group to reflect the exercise of
control and the extent of risk retained by the Company.
The combined financial statements also include the accounts of Cool Change
Holdings, Inc. ("CCH"), a charter boat business. As of December 31, 1995 and
1996 CCH is a 80% and 79%, respectively, owned subsidiary of the ADCS Group.
The ADCS Group owns a 12.053% interest in Atlantic Coast Polymers, Inc.
("ACP") common stock which is accounted for under the cost method. ACP
conducts business in the environmental remediation industry. The ADCS Group's
investment of $100,000 is recorded in other assets in the balance sheet. As
ACP is privately held, a fair market value is not readily determinable.
4. INVENTORIES
Inventories consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ------
<S> <C> <C>
Raw materials/component parts:
Chemicals................................................... $165 $ 261
Equipment................................................... 191 787
---- ------
356 1,048
---- ------
Finished goods:
Chemicals................................................... -- 266
Equipment................................................... -- 302
---- ------
-- 568
---- ------
$356 $1,616
==== ======
</TABLE>
F-9
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Land--Korea................................................. $ 791 $ 791
Buildings................................................... 211 225
Plant equipment............................................. 282 604
Plant--Korea................................................ -- 552
Machinery--Korea............................................ -- 257
Containers.................................................. 1,310 2,296
Furniture and fixtures...................................... 51 204
Leasehold improvements...................................... 17 28
Charter fishing vessel...................................... 198 196
Automobiles................................................. 171 157
------ ------
3,031 5,310
Less accumulated depreciation............................... 636 1,125
------ ------
2,395 4,185
Construction in progress--Korea............................. 104 --
------ ------
$2,499 $4,185
====== ======
</TABLE>
6. LONG-TERM DEBT
On January 25, 1994, CCH executed a $180,000, 7.5% fixed rate note payable
to a bank. The note requires 180 consecutive monthly payments in the amount of
$1,669 which commenced in February of 1994. The charter fishing vessel is held
as collateral and payment of the note is guaranteed by ADCS Nevada. The
scheduled maturities of the note subsequent to December 31, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
1997.................................................................. $ 8
1998.................................................................. 9
1999.................................................................. 10
2000.................................................................. 10
2001.................................................................. 11
Thereafter............................................................ 111
----
$159
====
</TABLE>
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the ADCS Group's deferred tax assets as of December 31, 1995 and 1996 are
as follows:
<TABLE>
<CAPTION>
1995 1996
----- -----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Tax basis in excess of book basis for fixed and intangible
assets.................................................... $ 36 $ 239
Accruals................................................... -- 6
---- -----
Deferred tax asset........................................... $ 36 $ 245
==== =====
</TABLE>
F-10
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes for the years ended
December 31, 1994, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Current:
Federal...................................... $852 $1,270 $1,243
State........................................ 118 155 215
---- ------ ------
Total current.................................. 970 1,425 1,458
Deferred:
Federal...................................... -- (33) (202)
State........................................ -- (3) (7)
---- ------ ------
Total deferred................................. -- (36) (209)
---- ------ ------
Income tax provision........................... $970 $1,389 $1,249
==== ====== ======
</TABLE>
The reconciliation of income tax provisions computed at the U.S. federal
statutory rate to income tax expense for the years ended December 31, 1994,
1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------ -------
(UNAUDITED)
<S> <C> <C> <C>
Tax expense at U.S. statutory rate.......... $1,001 $1,350 $ 2,474
State income tax net of federal benefit..... 118 99 155
Income not subject to federal income
taxation................................... -- -- (1,483)
Foreign income taxed at different rates..... -- -- 79
Other....................................... (149) (60) 24
------ ------ -------
Income tax expense.......................... $ 970 $1,389 $ 1,249
====== ====== =======
</TABLE>
As discussed in Note 1, the stockholders of ADCS Nevada elected S-
corporation status effective April 1, 1996. In October 1996, as a result of a
transfer of shares to an ineligible S-corporation shareholder, the S status
was terminated. During the period that ADCS Nevada was an S-corporation, its
earnings were not subject to federal corporate income tax. The provision for
pro forma income taxes on net income using an effective tax rate of 37.5%
differs from the amounts computed by applying the applicable federal statutory
rates (34%) due to state and local taxes.
Korea has granted the ADCS Group a five year full income tax exemption from
the year in which ADCS-Korea has taxable income, and an additional three year
50% exemption. Since ADCS-Korea has not yet generated any taxable income, the
expiration date is not currently determinable.
The ADCS Group has identified and analyzed certain deductions taken in tax
returns and if such deductions are challenged, it believes that it has
meritorious defenses and would vigorously defend the deductions. Management
believes that if examined, the likelihood that any resulting adjustments would
be material to the combined financial statements is remote. As there have been
no challenges or judgments against the ADCS Group in connection with this
issue, no amounts are provided for in the financial statements.
F-11
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. RELATED PARTY TRANSACTIONS
Upon its relocation to Austin, Texas, the ADCS Group purchased the
president's house as part of his relocation package. The ADCS Group recorded a
loss of approximately $50,000 during the year ended December 31, 1996 upon the
sale of this house.
Atlantic Coast Polymers, Inc. is a privately held company managed by a
relative of the majority stockholder of the ADCS Group (see also Note 3).
9. COMMITMENTS AND CONTINGENCIES
The ADCS Group leases office space under noncancelable operating leases.
Future minimum lease payments under these leases subsequent to December 31,
1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................................. $113
1998................................................................. 88
1999................................................................. 80
2000................................................................. 34
----
Total future minimum lease payments.................................. $315
====
</TABLE>
Total rent expense for the years ended December 31, 1995 and 1996 was
$90,000 and $122,000, respectively.
10. RISKS AND UNCERTAINTIES
The ADCS Group could experience a negative impact on its operations as a
result of technological advances within the semiconductor manufacturing
industry. Currently, the concentration of sales of one chemical contributes to
a significant portion of the ADCS Group's revenues. At the present time, the
aforementioned chemical is a critical component to the current technology
utilized in the industry. However, due to the industry's attempt to minimize
the size of microcomputer chips, this chemical is exposed to the risk of
obsolescence in the event a replacement chemical is developed.
The ADCS Group has a concentration of customers in the semiconductor and
semiconductor equipment manufacturing industries. They represent a total of
100% of year-end trade accounts receivable. A negative trend in this industry
could have a substantial effect on the ADCS Group. Furthermore, 34% of total
sales in each of the years ended December 31, 1995 and 1996 were to a single
customer. The same customer accounted for approximately 80% and 70% of total
equipment sales for the years ended December 31, 1995 and 1996, respectively.
Sales to this customer were less than 10% of total sales in 1994.
11. INDUSTRY AND GEOGRAPHIC INFORMATION
The ADCS Group operates in a single industry segment. The ADCS Group markets
its products in the United States and in foreign countries through sales
personnel and a foreign subsidiary. Export sales account for a significant
portion of the ADCS Group's total sales. Sales by geographic area are as
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Domestic............................................ 64% 65% 57%
Asia-Pacific........................................ 30 28 34
Europe.............................................. 6 7 9
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
F-12
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. SUBSEQUENT EVENT
The ADCS Group has signed a definitive agreement with Advanced Technology
Materials, Inc. (ATMI) of Danbury, Connecticut to merge the companies via a
pooling of interests. The transaction is anticipated to be completed by the
third quarter of 1997, subject to ATMI shareholder approval and the
satisfaction of other customary conditions. The agreement provides for the
ADCS Group to become a subsidiary of a new holding company of ATMI.
Approximately 5.5 million common shares of the new ATMI holding company would
be exchanged for the interests in the ADCS Group, although the final number of
shares will not be determined until the date of shareholder approval.
13. PRO FORMA ADJUSTMENTS, UNAUDITED
The unaudited pro forma adjustments on the 1996 statement of income reflect
an adjustment to record a provision for income taxes on income as if ADCS
Nevada had not been an S-corporation for a portion of the year.
F-13
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1997
--------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 3,342
Accounts receivable................................................. 3,010
Inventories......................................................... 2,315
Prepaid expenses.................................................... 134
Other current assets................................................ 668
-------
Total current assets.................................................. 9,469
Property, plant and equipment, net.................................... 4,615
Deferred tax asset.................................................... 274
Other noncurrent assets............................................... 159
-------
Total assets.......................................................... $14,517
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 1,014
Income taxes payable................................................ 108
Accrued liabilities................................................. 161
Current portion of long-term debt................................... 8
-------
Total current liabilities............................................. 1,291
Long-term debt........................................................ 150
Other noncurrent liabilities.......................................... 31
Minority interest..................................................... 572
-------
Total liabilities..................................................... 2,044
Commitments and contingencies
Stockholders' equity:
Common stock, 10,000 shares authorized; 605.8308 shares issued and
outstanding at June 30, 1997....................................... 227
Cumulative translation adjustment................................... (53)
Retained earnings................................................... 12,299
-------
Total stockholders' equity............................................ 12,473
-------
Total liabilities and stockholders' equity............................ $14,517
=======
</TABLE>
See accompanying notes.
F-14
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
--------------------
JUNE 30, JUNE 30,
1996 1997
--------- ---------
<S> <C> <C>
Sales:
Chemical............................................... $ 5,314 $ 6,550
Equipment.............................................. 5,674 3,891
--------- ---------
10,988 10,441
Cost of sales:
Chemical............................................... 865 1,017
Equipment.............................................. 2,551 2,818
--------- ---------
3,416 3,835
Gross profit............................................. 7,572 6,606
Selling and marketing expenses........................... 711 1,188
General and administrative expenses...................... 2,772 2,191
Research and development expenses........................ 1,105 996
--------- ---------
Income from operations................................... 2,984 2,231
Other income (expense):
Interest income........................................ 146 107
Interest expense....................................... (5) (3)
Other income (expense)................................. 10 17
Minority interest in net earnings of consolidated
subsidiaries.......................................... 64 (25)
--------- ---------
Income before income taxes............................... 3,199 2,327
Income tax provision:
Current................................................ 744 852
Deferred............................................... (106) (29)
--------- ---------
638 823
--------- ---------
Net income............................................... $ 2,561 $ 1,504
========= =========
Net income per share .................................... $4,227.25 $2,482.54
--------- ---------
Weighted average shares outstanding ..................... 605.8308 605.8308
========= =========
</TABLE>
See accompanying notes.
F-15
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
------------------
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 2,561 $1,504
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation............................................. 177 307
Deferred income tax benefit.............................. (106) (29)
Minority interest in net earnings of consolidated
subsidiaries............................................ (64) 25
Changes in assets and liabilities affected by operations:
Accounts receivable.................................... (698) (320)
Inventories............................................ (1,308) (699)
Prepaid expenses....................................... 129 (91)
Other assets........................................... (8) (633)
Accounts payable....................................... 441 393
Accrued liabilities.................................... 245 144
Other liabilities...................................... 5 10
Income taxes payable................................... (1,773) (303)
------- ------
Net cash (used in) provided by operating activities........ (399) 308
INVESTING ACTIVITIES
Proceeds from sale of equipment............................ -- 10
Purchases of equipment..................................... (949) (747)
------- ------
Net cash used in investing activities...................... (949) (737)
FINANCING ACTIVITIES
Proceeds from the issuance of a note....................... 127 --
Repayment of amounts borrowed.............................. (136) (1)
Cash contributed by minority partners...................... 182 2
Other 1 --
------- ------
Net cash provided by financing activities.................. 174 1
Effect of exchange rate changes on cash.................... (4) 2
------- ------
Net change in cash and cash equivalents.................... (1,178) (426)
Cash and cash equivalents, beginning of period............. 4,564 3,768
------- ------
Cash and cash equivalents, end of period................... $ 3,386 $3,342
======= ======
Cash paid for income taxes................................. $ 2,860 $1,155
======= ======
Cash paid for interest..................................... $ 6 $ 5
======= ======
</TABLE>
See accompanying notes.
F-16
<PAGE>
ADVANCED DELIVERY & CHEMICAL SYSTEMS AND AFFILIATES
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Advanced Delivery
& Chemical Systems and Affiliates (the "ADCS Group") have been prepared in
accordance with the instructions to Form 10-Q and Rule 10.01 of Regulation S-X
and do not include all of the financial information and disclosures required
by generally accepted accounting principles.
In the opinion of the ADCS Group's management, the financial information
contained herein has been prepared on the same basis as the audited Combined
Financial Statements contained in the ADCS Group's audited financial
statements for the year ended December 31, 1996, and includes adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the unaudited quarterly results set forth herein. The ADCS Group's quarterly
results have, in the past, been subject to fluctuation and, thus, the
operating results for any quarter are not necessarily indicative of results
for any future fiscal period.
2. INVENTORY
Inventory is comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
1997
--------------
(IN THOUSANDS)
<S> <C>
Raw materials/component parts:
Chemicals................................................. $ 283
Equipment................................................. 778
------
1,061
Finished goods:
Chemicals................................................. 611
Equipment................................................. 643
------
1,254
------
$2,315
======
</TABLE>
3. INCOME TAXES
The ADCS Group's income tax expense in 1997 relates primarily to federal
taxes on U.S. taxable income. The stockholders of ADCS Nevada elected S-
Corporation status effective April 1, 1996. In October 1996, as a result of a
transfer of shares to an ineligible S-Corporation shareholder, the S-
Corporation status was terminated. If ADCS Nevada had been a C-Corporation for
the entire six-month period ended June 30, 1996, the income tax provision
would have been $1,187,000, of which $1,293,000 would be current and
($106,000) deferred.
4. SUBSEQUENT EVENT
The ADCS Group has signed a definitive agreement with Advanced Technology
Materials, Inc. (ATMI) of Danbury, Connecticut to merge the companies via a
pooling of interests. The transaction is anticipated to be completed by the
third quarter of 1997, subject to ATMI shareholder approval and the
satisfaction of other customary conditions. The agreement provides for the
ADCS Group to become a subsidiary of a new holding company of ATMI.
Approximately 5.5 million common shares of the new ATMI holding company would
be exchanged for the interests in the ADCS Group, although the final number of
shares will not be determined until the date of shareholder approval.
F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Lawrence
Semiconductor Laboratories, Inc. and Affiliate
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Lawrence
Semiconductor Laboratories, Inc. and Affiliate (Lawrence) at December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Lawrence's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Phoenix, Arizona
May 17, 1997, except for the last
paragraph of Note 3 which is as of
July 29, 1997 and the last paragraph
of Note 6 which is as of December 18, 1997.
F-18
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 3,789,144 $ 4,369,370
Certificates of deposit.............................. -- 1,268,987
Accounts receivable.................................. 1,247,383 1,736,278
Due from related parties............................. 1,396,942 2,932,534
Inventories.......................................... 575,563 1,612,110
Other current assets................................. 33,571 142,384
----------- -----------
Total current assets................................... 7,042,603 12,061,663
Property and equipment, net............................ 11,448,201 18,372,531
Other assets........................................... 88,632 142,540
----------- -----------
Total assets........................................... $18,579,436 $30,576,734
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 988,125 $ 1,128,004
Accrued expenses..................................... 860,081 1,032,512
Accrued litigation settlement (See Note 10).......... -- 2,000,000
Current portion of capital lease obligations......... 959,067 1,836,941
Current portion of notes payable..................... 1,074,569 1,429,393
Deferred income taxes................................ -- 2,234,242
Income taxes payable................................. -- 255,480
----------- -----------
Total current liabilities.............................. 3,881,842 9,916,572
Capital lease obligations.............................. 3,139,546 5,427,475
Notes payable.......................................... 3,419,063 5,246,621
Deferred income taxes.................................. 2,694,489 1,873,160
----------- -----------
Total liabilities...................................... 13,134,940 22,463,828
----------- -----------
Commitments and contingencies (See Notes 7, 8 and 10)
Stockholders' equity:
Common stock, no par value, 1,100,000 shares
authorized, 20,000 shares issued and outstanding.... -- --
Additional paid-in capital........................... 60,000 60,000
Retained earnings.................................... 5,384,496 8,052,906
----------- -----------
Total stockholders' equity............................. 5,444,496 8,112,906
----------- -----------
Total liabilities and stockholders' equity............. $18,579,436 $30,576,734
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Net sales................................. $7,177,873 $14,408,800 $20,270,603
Cost of sales............................. 3,943,063 7,763,508 10,383,460
---------- ----------- -----------
Gross profit.............................. 3,234,810 6,645,292 9,887,143
Selling, general and administrative
expenses................................. 1,181,050 1,921,173 2,715,021
Litigation settlement (See Note 10)....... -- -- 2,000,000
---------- ----------- -----------
Income from operations.................... 2,053,760 4,724,119 5,172,122
Interest income........................... 27,819 139,567 303,098
Interest expense.......................... 691,166 1,053,667 1,137,658
Other income (expense).................... 167,671 (492,417) --
---------- ----------- -----------
Income before income taxes................ 1,558,084 3,317,602 4,337,562
Provision for income taxes................ 634,063 1,364,427 1,669,152
---------- ----------- -----------
Net income................................ 924,021 1,953,175 2,668,410
Retained earnings, beginning of year...... 2,507,300 3,431,321 5,384,496
---------- ----------- -----------
Retained earnings, end of year............ $3,431,321 $ 5,384,496 $ 8,052,906
========== =========== ===========
Pro forma net income per share
(unaudited).............................. $ 92.40 $ 195.32 $ 266.84
---------- ----------- -----------
Pro forma weighted average shares
outstanding (unaudited).................. 10,000 10,000 10,000
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES:
Net income............................. $ 924,021 $ 1,953,175 $ 2,668,410
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation expense................. 1,100,484 1,549,044 1,863,921
Bad debt expense..................... -- 15,531 191,210
Deferred income taxes................ 626,293 1,196,417 1,412,913
Loss on sale/leaseback of equipment.. -- 492,417 --
Change in assets and liabilities:
Accounts receivable................ (404,067) (478,245) (680,105)
Due from related parties........... (204,496) (179,578) (926,181)
Inventories........................ (141,484) (18,232) (1,036,547)
Other current assets............... (57,664) 107,127 (108,813)
Other assets....................... 83,423 23,302 (53,908)
Accounts payable................... 418,965 301,113 139,879
Accrued expenses................... (107,139) 730,392 172,431
Accrued litigation settlement (See
Note 10).......................... -- -- 2,000,000
Income taxes payable............... -- -- 255,480
----------- ----------- -----------
Net cash from operating
activities...................... 2,238,336 5,692,463 5,898,690
----------- ----------- -----------
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Purchase of property and equipment..... (200,737) (1,067,770) (4,671,608)
Advances to shareholder on notes
receivable............................ (157,651) (256,598) (286,058)
Purchase of certificates of deposit.... -- -- (1,268,987)
----------- ----------- -----------
Net cash used in investing
activities...................... (358,388) (1,324,368) (6,226,653)
----------- ----------- -----------
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Payments on capital lease obligations.. (838,247) (995,304) (1,274,193)
Payments on notes payable.............. (263,926) (1,191,366) (1,409,062)
Proceeds from borrowings............... -- 566,944 3,591,444
----------- ----------- -----------
Net cash from (used in) financing
activities...................... (1,102,173) (1,619,726) 908,189
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... 777,775 2,748,369 580,226
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR.................................. 263,000 1,040,775 3,789,144
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF
YEAR.................................. $ 1,040,775 $ 3,789,144 $ 4,369,370
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid.................... $ -- $ -- $ --
Interest paid........................ $ 691,166 $ 1,053,667 $ 1,137,658
Equipment acquired under capital
leases.............................. $ 2,615,235 $ 2,229,048 $ 4,439,996
Equipment acquired under notes
payable............................. $ 3,797,322 $ 1,584,658 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The accompanying combined financial statements include the accounts of
Lawrence Semiconductor Laboratories, Inc. and its affiliate, Lawrence
Semiconductor Laboratories Marketing and Sales, Inc., collectively referred to
as Lawrence, both of which are under common control. All significant
intercompany accounts and transactions have been eliminated. Lawrence
Semiconductor Laboratories, Inc. has 100,000 shares of no par value common
stock authorized, of which 10,000 shares were issued and outstanding during
all periods presented. Lawrence Semiconductor Laboratories Marketing and
Sales, Inc. has 1,000,000 shares of no par common stock authorized, of which
10,000 shares were issued and outstanding during all periods presented.
Lawrence is involved in the chemical vapor deposition of silicon wafers
using epitaxial processes to meet customer product specifications. Lawrence is
headquartered in Mesa, Arizona and has operations in Mesa and Tempe, Arizona.
On May 17, 1997, Lawrence entered into a merger agreement with Advanced
Technology Materials, Inc. (ATMI). Under the Lawrence Merger Agreement,
Lawrence's stockholders will exchange their common stock in Lawrence for
shares of ATMI or ATMI Holdings, Inc. common stock having a value equal to $80
million less the $2 million to be paid by Lawrence to settle the patent
litigation described in Note 10, as well as other adjustments defined in the
Lawrence Merger Agreement. The Lawrence Merger Agreement is subject to the
approval of both Lawrence stockholders and ATMI stockholders as well as other
customary conditions. The merger, which is expected to be tax-free to Lawrence
stockholders and to be accounted for as a pooling-of-interests, is expected to
close during the third quarter of 1997.
Prior to the consummation of and as a condition of the merger with ATMI, the
sole stockholder of Lawrence Semiconductor Laboratories Marketing and Sales,
Inc., who is also a 98% stockholder in Lawrence Semiconductor Laboratories,
Inc., will contribute all of the issued and outstanding shares of capital
stock of Lawrence Semiconductor Laboratories Marketing and Sales, Inc. to
Lawrence Semiconductor Laboratories, Inc., with Lawrence Semiconductor
Laboratories Marketing and Sales, Inc. becoming a wholly-owned subsidiary of
Lawrence Semiconductor Laboratories, Inc. The contribution will be accounted
for at historical cost in a manner similar to a pooling-of-interests. The
impact of the contribution on the accompanying financial statements is
expected to be insignificant. Unaudited pro forma net income per share in the
accompanying combined statements of income and retained earnings have been
based on the weighted average number of shares of Lawrence Semiconductor
Laboratories, Inc. outstanding during each period presented as if the
contribution of Lawrence Semiconductor Laboratories Marketing and Sales, Inc.
had occurred as of the beginning of each such period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Lawrence considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Inventories
Inventories, which consist primarily of manufacturing spare parts and
processing supplies, are stated at the lower of cost or market. Cost is
determined utilizing the first-in first-out method.
F-22
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Upon sale or retirement, cost and the related accumulated depreciation are
eliminated from the respective accounts, and any resulting gain or loss is
included in the results of operations. Depreciation expense is computed using
the straight-line method over estimated useful lives ranging from 5 to 10
years for machinery and equipment and 35 years for buildings.
Revenue Recognition
Lawrence recognizes revenue for epitaxial processing services at the time of
shipment to the customer. Accounts receivable as of December 31, 1995 and 1996
is shown net of an allowance for doubtful accounts of $15,531 and $191,210,
respectively.
Income Taxes
Lawrence Semiconductor Laboratories, Inc. utilizes a calendar year for
income tax reporting purposes while Lawrence Semiconductor Laboratories
Marketing and Sales, Inc. utilizes a fiscal year ending June 30. For financial
reporting purposes, the provision for income taxes has been prepared as if
both companies utilized a calendar year for income tax reporting purposes.
Lawrence recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in Lawrence's
financial statements or tax returns. Deferred tax liabilities and assets are
determined based on differences between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Financial Instruments
Financial instruments which potentially subject Lawrence to concentrations
of credit risk consist primarily of cash and cash equivalents, certificates of
deposit and trade accounts receivable. Accounts receivable are primarily with
large high technology customers. Lawrence reviews a customer's credit history
before extending credit and reviews each account based on specific credit risk
factors, historical trends and other information. The carrying value of
financial instruments approximates the related fair value because of the
relatively short maturity of these instruments. The carrying value of notes
payable and capital lease obligations approximates fair value as the related
interest rates approximate market rates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Manufacturing spare parts and processing supplies.... $405,994 $1,265,711
Wafers............................................... 85,932 182,254
Gases and chemicals.................................. 83,637 164,145
-------- ----------
$575,563 $1,612,110
======== ==========
</TABLE>
F-23
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED PARTY TRANSACTIONS
Due from related parties consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Notes receivable from shareholder................... $ 812,868 $1,098,926
Due from Lawrence Semiconductor Research
Laboratories, Inc.................................. 584,074 1,185,114
Due from Lawrence Semiconductor Investments, Inc.... -- 648,494
---------- ----------
$1,396,942 $2,932,534
========== ==========
</TABLE>
Notes receivable from shareholder represent advances which bear interest at
7% and are due upon demand. The balance at December 31, 1995 and 1996 includes
accrued interest of $69,589 and $125,647, respectively. Interest income on the
notes totaled $17,562, $31,598 and $56,058 during 1994, 1995 and 1996,
respectively.
Due from Lawrence Semiconductor Research Laboratories, Inc. (Research)
includes charges by Lawrence for use of its epitaxial reactors. Income from
such charges, which is included in net sales, totaled $204,496, $179,882 and
$255,280 in 1994, 1995 and 1996, respectively. The balance as of December 31,
1996 also includes $323,352 related to the transfer to Research of leasehold
improvements at net book value during 1996. All amounts are non-interest
bearing and are due upon demand.
Due from Lawrence Semiconductor Investments, Inc. includes the net amount of
non-interest bearing advances from Lawrence made during 1996. The amounts
outstanding are due upon demand.
During 1996, Lawrence leased an epitaxial reactor to Research. Monthly
payments required under the lease are equal to Lawrence's monthly debt service
requirements on Lawrence's note payable related to the reactor. Rental revenue
relating to this lease totaled $83,600 in 1996 and is reflected as a reduction
of cost of sales in the accompanying combined statement of income and retained
earnings.
Effective January 1, 1997, Lawrence entered into a non-exclusive royalty-
bearing license to use patented and non-patented technology owned by Research
in exchange for a royalty of five percent of gross revenues derived from the
sale of products by Lawrence using the licensed technology. The license
agreement, which was originally scheduled to expire on January 1, 2010, was
terminated July 29, 1997 effective retroactively to January 1, 1997. Lawrence
had not incurred obligations to Research under the license agreement.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Machinery and equipment........................ $13,496,925 $18,525,808
Building....................................... -- 4,169,519
Land........................................... 450,730 959,983
Leasehold improvements......................... 495,313 --
Office furniture and equipment................. 106,569 245,185
Construction in process........................ 1,093,652 243,742
----------- -----------
15,643,189 24,144,237
Less accumulated depreciation.................. (4,194,988) (5,771,706)
----------- -----------
$11,448,201 $18,372,531
=========== ===========
</TABLE>
F-24
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
totaled $1,100,484, $1,549,044 and $1,863,921, respectively.
5. CAPITAL LEASE OBLIGATIONS
Lawrence is obligated under capital leases for certain machinery and
equipment that expire at various dates during the next five years. Certain of
the capital lease obligations are personally guaranteed by Lawrence's primary
stockholder. The gross amount of machinery and equipment under capital leases
and the related accumulated depreciation at December 31 were as follows:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Machinery and equipment.......................... $ 5,710,473 $10,150,469
Less: accumulated depreciation................... (1,649,602) (2,229,946)
----------- -----------
$ 4,060,871 $ 7,920,523
=========== ===========
</TABLE>
Future lease payments required under capital lease obligations at December
31, 1996 are as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 2,390,355
1998.......................................................... 2,326,758
1999.......................................................... 1,923,517
2000.......................................................... 1,143,729
2001.......................................................... 519,866
-----------
Total lease payments.......................................... 8,304,225
Less amount representing interest............................. (1,039,809)
-----------
Present value of net capital lease payments................... 7,264,416
Less current portion.......................................... (1,836,941)
-----------
Long-term portion............................................. $ 5,427,475
===========
</TABLE>
Lawrence has commitments from two lessors to provide capital lease financing
totaling $7.3 million in 1997. The commitments require Lawrence to maintain
compliance with specified financial ratios.
In April 1995, Lawrence sold certain equipment, which was subject to capital
lease obligations, to a third party and then leased the equipment back from
the third party pursuant to a sixty-month operating lease. Lawrence recognized
a loss of $492,417 in 1995 as a result of this transaction.
F-25
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
6. NOTES PAYABLE
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Note payable, interest at 9.2%, monthly principal and
interest payments of $28,428 through June 2003,
secured by related real property.................... $ -- $ 3,087,194
Note payable, interest at 7.3%, monthly interest only
payments of $3,068, balance due April 1998, secured
by related real property............................ -- 504,252
Note payable, interest at 7.3%, monthly interest only
payments of $3,449, balance due May 1997, secured by
related real property............................... 566,944 566,944
Note payable, interest at 10%, monthly principal and
interest payments of $22,624 through April 2000,
secured by related equipment........................ 951,559 766,906
Note payable, interest at 11.52%, monthly principal
and interest payments of $21,387 through November
1999, secured by related equipment.................. 806,058 633,293
Note payable, interest at 10.75%, monthly principal
and interest payments of $21,581 through February
1999, secured by related equipment.................. 692,479 498,576
Note payable, interest at 11.52%, monthly principal
and interest payments of $20,900 through November
1999, secured by equipment utilized by related party
(See Note 3)........................................ 787,673 618,849
Other notes payable, interest ranging from 10.2% to
12.42%, maturing April 1997 through May 2000,
secured by related equipment, repaid in 1996........ 688,919 --
----------- -----------
4,493,632 6,676,014
Less current portion............................... (1,074,569) (1,429,393)
----------- -----------
Long-term portion.................................. $ 3,419,063 $ 5,246,621
=========== ===========
</TABLE>
Annual principal maturities at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................ $1,429,393
1998............................................................ 1,464,673
1999............................................................ 802,604
2000............................................................ 167,075
2001............................................................ 85,970
Thereafter...................................................... 2,726,299
----------
$6,676,014
==========
</TABLE>
Certain of the notes payable contain covenants requiring Lawrence to
maintain compliance with debt to tangible net worth, debt service coverage and
current assets to current liabilities ratios as defined in the related
agreements. At December 31, 1996, Lawrence was not in compliance with the debt
(defined as all liabilities) to tangible net worth ratio of 3.0 to 1.0, and
such violation continued into 1997. Additionally, subsequent to December 31,
1996, Lawrence was not in compliance with the covenant requiring the
maintenance of a ratio of current assets to current liabilities of at least
1.2 to 1.0. On June 10, 1997, the lender agreed to waive these covenant
violations through September 30, 1997. At September 30, 1997, Lawrence was in
violation of the debt-to-tangible net worth and current ratio covenants as well
as a covenant requiring the maintenance of a specified minimum debt coverage
ratio. On December 18, 1997, the lender agreed to waive these covenant
violations through January 31, 1998.
F-26
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. OPERATING LEASE COMMITMENTS
Lawrence is obligated under operating leases for certain manufacturing
equipment which expire in years 1997 through 2001. A summary of future minimum
rental payments required under these leases at December 31, 1996 is as
follows:
<TABLE>
<S> <C>
1997............................................................ $1,411,765
1998............................................................ 1,411,765
1999............................................................ 1,320,603
2000............................................................ 679,494
2001............................................................ 222,097
----------
$5,045,724
==========
</TABLE>
Rental expense under operating leases was $102,743, $492,134 and $1,310,092
during 1994, 1995 and 1996, respectively.
8. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................... $ -- $ -- $ 255,480
State..................................... -- -- --
-------- ---------- ----------
$ -- $ -- $ 255,480
-------- ---------- ----------
Deferred:
Federal................................... $504,794 $1,124,665 $1,115,765
State..................................... 129,269 239,762 297,907
-------- ---------- ----------
634,063 1,364,427 1,413,672
-------- ---------- ----------
$634,063 $1,364,427 $1,669,152
======== ========== ==========
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Non-expiring alternative minimum tax and other
credits......................................... $ 71,676 $ 295,824
Net operating loss carryforwards................. 482,307 --
Accrued expenses................................. -- 923,713
---------- ----------
Deferred tax assets............................ 553,983 1,219,537
---------- ----------
Deferred tax liabilities:
Depreciation..................................... 548,269 1,135,823
Capital leases................................... 916,432 1,033,161
Intercompany charges............................. 1,783,771 3,157,955
---------- ----------
Deferred tax liabilities....................... 3,248,472 5,326,939
---------- ----------
Net deferred tax liabilities....................... $2,694,489 $4,107,402
========== ==========
</TABLE>
F-27
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES (CONTINUED)
The provision for income taxes reflected in the combined statement of income
and retained earnings for the years ended December 31 differs from the amounts
computed by applying the statutory federal tax rate to income before income
taxes as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Expected tax provision.................... $529,748 $1,127,985 $1,474,771
State taxes, net of federal tax benefit... 85,317 158,243 196,619
Other..................................... 18,998 78,199 (2,238)
-------- ---------- ----------
$634,063 $1,364,427 $1,669,152
======== ========== ==========
</TABLE>
Lawrence Semiconductor Laboratories, Inc. intends to file a request for a
change in accounting with the Internal Revenue Service relating to the timing
of intercompany charges made to Lawrence Semiconductor Laboratories Marketing
and Sales, Inc.
9. EMPLOYEE BENEFIT PLANS
Lawrence maintains a profit sharing plan for the benefit of eligible
employees. Contributions to the plan are made at the discretion of the Board
of Directors up to a maximum amount of 15% of eligible participants' total
annual compensation. Contribution expense under the plan was $60,812, $78,550
and $119,304 in 1994, 1995 and 1996, respectively.
Lawrence maintains a savings plan for the benefit of eligible employees.
Lawrence makes matching contributions equal to 50% of the first 3% of employee
pre-tax contributions. Contribution expense under the plan was $10,455,
$10,773 and $25,450, in 1994, 1995 and 1996, respectively.
In 1995, Lawrence established a money purchase plan for the benefit of
eligible employees. Contributions of 5% of participants' annual eligible
compensation are made to the plan. Contribution expense under the plan was
$60,267 and $82,877 in 1995 and 1996, respectively.
In 1996, Lawrence made a one-time contribution of $38,366 to a qualified
non-elective contribution plan for the benefit of eligible employees.
10. COMMITMENTS AND CONTINGENCIES
On May 15, 1997, Lawrence settled patent infringement litigation with
Applied Materials, an equipment manufacturer, relating to equipment used by
Lawrence that was purchased from another manufacturer. Under the terms of the
related settlement agreement, Lawrence agreed to pay Applied Materials
$2,000,000 and purchase chemical reactors from Applied Materials assuming
Lawrence's business conditions justify such purchases. Such conditions include
growth in customer requirements necessitating the addition of epitaxial
processing capacity, such chemical reactors meeting the requirements of
Lawrence and its customers and the chemical reactors being competitive in
terms of price and productivity with other acceptable market alternatives.
Although the agreement specifies annual chemical reactor purchase requirements
for years 1997 through 2002, such requirements are not cumulative in the event
business conditions do not warrant the required purchases in any given year.
Lawrence anticipates purchasing one chemical reactor from Applied Materials in
1997 at an approximate fair market value of $2,500,000 with installation
expected during the second half of the year. Lawrence accrued the $2 million
relating to this settlement in the accompanying financial statements for the
year ended December 31, 1996. Under patent regulations, once damages have been
assessed and a settlement reached, Lawrence will be entitled to use the
equipment without further infringement or claim for damages.
F-28
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
On May 6, 1997, Lawrence entered into a letter agreement with an investor
relating to the potential recapitalization of Lawrence. Under terms of the
letter agreement, Lawrence agreed to reimburse the investor for out-of-pocket
expenses up to an aggregate maximum amount of $300,000 if a definitive
agreement was not negotiated between the parties within a specified period of
time. Lawrence also agreed to pay the investor a $1.5 million breakup fee if
Lawrence consummated a sale, as defined, with another party within one year
from the date of the letter agreement. The breakup fee will become payable by
Lawrence upon the consummation of the merger with ATMI described in Note 1.
In 1996, Lawrence entered into an agreement to purchase the majority of its
processing gases and chemicals from a supplier at established prices with
contract terms expiring from February 2001 to May 2006. Amounts purchased
under this agreement totaled $1,049,241 in 1996.
11. SIGNIFICANT CUSTOMERS
During 1996, three customers accounted for $4,826,000 or 24%, $2,937,000 or
14%, and $2,327,000 or 11% of total sales, respectively. No individual
customer accounted for more than 10% of total sales in 1994 or 1995.
F-29
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1997
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 1,816,456
Certificates of deposit.......................................... 1,085,841
Accounts receivable.............................................. 2,288,181
Due from related parties......................................... 4,060,142
Inventories...................................................... 1,659,471
Deferred merger costs............................................ 511,665
Other current assets............................................. 113,928
-----------
Total current assets............................................... 11,535,684
Property and equipment, net........................................ 21,755,284
Other assets....................................................... 142,540
-----------
Total assets....................................................... $33,433,508
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 1,903,686
Accrued expenses................................................. 962,791
Current portion of capital lease obligations..................... 3,486,568
Current portion of notes payable................................. 2,450,261
Deferred income taxes............................................ 2,806,354
-----------
Total current liabilities.......................................... 11,609,660
Capital lease obligations.......................................... 6,661,314
Notes payable...................................................... 3,806,122
Deferred income taxes.............................................. 2,061,753
-----------
Total liabilities.................................................. 24,138,849
-----------
Stockholders' equity:
Common stock, no par value, 1,100,000 shares authorized,
20,000 shares issued and outstanding............................ --
Additional paid-in capital....................................... 60,000
Retained earnings................................................ 9,234,659
-----------
Total stockholders' equity......................................... 9,294,659
-----------
Total liabilities and stockholders' equity......................... $33,433,508
===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
F-30
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
Net sales............................................. $ 10,594,321 $ 9,495,414
Cost of sales......................................... 4,968,574 5,696,942
------------ -----------
Gross profit.......................................... 5,625,747 3,798,472
Selling, general and administrative expenses.......... 1,181,264 1,362,785
------------ -----------
Income from operations................................ 4,444,483 2,435,687
Interest income....................................... 92,376 117,880
Interest expense...................................... 470,202 616,586
------------ -----------
Income before income taxes............................ 4,066,657 1,936,981
Provision for income taxes............................ 1,564,850 755,228
------------ -----------
Net income............................................ 2,501,807 1,181,753
Retained earnings, beginning of period................ 5,384,496 8,052,906
------------ -----------
Retained earnings, end of period...................... $ 7,886,303 $ 9,234,659
============ ===========
Pro forma net income per share........................ $ 250.18 $ 118.18
------------ -----------
Pro forma weighted average shares outstanding......... 10,000 10,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
F-31
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income........................................ $ 2,501,807 $ 1,181,753
Adjustments to reconcile net income to net cash
from operating activities
Depreciation expense............................ 728,226 1,105,920
Deferred income taxes........................... 1,225,102 760,705
Change in assets and liabilities:
Accounts receivable........................... (705,889) (551,903)
Due from related parties...................... (533,531) (972,347)
Inventories................................... (375,588) (47,361)
Other current assets.......................... (100,564) (483,209)
Other assets.................................. (24,000) --
Accounts payable.............................. (127,325) 775,682
Accrued expenses.............................. 169,542 (69,721)
Accrued litigation settlement................. -- (2,000,000)
Income taxes payable.......................... -- (255,480)
------------ ------------
Net cash from operating activities.......... 2,757,780 (555,961)
------------ ------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment................ (2,614,901) (635,605)
Advances to shareholder on notes receivable....... (31,565) (155,261)
Net redemption (purchase) of certificates of
deposit.......................................... (666,372) 183,146
------------ ------------
Net cash used in investing activities....... (3,312,838) (607,720)
------------ ------------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on capital lease obligations... (466,285) (969,602)
Principal payments on notes payable............... (522,344) (419,631)
Proceeds from borrowings.......................... 3,115,000 --
------------ ------------
Net cash used in financing activities....... 2,126,371 (1,389,233)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 1,571,313 (2,552,914)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...... 3,789,144 4,369,370
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR............ $ 5,360,457 $ 1,816,456
============ ============
SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid............................... $ -- $ 250,000
Interest paid................................... $ 470,201 $ 616,686
Equipment acquired under capital leases......... $ -- $ 3,853,068
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
F-32
<PAGE>
LAWRENCE SEMICONDUCTOR LABORATORIES, INC. AND AFFILIATE
NOTES TO COMBINED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The interim financial data as of and for the six-month periods ended June
30, 1996 and 1997 are unaudited; however, in the opinion of management, such
interim data include all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the financial
position and results of operations for the interim periods. The interim data
are not necessarily indicative of the results of operations for the full year.
The interim combined financial statements should be read in conjunction with
the combined financial statements and notes thereto for the year ended
December 31, 1996 included herein.
2. DEFERRED MERGER COSTS
Deferred merger costs relate to the professional fees incurred in connection
with the pending merger of Lawrence and ATMI. Such costs have been deferred in
the accompanying combined balance sheet as of June 30, 1997 and will be
charged to expense upon consummation of the merger.
F-33
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet at June 30,
1997 and the unaudited pro forma condensed combined statements of operations for
the years ended December 31, 1994, 1995 and 1996 and for the six months ended
June 30, 1996 and 1997 give effect to the transactions contemplated by the
Merger and Exchange Agreement pursuant to which ATMI became a wholly-owned
subsidiary of the Registrant and each share of ATMI Common Stock was converted
into one share of Registrant Common Stock at the Effective Time and the ADCS
Interests were simultaneously exchanged at the Closing Date for 5,468,747
shares of Registrant Common Stock, as if the Reorganization had occurred on
January 1, 1994 for purposes of the combined statements of operations and at
June 30, 1997 for the combined balance sheet. The unaudited pro forma condensed
combined balance sheet at June 30, 1997 and the unaudited pro forma condensed
combined statements of operations for the years ended December 31, 1994, 1995
and 1996 and for the six months ended June 30, 1996 and 1997 also give effect to
the Lawrence Acquisition pursuant to which the outstanding shares of LSL Common
Stock were converted at the Lawrence Effective Time into 3,628,571 shares of
Registrant Common Stock. The pro forma information gives effect to the
Reorganization and the Lawrence Acquisition under the pooling-of-interests
method and to the adjustments described in the accompanying notes to the
unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements may not be
indicative of the results that would have occurred if the transactions had been
consummated as of the dates indicated or the operating results which may be
obtained by the Registrant in the future. The unaudited pro forma condensed
combined financial statements should be read in conjunction with the
consolidated audited financial statements, including the related notes thereto,
and other financial information included in ATMI's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and in ATMI's Quarterly Reports on
Form 10-Q for the three month period ended June 30, 1997; in the ADCS Group's
combined financial statements for the fiscal years ended December 31, 1994, 1995
and 1996 and the six months ended June 30, 1996 and 1997; and in Lawrence's
combined financial statements for the fiscal years ended December 31, 1994, 1995
and 1996 and the six months ended June 30, 1996 and 1997.
P-1
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ATMI,
ADCS
PRO FORMA GROUP AND
ATMI ADCS GROUP LAWRENCE ADJUSTMENTS LAWRENCE
------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents
and marketable
securities............ $18,189 $ 3,342 $ 2,902 $ 24,433
Accounts receivable,
net................... 12,527 3,010 6,348 21,885
Inventories............ 4,698 2,315 1,660 8,673
Other.................. 2,128 802 626 $ 1,664 (b)
(2,590)(c) 2,630
------- ------- ------- --------
Total current assets.... 37,542 9,469 11,536 57,621
Property and equipment,
net.................... 9,122 4,615 21,755 35,492
Goodwill and other long-
term assets, net....... 6,426 433 143 7,002
------- ------- ------- --------
$53,090 $14,517 $33,434 $100,115
======= ======= ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $ 3,894 $ 1,014 $ 1,904 $ 6,812
Accrued expenses....... 4,022 161 963 $ 3,460 (c) 8,606
Notes payable, current
portion............... 587 8 5,937 6,532
Other.................. 786 108 2,806 3,700
------- ------- ------- --------
Total current
liabilities............ 9,289 1,291 11,610 25,650
Notes payable, less
current portion........ 4,726 150 10,467 15,343
Other long-term
liabilities............ 58 31 2,062 2,151
Minority interest....... 0 572 0 572
Stockholders' equity:
Common stock........... 88 227 0 (88)(a)
(227)(a)
179 (a) 179
Additional paid-in
capital............... 37,412 0 60 136 (a)
336 (b) 37,944
Retained earnings...... 1,517 12,246 9,235 (6,050)(c)
1,328 (b) 18,276
------- ------- ------- --------
Total stockholders'
equity................. 39,017 12,473 9,295 56,399
------- ------- ------- --------
$53,090 $14,517 $33,434 $100,115
======= ======= ======= ========
</TABLE>
P-2
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ATMI,
ADCS
GROUP AND
ATMI ADCS GROUP LAWRENCE LAWRENCE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product revenues.............. $ 12,539 $ 7,821 $7,178 $ 27,538
Contract revenues............. 7,222 0 0 7,222
--------- --------- ------ ----------
Total revenues.................. 19,761 7,821 7,178 34,760
Cost of revenues:
Cost of product revenues...... 5,839 1,806 3,943 11,588
Cost of contract revenues..... 6,151 0 0 6,151
--------- --------- ------ ----------
Total cost of revenues.......... 11,990 1,806 3,943 17,739
--------- --------- ------ ----------
Gross profit.................... 7,771 6,015 3,235 17,021
Operating expenses:
Research and development...... 3,415 566 0 3,981
Selling, general and
administrative............... 5,588 2,539 1,181 9,308
--------- --------- ------ ----------
9,003 3,105 1,181 13,289
--------- --------- ------ ----------
Operating income (loss)......... (1,232) 2,910 2,054 3,732
Interest income (expense), net.. 390 23 (663) (250)
Other income, net............... 3,594 0 167 3,761
--------- --------- ------ ----------
3,984 23 (496) 3,511
Income before taxes and minority
interest....................... 2,752 2,933 1,558 7,243
Income taxes.................... 124 970 634 1,728
--------- --------- ------ ----------
Income before minority
interest....................... 2,628 1,963 924 5,515
Minority interest............... 8 12 0 20
--------- --------- ------ ----------
Net income...................... $ 2,636 $ 1,975 $ 924 $ 5,535
========= ========= ====== ==========
Net income per common share(d).. $ 0.35 $3,370.31 $92.40
--------- --------- ------
Weighted average shares
outstanding(d)................. 7,595,193 586 10,000
========= ========= ======
Net income per common share(e).. $ 0.33
----------
Equivalent weighted average
shares outstanding (e)......... 16,692,511
==========
</TABLE>
P-3
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ATMI,
ADCS
GROUP AND
ATMI ADCS GROUP LAWRENCE LAWRENCE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product revenues................ $ 21,336 $ 15,715 $14,409 $ 51,460
Contract revenues............... 8,712 0 0 8,712
--------- --------- ------- ----------
Total revenues.................... 30,048 15,715 14,409 60,172
Cost of revenues:
Cost of product revenues........ 9,609 4,860 7,764 22,233
Cost of contract revenues....... 7,490 0 0 7,490
--------- --------- ------- ----------
Total cost of revenues............ 17,099 4,860 7,764 29,723
--------- --------- ------- ----------
Gross profit...................... 12,949 10,855 6,645 30,449
Operating expenses:
Research and development........ 4,206 1,491 0 5,697
Selling, general and
administrative................. 8,558 5,407 1,921 15,886
--------- --------- ------- ----------
12,764 6,898 1,921 21,583
--------- --------- ------- ----------
Operating income.................. 185 3,957 4,724 8,866
Interest income (expense), net.... 503 54 (914) (357)
Other expense, net................ 0 (51) (493) (544)
--------- --------- ------- ----------
503 3 (1,407) (901)
Income before taxes and minority
interest......................... 688 3,960 3,317 7,965
Income taxes...................... 134 1,389 1,364 2,887
--------- --------- ------- ----------
Income before minority interest... 554 2,571 1,953 5,078
Minority interest................. 0 10 0 10
--------- --------- ------- ----------
Net income........................ $ 554 $ 2,581 $ 1,953 $ 5,088
========= ========= ======= ==========
Net income per common share(d).... $ 0.07 $4,296.87 $195.32
--------- --------- -------
Weighted average shares
outstanding(d)................... 8,074,032 600.6694 10,000
========= ========= =======
Net income per common share(e).... $ 0.30
----------
Equivalent weighted average
shares outstanding (e)........... 17,171,350
==========
</TABLE>
P-4
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ATMI
ADCS
GROUP AND
ATMI ADCS GROUP LAWRENCE LAWRENCE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product revenues...... $ 36,504 $ 22,041 $20,271 $ 78,816
Contract revenues..... 9,846 0 0 9,846
--------- --------- ------- ----------
Total revenues.......... 46,350 22,041 20,271 88,662
Cost of revenues:
Cost of product
revenues............. 15,939 6,567 10,384 32,890
Cost of contract
revenues............. 8,341 0 0 8,341
--------- --------- ------- ----------
Total cost of revenues.. 24,280 6,567 10,384 41,231
--------- --------- ------- ----------
Gross profit............ 22,070 15,474 9,887 47,431
Operating expenses:
Research and
development.......... 7,627 2,212 0 9,839
Selling, general and
administrative....... 11,510 6,365 4,715 22,590
--------- --------- ------- ----------
19,137 8,577 4,715 32,429
--------- --------- ------- ----------
Operating income........ 2,933 6,897 5,172 15,002
Interest income
(expense), net......... 627 210 (835) 2
Other income, net....... 0 18 0 18
--------- --------- ------- ----------
627 228 (835) 20
Income before taxes and
minority interest...... 3,560 7,125 4,337 15,022
Income taxes(f)......... 239 2,732 1,669 4,640
--------- --------- ------- ----------
Income before minority
interest............... 3,321 4,393 2,668 10,382
Minority interest....... 0 151 0 151
--------- --------- ------- ----------
Net income.............. $ 3,321 $ 4,544 $ 2,668 $ 10,533
========= ========= ======= ==========
Net income per common
share(d)............... $ 0.35 $7,500.44 $266.84
--------- --------- -------
Weighted average shares
outstanding(d)......... 9,359,021 605.8308 10,000
========= ========= =======
Net income per common
share(e)............... $ 0.57
----------
Equivalent weighted
average shares
outstanding (e)........ 18,456,339
==========
</TABLE>
P-5
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ATMI,
ADCS
GROUP AND
ATMI ADCS GROUP LAWRENCE LAWRENCE
--------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product revenues...... $ 17,743 $ 10,988 $10,594 $ 39,325
Contract revenues..... 4,695 0 0 4,695
--------- --------- ------- ----------
Total revenues.......... 22,438 10,988 10,594 44,020
Cost of revenues:
Cost of product
revenues............. 7,607 3,416 4,968 15,991
Cost of contract
revenues............. 3,929 0 0 3,929
--------- --------- ------- ----------
Total cost of revenues.. 11,536 3,416 4,968 19,920
--------- --------- ------- ----------
Gross profit............ 10,902 7,572 5,626 24,100
Operating expenses:
Research and
development.......... 4,048 1,105 0 5,153
Selling, general and
administrative....... 5,920 3,483 1,181 10,584
--------- --------- ------- ----------
9,968 4,588 1,181 15,737
--------- --------- ------- ----------
Operating income........ 934 2,984 4,445 8,363
Interest income
(expense), net......... 287 141 (378) 50
Other income, net....... 0 10 0 10
--------- --------- ------- ----------
287 151 (378) 60
Income before taxes and
minority interest...... 1,221 3,135 4,067 8,423
Income taxes............ 111 638 1,565 2,314
--------- --------- ------- ----------
Income before minority
interest............... 1,110 2,497 2,502 6,109
Minority interest....... 0 64 0 64
--------- --------- ------- ----------
Net income.............. $ 1,110 $ 2,561 $ 2,502 $ 6,173
========= ========= ======= ==========
Net income per common
share(d)............... $ 0.12 $4,227.25 $250.18
--------- --------- -------
Weighted average shares
outstanding(d)......... 9,364,302 605.8308 10,000
========= ========= =======
Net income per common
share(e)............... $ 0.33
----------
Equivalent weighted
average shares
outstanding (e)........ 18,461,620
==========
</TABLE>
P-6
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ATMI,
ADCS
ADCS GROUP AND
ATMI GROUP LAWRENCE LAWRENCE
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product revenues...... $ 21,197 $ 10,441 $ 9,495 $ 41,133
Contract revenues..... 4,901 0 0 4,901
--------- --------- ------- ----------
Total revenues.......... 26,098 10,441 9,495 46,034
Cost of revenues:
Cost of product
revenues............. 9,330 3,835 5,697 18,862
Cost of contract
revenues............. 4,039 0 0 4,039
--------- --------- ------- ----------
Total cost of revenues.. 13,369 3,835 5,697 22,901
--------- --------- ------- ----------
Gross profit............ 12,729 6,606 3,798 23,133
Operating expenses:
Research and
development.......... 4,112 996 0 5,108
Selling, general and
administrative....... 6,189 3,379 1,363 10,931
--------- --------- ------- ----------
10,301 4,375 1,363 16,039
--------- --------- ------- ----------
Operating income........ 2,428 2,231 2,435 7,094
Interest income
(expense), net......... 350 121 (498) (27)
--------- --------- ------- ----------
Income before taxes and
minority interest...... 2,778 2,352 1,937 7,067
Income taxes............ 332 823 755 1,910
--------- --------- ------- ----------
Income before minority
interest............... 2,446 1,529 1,182 5,157
Minority interest....... 0 (25) 0 (25)
--------- --------- ------- ----------
Net income.............. $ 2,446 $ 1,504 $ 1,182 5,132
========= ========= ======= ==========
Net income per common
share(d)............... $ 0.26 $2,482.54 $118.18
--------- --------- -------
Weighted average shares
outstanding(d)......... 9,583,528 605.8308 10,000
========= ========= =======
Net income per common
share (e).............. $ 0.27
----------
Equivalent weighted
average shares
outstanding (e)........ 18,680,846
==========
</TABLE>
P-7
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) In the transactions, the Registrant exchanged 5,468,747 shares of
Registrant Common Stock for the ADCS Interests and 3,628,571 shares for the LSL
Common Stock. The unaudited pro forma condensed combined financial statements
reflect the issuance of such shares. The effect of this transaction is to
decrease the combined stated common stock of ATMI, the ADCS Group and Lawrence
by $88,000, $227,000 and $0, respectively, and to increase the combined stated
common stock of the Registrant up to $179,000 and the combined additional paid
in capital by $136,000 to reflect the par value of Registrant Common Stock
outstanding after the transactions.
(b) The pro forma condensed combined balance sheet includes the assumption
that the Registrant will recognize a deferred tax asset for the expected future
tax benefit to be derived from ATMI's net operating losses, deductions for non-
qualified stock options exercises and certain temporary differences as of June
30, 1997. Deferred tax assets are determined based on differences between
financial statement carrying amounts and tax bases of assets using enacted tax
rates in effect in the years in which they are expected to reverse. ATMI has
assumed an effective tax rate of 34% at June 30, 1997.
(c) The unaudited pro forma condensed combined balance sheet includes
$2,000,000 of transaction costs anticipated in connection with the
Reorganization and $1,500,000 of transaction costs anticipated in connection
with the Lawrence Acquisition as of June 30, 1997. As of June 30, 1997,
transaction costs of approximately $1,430,000 ($825,000 pertaining to the
Reorganization and $605,000 related to the Lawrence Acquisition), $648,000 and
$512,000 for ATMI, the ADCS Group and Lawrence, respectively, were included in
other current assets. The pro forma condensed combined balance sheet has been
adjusted to eliminate such costs and to recognize additional accrued expenses
equivalent to the expected transaction costs associated with the Reorganization
and the Lawrence Acquisition anticipated as of June 30, 1997. Retained earnings
has been adjusted to reflect a net of tax charge to earnings as if the
Reorganization and the Lawrence Acquisition had occurred on such date.
Additionally, Lawrence incurred a fee of approximately
P-8
<PAGE>
$750,000 to its investment banker and a break-up fee in connection with
another transaction of approximately $1,800,000 upon consummation of the
Lawrence Acquisition. Such amounts will be reflected as adjustments to the
purchase price and net book value defined in the Lawrence Merger Agreement.
However, because these charges are nonrecurring, they have not been reflected
in the pro forma condensed combined statements of operations.
The unaudited pro forma condensed combined statements of operations do not
include costs associated with the transactions, which are now expected to
approximate $5,400,000 in the aggregate and will be charged to earnings in the
period in which the transactions were consummated. The investment banker and
break-up fees also have not been reflected in the pro forma condensed combined
statements of income because of the nonrecurring nature of these charges.
(d) The calculation of net income per common share has been computed based
upon the weighted average shares outstanding as derived from the historical
consolidated financial statements of ATMI and historical combined financial
statements of the ADCS Group and Lawrence.
(e) Net income per common share has been computed based upon the combined
weighted average number of common shares outstanding of ATMI and the equivalent
shares exchanged in the pooling of interests for the Exchange of 5,468,747
shares and for the Lawrence Acquisition of 3,628,571 shares.
(f) Net income and net income per common share for the year ended December
31, 1996 have been presented to include tax amounts as if the ADCS Group were
a C Corporation for the full year. Actual net income and net income per common
share, based on the ADCS Group's historical financial statements, were
$6,027,000 and $9,948.32, respectively, as a result of the ADCS Group's S-
Corporation status for a portion of the year ended December 31, 1996.
P-9
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Date: December 22, 1997 ATMI, INC.
/s/ Daniel P. Sharkey
---------------------
Daniel P. Sharkey
Treasurer and Secretary
- 6 -
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- - -------------- -----------
2.01 Agreement and Plan of Merger and Exchange by and among Advanced
Technology Materials, Inc., ATMI Holdings, Inc., Alamo Merger,
Inc., Advanced Delivery & Chemical Systems Nevada, Inc.,
Advanced Delivery & Chemical Systems Manager, Inc., Advanced
Delivery & Chemical Systems Holdings, LLC, Advanced Delivery &
Chemical Systems Operating, LLC and Advanced Delivery & Chemical
Systems, Ltd. dated as of April 7, 1997 (Exhibit 2.01 to
Advanced Technology Materials, Inc. Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, File No. 0-22756
("June 30, 1997 Form 10-Q")). (1)
2.02(a) Agreement and Plan of Merger by and among Advanced Technology
Materials, Inc., ATMI Holdings, Inc., Welk Acquisition
Corporation, Lawrence Semiconductor Laboratories, Inc. and
Lawrence Semiconductor Laboratories Marketing and Sales, Inc.
dated as of May 17, 1997 (Exhibit 2.02(a) to June 30, 1997 Form
10-Q). (1)
(b) First Amendment to Agreement and Plan of Merger dated as of June
6, 1997 (Exhibit 2.02(b) to June 30, 1997 Form 10-Q). (1)
(c) Second Amendment to Agreement and Plan of Merger dated as of
July 30, 1997 (Exhibit 2.02(c) to June 30, 1997 Form 10-Q). (1)
4.01 Specimen of the Registrant's Common Stock Certificate (Exhibit
4.01 to the Registrant's registration statement and amendments
thereto on Form S-4, Registration No. 333-35323). (1)
23.01 Consent of Ernst & Young LLP. (2)
23.02 Consent of Ernst & Young LLP. (2)
23.03 Consent of Price Waterhouse LLP. (2)
99.01 Supplemental Consolidated Financial Statements of ATMI, Inc. for
years ended December 31, 1994, 1995 and 1996 (as restated to
reflect the acquisitions of Advanced Delivery & Chemical Systems
and affiliates and Lawrence Semiconductor Laboratories, Inc. and
affiliate, each on October 10, 1997). (2)
99.02 Supplemental Interim Consolidated Financial Statements of ATMI,
Inc. for the nine months ended September 30, 1996 and 1997 (as
restated to reflect the acquisitions of Advanced Delivery &
Chemical Systems and affiliates and Lawrence Semiconductor
Laboratories, Inc. and affiliate, each on October 10, 1997). (2)
-------------
(1) Incorporated by reference herein.
(2) Filed herewith.
E-1
<PAGE>
Exhibit 23.01
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
pertaining to the 1987 Stock Option Plan (Form S-8 No. 33-77060) and the
Registration Statement pertaining to the 1995 Stock Option Plan (Form S-8, No.
33-93048) of Advanced Technology Materials, Inc. of our report dated May 9, 1997
with respect to the combined financial statements of Advanced Delivery &
Chemical Systems and Affiliates included in the ATMI, Inc. Current Report on
Form 8-K/A dated October 10, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Austin, Texas
December 17, 1997
<PAGE>
Exhibit 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
pertaining to the 1987 Stock Option Plan (Form S-8 No. 33-77060) and the
Registration Statement pertaining to the 1995 Stock Option Plan (Form S-8 No.
33-93048) of Advanced Technology Materials, Inc. of our report dated December
15, 1997 with respect to the supplemental consolidated financial statements of
ATMI, Inc. included in its Current Report on Form 8-K/A dated October 10, 1997,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Stamford, Connecticut
December 17, 1997
<PAGE>
Exhibit 23.03
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-77060 and 33-93048) of ATMI, Inc. of our reports
dated May 17, 1997, except for the last paragraph of Note 3 which is as of July
29, 1997 and the last paragraph of Note 6 which is as of December 18, 1997
pertaining to the combined financial statements of Lawrence Semiconductor
Laboratories, Inc. and Affiliate appearing in ATMI, Inc.'s Current Report on
Form 8-K/A.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Phoenix, Arizona
December 18, 1997
<PAGE>
Exhibit 99.01
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
ATMI, Inc.
We have audited the supplemental consolidated balance sheets of ATMI, Inc.
(formed as a result of the consolidation of Advanced Technology Materials, Inc.,
Advanced Delivery & Chemical Systems Nevada, Inc. and its affiliates (the "ADCS
Group") and Lawrence Semiconductor Laboratories, Inc.) as of December 31, 1996
and 1995, and the related supplemental consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. The supplemental consolidated financial statements
give retroactive effect to the mergers of Advanced Technology Materials, Inc.,
the ADCS Group, and Lawrence Semiconductor Laboratories, Inc. on October 10,
1997, which have been accounted for using the pooling of interests method as
described in the notes to the supplemental consolidated financial statements.
These supplemental financial statements are the responsibility of the management
of ATMI, Inc. Our responsibility is to express an opinion on these supplemental
financial statements based on our audits. We did not audit the financial
statements of Lawrence Semiconductor Laboratories, Inc., which statements
reflect total assets constituting 33% for 1996 and 24% for 1995 of the related
supplemental consolidated financial statement totals, and which reflect total
net income constituting approximately 24% of the related supplemental
consolidated financial statement totals for the three year period ended December
31, 1996. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Lawrence Semiconductor Laboratories, Inc., is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
supplemental financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ATMI, Inc. at December
31, 1996 and 1995, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, after
giving retroactive effect to the mergers of Advanced Technology and Materials,
Inc., the ADCS Group and Lawrence Semiconductor Laboratories, Inc., as described
in the notes to the supplemental consolidated financial statements, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Stamford, Connecticut
December 15, 1997
-1-
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Lawrence Semiconductor Laboratories, Inc. and Affiliate
In our opinion, the combined balance sheets and the related combined statements
of income and retained earnings and of cash flows of Lawrence Semiconductor
Laboratories, Inc. and Affiliate (Lawrence) (not presented separately herein)
present fairly, in all material respects, the financial position of Lawrence
Semiconductor Laboratories, Inc. and Affiliate at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Lawrence's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Phoenix, Arizona
May 17, 1997, except for the last paragraph of
Note 3 which is as of July 29, 1997 and the last
paragraph of Note 6 which is as of December 18, 1997.
-2-
<PAGE>
ATMI, Inc.
Supplemental Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 1) $ 12,574,000 $ 11,962,000
Marketable securities (Notes 1 and 2) 18,238,000 21,856,000
Accounts receivable, net of allowance for doubtful accounts of
$361,000 in 1996 and $109,000 in 1995 (Note 3) 13,804,000 12,890,000
Notes and other receivables (Note 3) 2,933,000 1,397,000
Inventories (Notes 1 and 4) 7,769,000 3,579,000
Other 718,000 659,000
- - ---------------------------------------------------------------------------------------------------------------
Total current assets 56,036,000 52,343,000
Property and equipment, net (Notes 1 and 5) 30,660,000 19,522,000
Goodwill and other long-term assets, net (Notes 1 and 10) 6,495,000 6,725,000
===============================================================================================================
$ 93,191,000 $ 78,590,000
===============================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Notes payable, current portion (Note 6) $ 2,059,000 $ 5,808,000
Capital lease obligations, current portion (Note 7) 1,837,000 959,000
Accounts payable 5,219,000 4,905,000
Accrued expenses 3,921,000 4,841,000
Accrued commissions 1,379,000 984,000
Accrued litigation settlement (Note 12) 2,000,000 -
Deferred income taxes (Note 8) 1,989,000 -
Other 1,046,000 625,000
- - ---------------------------------------------------------------------------------------------------------------
Total current liabilities 19,450,000 18,122,000
Notes payable, less current portion (Note 6) 10,342,000 8,835,000
Capital lease obligations (Note 7) 5,427,000 3,140,000
Deferred income taxes (Note 8) 1,873,000 2,659,000
Other long-term liabilities 81,000 181,000
Minority interest 545,000 535,000
Stockholders' equity (Note 9):
Preferred stock, par value $.01: 2,000,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01: 30,000,000 shares authorized;
Issued 17,873,128 in 1996 and 17,818,929 in 1995 179,000 178,000
Additional paid-in capital 37,431,000 37,257,000
Cumulative translation adjustment (55,000) (10,000)
Retained earnings 17,918,000 7,693,000
- - ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity 55,473,000 45,118,000
===============================================================================================================
$ 93,191,000 $ 78,590,000
===============================================================================================================
</TABLE>
See accompanying notes.
- 3 -
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------
1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues (Note 1):
Product revenues $ 78,815,000 $ 51,460,000 $ 27,537,000
Contract revenues 9,846,000 8,712,000 7,223,000
- - ---------------------------------------------------------------------------------------------------------------
Total revenues 88,661,000 60,172,000 34,760,000
Cost of revenues:
Cost of product revenues 32,890,000 22,232,000 11,588,000
Cost of contract revenues 8,341,000 7,491,000 6,151,000
- - ---------------------------------------------------------------------------------------------------------------
Total cost of revenues 41,231,000 29,723,000 17,739,000
- - ---------------------------------------------------------------------------------------------------------------
Gross profit 47,430,000 30,449,000 17,021,000
Operating expenses:
Research and development (Note 1) 9,838,000 5,697,000 3,981,000
Selling, general and administrative 22,590,000 15,886,000 9,308,000
- - ---------------------------------------------------------------------------------------------------------------
32,428,000 21,583,000 13,289,000
- - ---------------------------------------------------------------------------------------------------------------
Operating income 15,002,000 8,866,000 3,732,000
Interest income 1,639,000 963,000 553,000
Interest expense (Note 6) (1,635,000) (1,320,000) (803,000)
Other income (expense), net (Notes 10 and 11) 18,000 (543,000) 3,769,000
- - ---------------------------------------------------------------------------------------------------------------
Income before taxes and minority interest 15,024,000 7,966,000 7,251,000
Income taxes (Note 8) 3,158,000 2,888,000 1,728,000
- - ---------------------------------------------------------------------------------------------------------------
Income before minority interest 11,866,000 5,078,000 5,523,000
Minority interest 151,000 10,000 12,000
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
Net income $ 12,017,000 $ 5,088,000 $ 5,535,000
===============================================================================================================
Net income per share (Notes 1 and 9) $0.65 $0.30 $0.33
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (Note 1) 18,456,000 17,171,000 16,693,000
===============================================================================================================
</TABLE>
See accompanying notes.
- 4 -
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Retained
Additional Cumulative Earnings/
Common Paid-in Capital Translation (Accumulated
Stock Adjustment Deficit) Total
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ 160,000 $ 19,595,000 $ - $ (2,930,000) $ 16,825,000
Issuance of 24,440 common shares
pursuant to the exercise of employee stock
options - 12,000 - 12,000
Issuance of 74,017 common shares pursuant to the
exercise of warrants 1,000 37,000 - 38,000
Net income - - 5,535,000 5,535,000
- - -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 161,000 19,644,000 - 2,605,000 22,410,000
Issuance of 137,571 common shares
pursuant to the exercise of employee stock
options 1,000 183,000 - 184,000
Sale of 1,525,000 common shares, net of issuance
costs of $1,489,000 16,000 17,177,000 - 17,193,000
Issuance of 20,000 common shares
pursuant to the acquisition of Epitronics - 203,000 - 203,000
Compensation from the issuance of common
stock options - 50,000 - 50,000
Cumulative translation adjustment (10,000) (10,000)
Net income - - 5,088,000 5,088,000
- - -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 178,000 37,257,000 (10,000) 7,693,000 45,118,000
Issuance of 54,199 common shares
pursuant to the exercise of employee stock
options 1,000 174,000 - 175,000
Distributions to stockholders - - (1,792,000) (1,792,000)
Cumulative translation adjustment (45,000) (45,000)
Net income - - 12,017,000 12,017,000
- - -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 179,000 $ 37,431,000 $ (55,000) $ 17,918,000 $ 55,473,000
===============================================================================================================================
</TABLE>
See accompanying notes.
- 5 -
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------
1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 12,017,000 $ 5,088,000 $ 5,535,000
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation and amortization 4,678,000 3,179,000 2,306,000
Gain on restructuring of joint venture - - (4,610,000)
Stock option compensation - 50,000 -
Gain on disposal of property and equipment - - (21,000)
Bad debt expense 191,000 16,000 -
Deferred income taxes 1,204,000 1,160,000 626,000
Loss on sale/leaseback of equipment - 542,000 -
Minority interest in net earnings of subsidiaries (151,000) (10,000) (12,000)
Changes in operating assets and liabilities
Increase in accounts and notes receivable (2,031,000) (5,505,000) (2,109,000)
Increase in inventory (4,415,000) (830,000) (705,000)
Increase in other assets (231,000) (259,000) (19,000)
Increase in accounts payable 313,000 1,341,000 1,052,000
Increase in accrued expenses 3,045,000 1,062,000 623,000
(Decrease) increase in other liabilities (1,395,000) 1,352,000 546,000
- - ---------------------------------------------------------------------------------------------------------------------------
Total adjustments 1,208,000 2,098,000 (2,323,000)
- - ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,225,000 7,186,000 3,212,000
- - ---------------------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (11,591,000) (6,328,000) (3,038,000)
Long-term investment - (1,000,000) -
Sale (purchase) of marketable securities, net 3,617,000 (11,213,000) 2,433,000
Advances to shareholder on notes receivable (286,000) (256,000) (158,000)
Payments for acquisitions (4,000,000) (550,000) (93,000)
Proceeds from sale of assets 619,000 384,000 -
Net cash received from joint venture restructuring - - 2,457,000
- - ---------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (11,641,000) (18,963,000) 1,601,000
- - ---------------------------------------------------------------------------------------------------------------------------
Financing activities
Proceeds from issuance of notes payable 4,447,000 3,226,000 1,414,000
Principal payments on notes payable (2,553,000) (1,933,000) (1,314,000)
Distribution to shareholders (1,792,000) - -
Repayment of amounts borrowed (135,000) (235,000) -
Payments on capital lease obligations (1,274,000) (995,000) (838,000)
Proceeds from sale of common stock - 17,193,000 -
Cash contributed by minority partner 161,000 539,000 18,000
Proceeds from exercise of stock options and warrants 174,000 113,000 49,000
- - ---------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (972,000) 17,908,000 (671,000)
- - ---------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 612,000 6,131,000 4,142,000
Cash and cash equivalents, beginning of year 11,962,000 5,831,000 1,689,000
===========================================================================================================================
Cash and cash equivalents, end of year $ 12,574,000 $ 11,962,000 $ 5,831,000
===========================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
Advanced Technology Materials, Inc. underwent a reorganization involving the
creation of a new holding company (ATMI, Inc. the successor registrant of
Advanced Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly owned subsidiary of the holding company. In
addition, these supplemental consolidated financial statements give retroactive
effect to the acquisitions of Advanced Delivery & Chemical Systems Nevada Inc.,
and related entities (the "ADCS Group") and Lawrence Semiconductor Laboratories,
Inc. and Affiliate ("LSL") which have been accounted for using the pooling-of-
interests method. These supplemental financial statements will become the
Company's primary historical financial statements upon issuance of financial
statements that include the date of consummation of all of the above-described
transactions. Both of these acquisitions occurred on October 10, 1997, as part
of the consummation of the transactions described in Note 11 below. The
accompanying audited financial statements are those of ATMI, Inc. ("ATMI"), the
newly formed company, and have been prepared in accordance with the instructions
to Form 10-K and Article 3 of Regulation S-X and include all of the financial
information and disclosures required by generally accepted accounting
principles.
Company's Activities
ATMI, Inc. together with its subsidiaries ("the Company") is a leading supplier
of thin film materials, equipment and services used worldwide in the manufacture
of semiconductor devices. The Company targets high growth consumable and
equipment markets within the semiconductor industry with proprietary and
patented products based on chemical vapor deposition ("CVD") technology.
Specifically, the Company provides, a broad range of ultrahigh purity thin film
materials and related delivery systems, a full line of point-of-use
semiconductor environmental equipment and services, and specialty epitaxial thin
film deposition services.
Principles of Consolidation
The consolidated financial statements include the accounts of ATMI and all
wholly and majority owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Revenue Recognition
Product revenues are recognized upon shipment of goods. Contract revenues under
fixed-price and cost-reimbursement-type contracts are recognized using the
percentage of completion method based upon costs incurred and estimated future
costs. Provisions for expected losses on contracts are recorded in the period
when incurred. Revenues under fixed price contracts from the U.S. Government
were $4,046,000 $4,542,000 and $4,201,000 for the years ended December 31, 1996,
1995 and 1994, respectively. Revenues under cost-reimbursement-type contracts
from the U.S. Government were $5,800,000, $4,170,000 and $2,817,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
-7-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Research and Development
Research and development costs, including materials, labor, and overhead related
to self-funded projects and cost sharing arrangements with the U.S. Government,
are expensed as incurred.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Marketable Securities
Marketable securities are classified as available for sale and are reported at
fair value, which approximates cost. Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. The cost of securities sold is based
on the specific identification method. Interest on these securities is included
in interest income.
Inventories
Inventories are stated at the lower of cost or market using the first-in, first-
out (FIFO) method.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization of
property and equipment is computed using the straight-line method over the
estimated useful lives of the assets, which vary from three to thirty-five
years.
Foreign Currency Translation
Adjustments relating to the translation of foreign currency to U.S. dollars are
reported as a separate component of stockholders' equity. Gains or losses
resulting from foreign currency transactions are included in other income
(expense) and are immaterial.
-8-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under
FAS 109, the liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based upon
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Fair Values of Financial Instruments
The Company's financial instruments include cash and cash equivalents, accounts
receivable, short-term investments and short-term debt. Marketable securities
are accounted for at fair value. All other financial instruments are accounted
for on a historical cost basis which, due to the nature of these instruments,
approximates fair value at the balance sheet dates.
Long Lived Assets
The Company reviews on a periodic basis the value of its long-lived assets to
determine whether an impairment exists. At December 31, 1996, no such
impairment existed. Goodwill and other long term assets are stated net of
accumulated amortization of $293,000 and $75,000 at December 31, 1996 and 1995,
respectively.
Stock Based Compensation
Effective in fiscal year 1996, the Company adopted Financial Accounting
Statement No. 123, "Accounting for Stock-Based Compensation." This statement
defines a fair value based method of accounting for employee stock compensation
plans. However, it also allows an entity to continue to measure compensation
cost for those plans in accordance with Accounting Principle Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25,
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date over the amount the employee must pay to acquire the stock.
The company has elected to continue to account for its employee stock
compensation plans under APB No. 25. Pro forma disclosures of net earnings and
earnings per share, as if the fair value based method of accounting had been
applied, are presented in Note 9.
-9-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Per Share Data
Earnings per common share are computed using the treasury stock method based on
the weighted average number of common shares and common stock equivalent shares
outstanding during the period. Shares outstanding have been restated to include
those shares that would have been issued in connection with the acquisitions of
the ADCS Group, LSL and Vector Technical Group, Inc. ("Vector") (see Note 10) in
each of the periods presented. Shares from the assumed exercise of options and
warrants granted by the Company have been included in the computations of
earnings per share for all periods, unless their inclusion would be
antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
This Statement simplifies the computation of earnings per share and makes the
computation more consistent with those of other countries. The implementation
will require the disclosure of basic and diluted earnings per share. The
Company will adopt this Statement during the fourth quarter of 1997. Pro forma
basic earnings per share under the new computation are $0.67, $0.31, and $0.34
for the years ended December 31, 1996, 1995, 1994, respectively. The impact of
Statement 128 on the calculation of fully diluted earnings per share for these
periods was not material.
2. Marketable Securities
Marketable securities are comprised of the following:
December 31,
------------------------------------------
1996 1995
------------------- -------------------
Corporate obligations $ 7,431,000 $ 7,775,000
U.S. Government obligations 9,538,000 14,081,000
Certificates of deposit 1,269,000 -
------------------- -------------------
$ 18,238,000 $ 21,856,000
=================== ===================
All of the Company's marketable securities have maturities of less than two
years.
3. Accounts and Notes Receivable
Amounts due from various agencies of the U.S. Government were approximately
$2,063,000 and $2,031,000 of accounts receivable at December 31, 1996 and 1995,
respectively. Unbilled accounts receivable were $757,000 and $586,000 and
customer advances, included in other liabilities, were $276,000 and $447,000 at
December 31, 1996 and 1995, respectively.
-10-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
3. Accounts and Notes Receivable (continued)
Notes receivable include advances to a shareholder which bear interest at 7% and
are due upon demand. The balances at December 31, 1996 and 1995 are $1,099,000
and $813,000, respectively and included accrued interest of $126,000 and
$70,000, respectively. Interest income on the notes totaled $56,000, $32,000
and $18,000, in years ended December 31, 1996, 1995 and 1994, respectively. In
addition notes receivable of $1,834,000 and $584,000 at December 31, 1996 and
1995, respectively, are for use of the Company's epitaxial reactors and
advances made to Lawrence Semiconductor Investments, Inc., an entity which is
owned by a significant shareholder of the Company.
Credit is extended to commercial customers based on an evaluation of their
financial condition, and collateral is not generally required. The evaluation of
financial condition is performed to reduce the risk of loss. The Company has
not experienced any material losses due to uncollectible accounts receivables
since inception. Certain transactions with foreign customers are supported by
letters of credit. The Company maintains an allowance for doubtful accounts at
a level that management believes is sufficient to cover potential credit losses.
4. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Raw materials $5,538,000 $2,779,000
Manufacturing spare parts 1,266,000 406,000
Work in process 687,000 614,000
Finished goods 937,000 59,000
---------------- ----------------
8,428,000 3,858,000
Obsolescence reserve (659,000) (279,000)
---------------- ----------------
$7,769,000 $3,579,000
================ ================
</TABLE>
5. Property and Equipment
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1995
----------------- ----------------
<S> <C> <C>
Land $ 1,751,000 $ 1,242,000
Buildings 4,947,000 211,000
Machinery and equipment 33,646,000 24,192,000
Furniture and fixtures 1,157,000 722,000
Leasehold improvements 3,788,000 3,929,000
---------------- ---------------
45,289,000 30,296,000
Accumulated depreciation
and amortization (14,629,000) (10,774,000)
----------------- ----------------
$30,660,000 $19,522,000
================= ================
</TABLE>
-11-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
5. Property and Equipment (continued)
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 was
$4,277,000, $3,104,000 and $2,306,000, respectively.
6. Notes Payable
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1995
------------------ ---------------
<S> <C> <C>
Note payable in conjunction with acquisition of Guardian Systems,
bearing interest at 5.4%, due on January 4, 1996. $ - $4,000,000
Note payable in conjunction with acquisition of Guardian Systems,
bearing interest at 8.5% and 8.25% at December 31, 1996 and 1995,
due in three annual installments beginning January 1, 1999 2,000,000 2,000,000
Term loans with a Connecticut state agency, bearing interest ranging
between 5%-6%, due between April 2001-June 2002 1,800,000 1,300,000
Equipment credit line with a commercial bank, bearing interest at
9% and 9.5% at December 31, 1996 and 1995, respectively, due
through June 2000 1,701,000 2,019,000
Notes payable with commercial banks and leasing companies, bearing
interest ranging between 7.3%-12.42%, due between April
1997-February 2009 6,835,000 4,661,000
Other notes payable 65,000 663,000
------------------ ---------------
12,401,000 14,643,000
Less current portion (2,059,000) (5,808,000)
------------------ ---------------
$10,342,000 $8,835,000
================== ===============
</TABLE>
-12-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
6. Notes Payable (continued)
The approximate aggregate debt maturities are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31:
1997 $ 2,059,000
1998 2,161,000
1999 2,058,000
2000 1,111,000
2001 1,442,000
Thereafter 3,570,000
----------------
$12,401,000
================
</TABLE>
The term loans of $1,800,000 are collateralized by various equipment, leasehold
improvements and renovations in the Company's Connecticut facility. The
Company's equipment credit line bears interest at prime plus 1/2% per annum and
is collateralized by certain assets. The Company is in compliance with the
credit line covenants, including maintaining certain liquidity, leverage, and
tangible net worth levels.
The majority of the Company's notes payable are secured by the related real
property or equipment. Certain of the notes payable contain covenants requiring
the Company to maintain compliance with debt to tangible net worth, debt service
coverage and current assets to current liabilities ratios as defined in the
related agreements. The Company is in compliance with the notes payable
covenants. In December, 1996, the Company obtained a $10 million unsecured line
of credit with a commercial bank which permits borrowing levels tied to a
percentage of accounts receivable and inventories. This line bears interest at
prime (with LIBOR options) and expires on December 26, 1997. There were no
borrowings under this line at December 31, 1996. Interest paid was $1,631,000,
$1,318,000 and $803,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company has never declared or paid cash dividends on its stock. The Company
does not anticipate paying any cash dividends in the foreseeable future. Certain
of the Company's subsidiaries' financing agreements contain limitations or
prohibitions on the payment of dividends without the lender's consent.
7. Leases
The Company is obligated under capital leases for certain machinery and
equipment that expire at various dates during the next five years. The gross
amount of machinery and equipment under the capital leases and the related
accumulated depreciation at December 31, were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
<S> <C> <C>
Machinery and equipment $10,151,000 $5,711,000
Accumulated depreciation (2,230,000) (1,650,000)
================ ===============
$7,921,000 $4,061,000
================ ===============
</TABLE>
-13-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
7. Leases (continued)
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1996:
<TABLE>
<CAPTION>
Capital
Year ending December 31: Leases
----------------
<S> <C>
1997 $ 2,390,000
1998 2,327,000
1999 1,923,000
2000 1,144,000
2001 520,000
----------------
Total lease payments 8,304,000
Less amount representing interest (1,040,000)
----------------
Present value of net capital lease payments 7,264,000
Less current portion (1,837,000)
----------------
Long-term portion $ 5,427,000
================
</TABLE>
The Company has commitments from two lessors to provide capital lease financing
totaling $7.3 million in 1997. The commitments require the Company to maintain
compliance with certain financial ratios.
The Company leases office and manufacturing facilities, and certain
manufacturing equipment under several operating leases. The lease for its
Danbury, Connecticut facility expires in August 2005 while the EcoSys San Jose,
California facility leases expire in March 2003 and the Epitronics Phoenix,
Arizona facility lease expires in August 1999. ADCS leases office space under a
lease which expires in May 2000. The manufacturing equipment leases expire in
years 1997 through 2001. Rental expense was $2,322,000, $1,018,000 and $449,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
The following is a schedule of future minimum lease payments for operating
leases as of December 31, 1996:
<TABLE>
<CAPTION>
Operating
Year ending December 31: Leases
----------------
<S> <C>
1997 $ 2,400,000
1998 2,266,000
1999 2,165,000
2000 1,399,000
2001 916,000
Thereafter 1,827,000
----------------
Total minimum lease payments $10,973,000
================
</TABLE>
-14-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
8. Income Taxes
Significant components of the provision for income taxes for the years ended
December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,421,000 $ 1,254,000 $ 894,000
State 532,000 305,000 200,000
------------------ ------------------ ------------------
Total current 1,953,000 1,559,000 1,094,000
Deferred:
Federal 914,000 1,092,000 505,000
State 291,000 237,000 129,000
------------------ ------------------ ------------------
Total deferred 1,205,000 1,329,000 634,000
------------------ ------------------ ------------------
Income tax provision $ 3,158,000 $ 2,888,000 $ 1,728,000
================== ================== ==================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities $ 1,063,000 $ 282,000
Net operating loss carryforwards and tax credits 829,000 2,305,000
Inventory reserves 577,000 281,000
Other, net 702,000 590,000
----------------- -----------------
3,171,000 3,458,000
Valuation allowance (1,706,000) (2,868,000)
----------------- -----------------
Net deferred tax assets 1,465,000 590,000
Deferred tax liabilities:
Depreciation 1,136,000 549,000
Capital leases 1,033,000 916,000
Other, net 3,158,000 1,784,000
----------------- -----------------
(5,327,000) (3,249,000)
================= =================
Net deferred tax liabilities in the financial statements $ (3,862,000) $ (2,659,000)
================= =================
</TABLE>
At December 31, 1996, the Company had loss carryforwards for United States
federal income tax purposes of approximately $2,800,000 and research and
development tax credit carryforwards of approximately $326,000 expiring in 2001
through 2010. It also had alternative minimum tax credit carryforwards of
approximately $85,000, with no expiration. For state tax purposes, the Company
had loss carryforwards of approximately $1,800,000 expiring between 1997 and
2000. For financial reporting purposes, a valuation allowance of $1,706,000 and
$2,868,000 at December 31, 1996 and 1995, respectively, has been recognized
based upon Advanced Technology Materials, Inc.'s cumulative tax loss position
for such periods and to offset those deferred tax assets related to
carryforwards which are limited due to the provisions of Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code"). Income taxes paid for
the years ended December 31, 1996, 1995, and 1994 were $3,894,000, $273,000, and
$343,000, respectively.
-15-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
8. Income Taxes (continued)
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to the Company's tax expense is:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate $ 5,160,000 $ 2,712,000 $ 2,467,000
State income taxes 669,000 407,000 285,000
Income not subject to federal income taxation (1,483,000) - -
Net operating loss carryforward utilization (1,263,000) (263,000) (894,000)
Other, net 75,000 32,000 (130,000)
----------------- ---------------- ----------------
$ 3,158,000 $ 2,888,000 $ 1,728,000
================= ================ ================
</TABLE>
Prior to ATMI's acquisition of the ADCS Group, the stockholders of Advanced
Delivery & Chemical Systems Nevada, Inc. ("ADCS Nevada") elected S-Corporation
status effective April 1, 1996. In October 1996, as a result of a transfer of
shares to an ineligible S-Corporation shareholder, the S status was terminated.
During the period that ADCS Nevada was an S-Corporation, its earnings were not
subject to federal corporate income tax. Additional federal corporate income tax
of $1,483,000 would have resulted if ADCS Nevada been taxed as a C-Corporation
for all of 1996, and the pro forma consolidated net income and net income per
share for ATMI for the year ended December 31, 1996 would have been $10,534,000
and $0.57, respectively.
Korea has granted the Company a five year full income tax exemption from the
year in which ADCS-Korea Co., Ltd. ("ADCS-Korea") has taxable income, and an
additional three year 50% exemption. Since ADCS-Korea has not yet generated any
taxable income, the expiration date is not currently determinable.
The Company has identified and analyzed certain deductions taken in tax returns
and if such deductions are challenged, it believes that it has meritorious
defenses and would vigorously defend the deductions. Management believes that if
examined, the likelihood that any resulting adjustments would be material to the
financial statements is remote. As there have been no challenges or judgments
against the Company in connection with this issue, no amounts have been provided
for in the financial statements.
9. Stockholders' Equity
In October 1995, the Company completed a public offering of 1,600,000 shares of
common stock at $12.25 per share. Net proceeds to the Company of $17,193,000
were from 1,525,000 shares sold by the Company while 75,000 shares were sold for
various selling shareholders. Costs of the offering, including underwriting
commissions, amounted to $1,489,000.
-16-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
9. Stockholder's Equity (continued)
Stock Plans
In May 1995, the Company's shareholders approved the adoption of the 1995 Stock
Plan ("1995 Plan"), which provides for the granting of up to 500,000
nonqualified stock options, "incentive stock options" ("ISOs") and stock
appreciation rights to employees, directors and consultants of the Company.
The Company's 1987 Stock Plan (the "1987 Plan"), as amended, provides for the
granting of up to 1,115,833 nonqualified stock options and "incentive stock
options" ("ISOs").
Under the terms of both stock plans, nonqualified options granted may not be at
a price of less than 50% of the fair market value of the common stock, and ISOs
granted may not be at a price of less than 100% of fair market value of the
common stock on the date of grant.
Options are generally exercisable commencing one year after the date of grant at
the rate of 20% per annum on a cumulative basis. Nonqualified options expire up
to ten years and one month from the date of grant, and ISOs expire five to ten
years from the date of grant.
Number of Option Price
Shares Per Share
-------------- -----------------
Options outstanding at December31, 1993 724,046 $ .28 - $ 7.00
Granted 156,900 $ 5.00 - $ 6.38
Canceled (22,910) $ .44 - $ 7.00
Exercised (24,440) $ .28 - $ .53
-------- ----------------
Options outstanding at December 31, 1994 833,596 $ .28 - $ 7.00
Granted 305,950 $ 6.88 - $ 13.88
Canceled (27,670) $ .53 - $ 6.38
Exercised (137,571) $ .28 - $ 5.50
--------- ----------------
Options outstanding at December 31, 1995 974,305 $ .28 - $13.88
Granted 92,500 $ 9.88 - $17.63
Canceled (53,590) $ .53 - $12.50
Exercised (54,999) $ .28 - $12.50
-------- ---------------
Options outstanding at December 31, 1996 958,216 $ .28 - $17.63
======= ===============
At December 31, 1996, options for 567,066 shares are exercisable, and options
for 239,043 shares are available for grant. The weighted average exercise price
of options are $4.99 and $3.43 for 1996 and 1995, respectively. The weighted
average remaining contractual life of these options is 6.5 years.
-17-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
9. Stockholder's Equity (continued)
If compensation expense for the Company's plans had been determined for all
stock option grants based on the fair value at the grant dates for awards under
those plans, consistent with the method described in SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below:
1996 1995
--------------- --------------
Net income: $11,695,000 $5,022,000
Earnings per share: $.63 $.29
During the initial phase-in period, as required by SFAS No. 123, the pro forma
amounts were determined based on the stock option grants subsequent to January
1, 1995. Therefore, the pro forma amounts presented may not be indicative of the
effects of compensation cost on net earnings and earnings per share in future
years due to the timing of stock option grants and considering that options
generally vest over a five year period.
The fair value of each option grant, for pro forma disclosure purposes, was
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions for 1996 and 1995:
1996 1995
------------- -------------
Expected dividend yield None None
Risk free interest rate 6.25% 6.10%
Expected volatility 54.6% 58.2
Expected life of options 7.5 years 7.5 years
The weighted average fair value of stock options granted in 1996 and 1995 was
$8.21 and $6.72, respectively.
Warrants
In connection with its initial public offering, the Company granted warrants to
its underwriters to purchase 131,250 common shares at $11.25 per share, which
became exercisable on November 23, 1994 and expire on November 23, 1998.
Additional warrants have been granted to agencies of the State of Connecticut in
connection with certain loan agreements with those agencies. These warrants are
for an aggregate of 70,000 shares at exercise prices ranging from $10.13 to
$11.25, of which 30,000 were vested as of December 31, 1996.
-18-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
10. Mergers, Acquisitions and Joint Ventures
On October 10, 1997, pursuant to an Agreement and Plan of Merger and Exchange
dated April 7, 1997 (the "Merger and Exchange Agreement"), the Company issued
5,468,747 of its Common Stock in exchange for all the ownership interests of the
ADCS Group. The ADCS Group manufactures, markets and designs ultrahigh purity
specialty thin film materials and related delivery equipment for the
semiconductor and semiconductor equipment manufacturing industries. The Company
is continuing the business of the ADCS Group and integrating its semiconductor
thin film and delivery systems product lines of the NovaMOS division into the
ADCS business.
In order to accomplish the tax-free and pooling of interest treatment of the
transaction contemplated by the Merger and Exchange Agreement, Advanced
Technology Materials, Inc. underwent a reorganization involving the creation of
a new holding company (ATMI, Inc. - the successor registrant of Advanced
Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly-owned subsidiary of the holding company. Pursuant
to the reorganization, each outstanding share of common stock of Advanced
Technology Materials, Inc. ("ATM") was converted into one share of the Company's
Common Stock. The reorganization was intended to be a tax-free transaction under
the Code and has been accounted for as a pooling of interests.
Also on October 10, 1997, pursuant to an Agreement and Plan of Merger, dated as
of May 17, 1997, as amended (the "Lawrence Merger Agreement"), the Company
issued 3,628,571 shares of the Company's Common Stock in exchange for all of the
outstanding common stock of LSL in a merger transaction. As a result, LSL became
a wholly-owned subsidiary of the Company. The amount of shares issued in
connection with this merger may be subject to adjustment based on the change in
the net book value of LSL since December 31, 1996. LSL is an outsourcer of
epitaxial processing of silicon wafers using chemical vapor deposition
technology to meet customer specifications. The Company is continuing the
business of LSL by integrating it with the Epitronics division of the Company
which develops, manufactures, distributes and sells high performance substrates
and thin film deposition services to the semiconductor industry. The acquisition
of LSL was also intended to be a tax-free transaction under the Code and has
been accounted for as a pooling of interests.
The former securityholders of the ADCS Group and LSL have agreed to indemnify
the Company and certain of its subsidiaries and affiliates from and against
certain losses arising out of breaches of representations and warranties made by
the respective securityholders and for certain tax matters. As security for
these obligations, the former securityholders of the ADCS Group have delivered
750,000 shares of the Company's Common Stock which they received and the former
securityholders of LSL have delivered five percent of the LSL consideration
received into escrow in connection with the acquisitions by the Company of the
ADCS Group and LSL.
-19-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
10. Mergers, Acquisitions and Joint Ventures (continued)
Non-recurring costs of approximately $9,000,000, primarily related to legal
costs, accounting costs, investment banker fees and a break-up fee in connection
with another transaction between LSL and another party, will be recorded as a
one-time charge in the fourth quarter of 1997 in conjunction with the October
1997 closings of the ADCS Group and LSL transactions.
For the years ended December 31, 1996, 1995 and 1994 prior to the acquisitions,
revenues and net income of ADCS and LSL included in the financial statements are
as follows:
Revenues: 1996 1995 1994
--------- --------------------------------------------
ATM $46,350,000 $30,048,000 $19,761,000
ADCS and LSL $42,311,000 $30,124,000 $14,999,000
Net Income: 1996 1995 1994
----------- ---------------------------------------------
ATM $ 3,321,000 $ 554,000 $ 2,636,000
ADCS and LSL $ 8,696,000 $ 4,534,000 $ 2,899,000
On December 30, 1995, the Company acquired certain assets pertaining to the
Guardian Systems ("Guardian") product line of Messer Greisheim Industries, Inc.
for $6,000,000. In connection with this purchase, the Company recorded
approximately $4,900,000 in goodwill to be amortized over twenty years. The
Guardian product line consists of flame oxidation units used in the treatment of
effluent in the semiconductor industry. The product line has become part of the
Company's Ecosys operation.
On May 8, 1995, the ADCS Group entered into a joint venture agreement with K.C.
Tech Co., Ltd., an unrelated corporation organized under the laws of the
Republic of Korea, whereby the ADCS Group obtained a 70% interest in a Korean
chusik hoesa, ADCS-Korea. The purpose of the joint venture is to manufacture,
sell and distribute chemicals to the semiconductor and related industries in
Korea.
During 1995, the Company also acquired the assets of two businesses in exchange
for 20,000 shares of its Common Stock, $550,000 in cash and a $700,000
promissory note bearing interest at prime plus 1%, payable in equal quarterly
installments beginning in September 1995. In 1996, one of those businesses was
subsequently sold, the $700,000 promissory note was paid in full and a note
receivable of approximately $498,000 was recorded. This note receivable bears
interest at 8% and is payable on October 31, 1999.
The pro forma unaudited results of operations for the years ended December 31,
1995 and 1994, for the purchase business combinations indicated above,
consummated as of the beginning of each period presented, are as follows:
-20-
<PAGE>
ATMI, Inc.
Notes to Supplemental Consolidated Financial Statements (continued)
10. Mergers, Acquisitions and Joint Ventures (continued)
1995 1994
---- ----
Revenues $65,590,000 $40,659,000
Net income 5,347,000 5,270,000
Net income per common share $.31 $.32
On September 15, 1994, the Company issued 698,505 shares of its Common Stock and
$93,309 in cash in exchange for all of the issued and outstanding shares of
common stock of Vector. In connection with this acquisition approximately $1.0
million of costs were charged to other income, net, which were non-recurring in
nature and consisted primarily of professional fees, compensation costs, and
provisions for miscellaneous costs associated with the integration and
consolidation of Vector with the Company.
The Vector acquisition was treated as a pooling of interests. For the nine
months ended September 30, 1994 prior to the acquisition, revenues and net
income of Vector included in the financial statements are $3,149,000 and
$208,000, respectively.
11. Asset Sale and Restructuring Agreement
On September 28, 1994, the Company executed an Asset Sale and Restructuring
Agreement whereby certain assets of a majority owned subsidiary, valued at $0.2
million, were sold in exchange for approximately $2.7 million in cash and a
royalty on future sales of certain products. A gain of approximately $4.6
million was recognized as a result of the transaction which is included in other
income, net. Revenue generated by these assets was $4,569,000. The net loss
incurred was $26,000 for the period from January 1, 1994 to September 28, 1994.
12. Commitments and Contingencies
On May 15, 1997, LSL settled patent infringement litigation with an equipment
manufacturer, related to equipment used by LSL that was purchased from another
manufacturer. Under the terms of the related settlement agreement, LSL agreed to
pay the manufacturer $2,000,000 and purchase reactors from the manufacturer
assuming LSL's business conditions justify such purchases. LSL has committed to
purchase a reactor at an approximate fair market value of $2,500,000. LSL
accrued the $2,000,000 relating to the litigation settlement in the accompanying
financial statements for the year ended December 31, 1996.
13. Geographic Data
During 1996, 1995, and 1994, the Company had export sales of approximately 29%,
25%, and 25%, respectively. Sales to Asia, primarily Korea, were approximately
23%, 19% and 19% of the Company's revenues.
-21-
<PAGE>
Quarterly Results of Operations (unaudited)
(Thousands of Dollars, except per share amounts)
<TABLE>
<CAPTION>
1996 ------------------------Quarter------------------------- Year
- - -----------------------------------------------------------------------------------------------------
First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 21,185 $ 22,835 $ 23,056 $ 21,585 $ 88,661
Gross profit 12,473 11,627 12,110 11,220 47,430
Net income 2,915 3,258 4,389 1,455 12,017
Income per share $.16 $.18 $.23 $.08 $.65
1995 ------------------------Quarter------------------------- Year
- - -----------------------------------------------------------------------------------------------------
First Second Third Fourth
Net sales $ 11,655 $ 14,989 $ 15,643 $ 17,885 $ 60,172
Gross profit 5,665 7,875 7,507 9,402 30,449
Net income (1,265) 1,929 1,846 2,578 5,088
Income per share $(.08) $.12 $.11 $.15 $.30
</TABLE>
-22-
<PAGE>
Exhibit 99.02
ATMI, Inc.
Supplemental Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
- - ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,306,000 $ 12,574,000
Marketable securities 15,829,000 18,238,000
Accounts receivable, net 19,184,000 13,804,000
Notes and other receivables 4,376,000 2,933,000
Inventories 9,269,000 7,769,000
Deferred merger costs 6,642,000 -
Other 1,145,000 718,000
- - ---------------------------------------------------------------------------------------------------------------------------
Total current assets 63,751,000 56,036,000
Property and equipment, net 36,164,000 30,660,000
Goodwill and other long-term assets, net 7,626,000 6,495,000
- - ---------------------------------------------------------------------------------------------------------------------------
$ 107,541,000 $ 93,191,000
===========================================================================================================================
Liabilities and stockholders' equity
Current liabilities:
Notes payable, current portion $ 1,562,000 $ 2,059,000
Capital lease obligations, current portion 2,696,000 1,837,000
Accounts payable 4,632,000 5,219,000
Accrued expenses 7,856,000 3,921,000
Accrued commissions 2,295,000 1,379,000
Accrued litigation settlement - 2,000,000
Deferred income taxes 1,052,000 1,989,000
Other 3,549,000 1,046,000
- - ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 23,642,000 19,450,000
Notes payable, less current portion 9,755,000 10,342,000
Capital lease obligations 6,827,000 5,427,000
Deferred income taxes 1,579,000 1,873,000
Other long-term liabilities 88,000 81,000
Minority interest 578,000 545,000
Stockholders' equity:
Preferred stock, par value $.01: 2,000,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01: 30,000,000 shares authorized;
Issued 17,935,973 in 1997 and 17,873,128 in 1996 179,000 179,000
Additional paid-in capital 37,924,000 37,431,000
Cumulative translation adjustment (62,000) (55,000)
Retained earnings 27,031,000 17,918,000
- - ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 65,072,000 55,473,000
- - ---------------------------------------------------------------------------------------------------------------------------
$ 107,541,000 $ 93,191,000
===========================================================================================================================
</TABLE>
See accompanying notes.
-1-
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Operations
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
- - ---------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues:
Product revenues $ 66,427,000 $ 59,597,000
Contract revenues 7,121,000 7,479,000
- - ---------------------------------------------------------------------------------------------------------
Total revenues 73,548,000 67,076,000
Cost of revenues:
Cost of product revenues 29,468,000 24,535,000
Cost of contract revenues 5,974,000 6,331,000
- - ---------------------------------------------------------------------------------------------------------
Total cost of revenues 35,442,000 30,866,000
- - ---------------------------------------------------------------------------------------------------------
Gross profit 38,106,000 36,210,000
Operating expenses:
Research and development 7,863,000 6,927,000
Selling, general and administrative 17,192,000 15,881,000
- - ---------------------------------------------------------------------------------------------------------
25,055,000 22,808,000
- - ---------------------------------------------------------------------------------------------------------
Operating income 13,051,000 13,402,000
Interest income 1,166,000 1,043,000
Interest expense (1,274,000) (1,070,000)
- - ---------------------------------------------------------------------------------------------------------
Income before taxes and minority interest 12,943,000 13,375,000
Income taxes (Note 4) 3,782,000 2,942,000
- - ---------------------------------------------------------------------------------------------------------
Income before minority interest 9,161,000 10,433,000
Minority interest (48,000) 129,000
- - ---------------------------------------------------------------------------------------------------------
Net income (Note 4) $ 9,113,000 $ 10,562,000
=========================================================================================================
Net income per share (Note 4) $0.49 $0.57
- - ---------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 18,730,000 18,460,000
=========================================================================================================
</TABLE>
See accompanying notes.
- 2 -
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Nine months ended September 30,
1997 1996
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited) (Unaudited)
Operating activities
Net income $ 9,113,000 $ 10,562,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,936,000 3,064,000
Deferred income taxes (1,231,000) (162,000)
Minority interest in net earnings of subsidiaries 33,000 51,000
Changes in operating assets and liabilities
Increase in accounts and notes receivable (6,823,000) (1,556,000)
Increase in inventory (1,500,000) (3,617,000)
Increase in deferred merger costs (6,642,000) -
Increase in other assets (1,308,000) (722,000)
(Decrease) increase in accounts payable (587,000) 538,000
Increase in accrued expenses 2,851,000 1,510,000
Increase in other liabilities 2,503,000 247,000
- - --------------------------------------------------------------------------------------------------------------------
Total adjustments (8,768,000) (647,000)
- - --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 345,000 9,915,000
- - --------------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures (5,587,000) (10,792,000)
Long-term investment (250,000) -
Sale of marketable securities, net 2,409,000 4,995,000
- - --------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (3,428,000) (5,797,000)
- - --------------------------------------------------------------------------------------------------------------------
Financing activities
Proceeds from issuance of notes payable - 668,000
Principal payments on notes payable (1,084,000) -
Distribution to shareholders - (1,485,000)
Payments on capital lease obligations (1,594,000) (956,000)
Proceeds from exercise of stock options and warrants 493,000 79,000
- - --------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (2,185,000) (1,694,000)
- - --------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (5,268,000) 2,424,000
Cash and cash equivalents, beginning of period 12,574,000 11,962,000
- - --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 7,306,000 $ 14,386,000
====================================================================================================================
</TABLE>
See accompanying notes.
-3-
<PAGE>
ATMI, Inc.
Notes To Supplemental Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
Advanced Technology Materials, Inc. underwent a reorganization involving the
creation of a new holding company (ATMI, Inc. - the successor registrant of
Advanced Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly owned subsidiary of the holding company. In
addition, these supplemental consolidated financial statements give retroactive
effect to the acquisitions of Advanced Delivery & Chemical Systems Nevada Inc.,
and related entities (the "ADCS Group") and Lawrence Semiconductor Laboratories,
Inc. and affiliate ("LSL") which have been accounted for using the
pooling-of-interests method. Both of these acquisitions occurred on October 10,
1997, as part of the consummation of the transactions described in Note 5 below.
The accompanying unaudited interim financial statements are those of ATMI, Inc.
("ATMI" or the "Company"), the newly formed company, and have been prepared in
accordance with the instructions to Form 10-Q and Rule 10.01 of Regulation S-X
and do not include all of the financial information and disclosures required by
generally accepted accounting principles.
In the opinion of the management of ATMI, the successor registrant to Advanced
Technology Materials, Inc. ("ATM"), the financial information contained herein
has been prepared on the same basis as the audited Consolidated Financial
Statements contained in ATM's Form 10-K for the year ended December 31, 1996,
and includes adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the unaudited quarterly results set forth herein.
The Company's nine month results have, in the past, been subject to fluctuation
and, thus, the operating results for any quarter are not necessarily indicative
of results for any future fiscal period. For further information, refer to the
supplemental financial statements and footnotes thereto included in this Form
8-K/A.
2. Per Share Data
Earnings per common share is computed using the treasury stock method based on
the weighted average number of common and common equivalent shares outstanding
during the period. Shares from the assumed exercise of options and warrants
granted by ATMI have been included in the computation of earnings per share for
all periods, unless their inclusion would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
This Statement simplifies the computation of earnings per share and makes the
computation more consistent with those of other countries. The implementation
will require the disclosure of basic and diluted earnings per share. The Company
will adopt this Statement during the fourth quarter of 1997. Pro forma basic
earnings per share under the new computation is $.51 and $.59 for the nine
months ended September 30, 1997 and 1996, respectively.
-4-
<PAGE>
ATMI, Inc.
Notes To Supplemental Consolidated Interim Financial Statements (continued)
(unaudited)
3. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------ -----------------
<S> <C> <C>
Raw materials $ 6,150,000 $ 5,538,000
Manufacturing spare parts 1,082,000 1,266,000
Work in process 1,228,000 687,000
Finished goods 1,552,000 937,000
------------------ -----------------
10,012,000 8,428,000
Obsolescence reserve (743,000) (659,000)
================== =================
$ 9,269,000 $ 7,769,000
================== =================
</TABLE>
4. Income taxes
ATMI's income tax expense in 1997 and 1996, relates to federal taxes and state
taxes on income generated, partially offset by the utilization of loss
carryforwards and available state tax credits.
Prior to ATMI's acquisition of the ADCS Group, the stockholders of Advanced
Delivery & Chemical Systems Nevada, Inc. ("ADCS Nevada") elected S-corporation
status effective April 1, 1996. In October 1996, as a result of a transfer of
shares to an ineligible S-Corporation shareholder, the S status was terminated.
During the period that ADCS Nevada was an S-Corporation, its earnings were not
subject to federal corporate income tax. Additional federal corporate income tax
of $1,517,000 would have resulted if ADCS Nevada been taxed as a C-Corporation
for the nine months ended September 30, 1996, and the pro forma consolidated net
income and net income per share for ATMI for the nine months ended September 30,
1996 would have been $9,045,000 and $0.49, respectively.
5. Mergers and Acquisitions
On October 10, 1997, pursuant to an Agreement and Plan of Merger and Exchange
dated April 7, 1997 (the "Merger and Exchange Agreement"), the Company issued
5,468,747 of its Common Stock in exchange for all the ownership interests of the
ADCS Group. The ADCS Group manufactures, markets and designs ultrahigh purity
specialty thin film materials and related delivery equipment for the
semiconductor and semiconductor equipment manufacturing industries. The Company
is continuing the business of the ADCS Group and integrating its semiconductor
thin film and delivery systems product lines of the NovaMOS division into the
business of the ADCS Group.
-5-
<PAGE>
ATMI, Inc.
Notes To Supplemental Consolidated Interim Financial Statements (continued)
(unaudited)
5. Mergers and Acquisitions (continued)
In order to accomplish the tax-free and pooling of interest treatment of the
transaction contemplated by the Merger and Exchange Agreement, Advanced
Technology Materials, Inc. underwent a reorganization involving the creation of
a new holding company (ATMI, Inc. - the successor registrant of Advanced
Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly-owned subsidiary of the holding company. Pursuant
to the reorganization, each outstanding share of common stock of ATM was
converted into one share of the Company's Common Stock. The reorganization was
intended to be a tax-free transaction under the Internal Revenue Code of 1986,
as amended (the "Code"), and has been accounted for as a pooling of interests.
Also on October 10, 1997, pursuant to an Agreement and Plan of Merger, dated as
of May 17, 1997, as amended (the "Lawrence Merger Agreement"), the Company
issued 3,628,571 shares of the Company's Common Stock in exchange for all of the
outstanding common stock of LSL in a merger transaction. As a result, LSL became
a wholly-owned subsidiary of the Company. The amount of shares issued in
connection with this merger may be subject to adjustment based on the change in
the net book value of LSL since December 31, 1996. LSL is an outsourcer of
epitaxial processing of silicon wafers using chemical vapor deposition
technology to meet customer specifications. The Company is continuing the
business of LSL by integrating it with the Epitronics division of the Company
which develops, manufactures, distributes and sells high performance substrates
and thin film deposition services to the semiconductor industry. The acquisition
of LSL was also intended to be a tax-free transaction under the Code and has
been accounted for as a pooling of interests.
The former securityholders of the ADCS Group and LSL have agreed to indemnify
the Company and certain of its subsidiaries and affiliates from and against
certain losses arising out of breaches of representations and warranties made by
the respective securityholders and for certain tax matters. As security for
these obligations, the former securityholders of the ADCS Group have delivered
750,000 shares of the Company's Common Stock which they received and the former
securityholder of LSL delivered five percent of the LSL consideration received,
into escrow in connection with the acquisitions by the Company of the ADCS Group
and LSL.
-6-
<PAGE>
ATMI, Inc.
Notes To Supplemental Consolidated Interim Financial Statements (continued)
(unaudited)
5. Mergers and Acquisitions (continued)
The following represents unaudited results of operations of the Company and the
merged entities of ADCS and LSL for the nine months ended September 30, 1997 and
1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months
-----------
1997 1996
---- ----
<S> <C> <C>
Revenues:
--------
ATM $41,286,000 $34,584,000
ADCS and LSL $32,262,000 $32,492,000
Net Income:
----------
ATM $ 3,979,000 $ 2,085,000
ADCS and LSL $ 5,134,000 $ 8,477,000
</TABLE>
Had ADCS been treated as a C-Corporation for all of 1996 (see Note 4) the net
income for ADCS and LSL combined for the nine months ended September 30, 1996
would have been $6,960,000.
As of September 30, 1997, approximately $6,642,000 of non-recurring transaction
costs have been classified on the consolidated balance sheet of ATMI as deferred
merger costs. This amount will be expensed, as part of approximately $9,000,000
of non-recurring costs, as a one-time charge in the fourth quarter of 1997 in
conjunction with the October closing of the transactions.
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