SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number: 0-22756
ATMI, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1481060
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 Commerce Drive, Danbury, CT 06810
(Address of principal executive offices) (Zip Code)
203-794-1100
(Registrant's telephone number, including area code)
_______________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No __
The number of shares outstanding of the registrant's common stock as of
April 30, 1999 was 22,271,457.
ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 1999
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet..................................... 3
Consolidated Statement of Income............................... 4
Consolidated Statement of Cash Flows........................... 5
Notes to Consolidated Interim Financial Statements............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K................ 14
Signatures...................................................... 15
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ATMI, Inc.
Consolidated Balance Sheet
<S> <C> <C>
March 31, December 31,
1999 1998
---- ----
Assets (unaudited)
Current assets:
Cash and cash equivalents ................................................ $ 19,681,000 $ 18,510,000
Marketable securities .................................................... 64,486,000 64,551,000
Accounts receivable, net of allowance for doubtful accounts of $603,000 in
1999 and $567,000 in 1998 .............................................. 16,856,000 16,250,000
Inventories .............................................................. 10,963,000 11,130,000
Other .................................................................... 5,585,000 5,549,000
--------- ---------
Total current assets ........................................................ 117,571,000 115,990,000
Property and equipment, net ................................................. 44,660,000 45,202,000
Goodwill and other long-term assets, net .................................... 8,200,000 8,213,000
--------- ---------
$170,431,000 $169,405,000
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable ........................................................ $ 3,510,000 $ 3,540,000
Accrued expenses ........................................................ 7,269,000 6,998,000
Accrued commissions ..................................................... 1,058,000 1,248,000
Notes and bonds payable, current portion ................................ 4,461,000 4,709,000
Capital lease obligations, current portion .............................. 2,400,000 2,488,000
Income taxes and other current payables ................................. 1,192,000 714,000
--------- -------
Total current liabilities .................................................. 19,890,000 19,697,000
Notes payable, less current portion ........................................ 2,206,000 3,609,000
Capital lease obligations .................................................. 3,207,000 3,736,000
Deferred income taxes ...................................................... 2,775,000 2,764,000
Other long-term liabilities ................................................ 118,000 95,000
Minority interest .......................................................... 845,000 846,000
Stockholders' equity:
Preferred stock, par value $.01: 2,000,000 shares authorized; none issued
and outstanding ...................................................... -- --
Common stock, par value $.01: 50,000,000 shares authorized; issued and
outstanding 22,269,000 in 1999 and 22,160,000 in 1998 223,000 222,000
Additional paid-in capital ............................................. 106,935,000 106,174,000
Retained earnings ...................................................... 35,487,000 33,495,000
Accumulated other comprehensive loss ................................... (1,255,000) (1,233,000)
---------- ----------
Total stockholders' equity ................................................. 141,390,000 138,658,000
----------- -----------
$170,431,000 $ 169,405,000
============ =============
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
ATMI, Inc.
Consolidated Statement of Income
(unaudited)
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Revenues:
Product revenues ................................. $ 22,352,000 $ 28,179,000
Contract revenues ................................ 1,677,000 2,355,000
--------- ---------
Total revenues ...................................... 24,029,000 30,534,000
Cost of revenues:
Cost of product revenues ......................... 10,589,000 12,291,000
Cost of contract revenues ........................ 1,245,000 1,721,000
--------- ---------
Total cost of revenues .............................. 11,834,000 14,012,000
---------- ----------
Gross profit ........................................ 12,195,000 16,522,000
Operating expenses:
Research and development ......................... 3,076,000 2,854,000
Selling, general and administrative .............. 6,837,000 7,028,000
--------- ---------
9,913,000 9,882,000
--------- ---------
Operating income .................................... 2,282,000 6,640,000
Interest income ..................................... 1,048,000 445,000
Interest expense .................................... (248,000) (451,000)
Other income ........................................ 24,000 153,000
------ -------
Income before taxes and minority interest ........... 3,106,000 6,787,000
Income taxes ........................................ 1,115,000 2,167,000
--------- ---------
Income before minority interest ..................... 1,991,000 4,620,000
Minority interest ................................... 1,000 (55,000)
----- -------
Net income .......................................... $ 1,992,000 $ 4,565,000
============ ============
Net income per share-basic .......................... $ 0.09 $ 0.24
============ ============
Net income per share-assuming dilution .............. $ 0.09 $ 0.22
============ ============
Weighted average shares outstanding ................. 21,457,000 19,100,000
============ ============
Weighted average shares outstanding-assuming dilution 22,737,000 20,647,000
============ ============
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
ATMI, Inc.
Consolidated Statement of Cash Flows
(unaudited)
Three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Operating activities
Net income ................................................................ $ 1,992,000 $ 4,565,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................ 2,064,000 1,742,000
Bad debt expense ..................................................... 42,000 62,000
Deferred income taxes ................................................ 127,000 31,000
Minority interest in net earnings of consolidated subsidiaries ....... (1,000) 55,000
Changes in operating assets and liabilities
Increase in accounts and notes receivable ........................ (648,000) (195,000)
(Increase) decrease in inventory ................................. 167,000 (1,796,000)
(Increase) decrease in other assets .............................. (97,000) 5,000
Increase (decrease) in accounts payable .......................... (30,000) 658,000
Increase (decrease) in accrued expenses .......................... 81,000 (5,000)
Increase (decrease) in other liabilities ......................... 374,000 (2,249,000)
------- ----------
Total adjustments ......................................................... 2,079,000 (1,692,000)
--------- ----------
Net cash provided by operating activities ................................. 4,071,000 2,873,000
--------- ---------
Investing activities
Capital expenditures ...................................................... (1,448,000) (2,358,000)
(Purchase) sale of marketable securities, net ............................. 65,000 (53,988,000)
------ -----------
Net cash used by investing activities ..................................... (1,383,000) (56,346,000)
---------- -----------
Financing activities
Principal payments on capital lease obligations ........................... (617,000) (893,000)
Principal payments on notes and bonds payable ............................. (1,651,000) (488,000)
Proceeds from sale of common shares, net .................................. -- 55,722,000
Proceeds from employee stock purchases, stock options and warrant exercises 762,000 101,000
------- -------
Net cash provided (used) by financing activities .......................... (1,506,000) 54,442,000
---------- ----------
Effects of exchange rate changes on cash .................................. (11,000) 31,000
Net increase in cash and cash equivalents ................................. 1,171,000 1,000,000
Cash and cash equivalents, beginning
of period .............................................................. 18,510,000 13,924,000
---------- ----------
Cash and cash equivalents, end of period .................................. $ 19,681,000 $ 14,924,000
============ ============
</TABLE>
See accompanying notes.
ATMI, Inc.
Notes To Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated interim financial statements of
ATMI, Inc. ("ATMI" or the "Company") have been prepared in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X and do not include
all of the financial information and disclosures required by generally accepted
accounting principles. In addition, these unaudited consolidated interim
financial statements give retroactive effect to the acquisition of NOW
Technologies, Inc. which has been accounted for using the pooling-of-interests
method. This acquisition occurred on August 4, 1998, and is more fully described
in the Company's Form 10-K for the year ended December 31, 1998.
The balance sheet at December 31, 1998 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of the management of ATMI, Inc. the financial information
contained herein has been prepared on the same basis as the audited consolidated
financial statements contained in the Company's Form 10-K for the year ended
December 31, 1998, and includes adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the unaudited quarterly results set
forth herein. The Company'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. Per Share Data
The following table presents the computation of basic and diluted earnings
per share for the three months ended March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net income .................................. $ 1,992,000 $ 4,565,000
=========== ===========
Denominator:
Denominator for basic earnings per share-
weighted-average share ...................... 21,457,000 19,100,000
Dilutive effect of contingent shares related
to the ADCS Group and NOW acquisitions .... 780,000 780,000
Dilutive effect of employee stock options
and warrants, net of tax benefit .......... 500,000 767,000
------- -------
Denominator for diluted earnings per share . 22,737,000 20,647,000
========== ==========
Net income per share--basic ....................... $ 0.09 $ 0.24
=========== ===========
Net income per share--assuming dilution ........... $ 0.09 $ 0.22
=========== ===========
</TABLE>
3. Inventory
Inventory is comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Raw materials .................................. $ 9,465,000 $ 9,815,000
Work in process ................................ 594,000 544,000
Finished goods ................................. 1,912,000 1,894,000
--------- ---------
11,971,000 12,253,000
Obsolescence reserve ........................... (1,008,000) (1,123,000)
---------- ----------
$ 10,963,000 $ 11,130,000
============ ============
</TABLE>
4. Comprehensive Income
Comprehensive income is a more inclusive financial reporting methodology
that includes disclosure of certain financial information that historically has
not been recognized in the calculation of net income.
The following table presents the computation of comprehensive income at
March 31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net income ........................................ $ 1,992,000 $ 4,565,000
Cumulative translation adjustment .............. (42,000) 173,000
Unrealized gain on available-for-sale securities
(net of taxes of $11,000) ..................... 20,000 --
------ ------
Comprehensive income .............................. $ 1,970,000 $ 4,738,000
=========== ===========
</TABLE>
5. Segment Data
Segment information included under the caption "Segment Data" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated herein by reference and is an integral part of these
unaudited interim financial statements.
6. Subsequent Event
On May 5, 1999, the Company acquired TeloSense Corporation in a pooling of
interests transaction valued at approximately $5.5 million. The Company issued
approximately 231,600 shares of its common stock to TeloSense shareholders.
TeloSense Corporation is a private company based in Fremont, CA. TeloSense's
patented SonoSense(tm) acoustic gas sensing technology analyzes the speed of
sound through air to selectively monitor for the presence of hydrogen in their
H2M (Hydrogen Monitor). Other TeloSense products include the ACM (Air
Composition Monitor) using FT-IR (Fourier Transform Infrared Spectroscopy) for
the detection of acid gases, VOCs (volatile organic compounds) and HAPs
(Hazardous Air Pollutants); and the TGM (Toxic Gas Monitor) for the detection of
extremely low levels of metal hydride and other toxic gases using Molecular
Emission Spectroscopy.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
ATMI, Inc. 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. The Company currently provides:
(i) a broad range of ultrahigh-purity thin film materials and related delivery
systems; (ii) a full line of point-of-use semiconductor environmental equipment
and services; and (iii) specialty epitaxial thin film deposition services. Over
the last four years, the Company has achieved a leadership position in each of
its target markets by providing a more complete line of products than its
competitors. ATMI's strategy is to continue its growth through product line
expansion in each of its existing markets and to leverage its core technology to
create new high growth businesses. The Company has grown in recent years through
strategic acquisitions in its target markets.
ATMI has capitalized on the growth of the semiconductor industry by
providing leading edge products and services in each of its target markets. The
Company has recently organized its operations along two business segments --
ATMI Materials and ATMI Technologies.
ATMI's Materials segment consists of the ADCS, NovaSource and NOW
divisions. ADCS develops and markets ultrahigh-purity thin film materials and
proprietary delivery systems. NovaSource develops and markets Safe Delivery
Source ("SDS"), which stores dangerous gases as solids in cylinders, providing
increased safety and substantially greater operating efficiencies. NOW
manufactures high performance containers and dispensing systems for advanced
purity chemicals used in the manufacture of microelectronics.
ATMI's Technologies segment consists of the EcoSys, Epitronics, Emosyn, and
Ventures divisions. The Company believes EcoSys is the only provider of
point-of-use environmental equipment offering all of the key technologies for
semiconductor effluent abatement. The Company's Epitronics division is a world
leader in specialty epitaxial services, providing high- quality processing of
silicon and next-generation III-V and wide bandgap wafers. The Company's Emosyn
division is bringing to market a new generation of semiconductor devices,
initially targeted at the high growth market for smart card integrated circuits.
ATMI participates in United States government-funded research and development
contracts through its Ventures division.
The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statement of income expressed as a percentage of
total revenues:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Product revenues ............................... 93.0% 92.3%
Contract revenues .............................. 7.0 7.7
--- ---
Total revenues ........................... 100.0 100.0
Cost of revenues ............................... 49.2 45.9
---- ----
Gross profit ................................... 50.8 54.1
Operating expenses:
Research and development ................. 12.8 9.4
Selling, general, and administrative ..... 28.5 22.9
---- ----
Total operating expenses ........... 41.3 32.3
---- ----
Operating income ............................... 9.5 21.8
Interest income (expense), net ................. 3.3 0.0
Other income, net .............................. 0.1 0.5
--- ---
Income before income taxes and minority interest 12.9 22.3
Income taxes ................................... 4.6 7.1
--- ---
Income before minority interest ................ 8.3 15.2
Minority interest .............................. 0.0 (0.2)
--- ----
Net income ..................................... 8.3% 15.0%
=== ====
</TABLE>
Results of Operations
Three Months Ended March 31, 1999 and 1998.
Revenues. Total revenues decreased 21.3% to approximately $24,029,000 in
the three months ended March 31, 1999 from approximately $30,534,000 in the same
three-month period in 1998. Product revenues decreased 20.7% to approximately
$22,352,000 in the three months ended March 31, 1999 from approximately
$28,179,000 in the comparable period in 1997. The product revenue decline was
primarily attributable to the continued effect the downturn in the semiconductor
capital equipment cycle had on the Company's product sales, beginning in the
second quarter of 1998. Contract revenues decreased 28.8% to approximately
$1,677,000 in the quarter ended March 31, 1999 from approximately $2,355,000 in
the same three-month period in 1998. The decrease in the 1999 quarter reflected
a general decrease in government funding of the Company's research activities
and the Company's decision to focus on research relating to specific,
commercially relevant efforts.
Gross Profit. Gross profit decreased 26.2% to approximately $12,195,000 in
the quarter ended March 31, 1999 from approximately $16,522,000 in the quarter
ended March 31, 1998. Gross margin decreased to 50.8% of revenues in the three
month period in 1999 from 54.1% of revenues in the three month period in 1998.
Gross profit from product revenues decreased 26.0% to approximately
$11,763,000 in the three months ended March 31, 1999 from approximately
$15,888,000 in the same three month period a year ago. Gross margin on product
revenues decreased to 52.6% in the 1999 period from 56.4% in the 1998 period.
This decrease was primarily a result of less efficient fixed cost absorption
attendant to the decrease in revenues recognized in the first quarter of 1999,
particularly within the EcoSys and Epitronics businesses, as compared to the
first quarter of 1998.
Gross profit on contract revenues decreased 31.9% to approximately $432,000
in the quarter ended March 31, 1999 from approximately $634,000 in the same
quarter a year ago. Gross margin on contract revenues decreased to 25.8% in the
first quarter of 1999 from 26.9% in the first quarter of 1998. Contract margins
vary slightly from year to year because of different fee arrangements and
indirect cost absorption.
Research and Development Expenses. Research and development expenses
increased 7.8% to approximately $3,076,000 in the first three months of 1999
from approximately $2,854,000 in the first three months of 1998. The increase in
the first quarter of 1999 was principally due to increased efforts to extend SDS
technology beyond ion implant applications into CVD, etch, and bulk gas
delivery, and continued product development activities within the Emosyn
business. As a percentage of revenues, research and development expenses
increased to 12.8% in the 1999 quarter from 9.4% in the 1998 quarter.
Selling, General, and Administrative Expenses. Selling, general and
administrative expenses decreased 2.7% to approximately $6,837,000 in the three
months ended March 31, 1999 from approximately $7,028,000 in the same three
month period in 1998. Despite an overall decline in S,G,&A expenses when
comparing the first quarter of 1999 and 1998, the decrease in the 1999 quarter
was primarily due to decreased administrative costs on lower product revenues.
As a percentage of revenues, these expenses increased to 28.5% in the three
month period in 1999 from 22.9% in the comparable period in 1998, primarily due
to expenses related to the beginning phases of an implementation of an
enterprise resource planning system ("ERP") for the Company.
Other Income, Net. Other income, including interest income and expense and
minority interest increased to approximately $825,000 in the quarter ended March
31, 1999 from approximately $92,000 in the quarter ended March 31, 1998. The
increase in the 1999 quarter is a direct result of the increased cash and
marketable securities that resulted from the Company's public offering at the
end of the first quarter of 1998.
Income Taxes. ATMI's income tax expense related primarily to federal and
state taxes on income generated, partially offset by various foreign and
research and development credits available. Income tax expense in the quarter
ended March 31, 1999 was $1,115,000 down from $2,167,000 in the same quarter a
year ago. The Company's effective income tax rate increased to 35.9% in the
first quarter of 1999 from 32.2% in the first quarter of 1998. The increase is a
result of the apportionment of state income and a decrease in credits available.
Earnings per Share. Earnings per share-assuming dilution decreased to $.09
for the first quarter of 1999 compared with a $.22 earnings per share-assuming
dilution in the first quarter of 1998. Shares outstanding for the first quarter
of 1999 were approximately 22.7 million compared to approximately 20.6 million
for the first quarter of 1998. The significant increase reflects the Company's
public offering at the end of the first quarter of 1998.
Segment Data
ATMI has two segments--ATMI Materials and ATMI Technologies. The Company
evaluates performance and allocates resources based on operating profit or loss,
not including interest and other income or expense and income taxes. The
accounting policies of the reportable segments are more fully described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The following tables provide reported results for each of these segments
for the three months ended March 31:
<TABLE>
<CAPTION>
Revenues 1999 1998
- - -------- ---- ----
<S> <C> <C>
ATMI Materials $ 14,134,000 $ 14,724,000
ATMI Technologies 9,895,000 15,810,000
--------- ----------
Consolidated Revenues $ 24,029,000 $ 30,534,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss) 1999 1998
- - ----------------------- ---- ----
<S> <C> <C>
ATMI Materials .............. $ 3,984,000 $ 4,866,000
ATMI Technologies ........... (776,000) 2,245,000
Corporate ................... (926,000) (471,000)
-------- --------
Consolidated Operating Income $ 2,282,000 $ 6,640,000
=========== ===========
Consolidated Net Income 1999 1998
- - ----------------------- ---- ----
Operating Income from
reportable segments $ 2,282,000 $ 6,640,000
Other income 825,000 92,000
Income Taxes (1,115,000) (2,167,000)
---------- ----------
Consolidated Net Income $ 1,992,000 $ 4,565,000
=========== ===========
</TABLE>
The following table provides reported balance sheet results for each of the
segments at March 31, 1999 and at December 31, 1998:
<TABLE>
<CAPTION>
Identifiable Assets 1999 1998
- - ------------------- ---- ----
<S> <C> <C>
ATMI Materials .......... $ 35,757,000 $ 32,934,000
ATMI Technologies ....... 48,459,000 48,848,000
General Corporate Assets 86,215,000 87,623,000
------------ ------------
Total Consolidated Assets $170,431,000 $169,405,000
============ ============
</TABLE>
Business Segments Results
ATMI Materials
Revenues in the Materials segment for the three months ended March 31, 1999
declined 4% from 1998 levels. A decline in semiconductor unit demand during the
second and third quarters of 1998 slowed sales of many of ATMI Materials'
product offerings. Although, during the fourth quarter of 1998, semiconductor
unit demand began to rebound and caused sequential revenue growth in the
Materials segment into the first quarter of 1999, the Materials segment is still
slightly below first quarter 1998 levels. The 1999 Materials sequential revenue
growth was spurred by stronger industry conditions and increased market
penetration particularly related to the SDS and NOW product lines.
Operating income in the Materials segment declined 18% for the three months
ended March 31, 1999 from the same period in 1998. The revenue decline in 1999
reduced operating income within the segment. Additionally, increased sales and
marketing efforts combined with increased research and development spending for
SDS technology beyond ion implant applications, led to lower levels of operating
income in the first quarter of 1999 as compared to the same period in 1998.
Operating income, as a percentage of revenues, was 28.2% and 33.1% for the three
months ended March 31, 1999 and 1998, respectively.
ATMI Technologies
Revenues in the Technologies segment in the first quarter of 1999 declined
37% from first quarter 1998 levels. Semiconductor manufacturing capacity
expansion came to a virtual standstill during 1998, which caused a significant
decline in revenues within the EcoSys and Epitronics businesses. Although signs
of a slow steady recovery have emerged in the first quarter of 1999, utilization
of existing manufacturing capacity must increase significantly before
substantial capacity expansion occurs and revenues return to 1998 levels.
Government contract revenues declined in the first quarter of 1999 as compared
to the same period in 1998, due to the completion of various programs in the
second half of 1998.
Operating income within the Technologies segment declined to a loss of $0.8
million in the first quarter of 1999 compared to operating profit of $2.2
million for the same period in 1998. The loss was attributable to the decline in
both EcoSys's and Epitronics operating results caused by their revenue declines
on a relatively fixed cost base and an increase in research and development
efforts focused on the Company's Emosyn business and other new business
ventures.
Corporate
Corporate expenses increased 96.6% for the three months ended March 31,
1999 compared to the same period in 1998 primarily because of additional general
and administrative support. The growth of the Company, driven by acquisitions,
required significant additional corporate infrastructure. Additionally, in late
1998, the Company began implementing an ERP system, which has led to an increase
in consultant and planning expenses.
Corporate identifiable assets consist primarily of cash and marketable
securities.
Liquidity and Capital Resources
To date, the Company has financed its activities through the sale of
equity, its operations, external research and development funding, and various
lease and debt instruments. The Company's working capital increased to $97.7
million at March 31, 1999 from $96.3 million at December 31, 1998.
Despite less profitability in the first quarter of 1999, net cash provided
by operations was approximately $4.1 million, compared to $2.9 million provided
during the first quarter of 1998. This resulted primarily from improvements in
working capital in the first quarter of 1999 as compared to the first quarter of
1998. The improvement in working capital was primarily caused by a decrease in
inventory and an increase in other liabilities in 1999, as compared to a
significant increase in inventory and decrease of other liabilities, primarily
related to changes in income tax payments, in 1998.
Net cash used by investing activities was approximately $1.4 million during
the three months ended March 31, 1999. Net cash used by investing activities was
approximately $56.4 million during the three months ended March 31, 1998. The
Company's investing activities included capital expenditures of $1.5 million and
$2.4 million for the three months ended March 31, 1999 and 1998, respectively.
The 1999 and 1998 expenditures primarily related to installation of additional
manufacturing capacity in Danbury, Connecticut. The significant use of cash in
1998 was primarily the result of investing the proceeds raised from the
Company's public offering at the end of the first quarter of 1998 into
marketable securities for future working capital requirements and potential
merger and acquisition activities.
The Company used $1.5 million for financing activities in the first quarter
of 1999, primarily for note and capital lease payments. During the first quarter
of 1998, the Company generated approximately $54.4 million from financing
activities, primarily due to the completion of a public offering in March 1998.
ATMI believes its existing cash balances, marketable securities, existing
sources of liquidity and anticipated funds from operations, including those of
the newly acquired businesses, will satisfy its projected working capital and
other cash requirements through at least the end of 2000. However, ATMI believes
the level of financing resources available to it is an important competitive
factor in its industry and may seek additional capital prior to the end of that
period. Additionally, ATMI considers, on a continuing basis, potential
acquisitions of technologies and businesses complementary to its current
business.
Year 2000 Compliance
ATMI has formed an internal compliance team to evaluate its internal
information technology infrastructure and application systems ("IT Systems") and
other non-IT infrastructure systems ("Non-IT Systems") to determine whether such
systems will operate correctly with regard to the import, export, and processing
of date information, including correct handling of leap years, in connection
with the change in the calendar year from 1999 to 2000 (the "Year 2000 Issue"),
and to evaluate the Year 2000 Issue with respect to the systems of third party
partners and suppliers with which the Company has a material relationship
("Third Party Systems").
ATMI conducted an IT Systems inventory analysis and risk assessment and has
recently completed upgrades of core IT Systems to incorporate additional desired
features and functionality including Year 2000 compliant operators. As a result
of such upgrades, the Company believes its core IT Systems are Year 2000
compliant. The Company does not expect that any additional costs of addressing
the Year 2000 Issue for its IT Systems will have a material adverse impact on
the Company's financial position, results of operations or cash flows.
ATMI has also completed a Non-IT System inventory analysis and risk
assessment. As a result of the analysis, the Company believes that no
remediation actions are required in order to be Year 2000 compliant. Because
ATMI believes the number of Non-IT Systems is relatively small, ATMI does not
expect that any additional costs of addressing the Year 2000 Issue for Non-IT
Systems will have a material adverse impact on its operations or its financial
position, results of operations or cash flows.
ATMI is in the process of completing a Third Party inventory and risk
assessment. ATMI expects to verify Year 2000 compliance of Third Party Systems
no later than June 30, 1999. ATMI believes the number of material Third Party
Systems is relatively small. However, until Year 2000 compliance of all Third
Party Systems is ascertained and written assurances are received, the risk to
ATMI's operations and any additional costs relating to such Third Party Systems
is unknown. ATMI believes that its most reasonably likely worst-case Year 2000
scenarios would involve Third Party Systems rather than its internal systems.
The Company believes that its greatest risks would be the partial or complete
shutdown of a critical supplier or strategic partner and its inability to
provide critical supplies and services to the Company on a timely basis. A
contingency plan addressing potential issues related to Third Party Systems has
been developed. The contingency plan consists of ensuring adequate levels of
critical supplies used in the Company's manufacturing processes are on hand at
the end of year 1999. The Company has also compiled a listing of manufacturers
of alternative supply sources for its critical products. In the event a third
party supplier is affected by Year 2000 issues, the Company will be making
arrangements with alternative suppliers for its critical raw materials.
ATMI has tested its products for Year 2000 compliance and has determined
that all ATMI products currently available for sale have either successfully
passed Year 2000 compliance testing or are not subject to Year 2000 compliance
because such products do not import, export, or process date information in any
manner.
To date, the Company has incurred approximately $565,000 of expense
relating to inventory analysis and risk assessment. The funds to cover the cost
incurred to date were derived from general operations. The costs primarily
relate to desktop compliance and standardization to Year 2000 compliance. These
Year 2000 expenditures are within the Company's planned organizational budgets
and include the cost of reviewing key operating systems. The remaining planned
expenditures for Year 2000 relate primarily to Third Party System reviews and
internal resources working on the Year 2000 issue. ATMI expects the cost related
to the Third Party Systems compliance to be minimal. As of March 31, 1999, no IT
Systems projects have been deferred because of problems associated with the Year
2000 Issue.
Forward-Looking Statements
The statements contained in this report which are not historical are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Examples of forward-looking statements include, without limitation,
statements by ATMI regarding financial projections, expectations for demand and
sales of new and existing products, market and technology opportunities,
business strategies, business opportunities, objectives of management for future
operations and semiconductor industry, market segment growth and efforts to
achieve Year 2000 compliance. In addition, when used in this report, the words
"anticipate," "plan," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify
forward-looking statements. All forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those discussed in, or
implied by, the forward-looking statements as a result of certain factors
including, but not limited to, changes in the pattern of semiconductor industry
growth, the markets for or customer interest in the products of ATMI, product
and market competition, delays or problems in the development and
commercialization of products, technological changes affecting the competencies
of ATMI and unanticipated internal and/or third party delays or failures in
achieving Year 2000 compliance. The cautionary statements made in this report
should be read as being applicable to all related forward-looking statements
wherever they appear in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to the Company's operations result primarily from
changes in interest rates and foreign exchange rates, as well as credit risk
concentrations. The Company's customer base is composed of semiconductor
manufacturers that are located throughout the United States, Europe, and the
Pacific Rim. There is no single geographic area of concentration in the United
States, Europe, or the Pacific Rim. The Company's market risks related to
interest and foreign exchange rates are not material to its operating results.
PART II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit No. Description
27.01 Financial Data Schedule (Filed herewith)
b. Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three months
ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATMI, Inc.
May 10, 1999
By /S/ Eugene G. Banucci
Eugene G. Banucci, Ph.D.,
President, Chief Executive Officer,
Chairman of the Board and Director
By /S/ Daniel P. Sharkey
Daniel P. Sharkey, Vice President, Chief Financial
Officer and Treasurer (Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
27.01 Financial Data Schedule (Filed herewith)
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