<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
Date of Report (Date of earliest event reported): May 31, 1999
__________
ATMI, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-30130 06-1481060
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
7 Commerce Drive
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code: (203) 794-1100
<PAGE>
ITEM 2. Acquisition or Disposition of Assets.
ACSI Merger Agreement
---------------------
On May 31, 1999 pursuant to an Agreement and Plan of Merger dated as of May
31, 1999 (the "ACSI Merger Agreement") by and among Advanced Chemical Systems
International, Inc., a Delaware corporation ("ACSI"), ATMI, Inc., a Delaware
corporation ("ATMI"), and Strip Acquisition Corp., a newly-formed, wholly-owned
Delaware subsidiary of ATMI ("Strip"), Strip merged (the "ACSI Merger") with and
into ACSI, with ACSI being the surviving corporation. As a result of the ACSI
Merger, ACSI became a wholly-owned subsidiary of ATMI.
Pursuant to the ACSI Merger, each outstanding share of ACSI Common Stock
was converted into .030276219 shares of ATMI Common Stock and each outstanding
share of ACSI Series C Preferred Stock was converted into .065589328 shares of
ATMI Common Stock. A total of 1,202,312 shares of ATMI Common Stock were issued
in this transaction.
The ACSI Merger 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. ACSI manufactures photolithography and chemical
mechanical polishing materials for use in the semiconductor manufacturing
industry. ATMI intends to continue the business currently performed by ACSI as
a subsidiary of ATMI.
The foregoing description of the terms and provisions of the ACSI Merger
Agreement is qualified in its entirety by reference to the full text of the ACSI
Merger Agreement which is filed herewith and incorporated by reference.
Delatech Merger Agreement
-------------------------
On May 31, 1999 pursuant to an Agreement and Plan of Merger dated as of May
31, 1999 (the "Delatech Merger Agreement") by and among Delatech Incorporated, a
California corporation ("Delatech"), ATMI, Napa Acquisition Corp., a newly-
formed, wholly-owned Delaware subsidiary of ATMI ("Napa"), and certain
shareholders of Delatech, Napa merged (the "Delatech Merger") with and into
Delatech, with Delatech being the surviving corporation. As a result of the
Delatech Merger, Delatech became a wholly-owned subsidiary of ATMI.
Pursuant to the Delatech Merger, each outstanding share of Delatech Common
Stock was converted into .5721393 shares of ATMI Common Stock. Pursuant to the
Delatech Merger, a total of 2,347,499 shares of ATMI Common Stock were issued.
2
<PAGE>
The Delatech Merger is intended to be a tax-free transaction under the
Code, and will be accounted for as a pooling of interests. Delatech provides
environmental abatement equipment to the semiconductor industry. ATMI intends
to continue the business currently performed by Delatech, in combination with
ATMI's other environmental abatement equipment subsidiary, ATMI EcoSys
Corporation.
The foregoing description of the terms and provisions of the Delatech
Merger Agreement is qualified in its entirety by reference to the full text of
the Delatech Merger Agreement which is filed herewith and incorporated by
reference.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial statements of business acquired. Not required.
(b) Pro forma financial information. Not required.
(c) Exhibits
Exhibit No. Description
---------- -----------
2.1 Agreement and Plan of Merger dated as of May 31, 1999
by and among Advanced Chemical Systems International,
Inc., ATMI, Inc. and Strip Acquisition Corp.(1)
2.2 Agreement and Plan of Merger dated as of May 31, 1999
by and among Delatech Incorporated, ATMI, Inc., Napa
Acquisition Corp. and certain shareholders of Delatech
Incorporated.(1)
23.1 Consent of Ernst & Young LLP.(2)
23.2 Consent of PricewaterhouseCoopers LLP.(2)
23.3 Consent of Deloitte & Touche LLP.(2)
27.1 Financial Data Schedule.(2)
27.2 Financial Data Schedule.(2)
99.1 Form of Press Release issued by ATMI dated June 1,
1999.(1)
99.2 Form of Press Release issued by ATMI dated June 1,
1999.(1)
99.3 Supplemental Selected Financial Data and Management's
Discussions and Analysis of Financial Conditions and
Results of Operations of ATMI, Inc. (as restated to
reflect the acquisitions of Advanced Chemical Systems
International, Inc. and Delatech Incorporated, each on
May 31, 1999).(2)
99.4 Supplemental Consolidated Financial Statements of ATMI,
Inc. for the years ended December 31, 1998, 1997 and
1996 and the three months ended March 31, 1999 and 1998
(as restated to reflect the acquisitions of Advanced
Chemical Systems International, Inc. and Delatech
Incorporated, each on May 31, 1999).(2)
__________________________
/(1)/ Previously filed.
/(2)/ Filed herewith.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, ATMI,
Inc. has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: July 1, 1999 ATMI, INC.
By: /s/ Daniel P. Sharkey
---------------------------------
Daniel P. Sharkey
Vice President, Chief Financial
Officer and Treasurer (Chief
Accounting Officer)
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
2.1 Agreement and Plan of Merger dated as of May 31,
1999 by and among Advanced Chemical Systems
International, Inc., ATMI, Inc. and Strip
Acquisition Corp./(1)/
2.2 Agreement and Plan of Merger dated as of May 31,
1999 by and among Delatech Incorporated, ATMI,
Inc., Napa Acquisition Corp. and certain
shareholders of Delatech Incorporated./(1)/
23.1 Consent of Ernst & Young LLP./(2)/
23.2 Consent of PricewaterhouseCoopers LLP./(2)/
23.3 Consent of Deloitte & Touche LLP./(2)/
27.1 Financial Data Schedule/(2)/
27.2 Financial Data Schedule/(2)/
99.1 Form of Press Release issued by ATMI dated June 1,
1999./(1)/
99.2 Form of Press Release issued by ATMI dated June 1,
1999./(1)/
99.3 Supplemental Selected Financial Data and
Management's Discussions and Analysis of Financial
Conditions and Results of Operations of ATMI, Inc.
(as restated to reflect the acquisitions of
Advanced Chemical Systems International, Inc. and
Delatech Incorporated, each on May 31, 1999)./(2)/
99.4 Supplemental Consolidated Financial Statements of
ATMI, Inc. for the years ended December 31, 1998,
1997 and 1996 and the three months ended March 31,
1999 and 1998 (as restated to reflect the
acquisitions of Advanced Chemical Systems
International, Inc. and Delatech Incorporated,
each on May 31, 1999)./(2)/
_____________________________
/(1)/ Previously filed.
/(2)/ Filed herewith.
5
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Nos. 33-77060, 33-93048, 333-49561, 333-56349, and 333-55827) of our
report dated June 29, 1999, with respect to the supplemental consolidated
financial statements and schedule of ATMI, Inc. included in its Current Report
on Form 8-K/A dated May 31, 1999, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Stamford, Connecticut
June 29, 1999
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-77060, 33-93048, 333-49561, 333-56349 and 333-
55827) of ATMI, Inc. of our report 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 as of and
for the year ended December 31, 1996 appearing in this Form 8-K/A of ATMI, Inc.
It should be noted, however, that such financial statements are not included
separately in the Form 8-K/A. We also consent to the application of our report
to the Financial Statement Schedule for the year ended December 31, 1996
appearing in this Form 8-K/A when such schedule is read in conjunction with the
financial statements referred to in our report. The audit referred to in our
report also included this schedule.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Phoenix, Arizona
June 29, 1999
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
pertaining to the 1998 Employee Stock Purchase Plan (Form S-8 No. 333-55827),
the 1998 Stock Option Plan (Form S-8 No. 333-56349), the 1997 Stock Option Plan
(Form S-8 No. 333-49561), the 1995 Stock Option Plan (Form S-8 No. 33-93048),
and the 1987 Stock Option Plan (Form S-8 No. 33-77060) of ATMI, Inc. of our
report dated May 1, 1998 relating to NOW Technologies, Inc. and Subsidiaries
appearing in this Current Report on Form 8-K/A of ATMI, Inc.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
June 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 21,128 15,122 17,505
<SECURITIES> 64,551 17,461 18,238
<RECEIVABLES> 20,747<F1> 32,909<F1> 19,714<F1>
<ALLOWANCES> 0 0 0
<INVENTORY> 15,563 14,939 10,335
<CURRENT-ASSETS> 129,599 85,628 70,123
<PP&E> 50,185<F2> 45,131<F2> 35,379<F2>
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 188,194 137,768 121,515
<CURRENT-LIABILITIES> 29,601 38,158 21,692
<BONDS> 2,700 3,000 3,400
0 0 0
0 0 0
<COMMON> 259 235 233
<OTHER-SE> 146,303 77,954 59,888
<TOTAL-LIABILITY-AND-EQUITY> 188,194 137,768 121,515
<SALES> 140,868 178,775 150,288
<TOTAL-REVENUES> 140,868 178,775 150,288
<CGS> 73,515 85,352 71,839
<TOTAL-COSTS> 73,515 85,352 71,839
<OTHER-EXPENSES> 14,949<F3> 13,658<F3> 12,314<F3>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,658 2,571 2,049
<INCOME-PRETAX> 7,888 15,452 17,309
<INCOME-TAX> 3,447 8,295 4,568
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,441 7,157 12,741
<EPS-BASIC> .18 .32 .57
<EPS-DILUTED> .17 .30 .54
<FN>
<F1>Net of allowance for doubtful accounts, consistent with balance sheet
presentation.
<F2>Net of accumulated depreciation, consistent with balance sheet presentation.
<F3>Research and development expenses
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 20,901 16,179
<SECURITIES> 64,486 71,449
<RECEIVABLES> 21,869<F1> 32,588<F1>
<ALLOWANCES> 0 0
<INVENTORY> 16,121 17,800
<CURRENT-ASSETS> 131,250 144,294
<PP&E> 8,487<F2> 46,344<F2>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 189,244 197,622
<CURRENT-LIABILITIES> 29,445 35,690
<BONDS> 2,600 3,000
0 0
0 0
<COMMON> 261 256
<OTHER-SE> 148,768 140,253
<TOTAL-LIABILITY-AND-EQUITY> 189,244 197,622
<SALES> 32,564 46,636
<TOTAL-REVENUES> 32,564 46,636
<CGS> 16,221 21,266
<TOTAL-COSTS> 16,221 21,266
<OTHER-EXPENSES> 3,595<F3> 3,617<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 263 451
<INCOME-PRETAX> 3,139 8,470
<INCOME-TAX> 1,196 3,034
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,943 5,436
<EPS-BASIC> .08 .24
<EPS-DILUTED> .07 .22
<FN>
<F1>Net of allowance for doubtful accounts, consistent with balance sheet
presentation.
<F2>net of accumulated depreciation, consistent with balance sheet presentation.
<F3>Research and development expenses
</FN>
</TABLE>
<PAGE>
Exhibit 99.3
Selected Financial Data.
The following selected consolidated statements of income for the years
ended December 31, 1998, 1997 and 1996 and the balance sheet data as of December
31, 1998 and 1997 are derived from the audited supplemental consolidated
financial statements of the Company. The consolidated statements of income for
the years ended December 31, 1995 and 1994 and the three months ended March 31,
1999 and 1998 are derived from unaudited consolidated financial statements. The
balance sheet data as of December 31, 1996, 1995 and 1994 and March 31, 1999 and
1998 is derived from unaudited consolidated financial statements. The unaudited
consolidated financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. The data set forth below should be read in conjunction with the
Supplemental Consolidated Financial Statements and Notes thereto and other
financial information included elsewhere in this Form 8-K/A.
<TABLE>
<CAPTION>
-------------------------------------------
Fiscal Year Ended December 31,
-------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ------- --------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Income:
Revenues.................................................. $ 140,868 $178,775 $150,288 $112,602 $ 68,440
Cost of revenues.......................................... 73,515 85,352 71,839 54,405 35,203
-----------------------------------------------------------------
Gross profit.............................................. 67,353 93,423 78,449 58,197 33,237
Operating expenses:
Research and development................................ 14,949 13,658 12,314 7,892 4,755
Selling, general and administrative..................... 45,107 54,632 46,864 36,454 21,472
Non-recurring expenses.................................. 2,102 (1) 9,000 (2) 2,000 (3) - -
-----------------------------------------------------------------
Total operating expenses.............................. 62,158 77,290 61,178 44,346 26,227
-----------------------------------------------------------------
Operating income.......................................... 5,195 16,133 17,271 13,851 7,010
Interest income (expense), net............................ 2,309 (979) (323) (277) (617)
Other income (expense), net............................... 495 300 210 (476) 3,809
-----------------------------------------------------------------
Income before income taxes and minority interest.......... 7,999 15,454 17,158 13,098 10,202
Income taxes.............................................. 3,447 8,295 4,568 4,849 2,814
-----------------------------------------------------------------
Income before minority interest........................... 4,552 7,159 12,590 8,249 7,388
Minority interest......................................... (111) (2) 151 10 12
-----------------------------------------------------------------
Net income................................................ $ 4,441 $ 7,157 $ 12,741 (4) $ 8,259 $ 7,400 (5)
=================================================================
Net income per share--assuming dilution................... $ 0.17 $ 0.30 $ 0.54 (4) $ 0.37 $ 0.34 (5)
=================================================================
Weighted average shares outstanding--assuming
dilution................................................. 25,798 24,035 23,768 22,501 22,011
<CAPTION>
Three Months Ended March
-------------------------
31,
---
1999 1998
------- --------
<S> <C> <C>
Consolidated Statements of Income:
Revenues.................................................. $32,564 $ 46,636
Cost of revenues.......................................... 16,221 21,266
----------------------
Gross profit.............................................. 16,343 25,370
Operating expenses:
Research and development................................ 3,595 3,617
Selling, general and administrative..................... 10,455 13,359
Non-recurring expenses.................................. - -
----------------------
Total operating expenses.............................. 14,050 16,976
----------------------
Operating income.......................................... 2,293 8,394
Interest income (expense), net............................ 788 5
Other income (expense), net............................... 57 126
----------------------
Income before income taxes and minority interest.......... 3,138 8,525
Income taxes.............................................. 1,196 3,034
----------------------
Income before minority interest........................... 1,942 5,491
Minority interest......................................... 1 (55)
----------------------
Net income................................................ $ 1,943 $ 5,436
======================
Net income per share--assuming dilution................... $ 0.07 $ 0.22
======================
Weighted average shares outstanding--assuming
dilution................................................. 26,873 24,783
</TABLE>
<TABLE>
<CAPTION>
December 31, March 31,
-------------------------- ---------
1998 1997 1996 1995 1994 1999
--------- -------- -------- --------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities. $ 85,679 $ 32,583 $ 35,743 $ 38,220 $18,920 $ 85,387
Working capital.................................. 99,998 47,470 37,597 34,907 19,892 101,805
Total assets..................................... 188,194 137,768 121,515 102,644 54,880 189,244
Long-term debt, less current portion............. 8,856 16,092 17,920 11,978 7,906 6,940
Minority interest................................ 846 595 545 535 6 845
Total stockholders' equity....................... 146,562 78,189 60,121 49,568 25,866 149,029
</TABLE>
(1) Represents a one-time charge of $1.7 million accrued in connection with
costs incurred in completing the NOW acquisition and a $0.4 million charge
relating to a restructuring charge primarily for severance at ATMI's EcoSys
division.
1
<PAGE>
(2) Represents a one-time charge of $9.0 million accrued in connection with
costs incurred in investigating, analyzing and completing the ADCS Group
and LSL acquisitions.
(3) Represents a one-time charge of $2.0 million ($1.2 million, net of taxes)
accrued in connection with patent litigation involving LSL, which resulted
in a settlement payment in May 1997.
(4) Net income and net income per share--assuming dilution in 1996 include the
effect of the ADCS Group's treatment as an S-Corporation for a portion of
the year. If the ADCS Group had been taxed as a C-Corporation for all of
1996, the Company's net income and net income per share--assuming dilution
would have been approximately $11.3 million and $0.47, respectively, for
the year ended December 31, 1996.
(5) Net income and net income per share--assuming dilution in 1994 include a
non-recurring gain of approximately $3.6 million, or $0.16 per share--
assuming dilution, related to the restructuring of a joint venture and
costs incurred in the acquisition of The Vector Technical Group, Inc.
2
<PAGE>
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. Management's Discussion and
Analysis of Financial Condition and Results of Operations give retroactive
effect to the acquisitions of ACSI, Delatech, and TeloSense which have been
accounted for using the pooling of interests method.
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, ACSI and NOW
divisions. ADCS develops and markets ultrahigh-purity thin film materials and
proprietary delivery systems. NovaSource develops and markets SDS, which stores
dangerous gases as solids in cylinders, providing increased safety and
substantially greater operating efficiencies. ACSI manufactures and markets
specialty materials used in photolithography and chemical mechanical processing
steps in semiconductor manufacturing. NOW manufactures high performance
containers and dispensing systems for advanced purity chemicals used in the
manufacture of microelectronics. The Materials segment contributed approximately
47% of consolidated revenues in 1998.
ATMI's Technologies segment consists of the EcoSys, Epitronics, Emosyn, and
Ventures divisions. The Company believes EcoSys, particularly after the May
1999 acquisitions of Delatech and TeloSense, is the only provider of point-of-
use environmental equipment offering all of the key technologies for
semiconductor effluent abatement and monitoring. 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
Technologies business contributed approximately 53% of consolidated revenues in
1998.
3
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain items from
the Company's consolidated statements of income expressed as a percentage of
total revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
----------------------------------------------------------------------
Fiscal Year Ended December 31, Quarter Ended March 31,
------------------------------------------ --------------------------
1998 1997 1996 1999 1998
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.............................................. 100.0 100.0 100.0 100.0 100.0
Cost of revenues...................................... 52.2 47.7 47.8 49.8 45.6
----- ----- ----- ----- -----
Gross profit.......................................... 47.8 52.3 52.2 50.2 54.4
Operating expenses:
Research and development............................. 10.6 7.6 8.2 11.0 7.8
Selling, general and administrative.................. 32.0 30.5 31.2 32.1 28.6
Non-recurring expenses............................... 1.5 5.0 1.3 0.0 0.0
----- ----- ----- ----- -----
Total operating expenses............................ 44.1 43.1 40.7 43.1 36.4
----- ----- ----- ----- -----
Operating income...................................... 3.7 9.2 11.5 7.1 18.0
Interest income (expense), net........................ 1.6 (0.5) (0.2) 2.4 0.0
Other income, net..................................... 0.4 0.2 0.1 0.3 0.3
----- ----- ----- ----- -----
Income before income taxes and minority interest...... 5.7 8.9 11.4 9.8 18.3
Income taxes.......................................... 2.4 4.6 3.0 3.7 6.5
----- ----- ----- ----- -----
Income before minority interest....................... 3.3 4.3 8.4 6.1 11.8
Minority interest..................................... (0.1) 0.0 0.1 0.0 (0.1)
----- ----- ----- ----- -----
Net income............................................ 3.2% 4.3% 8.5% 6.1% 11.7%
===== ===== ===== ===== =====
</TABLE>
Comparison of Three Months Ended March 31, 1999 and 1998
Revenues. Revenues decreased 30.2% to $32.6 million in the three months ended
March 31, 1999 from $46.6 million in the same three month period in 1998. The
revenue decline was primarily attributable to the significant effect the
downturn in the semiconductor capital equipment cycle had on the Company's
product sales, particularly the environmental equipment products from Ecosys
(including recently acquired Delatech), beginning in the second quarter of 1998.
Gross Profit. Gross profit decreased 35.6% to $16.3 million in the quarter
ended March 31, 1999 from $25.4 million in the quarter ended March 31, 1998.
Gross margin decreased to 50.2% of revenues in the three month period in 1999
from 54.4% of revenues in the three month period in 1998. This decrease was
primarily a result of a sizable decline in environmental equipment revenues and
less efficient fixed cost absorption attendant to the decrease in revenues
within the Epitronics business, when comparing the first quarter of 1999 with
the first quarter of 1998.
Research and Development Expenses. Research and development expenses were $3.6
million in the first three months of 1999 and the first three months of 1998.
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 were offset be reduced R&D spending within Ecosys,
forced by the industry downturn. As a percentage of revenues, research and
development expenses increased to 11.0% in the 1999 quarter from 7.8% in the
1998 quarter.
Selling, General and Administrative Expenses. Despite incurring expenses
related to the beginning phases of an implementation of an enterprise resource
planning system ("ERP") for the Company, selling, general and administrative
expenses decreased 21.7% to $10.5 million in the three months ended March 31,
1999 from $13.4 million in the same three month period in 1998. The substantial
decline was a result of reduced variable selling expenses tied to reduced
revenues, and a decline in compensation paid to members of management of the
Delatech, ACSI and TeloSense businesses due to weaker operating performance in
1998. As a percentage of revenues, these expenses increased to 32.1% in the
three month period in 1999 from 28.6% in the comparable period in 1998.
4
<PAGE>
Other Income, Net. Other income, including interest income and expense
increased to $845,000 in the quarter ended March 31, 1999 from $131,000 in the
quarter ended March 31, 1998. The increase in the 1999 quarter was 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 $1.2 million, down from $3.0 million in the same
quarter in 1998. The Company's effective income tax rate increased to 38.1% in
the first quarter of 1999 from 35.6% in the first quarter of 1998. The increase
was a result of a shift in apportionment of state income and a decrease in
available tax credits.
Earnings per Share. Earnings per share-assuming dilution decreased to $0.07
for the first quarter of 1999 compared with a $0.22 earnings per share-assuming
dilution in the first quarter of 1998. Weighted average shares outstanding for
the first quarter of 1999 were approximately 26.9 million compared to
approximately 24.8 million for the first quarter of 1998. The significant
increase reflected the Company's public offering at the end of the first quarter
of 1998.
Comparison of Fiscal Years Ended December 31, 1998, 1997, and 1996
Revenues. Revenues decreased 21.2% to $140.9 million in 1998 from $178.8
million in 1997, following an increase of 19.0% in 1997 from $150.3 million in
1996. Soft market conditions in 1998, evidenced by a decline in semiconductor
unit demand in the second and third quarters of 1998 and a significant reduction
in semiconductor equipment spending during most of 1998, were the primary causes
of the revenue decline when comparing 1998 with 1997. The growth in revenues
from 1996 to 1997 was driven primarily by a substantial increase in SDS product
sales, increased market penetration particularly within the environmental
equipment and specialty materials product lines, and healthy overall growth in
the semiconductor industry in 1997.
Gross Profit. Gross profit decreased 27.9% to $67.4 million in 1998 from
$93.4 million in 1997. Gross margin decreased to 47.8% of revenues in 1998 from
52.3% of revenues in 1997, primarily as a result of less efficient fixed cost
absorption attendant to the decrease in revenues experienced in 1998,
particularly within the EcoSys, Epitronics and NOW businesses. Volume declines
within the ACSI business, driven by the softening semiconductor industry
conditions, also contributed to the reduction in gross margins in 1998.
Gross profit increased 19.1% to $93.4 million in 1997 from $78.5 million in
1996. Gross margin increased slightly to 52.3% of revenues in 1997 from 52.2% of
revenues in 1996. The revenue growth and product mix shift in the Ecosys
business in 1997 generated higher margins that were offset by lower margins in
the silicon epi business because of the relocation of manufacturing equipment
during the first half of 1997 and duplicate facility costs during that period.
Additionally, margin increases were offset by lower selling prices to end-user
customers of ADCS and the fact that the SDS revenue stream was a smaller but
higher margin royalty stream in 1996.
Research and Development Expenses. Research and development expenses
increased 9.5% to $14.9 million in 1998 from $13.7 million in 1997, and
increased 10.9% in 1997 from $12.3 million in 1996. The 1998 increase was
primarily due to the development efforts to extend the SDS technology beyond ion
implant applications into CVD, etch and bulk gas delivery, development of new
chemical mechanical polishing ("CMP") materials within ACSI, and product
development activities within the Company's Emosyn division. The 1997 increase
was primarily due to increased staffing for several development efforts related
to the Company's advanced thin film technology and applications, including CMP.
Research and development expenses as a percentage of revenues increased to 10.6%
in 1998, compared with 7.6% in 1997, which was a decrease from 8.2% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 17.4% to $45.1 million in 1998 from $54.6
million in 1997, and increased 16.6% in 1997
5
<PAGE>
from $46.9 million in 1996. The 1998 decrease was primarily due to a significant
reduction in compensation paid to members of management of the Delatech, ACSI
and TeloSense businesses due to weaker operating performance in 1998, a decrease
in executive compensation, and a reduction of administrative costs resulting
from reductions in personnel, and decreased commissions on lower product
revenues. ATMI's variable selling costs grew in 1997 in line with the Company's
revenue growth from 1996 levels. ATMI also added administrative staff in 1997 as
compared to 1996 to support revenue growth and incurred increased costs related
to the businesses acquired in 1997. Selling, general and administrative expenses
as a percentage of revenues increased to 32.0% in 1998, compared with 30.5% in
1997 and 31.2% in 1996.
Non-Recurring Expenses. The 1998 and 1997 operating results included a one-
time, non-recurring charge of $1.7 million and $9.0 million, respectively,
related to the costs incurred in completing the NOW acquisition in 1998 and the
ADCS Group and LSL acquisitions in 1997. The 1996 operating results included a
one-time charge of $2.0 million in connection with patent litigation involving
LSL, which resulted in a settlement payment in May 1997. Additionally, in the
third quarter of 1998 the Company recorded approximately $400,000 of non-
recurring charges related to workforce reductions in the EcoSys business, which
was recorded in non-recurring charges and an increase of approximately $900,000
in general business reserves, deemed necessary by the weakness in the
semiconductor industry in 1998, which was recorded in cost of sales, selling,
general and administrative expenses.
Interest Income (Expense), Net. Interest income increased 149% to $4.0
million in 1998 from $1.6 million in 1997, and decreased 7.8% in 1997 from $1.7
million in 1996. The 1998 increase in interest income was a direct result of the
increased cash and marketable securities that resulted from the Company's public
offering in the first quarter of 1998. The decrease in interest income in 1997
was due to lower levels of cash on hand from the acquisition cost of ADCS and
LSL in the fourth quarter of 1997. Interest expense decreased 35.5% to $1.7
million in 1998 from $2.6 million in 1997, and increased 25.5% in 1997 from $2.0
million in 1996. The 1998 decrease was due to a conversion of outstanding debt
at ACSI into equity in late 1997 and lower overall debt balances outstanding
during 1998, as capital lease lines were paid down and certain high-interest
rate debt was retired. Interest expense was higher in 1997 than 1996, due
primarily to increased borrowings under capital lease lines and increased bank
borrowings by ACSI.
Income Taxes. Income tax expense decreased 58.4% to $3.4 million in 1998 from
$8.3 million in 1997, and increased 81.6% in 1997 from $4.6 million in 1996. The
effective income tax rate decreased to 43.1% in 1998 from 53.7% in 1997 and
increased from 26.6% in 1996. ATMI's income tax expense related primarily to
United States federal and state taxes liabilities, which was partially offset by
various foreign sales corporation benefits and research and development credits.
The 1998 effective tax rate of 43.1% was higher than statutory rates because no
tax benefit was taken for the non-recurring charge of $1.7 million related to
the NOW acquisition and no tax benefit was recognized for operating losses
sustained by ACSI in 1998. The significant increase in 1997 to a level above
statutory rates was due in part to the 1997 operating results including the $9.0
million non-recurring charge related to the ADCS Group and LSL acquisitions for
which no tax benefit was taken. The 1996 effective rate is below statutory
rates because ADCS, prior to acquisition, was an S-corporation for a portion of
the 1996 tax year.
Minority Interest. Minority interest represents the 30% interest held by
K.C. Tech Co., Ltd. ("K.C. Tech") in the operations of ADCS-Korea a South Korean
chusik hoesa, which is a joint venture established to manufacture, sell and
distribute chemicals to the semiconductor and related industries in South Korea.
Earnings Per Share. Earnings per share, on a diluted basis, decreased to
$0.17 per share in 1998 from $0.30 in 1997, which had declined from $0.54 per
share in 1996. However, after adjusting earnings to exclude the non-recurring
and one-time charges recognized in 1998, 1997 and 1996, and to adjust 1996
earnings on a pro forma basis to treat the ADCS Group as a C-Corporation for all
of 1996, earnings per share, on a diluted basis, decreased 62.7% to $0.25 per
share in 1998 from $0.67 per share in 1997, and increased 19.6% in 1997 from
$0.56 per share in 1996.
6
<PAGE>
Segment Data
During 1998, the Company adopted FASB Statement No. 131 Disclosure About
Segments of an Enterprise and Related Information. ATMI has two segments- ATMI
Materials and ATMI Technologies. ATMI Materials, which consists of the ADCS,
NovaSource, ACSI and NOW divisions, develops and markets ultrahigh purity thin
film materials and proprietary delivery systems. ATMI Technologies consists of
the EcoSys, Epitronics, Emosyn and Venture divisions. EcoSys is a provider of
point-of-use environmental equipment offering all of the key technologies for
semiconductor effluent abatement. Epitronics is involved in specialty epitaxial
services, providing high quality processing of silicon and next-generation III-V
and wide bandgap-wafers. Emosyn 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 Company
has a corporate headquarters, which is not a separate operating unit. Activity
of the corporate headquarters has been classified in Corporate listed below.
The reportable segments are each managed separately because they manufacture and
distribute distinct products with different production processes.
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 the same as those
described in the summary of significant accounting policies in ATMI's
Consolidated Financial Statements. Intercompany sales are not material among
segments or operating divisions. The general corporate assets include primarily
cash and marketable securities, goodwill and other long-lived assets of the
Company.
7
<PAGE>
The following tables provide reported results for each of these segments:
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------------------------- --------------------------
Revenues 1998 1997 1996 1999 1998
- -------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ATMI Materials................ $ 66,681,000 $ 78,757,000 $ 57,833,000 $17,884,000 $19,462,000
ATMI Technologies............. 74,187,000 100,018,000 92,455,000 14,680,000 27,174,000
-----------------------------------------------------------------------
Consolidated Revenues $140,868,000 $178,775,000 $150,288,000 $32,564,000 $46,636,000
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------------------------- -------------------------
Operating Income (Loss) 1998 1997 1996 1999 1998
- ----------------------- ------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ATMI Materials................. $11,710,000 $17,917,000 $10,021,000 $3,905,000 $4,403,000
ATMI Technologies.............. (2,524,000) 8,573,000 9,870,000 (686,000) 4,462,000
Non-recurring charges.......... (2,102,000) (9,000,000) (2,000,000) - -
Corporate...................... (1,889,000) (1,357,000) (620,000) (926,000) (471,000)
----------------------------------------------------------------------
Consolidated Operating
Income $ 5,195,000 $16,133,000 $17,271,000 $2,293,000 $8,394,000
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets December 31, March 31,
- ------------------- ------------------------------------ ------------
1998 1997 1999
------------ ------------ ------------
<S> <C> <C> <C>
ATMI Materials............................ $ 39,534,000 $ 34,832,000 $ 41,783,000
ATMI Technologies......................... 61,037,000 67,679,000 61,246,000
General Corporate Assets.................. 87,623,000 35,257,000 86,215,000
----------------------------------------------------------
Total Consolidated Assets $188,194,000 $137,768,000 $189,244,000
==========================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended March 31,
------------------------------------------ --------------------------
Consolidated Net Income 1998 1997 1996 1999 1998
- ----------------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Income from
reportable segments......... $ 5,195,000 $16,133,000 $17,271,000 $ 2,293,000 $ 8,394,000
Other Profit or (Loss)....... 2,693,000 (681,000) 38,000 846,000 76,000
Income Taxes (Provision)..... (3,447,000) (8,295,000) (4,568,000) (1,196,000) (3,034,000)
---------------------------------------------------------------------
Consolidated Net Income $ 4,441,000 $ 7,157,000 $12,741,000 $ 1,943,000 $ 5,436,000
=====================================================================
</TABLE>
Business Segments Results
ATMI Materials
Revenues in the Materials segment for the three months ended March 31, 1999
declined 8.1% from first quarter of 1998 levels. In 1998, revenues in this
segment declined 15.3% from 1997 levels, which had increased 36.2% from 1996
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 1997 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 11.3% 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,
8
<PAGE>
as a percentage of revenues, was 21.8% and 22.6% for the three months ended
March 31, 1999 and 1998, respectively.
Operating income in the Materials segment declined 34.6% in fiscal 1998 from
1997 levels, which had increased 78.8% from 1996 levels. The revenue decline in
1998 reduced gross margins within the segment and, combined with an increase in
R&D spending, drove the operating income decline. Alternatively, the revenue
growth in 1997 when compared to 1996 increased gross margins and generated
higher operating profitability. Operating income, as a percentage of revenues,
was 17.6%, 22.7% and 17.3% for 1998, 1997 and 1996, respectively.
ATMI Technologies
Revenues in the Technologies segment in the first quarter of 1999 declined
46.0% from first quarter 1998 levels. Overall revenues in the Technologies
segment in 1998 declined 25.8% from 1997 levels, which had increased 8.2% from
1996 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.
Operating income within the Technologies segment declined to a loss of $0.7
million in the first quarter of 1999 compared to operating profit of $4.5
million for the same period in 1998. Operating income within the Technologies
segment also declined to a loss of $2.5 million in fiscal 1998 compared to
operating profit of $8.6 million in 1997. These losses were attributable to the
severe decline in the EcoSys business, reduced Epitronics operating results
caused by 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. In 1997, the increased operating income generated
through the growth of the EcoSys and Epitronics businesses was offset by reduced
profitability on government contracts and incremental investment in the Emosyn
venture.
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 expenses also increased in 1998 from 1997 and 1996, due to the
overall increase in general and administrative support in 1998 and 1997. The
corporate expenses increased 39.2% in 1998 from 1997, which had increased 118.9%
from 1996 levels.
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 $101.8 million at
March 31, 1999 from $100.0 million at December 31, 1998 and $47.5 million at
December 31, 1997.
Despite a reduction in profitability in the first quarter of 1999, net cash
provided by operations was $2.9 million resulting primarily from improvements in
working capital in the first quarter of 1999 as compared to the end of 1998. The
improvement in working capital was primarily caused by a decrease in inventory
and an increase in other liabilities at March 31, 1999. In 1998, operations
provided cash of approximately $12.5 million. The $1.7 million of non-recurring
transaction costs, expensed in the third quarter of 1998, reduced the cash
generated from operations by approximately $1.1 million, as
9
<PAGE>
approximately $0.6 million remained unpaid at December 31, 1998. Net cash
generated from operations in 1997 was approximately $5.1 million. Working
capital increases needed to support the revenue growth of the Company in 1997,
most notably in accounts receivable, inventory, and other assets, resulted in
significant uses of cash. The $9.0 million of non-recurring transaction costs,
expensed in the fourth quarter of 1997, reduced the cash generated from
operations by approximately $7.0 million, as approximately $2.0 million remain
unpaid at December 31, 1997. In 1996, ATMI generated net cash from operations of
$13.8 million, primarily due to the profitability of operations.
The Company's investing activities included capital expenditures of $1.7
million, $13.2 million, $7.7 million and $13.4 million in the three months ended
March 31, 1999 and the years 1998, 1997 and 1996, respectively. The 1998
expenditures primarily related to installation of additional manufacturing
capacity in Danbury, Connecticut, San Jose, California and the Company's two
Texas facilities. The 1997 expenditures included both the installation of SDS
manufacturing capacity in the Danbury, Connecticut facility and an increase in
epitaxial capacity in Epitronics' Arizona facilities. Capital expenditures for
1996 included final construction of Epitronics' manufacturing facility in Mesa,
Arizona, as well as manufacturing expansion for EcoSys and ADCS-Korea, and
laboratory construction for customer application work for EcoSys.
Among other investing activities, in 1998, the Company invested approximately
$47.9 million raised primarily from the sale of its Common Stock into marketable
securities for future working capital requirements and potential merger and
acquisition activities. The Company sold $0.8 million in marketable securities,
net in 1997, while in 1996, ATMI sold $3.6 million in marketable securities, net
and made a $4.0 million payment in connection with the 1995 acquisition of the
Guardian Systems product line.
As of March 31, 1999, ATMI has financed a significant portion of its capital
equipment purchases, particularly the silicon epitaxial capacity, through
capital leases with approximately $5.6 million of capital lease obligations
outstanding. During the first quarter of 1999 and the year 1998, the Company
made payments on capital leases of approximately $0.6 million and $2.8 million,
respectively. Financial institutions have also provided collateral-based loans
for other equipment purchases. In the first quarter of 1999, the Company made
$1.8 million of note payments and during 1998, the Company made payments on
notes of approximately $6.2 million, with the most significant payment being the
retirement of a mortgage on the Mesa, Arizona Epitronics facility. The Company's
NOW business has an industrial revenue bond arrangement outstanding in the
amount of $2.6 million, which was used for equipment and improvements at its
manufacturing facility and corporate office. At March 31, 1999, $15.7 million of
loans, bonds and financing remained outstanding. Management believes that its
debt service obligations can be adequately satisfied by cash flows from
operations.
ATMI believes its existing cash balances, marketable securities, existing
sources of liquidity and anticipated funds from operations 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. There are no present agreements with
respect to any such acquisitions. However, any such transactions may affect
ATMI's future capital needs.
Operations Outside the United States
For the years ended December 31, 1998, 1997 and 1996, sales outside the United
States, including Asia and Europe, accounted for 27.7%, 26.6%, and 31.5%,
respectively, of the Company's revenues. The Company anticipates its sales
outside the United States will continue to account for significant percentage of
its revenues. In addition, the Company has a wholly-owned subsidiary in South
Korea that manufactures and markets environmental abatement equipment in South
Korea and a joint venture agreement with K.C. Tech pursuant to which it has a
70% interest in ADCS-Korea, a South Korean chusik hoesa, which manufactures,
sells and distributes thin film materials to the semiconductor and related
industries in South Korea.
10
<PAGE>
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 has completed an IT Systems inventory analysis and risk assessment. As
previously planned and budgeted, the Company is actively upgrading its core IT
Systems to incorporate additional desired features and functionality including
Year 2000 compliant operators. ATMI has completed most of these upgrades and
will complete those necessary to make the recently acquired businesses Year 2000
compliant by September 30, 1999. In connection with such upgrades, the Company
expects its core IT Systems will be 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
and 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, no remediation actions were required
in order to be Year 2000 compliant. Because ATMI believes the number of Non-IT
Systems is relatively small and therefore, 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 September 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 is 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.
For the year ending December 31, 1998, the Company has incurred
approximately $600,000 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 of 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 as well as planned upgrades or planned
replacement systems which will have a positive impact on resolving the Year 2000
issue. ATMI expects the cost related to the Third Party Systems compliance to
be minimal. As of December 31, 1998, no IT Systems projects have been deferred
because of problems associated with the Year 2000 Issue.
11
<PAGE>
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.
12
<PAGE>
Exhibit 99.4
ATMI, INC.
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
Page
----
Report of Ernst & Young LLP F-2
Report of Deloitte & Touche LLP F-3
Report of PriceWaterhouse LLP F-4
Audited Financial Statements and Schedule
Supplemental Consolidated Balance Sheets - December 31, 1998 and 1997 F-5
Supplemental Consolidated Statements of Income for the years ended F-6
December 31, 1998, 1997, and 1996
Supplemental Consolidated Statements of Stockholders' Equity for the F-7
years ended December 31, 1998, 1997, and 1996
Supplemental Consolidated Statements of Cash Flows for the years ended F-8
December 31, 1998, 1997, and 1996
Notes to Supplemental Consolidated Financial Statements F-9
Schedule II - Valuation and Qualifying Accounts F-27
Unaudited Financial Statements
Supplemental Consolidated Balance Sheets - March 31, 1999 and December F-28
31, 1998
Supplemental Consolidated Statements of Income for the three months F-29
ended March 31, 1999 and 1998
Supplemental Consolidated Statements of Cash Flows for the three F-30
months ended March 31, 1999 and 1998
Notes to Supplemental Consolidated Interim Financial Statements F-31
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders of
ATMI, Inc.
We have audited the supplemental consolidated balance sheets of ATMI, Inc. as of
December 31, 1998 and 1997, 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, 1998. Our audits also included the financial
statement schedule listed in the index. The supplemental consolidated financial
statements and schedule give retroactive effect to the mergers of ATMI, Inc.
with TeloSense Corporation ("TeloSense"), Advanced Chemical Systems
International, Inc. ("ACSI") and Delatech Incorporated ("Delatech") on May 5,
1999, May 31, 1999 and May 31, 1999, respectively, 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 and schedule based on our audits. We did not audit the financial
statements of NOW Technologies, Inc. ("NOW"), a wholly owned subsidiary, as of
March 31, 1998, which statements reflect total assets constituting 7% at March
31, 1998 and reflect revenues constituting 8% and 7% for the years ended March
31, 1998 and 1997, respectively, (which were combined with the accounts of ATMI,
Inc. at December 31, 1997 and for the two years then ended). Nor did we audit
the financial statements or Valuation and Qualifying Accounts Schedule Data of
Lawrence Semiconductor Laboratories, Inc., ("Lawrence"), a wholly-owned
subsidiary, for the year ended December 31, 1996. These statements reflect
revenues constituting 14% of the related supplemental consolidated financial
statement total for the year ended December 31, 1996. Those statements were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to data included for NOW and Lawrence is based
solely on the reports of such 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 reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports 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, 1998 and 1997, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, after
giving retroactive effect to the mergers of TeloSense, ACSI and Delatech, as
described in the notes to the supplemental consolidated financial statements, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic supplemental financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Stamford, Connecticut
June 29, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS REPORT
Board of Directors
NOW Technologies, Inc. and Subsidiaries
Bloomington, Minnesota
We have audited the consolidated balance sheet of NOW Technologies, Inc.
and Subsidiaries (the Company) as of March 31, 1998 and the related statements
of income, stockholders' equity and cash flows for each of the two years in the
period ended March 31, 1998 (not presented herein). These consolidated
financial statements are the responsibility of the Company'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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of March 31,
1998 and the results of its operations and its cash flows for each of the two
years in the period ended March 31, 1998, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE, LLP
Minneapolis, Minnesota
May 1, 1998
F-3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Lawrence Semiconductor Laboratories, Inc. and Affiliate
In our opinion, the combined statements of income and retained earnings and
of cash flows of Lawrence Semiconductor Laboratories, Inc. and Affiliate (not
presented separately herein) present fairly, in all material respects, the
results of operations and cash flows of Lawrence Semiconductor Laboratories,
Inc. and Affiliate for the year ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit 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
audit provides 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
F-4
<PAGE>
ATMI, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1)............................. $ 21,128,000 $ 15,122,000
Marketable securities (Notes 1 and 2).......................... 64,551,000 17,461,000
Accounts receivable, net of allowance for doubtful accounts of
$794,000 in 1998, and $1,167,000 in 1997 (Note 3)............ 20,747,000 32,909,000
Inventories (Notes 1 and 4).................................... 15,563,000 14,939,000
Other.......................................................... 7,610,000 5,197,000
-----------------------------------
Total current assets........................................ 129,599,000 85,628,000
Property and equipment, net (Notes 1 and 5)...................... 50,185,000 45,131,000
Goodwill and other long-term assets, net (Notes 1 and 10)........ 8,410,000 7,009,000
-----------------------------------
$188,194,000 $137,768,000
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans, notes and bonds payable, current portion (Note 6)....... $ 6,602,000 $ 7,155,000
Capital lease obligations, current portion (Note 7)............ 2,493,000 2,828,000
Accounts payable............................................... 6,903,000 8,446,000
Accrued expenses............................................... 10,485,000 14,258,000
Accrued commissions............................................ 1,315,000 2,364,000
Income taxes payable (Note 8).................................. 1,803,000 2,544,000
Deferred income taxes (Note 8)................................. - 563,000
-----------------------------------
Total current liabilities................................... 29,601,000 38,158,000
Loans, notes and bonds payable, less current portion (Note 6).... 5,110,000 9,854,000
Capital lease obligations (Note 7)............................... 3,746,000 6,238,000
Deferred income taxes (Note 8)................................... 2,041,000 3,941,000
Other long-term liabilities .................................... 288,000 793,000
Minority interest................................................ 846,000 595,000
Stockholders' equity (Note 9):
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 25,941,000 in 1998, and 23,525,000 in 1997............ 259,000 235,000
Additional paid-in capital..................................... 113,059,000 48,591,000
Retained earnings.............................................. 34,547,000 30,608,000
Accumulated other comprehensive income......................... (1,303,000) (1,245,000)
-----------------------------------
Total stockholders' equity.................................. 146,562,000 78,189,000
-----------------------------------
$188,194,000 $137,768,000
===================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
ATMI, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1998 1997 1996
----------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues (Notes 1 and 14).............................. $140,868,000 $178,775,000 $150,288,000
Cost of revenues....................................... 73,515,000 85,352,000 71,839,000
----------------------------------------------------
Gross profit........................................... 67,353,000 93,423,000 78,449,000
Operating expenses:
Research and development (Note 1).................... 14,949,000 13,658,000 12,314,000
Selling, general and administrative.................. 45,107,000 54,632,000 46,864,000
Non-recurring expenses (Notes 10 and 12)............. 2,102,000 9,000,000 2,000,000
----------------------------------------------------
62,158,000 77,290,000 61,178,000
----------------------------------------------------
Operating income (Note 14)............................. 5,195,000 16,133,000 17,271,000
Interest income........................................ 3,967,000 1,592,000 1,726,000
Interest expense (Note 6).............................. (1,658,000) (2,571,000) (2,049,000)
Other income, net...................................... 495,000 300,000 210,000
----------------------------------------------------
Income before taxes and minority interest.............. 7,999,000 15,454,000 17,158,000
Income taxes (Note 8).................................. 3,447,000 8,295,000 4,568,000
----------------------------------------------------
Income before minority interest........................ 4,552,000 7,159,000 12,590,000
Minority interest...................................... (111,000) (2,000) 151,000
----------------------------------------------------
Net income (Note 14)................................... $ 4,441,000 $ 7,157,000 $ 12,741,000
====================================================
Net income per share--basic (Notes 1 and 9)............ $0.18 $0.32 $0.57
----------------------------------------------------
Net income per share--assuming dilution (Notes 1 and 9) $0.17 $0.30 $0.54
----------------------------------------------------
Weighted average shares outstanding (Notes 1 and 9) 24,256,000 22,228,000 22,205,000
----------------------------------------------------
Weighted average shares outstanding--assuming dilution
(Notes 1 and 9)....................................... 25,798,000 24,035,000 23,768,000
----------------------------------------------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
ATMI, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumulated
---------- -----------
Common Paid-in Retained Other
------ ------- -------- -----
Stock Capital Earnings Comprehensive Income Total
----- ------- -------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995.................... $232,000 $ 40,287,000 $12,820,000 $ (10,000) $ 53,329,000
Issuance of 54,199 common shares pursuant
to the exercise of employee stock options...... 1,000 188,000 -- -- 189,000
Issuance of common and preferred shares by
pooled entity.................................. -- 186,000 -- -- 186,000
Distributions to stockholders................... -- -- (1,911,000) -- (1,911,000)
Net income...................................... -- -- 12,741,000 -- 12,741,000
Cumulative translation adjustment............... -- -- -- (53,000) (53,000)
----------------
Comprehensive income............................ 12,688,000
--------------------------------------------------------------------------------
Balance at December 31, 1996.................... 233,000 40,661,000 23,650,000 (63,000) 64,481,000
Issuance of 82,520 common shares pursuant
to the exercise of employee stock options...... -- 454,000 -- -- 454,000
Issuance of 151,250 common shares pursuant
to the exercise of warrants.................... 2,000 1,688,000 -- -- 1,690,000
Issuance of common and preferred shares by
pooled entity.................................. -- 4,838,000 -- -- 4,838,000
Distributions to stockholders................... -- -- (199,000) -- (199,000)
Compensation for the issuance of common
shares......................................... -- 272,000 -- -- 272,000
Tax benefit related to nonqualified stock
options........................................ -- 678,000 -- -- 678,000
Net income...................................... 7,157,000 7,157,000
Cumulative translation adjustment............... -- -- -- (1,182,000) (1,182,000)
----------------
Comprehensive income............................ 5,975,000
--------------------------------------------------------------------------------
Balance at December 31, 1997.................... 235,000 48,591,000 30,608,000 (1,245,000) 78,189,000
Issuance of 158,918 common shares pursuant
to the exercise of employee stock options...... 1,000 782,000 -- -- 783,000
Sale of 2,257,000 common shares, net of issuance
costs of $4,161,000............................ 23,000 62,403,000 -- -- 62,426,000
Compensation for the issuance of common
shares......................................... -- 184,000 -- -- 184,000
Tax benefit related to nonqualified stock
options........................................ -- 1,099,000 -- -- 1,099,000
Distributions to stockholders.................... -- -- (400,000) -- (400,000)
Adjustment to reflect change in pooled entity
fiscal year..................................... -- -- (102,000) -- (102,000)
Net income...................................... -- -- 4,441,000 -- 4,441,000
Unrealized loss on available-for-sale securities
(net of tax benefit of $281,000)............... -- -- -- (500,000) (500,000)
Cumulative translation adjustment............... -- -- -- 442,000 442,000
----------------
Comprehensive income............................ 4,383,000
--------------------------------------------------------------------------------
Balance at December 31, 1998.................... $259,000 $113,059,000 $34,547,000 $(1,303,000) $146,562,000
--------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-7
<PAGE>
ATMI, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities
Net income................................................................ $ 4,441,000 $ 7,157,000 $ 12,741,000
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization............................................ 8,561,000 7,059,000 6,019,000
Stock option compensation................................................ 184,000 272,000 -
Effect of change of fiscal year of pooled entity......................... (102,000) - -
Bad debt expense......................................................... 242,000 910,000 426,000
Deferred income taxes.................................................... (2,154,000) 2,217,000 933,000
Tax benefit of nonqualified stock options............................. 1,099,000 678,000 -
Minority interest in net earnings of subsidiaries........................ 111,000 2,000 (151,000)
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable............................. 12,162,000 (11,216,000) (2,542,000)
(Increase) in inventory................................................ (624,000) (3,682,000) (4,939,000)
(Increase) in other assets............................................. (4,204,000) (2,439,000) (123,000)
Increase (decrease) in accounts payable................................ (1,543,000) 58,000 547,000
Increase (decrease) in accrued expenses................................ (4,822,000) 3,158,000 2,868,000
Increase (decrease) in other liabilities............................... (858,000) 949,000 (2,030,000)
-------------------------------------------
Total adjustments................................................... 8,052,000 (2,034,000) 1,008,000
-------------------------------------------
Net cash provided by operating activities........................... 12,493,000 5,123,000 13,749,000
-------------------------------------------
Investing activities
Capital expenditures...................................................... (13,225,000) (7,744,000) (13,376,000)
Long-term investment...................................................... - (250,000) -
Sale (purchase) of marketable securities, net............................. (47,871,000) 777,000 3,617,000
Advances to LSL stockholder on note receivable............................ - - (286,000)
Payments for acquisitions................................................. - - (4,000,000)
Proceeds from sale of assets.............................................. 180,000 - 619,000
-------------------------------------------
Net cash used by investing activities............................... (60,916,000) (7,217,000) (13,426,000)
-------------------------------------------
Financing activities
Borrowings from loans, notes and bonds payable............................ 556,000 713,000 6,446,000
Payments on loans, notes and bonds payable................................ (6,245,000) (3,863,000) (2,754,000)
Distribution to stockholders.............................................. (400,000) (199,000) (1,911,000)
Repayment of amounts borrowed............................................. - - (135,000)
Payments on capital lease obligations..................................... (2,831,000) (3,125,000) (1,476,000)
Proceeds from sale of common stock, net................................... 62,426,000 - -
Proceeds from sale of common and preferred stock by pooled entities - 4,153,000 186,000
Investment by minority stockholder........................................ - 48,000 160,000
Proceeds from exercise of stock options and warrants...................... 783,000 2,144,000 189,000
-------------------------------------------
Net cash provided (used) by financing activities.................... 54,289,000 (129,000) 705,000
-------------------------------------------
Effects of exchange rate changes on cash.................................. 140,000 (160,000) (53,000)
-------------------------------------------
Net increase in cash and cash equivalents................................ 6,006,000 (2,383,000) 975,000
Cash and cash equivalents, beginning of year.............................. 15,122,000 17,505,000 16,530,000
-------------------------------------------
Cash and cash equivalents, end of year $ 21,128,000 $ 15,122,000 $ 17,505,000
===========================================
Supplemental disclosure of noncash financing activities
Conversion of note payable to preferred stock by pooled entity............ -- $ 685,000 --
===========================================
</TABLE>
See accompanying notes.
F-8
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The supplemental consolidated financial statements include the accounts of
ATMI, Inc. and its majority-owned subsidiaries, after elimination of
intercompany accounts and transactions. In addition, these consolidated
financial statements give retroactive effect to the acquisitions of Advanced
Chemical Systems International, Inc. ("ACSI"), Delatech Incorporated
("Delatech"), and TeloSense Corporation which have been accounted for using the
pooling-of-interests method. The acquisitions of ACSI and Delatech occurred on
May 31, 1999, and the acquisition of TeloSense occurred on May 5, 1999 as part
of the consummation of the transactions described in Note 10.
Certain amounts have been reclassified to conform to current year
presentation.
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. 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, state-of-the-art,
high performance containers and dispensing systems for advanced purity chemicals
and specialty epitaxial thin film deposition services.
Revenue Recognition
Product revenues are recognized upon shipment of goods. Contract revenues
are derived from long-term, fixed-price and cost-reimbursement-type contracts
for research and development with the U.S. Government. Such contract revenues
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 identified. Revenues under fixed-price contracts
from the U.S. Government were $2,739,000, $3,708,000, and $4,046,000 for the
years ended December 31, 1998, 1997, 1996, respectively. Revenues under cost-
reimbursement-type contracts from the U.S. Government were $5,208,000,
$5,412,000, and $5,800,000 for the years ended December 31, 1998, 1997, 1996,
respectively.
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 are expensed as incurred. Costs incurred in
providing services under the Company's research and development contracts with
the U.S. Government are recorded as cost of contract revenues in the Company's
statements of income.
F-9
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Summary of Significant Accounting Policies (continued)
Marketable Securities and Investments
Highly liquid investments with maturities of three months or less, when
purchased, are classified as cash and cash equivalents. Investments with
maturities greater than three months and less than two years are classified as
marketable securities.
The Company accounts for investments in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
Company's policy is to protect the value of its investments portfolio and to
minimize principal risk by earning returns based on current interest rates. All
of the Company's marketable securities are classified as available-for-sale as
of the balance sheet date and are reported at fair value with unrealized gains
and losses recorded in accumulated other comprehensive income, net of tax. The
cost of securities sold is based on the specific identification method.
Interest on these securities is accrued and included in interest income.
Management determines the classification of marketable debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date.
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 accumulated other comprehensive income.
Gains or losses resulting from foreign currency transactions are included in
other income (expense) and have been immaterial.
Taxes
The Company accounts for income taxes in accordance with the liability
method. Under this method, deferred tax assets and liabilities are determined
based upon differences between financial reporting and the tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.
F-10
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Summary of Significant Accounting Policies (continued)
Fair Values of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
marketable securities, accounts receivable, short-term investments and debt.
Marketable securities are accounted for at fair value. All other financial
instruments are accounted for on an 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, 1998, no such
impairment existed. Goodwill and other long-term assets are stated net of
accumulated amortization of $1,227,000 and $837,000 at December 31, 1998 and
1997, 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 income, net
income per share-basic and net income per share-assuming dilution, as if the
fair value based method of accounting had been applied, are presented in Note 9.
Per Share Data
Basic and diluted earnings per share is calculated in accordance with FASB
Statement No. 128, Earnings Per Share. All earnings per share amounts for all
periods have been presented in accordance with, and where appropriate restated
to conform to, the requirements of Statement 128.
F-11
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Marketable Securities
Marketable securities are comprised of the following at December 31, 1998:
<TABLE>
<CAPTION>
Gross Estimated
----- ---------
Unrealized Fair
---------- ----
Cost Loss Value
---- ---- -----
<S> <C> <C> <C>
Corporate obligations.......................... $49,563,000 -- $49,563,000
U.S. Government obligations.................... 8,695,000 -- 8,695,000
Certificates of deposit........................ 4,887,000 -- 4,887,000
------------------------------------------
Total debt securities 63,145,000 -- 63,145,000
------------------------------------------
Other equity................................... 2,187,000 $(781,000) 1,406,000
------------------------------------------
Total available for sale $65,332,000 $(781,000) $64,551,000
==========================================
</TABLE>
Marketable securities are comprised of the following at December 31, 1997:
<TABLE>
<CAPTION>
Estimated
---------
Fair
----
Cost Value
---- -----
<S> <C> <C>
Corporate obligations.......................... $10,590,000 $10,590,000
U.S. Government obligations.................... 6,407,000 6,407,000
Certificates of deposit........................ 464,000 464,000
----------- -----------
Total marketable securities $17,461,000 $17,461,000
----------- -----------
</TABLE>
All of the Company's marketable debt securities have maturities of less than two
years.
3. Accounts Receivable
Amounts due from various agencies of the U.S. Government were approximately
$2,054,000, and $2,619,000 of accounts receivable at December 31, 1998 and 1997,
respectively. Unbilled accounts receivable were $620,000, and $1,019,000, and
customer advances, included in other liabilities, were $790,000, and $612,000 at
December 31, 1998 and 1997, respectively.
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 receivable 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.
F-12
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -------------
<S> <C> <C>
Raw materials............... $12,542,000 $10,574,000
Work in process............. 839,000 2,748,000
Finished goods.............. 3,605,000 2,980,000
----------- -----------
16,986,000 16,302,000
Obsolescence reserve........ (1,423,000) (1,363,000)
----------- -----------
$15,563,000 $14,939,000
=========== ===========
</TABLE>
5. Property and Equipment
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
------------- ------------
<S> <C> <C>
Land................................. $ 1,921,000 $ 1,773,000
Buildings............................ 8,925,000 8,552,000
Machinery and equipment.............. 59,211,000 49,466,000
Furniture and fixtures............... 4,155,000 3,761,000
Leasehold improvements............... 7,919,000 6,111,000
------------ ------------
82,131,000 69,663,000
Accumulated depreciation and
amortization........................ (31,946,000) (24,532,000)
------------ ------------
$ 50,185,000 $ 45,131,000
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1998, 1997 and 1996,
was $8,171,000, $6,724,000, and $5,588,000, respectively.
F-13
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Loans, Notes and Bonds Payable
Loans, notes and bonds payable consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Note payable in conjunction with acquisition of Guardian Systems,
bearing interest at 8.5%, due in three annual installments beginning
January 1, 1999...................................................... $ 2,000,000 $ 2,000,000
Term loans with Connecticut state agency, bearing interest ranging
between 5%-6%, due between April 2001 and June 2002.................. 1,649,000 1,713,000
Equipment credit line with a commercial bank, bearing interest at
8.25%, due through June 2000......................................... 525,000 1,128,000
Credit lines with commercial banks bearing interest ranging between
9.0%-9.75% available through May, 1999............................... 1,851,000 1,181,000
Notes payable with commercial banks and leasing companies, bearing
interest ranging between 7.3%-11.52%, due between April 1997 and
June 2001............................................................ 1,532,000 6,502,000
Mortgages payable with financial institutions, bearing interest at
8.63%, due November 2016............................................. 1,455,000 1,485,000
City of Bloomington, Minnesota Industrial Revenue Bond, interest
rate is variable (4.40% and 4.05% at December 31, 1998 and 1997),
quarterly payments of $100,000, due September 2005................... 2,700,000 3,000,000
----------- -----------
11,712,000 17,009,000
Less current portion.................................................. (6,602,000) (7,155,000)
----------- -----------
$ 5,110,000 $ 9,854,000
=========== ===========
</TABLE>
The approximate aggregate debt maturities are as follows as of December 31,
1998:
1999 $ 4,302,000
2000 2,039,000
2001 1,731,000
2002 1,180,000
2003 453,000
Thereafter 2,007,000
-----------
$11,712,000
===========
The term loans are collateralized by various equipment, leasehold
improvements and renovations in the Company's Connecticut facility. The
mortgages are collateralized by the building at the Company's Delatech
subsidiary. The majority of the Company's notes payable are secured by the
related real property or equipment. The Company's equipment credit line bears
interest at prime plus 0.5% per annum and is collateralized by certain assets.
The revolving credit lines are secured by substantially all the assets of
certain of the Company's subsidiaries and have available borrowing capacity
approximating $1,543,000 at December 31, 1998. The Company is in compliance with
the equipment credit line and notes payable covenants.
F-14
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Loans, Notes and Bonds Payable (continued)
The bondholders may tender the City of Bloomington, Minnesota bonds at any
time for the principal amount plus accrued interest, as a result they have been
classified as a current liability. The Company has the option to convert the
bonds to a fixed rate provided all bonds can be remarketed at the fixed rate.
The first fixed rate optional redemption date would be July 1 of the year that
is halfway between the conversion date and July 1, 2005. If redeemed, the
Company must pay 102% and 101% of bond principal in the first and second years
following the first fixed rate optional redemption date, respectively. Prior to
conversion to a fixed rate, the Company has the option to redeem the bonds
without premium.
Certain of the Company's subsidiaries' financing agreements contain
limitations or prohibitions on the payment of dividends without the lender's
consent or in conjunction with the subsidiary's failure to comply with various
financial covenants. The Company has never declared or paid cash dividends on
its capital stock. The Company does not anticipate paying any cash dividends in
the foreseeable future.
Interest paid was $1,887,000, $2,700,000, and $2,134,000, for the years
ended December 31, 1998, 1997, and 1996, respectively.
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 were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- -----------
<S> <C> <C>
Machinery and equipment.......... $12,269,000 $14,556,000
Accumulated depreciation......... (3,109,000) (3,549,000)
----------- -----------
$ 9,160,000 $11,007,000
=========== ===========
</TABLE>
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1998:
<TABLE>
<CAPTION>
Capital Leases
--------------
<S> <C>
1999................................ $ 2,943,000
2000................................ 2,173,000
2001................................ 1,570,000
2002................................ 359,000
-----------
Total lease payments.......................... 7,045,000
Less amount representing interest............. (806,000)
-----------
Present value of net capital lease payments... 6,239,000
Less current portion.......................... (2,493,000)
-----------
Long-term portion............................. $ 3,746,000
===========
</TABLE>
The Company leases office and manufacturing facilities, and certain
manufacturing equipment under several operating leases expiring between 1999 and
2005. Rental expense was $4,250,000, $3,885,000, and $3,534,000, for the years
ended December 31, 1998, 1997 and 1996, respectively.
F-15
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Leases (continued)
The following is a schedule of future minimum lease payments for operating
leases as of December 31, 1998:
<TABLE>
<CAPTION>
Operating
---------
Leases
--------
<S> <C>
1999......................... $3,106,000
2000......................... 2,200,000
2001......................... 1,727,000
2002......................... 1,274,000
2003......................... 581,000
Thereafter................... 810,000
----------
Total minimum lease payments...... $9,698,000
==========
</TABLE>
8. Income Taxes
Significant components of the provision for income taxes for the periods
presented are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
Current:
Federal.............. $ 4,485,000 $5,227,000 $2,698,000
State................ 1,100,000 714,000 865,000
Foreign.............. 16,000 137,000 72,000
----------- ---------- ----------
Total current......... 5,601,000 6,078,000 3,635,000
----------- ---------- ----------
Deferred:
Federal.............. (1,618,000) 1,896,000 658,000
State................ (536,000) 321,000 275,000
----------- ---------- ----------
Total deferred........ (2,154,000) 2,217,000 933,000
----------- ---------- ----------
$ 3,447,000 $8,295,000 $4,568,000
=========== ========== ==========
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities............................................ $ 984,000 $ 576,000
Inventory reserves............................................. 1,114,000 528,000
Net operating loss carryforward and tax credits................ 1,520,000 800,000
Other, net..................................................... 428,000 914,000
---------------------------
4,046,000 2,818,000
Valuation allowance................................................. (1,520,000) (800,000)
---------------------------
2,526,000 2,018,000
Deferred tax liabilities:
Depreciation................................................... (2,768,000) (2,177,000)
Capital leases................................................. (1,184,000) (1,182,000)
Other, net..................................................... (615,000) (3,163,000)
---------------------------
(4,567,000) (6,522,000)
---------------------------
Net deferred tax liabilities........................................ $(2,041,000) $(4,504,000)
===========================
</TABLE>
F-16
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes (continued)
As of December 31, 1998, the Company's ACSI subsidiary has federal and
state net operating loss carryforwards of $3,508,000 and approximately $469,000,
respectively. ASCI also has federal and California research and development tax
credit carryforwards of approximately $111,000 and $101,000, respectively. The
net operating loss and tax credit carryforwards will expire at various dates
beginning in 1999 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of these net operating losses and
credits before utilization.
As of December 31, 1998 and 1997, the Company's net operating
loss and research credit carryforwards of approximately $1,520,000 and $800,000,
respectively have been offset by a valuation allowance. The net valuation
allowance increased by approximately $720,000 and $100,000 for the years ended
December 31, 1998 and 1997, respectively.
Income taxes paid for the years ended December 31, 1998, 1997, and 1996
were $8,855,000, $5,860,000, and $4,549,000.
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to the Company's tax expense is:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1998 1997 1996
------------ --------------- -------------
<S> <C> <C> <C>
U.S. statutory rate............................................. $3,243,000 $ 5,484,000 $ 6,306,000
State income taxes.............................................. 356,000 672,000 883,000
Effect of nondeductible acquisition expenses.................... 599,000 3,436,000 13,000
Income not subject to federal income taxation................... (39,000) (75,000) (1,571,000)
Net operating loss carryforward utilization..................... -- (296,000) (1,285,000)
Foreign sales corporation benefit............................... (324,000) -- --
Reversal of valuation allowance................................. -- (1,163,000) --
Tax credits..................................................... (244,000) -- --
Other, net...................................................... (144,000) 237,000 222,000
--------------------------------------------
$3,447,000 $ 8,295,000 $ 4,568,000
============================================
</TABLE>
Prior to ATMI's acquisition of the Advanced Delivery & Chemical Systems
Nevada, Inc. and its affiliates (collectively, 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 had been taxed as a C-Corporation for all of 1996, and the pro forma
consolidated net income and net income per share-assuming dilution for ATMI for
the year ended December 31, 1996 would have been $11,258,000 and $0.47,
respectively.
F-17
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes (continued)
South Korea has granted the Company a five year full income tax exemption,
which expires in 2003, and an additional three year 50% exemption, which expires
in 2006, for its operations at ADCS-Korea Co., Ltd. ("ADCS-Korea")
The former securityholders of the ADCS Group have agreed to indemnify the
Company against losses arising out of certain tax matters. As security for these
tax matters, the former securityholders of the ADCS Group have delivered 700,000
shares of the Company's common stock which they received into escrow. Any claim
for such tax matters adversely determined against the Company, regardless of the
escrow, would result in a charge to the Company's results of operations. The
former securityholders of the ADCS Group believe that any exposure would be
immaterial, and the Company believes that any successful challenge to the tax
matters is not probable. While the possible exposures, if any, are difficult to
quantify, the Company believes that, regardless of the probability that
liabilities arise, the potential exposures range from $0 to $22 million
depending on the tax matter.
9. Stockholders' Equity
In March 1998, the Company completed a registered underwritten public
offering of 5,428,000 shares, including over-allotments, of common stock at
$29.50 per share. Net proceeds to the Company of $62,426,000 were from 2,257,291
shares sold by the Company while 3,170,709 shares were sold by certain
stockholders. Costs of the offering, including underwriting commissions, were
$4,161,000.
Stock Plans
In May 1998, the Company's stockholders approved the adoption of the 1998
Stock Plan ("1998 Plan"), which provides for the granting of up to 2,000,000
nonqualified stock options, "incentive stock options" ("ISOs") stock
appreciation rights and restricted stock awards to employees, directors and
consultants of the Company.
In May 1997, the Company's stockholders approved the adoption of the 1997
Stock Plan ("1997 Plan"), which provides for the granting of up to 900,000
nonqualified stock options, ISOs and stock appreciation rights to employees,
directors and consultants of the Company.
In May 1995, the Company's stockholders approved the adoption of the 1995
Stock Plan ("1995 Plan"), which provides for the granting of up to 500,000
nonqualified 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, provided for the granting of up to 1,115,833
nonqualified stock options and SOS. The 1987 Plan expired in 1997.
F-18
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Stockholders' Equity (continued)
Under the terms of these 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. All grants have been made at fair market
value under the plans. 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 from the date of grant, and ISOs
expire five to ten years from the date of grant.
<TABLE>
<CAPTION>
Number of Option Price
--------- ------------
Shares Per Share
------ ---------
<S> <C> <C>
Options outstanding at December 31, 1995 974,305 $ 0.28 - $13.88
Granted.................................................... 92,500 $ 9.88 - $17.63
Canceled................................................... (54,390) $ 0.53 - $12.50
Exercised.................................................. (54,199) $ 0.28 - $12.50
--------- ---------------
Options outstanding at December 31, 1996 958,216 $ 0.28 - $17.63
Granted.................................................... 900,490 $16.88 - $40.13
Canceled................................................... (348,250) $ 0.53 - $40.13
Exercised.................................................. (82,520) $ 0.28 - $13.50
--------- ---------------
Options outstanding at December 31, 1997 1,427,936 $ 0.28 - $29.38
Granted.................................................... 752,440 $ 4.04 - $33.00
Canceled................................................... (110,130) $ 5.63 - $33.00
Exercised.................................................. (158,918) $ 0.28 - $17.63
--------- ---------------
Options outstanding at December 31, 1998 1,911,328 $16.88 - $40.13
========= ---------------
</TABLE>
At December 31, 1998, 1997, and 1996 options for 773,241, 657,396, and
567,066 shares, respectively, were exercisable, and at December 31, 1998 options
for 1,945,293 shares were available for grant. Exercise prices for 764,158
options outstanding ranged from $0.44-$10.00; for 422,050 options outstanding
ranged from $10.01-$20.00; and for 725,120 options outstanding ranged from
$20.01-$33.00 as of December 31, 1998.
The weighted average exercise price and remaining contractual life of
options outstanding at December 31, 1998 was $14.56 and 7.5 years, respectively.
As a result of the NOW merger in 1998, stock options of NOW were converted
into 205,089 of ATMI stock options. These stock options were converted into ATMI
stock options at historical prices ranging from $4.04 to $8.90.
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, net income per share-basic and net income per share-assuming
dilution would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- -------------
<S> <C> <C> <C>
Net income................................. $2,490,000 $6,318,000 $12,420,000
Net income per share--basic................ $ 0.10 $ 0.28 $ 0.56
Net income per share--assuming dilution.... $ 0.10 $ 0.26 $ 0.52
</TABLE>
F-19
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Stockholders' Equity (continued)
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:
1998 1997 1996
--------- --------- ---------
Expected dividend yield None None None
Risk free interest rate 5.50% 6.00% 6.25%
Expected volatility 62.8% 56.0% 54.6%
Expected life of options 7.5 years 7.5 years 7.5 years
The weighted average fair value of non-canceled stock options granted in
1998, 1997 and 1996 was $14.74, $17.04 and $8.21, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan ("ESPP Plan") was approved in May 1998 and
enables all employees to subscribe at six month intervals to purchase shares of
common stock at the lower of 85% of the fair market value of the shares on the
first day or last day of each six month period. A maximum of 500,000 shares are
authorized for subscription. At December 31, 1998 no shares had been issued
under the ESPP Plan.
Earnings Per Share
The following table presents the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Numerator:
Net income $ 4,441,000 $ 7,157,000 $12,741,000
---------------------------------------------
Denominator:
Denominator for basic earnings per share-
Weighted-average share 24,256,000 22,228,000 22,205,000
Dilutive effect of contingent shares related to
the ADCS Group, NOW, ACSI and Delatech acquisitions 1,135,000 1,135,000 1,135,000
Dilutive effect of employee stock options 407,000 672,000 428,000
---------------------------------------------
Denominator for diluted earnings per share 25,798,000 24,035,000 23,768,000
---------------------------------------------
Net income per share--basic $ 0.18 $ 0.32 $ 0.57
=============================================
Net income per share--assuming dilution $ 0.17 $ 0.30 $ 0.54
=============================================
</TABLE>
Options to purchase 720,520, 16,000 and 32,000 shares of common stock,
outstanding as of December 31, 1998, 1997 and 1996, respectively, were not
included in the computation of diluted earnings per share because their exercise
prices were greater than the average market price of the common shares and,
therefore, their inclusion would be antidilutive.
F-20
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Mergers and Acquisitions
On May 31, 1999, pursuant to an Agreement and Plan of Merger, the Company
issued 2,347,499 shares of its common stock in exchange for all of the ownership
interests of Delatech Incorporated. Delatech manufactures and distributes
exhaust gas conditioning equipment used in the semiconductor industry.
Also on May 31, 1999, pursuant to an Agreement and Plan of Merger, the Company
issued 1,202,312 shares of its common stock in exchange for all of the ownership
interests of ACSI. ACSI manufactures, distributes, and sells chemicals to
integrated circuit manufacturers.
On May 5, 1999, pursuant to a Merger Agreement, the Company issued 231,594
shares of its common stock in exchange for all of the ownership interests of
TeloSense Corporation. TeloSense manufactures and sells electronic toxic gas
sensors and gas monitoring systems.
The former securityholders of ACSI and Delatech have agreed to indemnify the
Company from and against certain losses arising out of breaches of
representations and warranties made by the respective securityholders. As
security for these obligations, the former securityholders of ACSI and Delatech
delivered 120,000 and 235,000 shares, respectively, of the Company's Common
Stock which they received into escrow in connection with these acquisitions.
The acquisitions of TeloSense, ACSI and Delatech were treated as a pooling of
interests. Both TeloSense and Delatech's fiscal year ended on November 30. These
financial statements have been restated to combine TeloSense and Delatech's
fiscal year-end November 30 and ATMI and ACSI's year-end December 31. For the
years ended December 31, 1998, 1997 and 1996, prior to the acquisitions,
revenues and net income of ATMI, TeloSense, ACSI and Delatech included in the
financial statements are as follows:
<TABLE>
<CAPTION>
Revenues: 1998 1997 1996
-------- -----------------------------------------------
<S> <C> <C> <C>
ATMI........................ $97,874,000 $116,732,000 $98,772,000
TeloSense, ACSI and Delatech $42,994,000 $ 62,043,000 $51,516,000
<CAPTION>
Net Income: 1998 1997 1996
---------- -----------------------------------------------
<S> <C> <C> <C>
ATMI......................... $ 6,465,000 $ 5,929,000 $12,202,000
TeloSense, ACSI and Delatech $(2,024,000) $ 1,228,000 $ 539,000
</TABLE>
F-21
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Mergers and Acquisitions (continued)
On August 4, 1998, pursuant to a Merger Agreement, NOW became a wholly-owned
subsidiary of ATMI. Pursuant to the Merger, each outstanding share of NOW
Common Stock was converted into .865338 shares of ATMI Common Stock. In the
aggregate, 1,593,952 shares of ATMI Common Stock were issued in the Merger. In
addition, each outstanding option to purchase one share of NOW Common Stock was
converted into a stock option to purchase .865338 shares of ATMI Common Stock.
The Merger has been accounted for as a pooling of interests. NOW's fiscal year
ended on March 31. The Company's consolidated financial statements have been
restated to combine NOW's fiscal year end March 31 and ATMI's year end December
31. Certain adjustments have been made to the financial statements to combine
the operations. An adjustment of $102,000 was made to retained earnings to
adjust for the different fiscal year ends. NOW manufactures proprietary, state-
of-the-art, high performance containers and dispensing systems for advanced
purity chemicals used in the manufacture of microelectronics, particularly
semiconductor integrated circuits and active matrix flat panel displays.
The former securityholders of NOW have agreed to indemnify the Company from
and against certain losses arising out of breaches of representations and
warranties made by the respective securityholders. As security for these
obligations, the former securityholders of NOW delivered 80,000 shares of the
Company's Common Stock which they received into escrow in connection with the
acquisition by the Company of NOW.
Non-recurring costs of approximately $1,700,000, primarily related to
investment banker fees, legal fees, and accounting fees have been recorded as a
one-time charge in 1998 in conjunction with the investigation, analysis, and
August 1998 closing of the NOW transaction.
The acquisition of NOW was treated as a pooling of interests. For the six
month period ended June 30, 1998 and years ended December 31, 1997 and 1996,
prior to the acquisition, revenues and net income of ATMI and NOW included in
the financial statements are as follows:
<TABLE>
<CAPTION>
Six Months Ended
---------------------
Revenues: June 30, 1998 1997 1996
-------- --------------------- -------------- -------------
<S> <C> <C> <C>
ATMI........................ $49,006,000 $101,877,000 $88,661,000
NOW......................... $ 6,043,000 $ 14,855,000 $10,111,000
<CAPTION>
Six Months Ended
---------------------
Net Income: June 30, 1998 1997 1996
---------- --------------------- -------------- -------------
<S> <C> <C> <C>
ATMI........................ $ 5,999,000 $ 4,421,000 $12,017,000
NOW......................... $ 240,000 $ 1,508,000 $ 185,000
</TABLE>
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 shares 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
acquisition of the ADCS Group was accounted for as a pooling of interests.
F-22
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Mergers and Acquisitions (continued)
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 3,671,349 shares of the Company's Common Stock in exchange for all of the
outstanding common stock of Lawrence Semiconductor Laboratories, Inc. and its
affiliate (collectively, "LSL") in a merger transaction. As a result, LSL became
a wholly-owned subsidiary of the Company. LSL is a provider of epitaxial
processing of silicon wafers using chemical vapor deposition technology to meet
customer specifications. The acquisition of LSL was 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 "ADCS Merger Agreement"), the Company issued
3,671,349 shares of the Company's Common Stock in exchange for all of the
outstanding common stock of the ADCS Group in a merger transaction. As a result,
ADCS Group became a wholly-owned subsidiary of the Company. ADCS Group is a
provider of epitaxial processing of silicon wafers using chemical vapor
deposition technology to meet customer specifications. The acquisition of ADCS
Group was accounted for as a pooling of interests.
The former securityholders of the ADCS Group 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 delivered 700,000
shares of the Company's Common Stock which they received into escrow in
connection with the acquisition by the Company of the ADCS Group.
Non-recurring costs of approximately $9,000,000, primarily related to
investment banker, legal, accounting fees, and a break-up fee in connection with
another transaction between LSL and another investor, were recorded as a one-
time charge in 1997 in conjunction with the investigation, analysis and October
1997 closings of the ADCS Group and LSL transactions.
For the nine month period ended September 30, 1997 and year ended December 31,
1996, prior to the acquisition, revenues and net income of ATM, the ADCS Group
and LSL included in the financial statements are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
Revenues: September 30, 1997 1996
-------- ----------------------- ------------
<S> <C> <C>
ATM........................ $41,286,000 $46,350,000
ADCS and LSL............... $32,262,000 $42,311,000
Nine Months Ended
-----------------------
Net Income: September 30, 1997 1996
---------- ----------------------- ------------
<S> <C> <C>
ATM........................ $ 3,979,000 $ 3,321,000
ADCS and LSL............... $ 5,134,000 $ 8,696,000
</TABLE>
F-23
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Comprehensive Income
During the first quarter of 1998, the Company adopted FASB Statement No. 130,
Reporting Comprehensive Income. Statement No. 130 requires the reporting of
comprehensive income in addition to net income from operations. 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 components of comprehensive income are as follows:
<TABLE>
<CAPTION>
Currency Unrealized Loss on
-------- ------------------
Translation Available-for-Sale
----------- ------------------
Adjustments Securities Total
----------- ---------- -----
<S> <C> <C> <C>
Balance at December 31, 1996........................... $ (63,000) -- $ (63,000)
Cumulative translation adjustment...................... (1,182,000) -- (1,182,000)
------------------------------------------------------------
Balance at December 31, 1997........................... (1,245,000) -- (1,245,000)
Unrealized loss on available-for-sale
securities, (net of tax benefit of $281,000).......... -- $(500,000) (500,000)
Cumulative translation adjustment...................... 442,000 -- 442,000
------------------------------------------------------------
Balance at December 31, 1998........................... $ (803,000) $(500,000) $(1,303,000)
------------------------------------------------------------
</TABLE>
12. Restructuring Charge
During the third quarter of 1998, the Company reduced its workforce and
recorded a $400,000 restructuring charge. The Company's initiative was
completed by December 31, 1998.
13. 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 to purchase reactors from the manufacturer
assuming LSL's business conditions justify such purchases. LSL has purchased a
reactor at an approximate fair market value of $2,500,000. LSL accrued the
$2,000,000 relating to this settlement in the accompanying financial statements
for the year ended December 31, 1996. The amount was paid to the manufacturer
during the year ended December 31, 1997.
In the normal course of business, the Company is involved in various lawsuits
and claims. Although the ultimate outcome of any of these legal proceedings
cannot be determined at this time, management, including internal counsel, does
not believe that the outcome of these proceedings, individually or in the
aggregate, will have a material adverse effect on the Company's financial
position or overall trends in results of operations.
F-24
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Segment and Geographic 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 financial
statements.
The Company's geographic data for years ended December 31, 1998, 1997 and
1996, are as follows:
<TABLE>
<CAPTION>
Revenues from external customers 1998 1997 1996
- -------------------------------- ----------------- ---------------------- -------------------
<S> <C> <C> <C>
United States......................... $101,903,000 $131,137,000 $102,953,000
Pacific Rim........................... 31,313,000 41,179,000 41,023,000
Europe................................ 7,652,000 6,459,000 6,312,000
--------------------------------------------------------------
Total revenues from external customers $140,868,000 $178,775,000 $150,288,000
--------------------------------------------------------------
</TABLE>
Revenues are attributed to countries based on the location of the customer.
No one specific country within the Pacific Rim or Europe accounted for greater
than 10% of consolidated revenues in 1998 and 1997. During 1996, the Company had
export sales of approximately 15% to South Korea. Approximately all assets of
the Company are based in the United States. Assets outside of the United States
are immaterial to the consolidated balance sheet at December 31, 1998 and at
December 31, 1997. Net income recorded by the Company's foreign subsidiaries is
not material to the consolidated operations of the Company for the three years
ended December 31, 1998. The Company utilized one vendor to manufacture product
that accounted for approximately 10% and 7% of revenues in 1998 and 1997,
respectively.
F-25
<PAGE>
Quarterly Results of Operations (unaudited)
(Thousands of Dollars, except per share amounts)
<TABLE>
<CAPTION>
Quarter Year
-------------------------------------------------------- -------------
1998 First Second Third Fourth 1998
- ---- ----------- ---------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $46,636 $36,905 $ 29,485 $ 27,842 $140,868
Gross profit.......................... 25,370 16,879 12,419 12,685 67,353
Net income (loss)..................... 5,436 1,069 (2,266) (1) 202 4,441
Net income (loss) per share--basic.... $ 0.24 $ 0.05 $ (0.09) (1) $ 0.01 $ 0.18
Net income (loss) per share--assuming
dilution.............................. $ 0.22 $ 0.04 $ (0.09) (1) $ 0.01 $ 0.17
<CAPTION>
Quarter Year
------------------------------------------------------- ------------
1997 First Second Third Fourth 1997
- ---- ----------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $39,046 $41,773 $ 48,935 $ 49,021 $178,775
Gross profit.......................... 19,677 21,817 26,512 25,417 93,423
Net income (loss)..................... 2,561 3,304 5,538 (4,246) (2) 7,157
Net income (loss) per share--basic.... $ 0.11 $ 0.15 $ 0.25 $ (0.18) (2) $ 0.32
Net income (loss) per share--assuming
dilution.............................. $ 0.11 $ 0.14 $ 0.24 $ (0.18) (2) $ 0.30
</TABLE>
(1) Includes a non-recurring and restructuring charge of $2.1 million accrued in
connection with costs incurred in completing the NOW acquisition, and
severance for employees.
(2) Includes a non-recurring charge of $9.0 million accrued in connection with
costs incurred in investigating, analyzing and completing the ADCS Group and
LSL acquisitions.
F-26
<PAGE>
Schedule II
ATMI, INC.
VALUATION & QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Balance at
---------- ----------
Beginning Charged to End
--------- ---------- ----
Year Ended of Period Cost/Expense Deductions of Period
- ---------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1998
Allowance for doubtful accounts....... $1,167,000 $ 242,000 $ 615,000 $ 794,000
Obsolescence reserve.................. 1,363,000 1,173,000 1,113,000 1,423,000
Restructuring reserve................. 0 402,000 402,000 0
DECEMBER 31, 1997
Allowance for doubtful accounts....... 671,000 910,000 414,000 1,167,000
Obsolescence reserve.................. 952,000 1,234,000 823,000 1,363,000
December 31, 1996
Allowance for doubtful accounts....... 274,000 426,000 29,000 671,000
Obsolescence reserve.................. 376,000 576,000 0 952,000
</TABLE>
F-27
<PAGE>
ATMI, Inc.
Supplemental Consolidated Balance Sheet
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 20,901,000 $ 21,128,000
Marketable securities 64,486,000 64,551,000
Accounts receivable, net of allowance for doubtful accounts of
$830,000 in 1999 and $ 794,000 in 1998 21,869,000 20,747,000
Inventories 16,121,000 15,563,000
Other 7,873,000 7,610,000
------------------- -------------------
Total current assets 131,250,000 129,599,000
Property and equipment, net 49,507,000 50,185,000
Goodwill and other long-term assets, net 8,487,000 8,410,000
------------------- -------------------
$189,244,000 $188,194,000
=================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,068,000 $ 6,903,000
Accrued expenses 9,908,000 10,485,000
Accrued commissions 1,066,000 1,315,000
Loans, notes and bonds payable, current portion 6,391,000 6,602,000
Capital lease obligations, current portion 2,400,000 2,493,000
Income taxes and other current payables 2,612,000 1,803,000
------------------- -------------------
Total current liabilities 29,445,000 29,601,000
Loans, notes payable, less current portion 3,721,000 5,110,000
Capital lease obligations 3,219,000 3,746,000
Deferred income taxes 2,775,000 2,041,000
Other long-term liabilities 210,000 288,000
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 26,050,000 in 1999 and 25,941,000 in
1998 261,000 259,000
Additional paid-in capital 113,822,000 113,059,000
Retained earnings 36,290,000 34,547,000
Accumulated other comprehensive loss (1,344,000) (1,303,000)
------------------- -------------------
Total stockholders' equity 149,029,000 146,562,000
------------------- -------------------
$189,244,000 $188,194,000
=================== ===================
</TABLE>
See accompanying notes.
F-28
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues 32,564,000 46,636,000
Cost of revenues 16,221,000 21,266,000
----------------- -----------------
Gross profit 16,343,000 25,370,000
Operating expenses:
Research and development 3,595,000 3,617,000
Selling, general and administrative 10,455,000 13,359,000
----------------- -----------------
14,050,000 16,976,000
----------------- -----------------
Operating income 2,293,000 8,394,000
Interest income 1,051,000 456,000
Interest expense (263,000) (451,000)
Other income 57,000 126,000
----------------- -----------------
Income before taxes and minority interest 3,138,000 8,525,000
Income taxes 1,196,000 3,034,000
----------------- -----------------
Income before minority interest 1,942,000 5,491,000
Minority interest 1,000 (55,000)
----------------- -----------------
Net income $ 1,943,000 $ 5,436,000
================= =================
Net income per share-basic $0.08 $0.24
================= =================
Net income per share-assuming dilution $0.07 $0.22
================= =================
Weighted average shares outstanding 24,883,000 22,526,000
================= =================
Weighted average shares outstanding-assuming dilution 26,518,000 24,428,000
================= =================
</TABLE>
See accompanying notes.
F-29
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
1999 1998
--------------- -----------------
<S> <C> <C>
Operating Activities
Net income $ 1,943,000 $ 5,436,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,448,000 1,956,000
Bad debt expense 42,000 62,000
Effect of change of fiscal year of pooled entity (200,000) -
Deferred income taxes 739,000 110,000
Minority interest in net earnings of consolidated subsidiaries (1,000) 55,000
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (1,164,000) 533,000
(Increase) in inventory (558,000) (2,783,000)
(Increase) in other assets (304,000) (250,000)
Increase (decrease) in accounts payable 165,000 760,000
Increase (decrease) in accrued expenses (826,000) (2,657,000)
Increase (decrease) in other liabilities 604,000 (687,000)
----------------- ------------------
Total adjustments 945,000 (2,901,000)
----------------- ------------------
Net cash provided by operating activities 2,888,000 2,535,000
----------------- ------------------
Investing Activities
Capital expenditures (1,695,000) (2,827,000)
(Purchase) sale of marketable securities, net 65,000 (53,988,000)
----------------- ------------------
Net cash used by investing activities (1,630,000) (56,815,000)
----------------- ------------------
FINANCING ACTIVITIES
Borrowings from loans, notes and bonds payable 173,000 921,000
Principal payments on capital lease obligations (620,000) (955,000)
Principal payments on loans, notes and bonds payable (1,772,000) (503,000)
Distribution to stockholder ---- (58,000)
Proceeds from sale of common shares, net ---- 55,722,000
Proceeds from employee stock purchases, stock options and
warrant exercises 764,000 101,000
----------------- ------------------
Net cash provided (used) by financing activities (1,455,000) 55,228,000
----------------- ------------------
Effects of exchange rate changes on cash (30,000) 31,000
Net increase in cash and cash equivalents (227,000) 979,000
Cash and cash equivalents, beginning
of period 21,128,000 15,200,000
----------------- ------------------
Cash and cash equivalents, end of period $20,901,000 $ 16,179,000
================= ==================
</TABLE>
See accompanying notes.
F-30
<PAGE>
ATMI, Inc.
Notes To Supplemental Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited supplemental 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
acquisitions of ACSI, Delatech, and TeloSense which have been accounted for
using the pooling-of-interests method. The acquisitions of ACSI and Delatech
occurred on May 31, 1999, and the acquisition of TeloSense occurred on May 5,
1999 as part of the consummation of the transactions described in Note 6.
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. For further
information, refer to the supplemental financial statements and footnotes
thereto included in this Form 8-K/A.
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 $ 1,943,000 $ 5,436,000
=========== ===========
Denominator:
Denominator for basic earnings per share-
weighted-average share 24,883,000 22,526,000
Dilutive effect of contingent shares related
to the ADCS Group, NOW, ACSI, and Delatech acquisitions 1,135,000 1,135,000
Dilutive effect of employee stock options,
net of tax benefit 500,000 767,000
----------- -----------
Denominator for diluted earnings per share 26,518,000 24,428,000
=========== ===========
Net income per share--basic $ 0.08 $ 0.24
=========== ===========
Net income per share--assuming dilution $ 0.07 $ 0.22
=========== ===========
</TABLE>
F-31
<PAGE>
3. Inventory
Inventory is comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw materials $11,134,000 $12,542,000
Work in process 1,225,000 839,000
Finished goods 5,070,000 3,605,000
----------- -----------
17,429,000 16,986,000
Obsolescence reserve (1,308,000) (1,423,000)
----------- -----------
$16,121,000 $15,563,000
=========== ===========
</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 $1,943,000 $5,436,000
Cumulative translation adjustment (61,000) 173,000
Unrealized gain on available-for-sale securities
(net of taxes of $11,000) 20,000 ----
---------- ----------
Comprehensive income $1,902,000 $5,609,000
========== ==========
</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 supplemental interim financial statements.
6. Mergers and Acquisitions
On May 31, 1999, pursuant to an Agreement and Plan of Merger, the Company
issued 2,347,499 shares of its common stock in exchange for all of the ownership
interests of Delatech Incorporated. Delatech manufactures and distributes
exhaust gas conditioning equipment used in the semiconductor industry.
Also on May 31, 1999, pursuant to an Agreement and Plan of Merger, the
Company issued 1,202,312 shares of its common stock in exchange for all of the
ownership interests of ACSI. ACSI manufactures, distributes, and sells chemicals
to integrated circuit manufacturers.
On May 5, 1999, pursuant to a Merger Agreement, the Company issued 231,594
shares of its common stock in exchange for all of the ownership interests of
TeloSense Corporation. TeloSense manufactures and sells electronic toxic gas
sensors and gas monitoring systems.
The former securityholders of ACSI and Delatech have agreed to indemnify
the Company from and against certain losses arising out of breaches of
representations and warranties made by the respective securityholders. As
security for these obligations, the former securityholders of ACSI and Delatech
delivered 120,000 and 235,000 shares, respectively, of the Company's Common
Stock which they received into escrow in connection with these acquisitions.
F-32
<PAGE>
The acquisitions of TeloSense, ACSI and Delatech were treated as a pooling
of interests. Both TeloSense and Delatech's fiscal year ended on November 30.
The financial statements have been restated to combine TeloSense and Delatech's
fiscal year-end November 30 and ATMI and ACSI's year-end December 31. Certain
adjustments have been made to the financial statements to combine their
operations. An adjustment of $200,000 was made to retained earnings to adjust
for the different fiscal year ends. The following represents unaudited results
of operations of the Company and the merged entities of TeloSense, ACSI and
Delatech for the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended March 31,
1999 1998
-----------------------------
<S> <C> <C>
Revenues:
--------
ATMI........................ $24,029,000 $30,534,000
TeloSense, ACSI and Delatech $ 8,535,000 $16,102,000
Net Income:
----------
ATMI......................... $ 1,992,000 $ 4,565,000
TeloSense, ACSI and Delatech $ (49,000) $ 871,000
</TABLE>
F-33
