<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): November 29, 1999
ATMI, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-30130 06-1481060
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation) identification no.)
7 Commerce Drive
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 794-1100
<PAGE>
Item 2. Acquisition or Disposition of Assets.
MST Merger Agreement
On November 29, 1999 pursuant to an Agreement and Plan of Merger dated
as of November 29, 1999 (the "MST Merger Agreement") by and among ATMI, Inc.
("ATMI"), Fog Acquisition Corporation, a wholly-owned Delaware subsidiary of
ATMI ("Fog"), MST Analytics, Inc., a Delaware corporation ("MST"), and the
Controlling Stockholders of MST as defined in the MST Merger Agreement, Fog
merged (the "MST Merger") with and into MST, with MST being the surviving
corporation. As a result of the MST Merger, MST became a wholly-owned subsidiary
of ATMI.
Pursuant to the MST Merger, each outstanding share of MST capital stock
was converted into .95280 (the "Exchange Ratio") shares of ATMI common stock.
Pursuant to the MST Merger, a total of 1,074,601 shares of ATMI common stock
were issued (after accounting for the conversion of options and warrants
exercisable into MST capital stock into similar options exercisable into ATMI
common stock based upon the Exchange Ratio).
The MST 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. MST manufactures gas sensing products, liquid
analyzers and process control systems which are used in the manufacture of
semiconductors. ATMI intends to continue the business currently performed by MST
as a wholly-owned subsidiary of ATMI.
The foregoing description of the terms and provisions of the MST Merger
Agreement is qualified in its entirety by reference to the full text of the MST
Merger Agreement which is filed herewith and incorporated by reference.
Other Acquisitions
On November 24, 1999, ATMI acquired all of the capital stock of
Newform, N.V., a Belgian corporation ("Newform") in exchange for 550,000 shares
of ATMI common stock (the "Newform Acquisition"). The Newform Acquisition is
intended to be a tax-free transaction under the Code and will be accounted for
as a pooling of interests. Newform provides high-purity flexible ultra-clean
Cleanstream(TM) packaging to the semiconductor and pharmaceutical industries.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired. Not required.
-----------------------------------------
(b) Pro Forma Financial Information. Not required.
-------------------------------
-2-
<PAGE>
(c) Exhibits.
--------
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger dated as of November
29, 1999 by and among ATMI, Inc., Fog Acquisition
Corporation, MST Analytics, Inc., and the
Controlling Stockholders of MST Analytics, Inc. as
identified therein. (1)
23.1 Consent of Ernst & Young LLP. (2)
23.2 Consent of PricewaterhouseCoopers LLP. (2)
23.3 Consent of Deloitte & Touche LLP. (2)
23.4 Consent of Arthur Andersen LLP. (2)
23.5 Consent of Rath, Anders, Dr. Wanner & Partner. (2)
27.1 Financial Data Schedule. (2)
27.2 Financial Data Schedule. (2)
99.1 Press Release issued by ATMI dated October 15, 1999.
(1)
99.2 Press Release issued by ATMI dated November 29,
1999. (1)
99.3 Press Release issued by ATMI dated November 30,
1999. (1)
99.4 Supplemental Selected Financial Data and
Management's Discussion and Analysis of Financial
Condition and Results of Operations of ATMI, Inc.
(as restated to reflect the acquisitions of Newform,
N.V. on November 24, 1999 and MST Analytics, Inc. on
November 29, 1999). (2)
99.5 Supplemental Consolidated Financial Statements of
ATMI, Inc. for the years ended December 31, 1998,
1997 and 1996 and the nine months ended September
30, 1999 and 1998 (as restated to reflect the
acqusitions of Newform, N.V. on November 24, 1999
and MST Analytics, Inc. on November 29, 1999). (2)
_________________________
(1) Previously filed.
(2) Filed herewith.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 13, 2000 ATMI, INC.
/s/Daniel P. Sharkey
-------------------------------------------
Daniel P. Sharkey
Vice President, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
-4-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of November 29, 1999 by and
among ATMI, Inc., Fog Acquisition Corporation, MST Analytics,
Inc., and the Controlling Stockholders of MST Analytics, Inc. as
identified therein. (1)
23.1 Consent of Ernst & Young LLP. (2)
23.2 Consent of PricewaterhouseCoopers LLP. (2)
23.3 Consent of Deloitte & Touche LLP. (2)
23.4 Consent of Arthur Andersen LLP. (2)
23.5 Consent of Rath, Anders, Dr. Wanner & Partner. (2)
27.1 Financial Data Schedule. (2)
27.2 Financial Data Schedule. (2)
99.1 Press Release issued by ATMI dated October 15, 1999. (1)
99.2 Press Release issued by ATMI dated November 29, 1999. (1)
99.3 Press Release issued by ATMI dated November 30, 1999. (1)
99.4 Supplemental Selected Financial Data and Management's Discussion
and Analysis of Financial Condition and Results of Operations of
ATMI, Inc. (as restated to reflect the acquisitions of Newform,
N.V. on November 24, 1999 and MST Analytics, Inc. on November 29,
1999). (2)
99.5 Supplemental Consolidated Financial Statements of ATMI, Inc. for
the years ended December 31, 1998, 1997 and 1996 and the nine
months ended September 30, 1999 and 1998 (as restated to reflect
the acqusitions of Newform, N.V. on November 24, 1999 and MST
Analytics, Inc. on November 29, 1999). (2)
</TABLE>
___________________________
(1) Previously filed.
(2) Filed herewith.
-E-1-
<PAGE>
CONSENT OF INDEPENDENT AUDITORS Exhibit 23.1
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 January 11, 2000, with respect to the supplemental consolidated
financial statements and schedule of ATMI, Inc. included in its Current Report
on Form 8-K/A dated November 29, 1999, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 11, 2000
<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
Phoenix, Arizona
January 11, 2000
<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
January 11, 2000
<PAGE>
Exhibit 23.4
CONSENT 8K/A
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8K/A, into ATMI Inc.'s previously filed
Registration Statement File Nos. 33-77060, 33-93048, 333-49561, 33-56349 and
333-55827. We also consent to the application of our reports to the schedule
labeled "Valuation and Qualifying Accounts" as of the dates and period covered
by our reports.
/s/ Arthur Andersen LLP
Chicago, Illinois
January 11, 2000
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8K/A, into ATMI Inc.'s previously filed
Registration Statement File Nos. 33-77060, 33-93048, 333-49561, 33-56349 and
333-55827. We also consent to the application of our reports to the schedule
labeled "Valuation and Qualifying Accounts" as of the dates and period covered
by our reports.
/s/ Rath, Anders, Dr. Wanner and Partner
/s/ Dipl.-Kfm. Kabisch
Vereidigter Buchprufer
/s/ Dipl.-Kfm. Metzler
Munich, Germany Wirtschaftsprufer
January 11, 2000
<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> 21,618 15,442 17,728
<SECURITIES> 64,551 17,461 18,238
<RECEIVABLES> 25,708<F1> 36,425<F1> 20,168<F1>
<ALLOWANCES> 0 0 0
<INVENTORY> 19,216 18,412 11,091
<CURRENT-ASSETS> 139,072 93,530 71,853
<PP&E> 54,683<F2> 48,605<F2> 37,926<F2>
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 206,110 153,529 125,873
<CURRENT-LIABILITIES> 36,994 44,652 23,901
<BONDS> 2,700 3,000 3,400
0 0 0
0 0 0
<COMMON> 275 251 239
<OTHER-SE> 152,445 83,052 61,453
<TOTAL-LIABILITY-AND-EQUITY> 206,110 153,529 125,873
<SALES> 165,106 192,012 154,390
<TOTAL-REVENUES> 165,106 192,012 154,390
<CGS> 83,419 92,561 73,673
<TOTAL-COSTS> 83,419 92,561 73,673
<OTHER-EXPENSES> 16,630<F3> 14,336<F3> 12,314<F3>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,723 2,609 2,101
<INCOME-PRETAX> 9,347 14,983 17,838
<INCOME-TAX> 4,412 8,588 4,745
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,935 6,395 13,093
<EPS-BASIC> .19 .27 .58
<EPS-DILUTED> .18 .25 .54
<FN>
<F2>net of accumulated depreciation, consistent with balance sheet presentation.
<F3>Research and development expenses
<F1>Net of allowance for doubtful accounts, consistent with balance sheet
presentation.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 26,139 18,183
<SECURITIES> 60,597 75,046
<RECEIVABLES> 37,355<F1> 25,944<F1>
<ALLOWANCES> 0 0
<INVENTORY> 20,785 19,842
<CURRENT-ASSETS> 151,855 147,850
<PP&E> 54,567<F2> 53,867<F2>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 215,146 213,094
<CURRENT-LIABILITIES> 38,803 36,979
<BONDS> 2,400 2,800
0 0
0 0
<COMMON> 277 275
<OTHER-SE> 163,507 152,373
<TOTAL-LIABILITY-AND-EQUITY> 215,146 213,094
<SALES> 138,618 131,654
<TOTAL-REVENUES> 138,618 131,654
<CGS> 66,583 66,925
<TOTAL-COSTS> 66,583 66,925
<OTHER-EXPENSES> 13,494<F3> 12,577<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 983 1,381
<INCOME-PRETAX> 12,539 8,932
<INCOME-TAX> 5,750 4,037
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,789 4,895
<EPS-BASIC> .26 .19
<EPS-DILUTED> .24 .18
<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>
Selected Financial Data. Exhibit 99.4
The following selected supplemental consolidated statements of income for
the years ended December 31, 1998, 1997 and 1996 and the supplemental
consolidated balance sheet data as of December 31, 1998 and 1997 are derived
from the audited supplemental consolidated financial statements of ATMI, Inc.
("ATMI" or the "Company"). The supplemental consolidated statements of income
for the years ended December 31, 1995 and 1994 and the nine months ended
September 30, 1999 and 1998 are derived from unaudited supplemental consolidated
financial statements. The balance sheet data as of December 31, 1996, 1995 and
1994 and September 30, 1999 and 1998 is derived from unaudited consolidated
financial statements. The unaudited supplemental 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>
Nine Months Ended
September 30, Fiscal Year Ended December 31,
----------------- ------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- ---------
(in thousands, except per share data)
Consolidated Statements of Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ....................................... $138,618 $131,654 $165,106 $192,012 $154,390 $115,984 $ 70,854
Cost of revenues ............................... 66,583 66,925 83,419 92,561 73,673 56,780 36,900
--------------------------------------------------------------------------------
Gross profit ................................... 72,035 64,729 81,687 99,451 80,717 59,204 33,954
Operating expenses:
Research and development ..................... 13,494 12,577 16,630 14,336 12,314 7,892 4,755
Selling, general and administrative .......... 41,360 42,841 56,523 60,593 48,435 37,162 22,034
Merger costs and other expenses .............. 6,800 (6) 2,102 (1) 2,102 (1) 9,000 (2) 2,000 (3) - -
--------------------------------------------------------------------------------
Total operating expenses ................... 61,654 57,520 75,255 83,929 62,749 45,054 26,789
--------------------------------------------------------------------------------
Operating income ............................... 10,381 7,209 6,432 15,522 17,968 14,150 7,165
Interest income (expense), net ................. 2,360 1,517 2,487 (877) (375) (338) (644)
Other income (expense), net .................... (11) 277 539 340 94 (474) 3,809 (5)
--------------------------------------------------------------------------------
Income before income taxes and minority interest 12,730 9,003 9,458 14,985 17,687 13,338 10,330
Income taxes ................................... 5,750 4,037 4,412 8,588 4,745 4,947 2,874
--------------------------------------------------------------------------------
Income before minority interest ................ 6,980 4,966 5,046 6,397 12,942 8,391 7,456
Minority interest .............................. (191) (71) (111) (2) 151 10 12
--------------------------------------------------------------------------------
Net income ..................................... $ 6,789 $ 4,895 $ 4,935 $ 6,395 $ 13,093 (4) $ 8,401 $ 7,468 (5)
================================================================================
Net income per share--assuming dilution ........ $ 0.24 $ 0.18 $ 0.18 $ 0.25 $ 0.54 (4) $ 0.36 $ 0.33 (5)
================================================================================
Weighted average shares outstanding--assuming
dilution ...................................... 28,256,000 27,374,000 27,423,000 25,660,000 24,318,000 23,051,000 22,561,000
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- ---------
(in thousands)
Consolidated Balance Sheet Data:
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents and marketable securities $ 86,736 $ 86,169 $ 32,903 $ 35,966 $ 38,256 $ 19,030
Working capital ................................ 113,052 102,078 48,878 37,118 35,093 20,097
Total assets ................................... 215,146 206,110 153,529 125,873 105,545 57,294
Long-term debt, less current portion ........... 7,341 12,559 19,763 18,499 12,461 8,246
Minority interest .............................. 1,037 846 595 545 535 6
Total stockholders' equity ..................... 163,784 152,720 83,303 66,049 54,661 26,963
</TABLE>
(1) Includes costs of $1.7 million incurred in connection with completing the
NOW acquisition and a $0.4 million charge relating to a restructuring
charge for severance primarily at ATMI's EcoSys division.
(2) Costs incurred in investigating, analyzing and completing the ADCS Group
and LSL acquisitions.
(3) Represents $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 $11.6 million and $.48, 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.
(6) Merger related costs incurred in connection with the Delatech, ACSI, and
TeloSense acquisitions.
1
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
ATMI, Inc. is a leading supplier of materials and equipment used in the
manufacture of semiconductor devices. Our specific focus is proprietary and
patented products that are used in the manufacture of the thin films that are
deposited on semiconductor wafers to make them functional as complex devices.
Over the last four years, we have achieved a leadership position in each of our
target markets by providing a more complete line of products than our
competitors. Our strategy is to continue our growth through product line
expansion in each of our existing markets and to leverage our core technology to
create new high growth businesses. Our customers include most of the leading
semiconductor manufacturers in the world. We currently provide:
. a broad range of ultrahigh-purity semiconductor materials;
. semiconductor materials packaging and delivery systems that bring materials
to the processing equipment;
. sensors for the workplace and environment that detect materials as they
move through the workplace;
. point-of-use environmental equipment that abates materials; and
. specialty thin film deposition services that provide coated wafers directly
to our customers.
We have organized our operations along two business segments: ATMI
Materials and ATMI Technologies. ATMI Materials provides all of ATMI's products
that are used in the semiconductor manufacturing process and the packaging and
delivery systems that are used to get them there. ATMI Technologies provides
products that sense and environmentally control these materials while also
providing manufacturing services to those end users that do not wish to perform
certain thin film manufacturing processes in-house. ATMI Technologies is also
responsible for ATMI's venture and government contracting activities.
ATMI's products are sold under a number of brand names as a result of its
strategy of rapid growth through a combination of internal development and the
acquisition of complementary product lines. Key products developed internally
are: the SDS gas delivery system, which stores dangerous gases as solids in
cylinders, providing increased safety and substantially greater operating
efficiencies; the VaporSource liquid delivery system and a number of related
next generation thin film materials; several products that now comprise the
Ecosys environmental equipment business; and the Emosyn line of smart card
integrated circuits based on a proprietary materials and design methodology.
Recently acquired product lines include: the NOWPak and Newform high performance
packaging and dispensing systems; the ACSI photolithography stripping and
chemical mechanical processing materials, the Delatech line of environmental
abatement equipment; and the MST and Telosense lines of materials sensing
devices.
We believe this portfolio of products makes ATMI a leader in its
marketplace. We believe that we have the unique ability to deliver complete
"materials solutions" to our customers, i.e. specialty materials, systems that
deliver them to the processing equipment, devices that measure their presence in
the workplace and the environment and equipment that removes them from the
environment.
Management's Discussion and Analysis of Financial Condition and Results of
Operations give retroactive effect to the acquisitions of NewForm and MST (which
commenced its operations January 3, 1997) which have been accounted for using
the pooling of interests method.
2
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain items
from the Company's supplemental consolidated statements of income expressed as a
percentage of total revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
-----------------------------
Nine Months Ended
September 30, Fiscal Year Ended December 31,
----------------- ------------------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues ......................................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues ................................. 48.0 50.8 50.5 48.2 47.7
-----------------------------------------------------
Gross profit ..................................... 52.0 49.2 49.5 51.8 52.3
Operating expenses:
Research and development ........................ 9.7 9.6 10.1 7.5 8.0
Selling, general and administrative ............. 29.8 32.5 34.2 31.6 31.4
Merger related costs and other expenses ......... 4.9 1.6 1.3 4.7 1.3
-----------------------------------------------------
Total operating expenses ....................... 44.4 43.7 45.6 43.8 40.7
-----------------------------------------------------
Operating income ................................. 7.6 5.5 3.9 8.0 11.6
Interest income (expense), net ................... 1.7 1.2 1.5 (0.5) (0.2)
Other income, net ................................ - 0.2 0.3 0.2 0.1
-----------------------------------------------------
Income before income taxes and minority interest . 9.3 6.9 5.7 7.7 11.5
Income taxes ..................................... 4.1 3.1 2.7 4.5 3.1
-----------------------------------------------------
Income before minority interest .................. 5.2 3.8 3.0 3.2 8.4
Minority interest ................................ (0.1) (0.1) (0.1) - 0.1
-----------------------------------------------------
Net income ....................................... 5.1 3.7 2.9 3.2 8.5
=====================================================
</TABLE>
Comparison of Nine Months Ended September 30, 1999 and 1998
Revenues. Total revenues increased 5.3% to approximately $138.6 million in
the nine months ended September 30, 1999 from approximately $131.7 million in
the same period in 1998. The increase in revenues was primarily attributable to
the semiconductor industry's recovery, particularly for consumable products.
There were significant gains in the Materials segment related to the Company's
SDS, NOW dispensing and packaging products and ADCS chemical product lines for
the nine months ended September 30, 1999 as compared to the same period in the
prior year. Product revenues driven by capital equipment spending declined after
a first quarter 1998 peak until the second quarter of 1999 where revenues have
again begun to increase.
Gross Profit. Gross profit increased 11.3% to approximately $72.0 million
in the nine months ended September 30, 1999 from approximately $64.7 million in
the nine months ended September 30, 1998. As a percentage of revenues, gross
margin increased to 52.0% for the nine months ended September 30, 1999 from
49.2% of revenues in the same period in 1998. This increase was due principally
to margin growth related to efficiencies from increased sales and a change in
product mix of SDS, NOW dispensing and packaging system and ADCS chemical
product lines.
3
<PAGE>
Research and Development Expenses. Research and development expenses
increased 7.3% to approximately $13.5 million for the nine months ended
September 30, 1999 from approximately $12.6 million for the nine months ended
September 30, 1998. Increased efforts to expand SDS technology beyond ion
implant applications into CVD, etch, and bulk gas delivery, and continued
product development activities within the Materials segment and the Emosyn
business resulted in growth of the research and development efforts. As a
percentage of revenues, research and development expenses increased to 9.7% for
the nine months ended September 30, 1999 from 9.6% for the same period in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 3.5% to approximately $41.4 million for the
nine months ended September 30, 1999 from approximately $42.8 million, in the
same period in 1998. The decrease in the 1999 period was primarily due to
decreased administrative costs and cost-savings resulting from the integration
of recent business acquisitions. As a percentage of revenues, these expenses
decreased to 29.8% in the nine months ended September 30, 1999 from 32.5% for
the nine months ended September 30, 1998.
Merger Related Costs and Other Expenses. The nine months ended September
30, 1999 operating results include merger and related costs of approximately
$6.8 million, including $2.4 million of investment banker fees, legal and
accounting fees in connection with the investigation, analysis and May 1999
closing of the TeloSense, Delatech and ACSI transactions. The acquisition of
Delatech also resulted in a $4.4 million asset impairment charge during the
second quarter of 1999 for inventory ($1.0 million) and goodwill ($3.4 million)
associated with certain existing EcoSys product lines which were determined to
be impaired. The nine months ended September 30, 1998 operating results include
merger and related costs of approximately $1.7 million, in connection with the
August 1998 acquisition of NOW Technologies and $0.4 million for a reduction in
workforce at the EcoSys business in the third quarter of 1998.
Other Income, Net. Other income, net, increased to approximately $2.3
million for the nine months ended September 30, 1999 from $1.8 million for the
nine months ended September 30, 1998. The increase in the 1999 period related to
a significant increase in interest income due to increased cash levels on hand
during the first quarter of 1999 compared to the first quarter of 1998. These
increased cash levels resulted from the public offering that was completed at
the beginning of the second quarter of 1998. Increased interest rate levels in
the current year have also resulted in increased interest income. Interest
expense has declined in the current year due to lower levels of debt outstanding
at September 30, 1999 compared to September 30, 1998.
Income Taxes. Income tax expense for the nine months ended September 30,
1999 was $5.8 million, which was an increase from $4.0 million for the same
period in 1998. The differences between the consolidated effective income tax
rate and the U.S. Federal statutory rate are primarily attributed to state and
foreign income taxes and the effects of certain non-deductible merger related
costs.
Earnings per Share. Earnings per share-basic increased to $0.26 for the
nine months ended September 30, 1999 as compared to $0.19 for the nine months
ended September 30, 1998. Earnings per share-basic in the 1999 period reflects a
4.0% increase in the weighted average shares outstanding to approximately $26.4
million from approximately $25.4 million in the nine months ended September 30,
1998. Earnings per share-assuming dilution, increased to $0.24 for the nine
months ended September 30, 1999 as compared to $0.18, for the nine months ended
September 30, 1998. Earnings per share-assuming dilution in the 1999 period
reflects a 3.2% increase in weighted average shares outstanding to approximately
28.3 million for the nine months ended September 30, 1999 from approximately
27.4 million in the nine months ended September 30, 1998.
Comparison of Fiscal Years Ended December 31, 1998, 1997, and 1996
Revenues. Revenues decreased 14% to $165.1 million in 1998 from $192.0
million in 1997, following an increase of 24.4% in 1997 from $154.4 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
4
<PAGE>
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. An additional component of
the 1997 growth was the initial product sales of the recently acquired MST
business which was in its first year of operation as MST Analytics, Inc.
Gross Profit. Gross profit decreased 17.9% to $81.7 million in 1998 from
$99.5 million in 1997. Gross margin decreased to 49.5% of revenues in 1998 from
51.8% 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 product lines. Volume
declines within the ACSI product lines, driven by the softening semiconductor
industry conditions, also contributed to the reduction in gross margins in 1998.
Gross profit increased 23.2% to $99.5 million in 1997 from $80.7 million in
1996. Gross margin decreased slightly to 51.8% of revenues in 1997 from 52.3% of
revenues in 1996. This decrease in gross margin was caused in part by the
relocation of manufacturing equipment used in the silicon epi business and
duplicate facility costs during the first half of 1997, the lower selling prices
to end-user customers of ADCS product lines and the fact that the SDS revenue
stream was a smaller but higher margin royalty stream in 1996. Margin decreases
were offset by the revenue growth and product mix shift in the Ecosys business
in 1997.
Research and Development Expenses. Research and development expenses
increased 16.0% to $16.6 million in 1998 from $14.3 million in 1997, and
increased 16.4% 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, increased research efforts to
expand the Company's sensing and monitoring product lines, 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.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 6.7% to $56.5 million in 1998 from $60.6
million in 1997, and increased 25.1% in 1997 from $48.4 million in 1996. The
1998 decrease was primarily due to a significant reduction in executive
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. The 1998
decrease was partially offset by the expenses incurred in ramping the MST
operations throughout the year. 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 and incurred
initial costs in starting the MST operation.
Merger Related Costs and Other Expenses. The 1998 and 1997 operating
results include merger related charges 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 $0.4 million of
non- recurring charges related to workforce reductions in the EcoSys business,
and an increase of approximately $0.9 million 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.
Other Income (Expense), Net. Other income, net increased 143.1% to $3.0
million in 1998 from $1.7 million in 1997 and $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
5
<PAGE>
quarter of 1998. Interest expense decreased 34.0% to $1.7 million in 1998 from
$2.6 million in 1997, and increased 24.2% in 1997 from $2.1 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 48.6% to $4.4 million in 1998
from $8.6 million in 1997, and increased 81.0% in 1997 from $4.7 million in
1996. The effective income tax rate decreased to 46.6% in 1998 from 57.3% in
1997 and increased from 26.8% in 1996. ATMI's income tax expense related
primarily to United States federal and state tax liabilities, which were
partially offset by various foreign sales corporation benefits and research and
development credits. The 1998 effective tax rate of 46.6% was higher than
statutory rates because no tax benefit was taken for the $1.7 million of merger
costs 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 for merger costs 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-basic, decreased to $0.19 per share
in 1998 from $0.27 in 1997, which had decreased from $0.58 per share in 1996.
Earnings per share-basic in 1998 reflects a 8.6% increase in weighted average
shares outstanding to approximately 25.6 million from 23.6 million in 1997,
which increased 40.4% from 22.7 million in 1996. Earnings per share, assuming
dilution, decreased to $0.18 per share in 1998 from $0.25 in 1997, which had
declined from $0.54 per share in 1996. Earnings per share assuming dilution in
1998 reflects a 6.9% increase in weighted average shares outstanding to
approximately 27.4 million from 25.7 million in 1997, which increased 5.5% from
24.3 million in 1996.
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 provides all of ATMI's products
that are used in the semiconductor manufacturing process and the packaging and
delivery systems that are used to get them there. ATMI Technologies provides
products that sense and environmentally control semiconductor materials while
also providing manufacturing services to those end users that do not wish to
perform certain thin film manufacturing processes in-house. ATMI Technologies is
also responsible for ATMI's venture and government contracting activities. 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
Supplemental 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.
6
<PAGE>
The following tables provide reported results for each of these segments:
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
------------------------------- -----------------------
Revenues 1999 1998 1998 1997 1996
- -------- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
ATMI Materials .............. $ 68,462,000 $ 54,681,000 $ 71,279,000 $ 83,060,000 $ 61,935,000
ATMI Technologies ........... 70,156,000 76,973,000 93,827,000 108,952,000 92,455,000
---------------------------------------------------------------------------
Consolidated Revenues $138,618,000 $131,654,000 $165,106,000 $192,012,000 $154,390,000
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
--------------------------------- -----------------------
Operating Income (Loss) 1999 1998 1998 1997 1996
- ----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ATMI Materials .............. $14,548,000 $ 7,752,000 $11,373,000 $17,757,000 $10,466,000
ATMI Technologies ........... 2,633,000 1,559,000 (2,839,000) 6,765,000 9,502,000
Merger related costs and
other expenses ............. (6,800,000) (2,102,000) (2,102,000) (9,000,000) (2,000,000)
----------------------------------------------------------------------------
Consolidated Operating
Income $10,381,000 $ 7,209,000 $ 6,432,000 $15,522,000 $17,968,000
============================================================================
</TABLE>
Identifiable Assets September 30, December 31,
- ------------------- ------------- ------------
1999 1998 1997
------------- ------------ ------------
ATMI Materials ................... $ 56,285,000 $ 45,166,000 $ 39,725,000
ATMI Technologies ................ 73,983,000 73,321,000 78,547,000
General Corporate Assets ......... 84,878,000 87,623,000 35,257,000
-------------------------------------------
Total Consolidated Assets $215,146,000 $206,110,000 $153,529,000
===========================================
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
--------------------------------- -----------------------
Consolidated Net Income 1999 1998 1998 1997 1996
- ----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Income from
reportable segments ........ $10,381,000 $ 7,209,000 $ 6,432,000 $15,522,000 $17,968,000
Other Profit or (Loss) ...... 2,158,000 1,723,000 2,915,000 (539,000) (130,000)
Income Taxes (Provision) .... (5,750,000) (4,037,000) (4,412,000) (8,588,000) (4,745,000)
---------------------------------------------------------------------------
Consolidated Net Income $ 6,789,000 $ 4,895,000 $ 4,935,000 $ 6,395,000 $13,093,000
===========================================================================
</TABLE>
Business Segments Results
ATMI Materials
Revenues in the Materials segment for the nine months ended September 30,
1999 increased 25.2% from 1998 levels. An increase in semiconductor unit demand
during the period led to a significant increase in sales of ATMI Materials'
product sales. The 1999 growth in Materials was spurred by stronger industry
conditions and increased market penetration particularly related to the SDS and
the NOW packaging product lines. In 1998, revenues in this segment declined
14.2% from 1997 levels, which had increased 34.1% 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. 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 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 for the nine months ended
September 30, 1999 increased 87.7% from the same period in 1998. This increase
reflects the gains made due to the improved market conditions within the
industry and increased market share penetration during 1999. The significant
revenue increase in 1999 combined with stronger margins and cost containment
initiatives resulted in higher operating income within the segment. Operating
income, as a percentage of revenues, was 21.2% and 14.2% for the nine months
ended September 30, 1999 and 1998, respectively.
7
<PAGE>
Operating income in the Materials segment declined 36.0%% in fiscal 1998
from 1997 levels, which had increased 69.7% 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 16.0%, 21.4% and 16.9% for 1998, 1997 and 1996, respectively.
ATMI Technologies
Revenues in the Technologies segment for the nine months ended September
30, 1999 decreased 8.9% from 1998 levels. Overall revenues in the Technologies
segment in 1998 declined 13.9% from 1997 levels, which had increased 17.8% 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 revenue levels for the nine
months ended September 30, 1999 trail the comparable period of 1998,
semiconductor manufacturing capacity expansion began to rebound in 1999 leading
to improved sales at EcoSys (including the Delatech, Telosense and MST product
lines) and Epitronics.
Operating income within the Technologies segment improved to $2.6 million
in the nine months ended September 30, 1999 compared to a $1.6 million for the
same period in 1998. The income increase was attributable to the improvement in
both EcoSys' and Epitronics product margins due to revenue growth and a
favorable product mix shift along with an improvement in profitability of
various contract programs. For the nine months ended September 30, 1999,
operating income improved 68.9% from 1998 levels. Investments in research and
product development within EmoSyn and other ATMI Ventures are reflected in the
operating income of the Technologies segment.
Operating income declined to a loss of $2.8 million in fiscal 1998 compared
to operating profit of $6.8 million in 1997. These losses were attributable to
the severe decline in sale of EcoSys products, 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, operating income declined by
28.8% from $9.5 million in 1996. The increased operating income generated
through the growth of the EcoSys and Epitronics businesses was offset by losses
incurred in the first year of MST operations, reduced profitability on
government contracts and incremental investment in the Emosyn venture.
Corporate
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 $113.0
million at September 30, 1999 from $102.1 million at December 31, 1998 and $48.9
million at December 31, 1997.
Net cash provided by operations was approximately $11.5 million during the
nine months ended September 30, 1999, resulting primarily from improvements in
working capital, as compared to cash provided from operations of $11.4 million
during the same nine month period of 1998. The increase in cash flow from
operations for the period ended September 30, 1999 relates primarily to the
increase in net income and asset impairment charge partially offset by the
increase in accounts receivable. The improvement in working capital for the nine
months ended September 30, 1999 was primarily caused by a decrease in other
assets, and increases in accounts payable, accrued expenses, and other
liabilities. In 1998, operations provided cash of approximately $13.3 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 approximately $0.6 million remained unpaid at December 31,
1998. Net
8
<PAGE>
cash used in operations in 1997 was approximately $4.1 million. Additionally,
the $9.0 million of merger related 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 remained unpaid at December 31,
1997. In 1996, ATMI generated net cash from operations of $15.3 million,
primarily due to the profitability of operations.
The Company's investing activities included capital expenditures of $7.7
million, $15.0 million, $9.1 million and $14.7 million in the nine months ended
September 30, 1999 and the years 1998, 1997 and 1996, respectively. The 1999
expenditures were made primarily to support the growth experienced at the
Company's several manufacturing facilities. 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, net raised primarily from a public offering of its
Common Stock, into marketable securities for future working capital requirements
and potential merger and acquisition activities. In July 1997, the Company used
$5.6 million to purchase four businesses that comprised the formation of MST
Analytics, Inc. 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.
On July 15, 1997, MST Analytics, Inc. ("MST") acquired 100% of the
outstanding capital stock of four operating companies (i) Environmental
Monitoring Technology S.A. ("EMT"), a Swiss holding company which owns 100% of
the stock of MST Measurement Systems, Inc. ("MST U.S."), based in Wheeling,
Illinois; (ii) Micro-Sensor Technologie GmbH ("MST GmbH"), based in Munich,
Germany; (iii) FPM Analytics, Inc. ("FPM"), based in Wheeling, Illinois; and
(iv) Sensoric GmbH ("Sensoric"), based in Bonn Germany ("four operating
companies"). The aggregate purchase price for the four operating companies was
$18.8 million which was composed of cash of $5.6 million, the issuance of MST's
stock, and a two-year promissory note totaling $0.1 million.
In April 1998, the Company completed a registered underwritten public
offering of 5,428,000 shares of its common stock. Of such shares, 2,257,000
shares were sold by ATMI, and 3,171,000 shares were sold by certain stockholders
of ATMI. ATMI received net proceeds from the offering of approximately $62.4
million.
As of September 30, 1999, ATMI has financed a significant portion of its
capital equipment purchases, particularly the silicon epitaxial capacity,
through capital leases with approximately $4.6 million of capital lease
obligations outstanding. During the first nine months of 1999 and the year 1998,
the Company made payments on capital leases of approximately $1.7 million and
$2.8 million, respectively. Financial institutions have also provided
collateral-based loans for other equipment purchases. In the first nine months
of 1999, the Company made $7.8 million of note payments and during 1998, the
Company made payments on notes of approximately $6.7 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 $2.4 million, which was used for
equipment and improvements at its manufacturing facility and corporate office.
At September 30, 1999, $10.5 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 nine months ended September 30, 1999 and the years ended December
31, 1998, 1997 and 1996, export sales outside the United States, including Asia
and Europe, accounted for 30.3%, 31.9%, 30.0%, and 33.3%, respectively, of the
Company's revenues. The Company anticipates its sales outside
9
<PAGE>
the United States will continue to account for significant percentage of its
revenues. The November 1999 acquisitions of MST and NewForm have increased ATMI
European operations. 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.
Year 2000 Compliance
ATMI 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 completed an IT Systems inventory analysis and risk assessment. As
previously planned and budgeted, the Company upgraded its core IT Systems to
incorporate additional desired features and functionality including Year 2000
compliant operators. ATMI completed the necessary upgrades to make the recently
acquired businesses Year 2000 compliant by December 31, 1999. In connection with
such upgrades, the Company expects that its core IT Systems are Year 2000
compliant and no significant issues have arisen to date from the calendar change
to January 2000. 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 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. 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 completed a Third Party inventory and risk assessment and verified
material Year 2000 compliance of Third Party Systems by December 31, 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,
the risk to ATMI's operations and any additional costs relating to such Third
Party Systems is unknown. ATMI believes that any problems that might arise would
involve Third Party Systems rather than its internal systems. The Company
believes the majority of the risks associated with Year 2000 non-compliance have
been averted as the calendar turned. Any further risk might be the partial
shutdown of a supplier or strategic partner and its inability to provide
supplies and services to the Company on a timely basis. A contingency plan
addressing potential issues related to Third Party Systems had been developed
and consisted of ensuring adequate levels of critical supplies used in the
Company's manufacturing processes were on hand at the end of year 1999.
ATMI tested its products for Year 2000 compliance and 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.
The Company incurred approximately $600,000 relating to inventory analysis
and risk assessment of potential Year 2000 difficulties. The funds to cover the
cost incurred were derived from general operations. The costs primarily related
to desktop compliance and standardization to Year 2000 compliance. These Year
2000 expenditures were within the Company's planned organizational budgets and
included the cost of reviewing of key operating systems. No IT Systems projects
were deferred because of problems associated with the Year 2000 Issue.
10
<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.
11
<PAGE>
Exhibit 99.5
ATMI, INC.
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP 2
Report of Deloitte & Touche, LLP 3
Report of PriceWaterhouse LLP 4
Reports of Arthur Andersen LLP 5
Reports of Rath, Anders, Dr. Wanner and Partner (GbR) 7
Audited Financial Statements and Schedule 9
Supplemental Consolidated Balance Sheets - December 31, 1998 and 1997
Supplemental Consolidated Statements of Income for the years ended December 31,
1998, 1997, and 1996 10
Supplemental Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1997, and 1998 11
Supplemental Consolidated Statements of Cash Flows for the years ended December
31, 1996, 1997, and 1998 12
Notes to Supplemental Consolidated Financial Statements 13
Schedule II - Valuation and Qualifying Accounts 32
Unaudited Financial Statements
Supplemental Consolidated Balance Sheets - September 30, 1999 and December 31,
1998 33
Supplemental Consolidated Statements of Income for the nine months ended
September 30, 1999 and 1998 34
Supplemental Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 35
Notes to Supplemental Consolidated Interim Financial Statements 36
</TABLE>
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 NewForm N.V. ("NewForm") and MST Analytics Inc. ("MST") on November 24,
1999 and November 29, 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 consolidated financial
statements are the responsibility of the management of ATMI, Inc. Our
responsibility is to express an opinion on these supplemental consolidated
financial statements and schedule based on our audits. We did not audit the
financial statements or Valuation and Qualifying Accounts Schedule Data of MST,
a wholly-owned subsidiary, as of December 31, 1998 and 1997 or for the year
ended December 31, 1998, which statements reflect total assets consisting of 6%
and 7% as of December 31, 1998 and 1997, respectively, and reflect revenues
consisting of 12% for the year ended December 31, 1998 of the related
supplemental consolidated financial statements. Nor did we 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, of the related supplemental consolidated
financial statements (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, which statements reflect revenues constituting 13% 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 MST, NOW and Lawrence is based solely on the reports of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 consolidated 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 NewForm and MST, as
described in the notes to the supplemental consolidated financial statements, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related supplemental consolidated financial statement
schedule, when considered in relation to the basic supplemental consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
January 11, 2000
2
<PAGE>
INDEPENDENT AUDITORS REPORT
Board of Directors
NOW Technologies, Inc. and Subsidiaries
Bloomington, Minnesota
We have audited the consolidated balance sheet (not presented herein) 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. 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.
/s/ DELOITTE & TOUCHE, LLP
Minneapolis, Minnesota
May 1, 1998
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.
/s/ PricewaterhouseCoopers 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
4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
MST Analytics, Inc.
We have audited the consolidated balance sheet of MST ANALYTICS, INC. (a
Delaware corporation) AND SUBSIDIARIES as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. 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 did not audit the financial
statements of MST Micro-Sensor-Technologie GmbH, Hohenschaftlarn and Sensoric
Gesellschaft fur angewandte Elektrochemie mbh & Co. KG, Hohenschaftlarn, wholly
and majority-owned subsidiaries, respectively, which statements reflect total
assets and total revenues of 55% and 47%, respectively, of the related
consolidated totals. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for those entities, is solely based on the report of the other
auditors.
We conducted our audit in accordance with generally accepted accounting
principles. 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 audit and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of MST Analytics, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
May 28, 1999
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
MST Analytics, Inc.
We have audited the consolidated balance sheet of MST ANALYTICS, INC. (a
Delaware corporation) AND SUBSIDIARIES as of December 31, 1997. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of MST Analytics, Inc. and
Subsidiaries as of December 31, 1997, in conformity with generally accepted
accounting principles.
The consolidated statements of operations, stockholders' equity and cash flows
for the period from January 3, 1997, to December 31, 1997, were not audited by
us and, accordingly, we do not express an opinion on them.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 11, 1998
6
<PAGE>
OPINION
MST Micro-Sensor-Technologie GmbH
Hohenschaftlarn, Germany
A. Opinion
We have conducted a full audit of MST Micro-Sensor-Technologie GmbH,
Hohenschaftlarn, (in the following called "MST" or "Company"), expressed in
Deutsche Mark (DM), as of December 31, 1998.
(1) 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.
(2) We have conducted our audit in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 audit provides a reasonable basis for our opinion.
(3) The reporting package does not present all disclosures required under US-
GAAP, e.g. no cash flow statement and no tax rationalization form have been
prepared.
(4) On the basis of our audit we certify that the documents attached to this
clearance have been issued in compliance with the methods and principles
accepted by US-GAAP.
Munich, January 22, 1999
/s/ Kabisch /s/ Metzler
Dipl.-Kfm. Kabisch Dipl.-Kfm. Metzler
Vereidigter Buchprufer Wirtschaftsprufer
7
<PAGE>
OPINION
Sensoric Gesellschaft fur angewandte
Elektrochemie mbh Co. KG
Hohenschaftlarn
A. Opinion
We have conducted a full audit of Sensoric Gesellschaft fur angewandte
Elektrochemie mbh & Co. KG, Hohenschaftlarn, (in the following called "Sensoric"
or "Company"), expressed in Deutsche Mark (DM), as of December 31, 1998.
(1) 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.
(2) We have conducted our audit in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. 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 audit provides a reasonable basis for our opinion.
(3) The reporting package does not present all disclosures required under US-
GAAP, e.g. no cash flow statement and no tax rationalization form have been
prepared.
(4) On the basis of our audit we certify that the documents attached to this
clearance have been issued in compliance with the methods and principles
accepted by US-GAAP.
Munich, January 22, 1999
/s/ Kabisch /s/ Metzler
Dipl.-Kfm. Kabisch Dipl.-Kfm. Metzler
Vereidigter Buchprufer Wirtschaftsprufer
8
<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) ............................ $ 21,618,000 $ 15,442,000
Marketable securities (Note 2) ................................ 64,551,000 17,461,000
Accounts receivable, net of allowance for doubtful accounts of
$959,000 in 1998, and $1,487,000 in 1997 (Note 3) ........... 25,708,000 36,425,000
Inventories (Notes 4) ......................................... 19,216,000 18,412,000
Other.......................................................... 7,979,000 5,790,000
-----------------------------
Total current assets ....................................... 139,072,000 93,530,000
Property and equipment, net (Note 5) ............................ 54,683,000 48,605,000
Goodwill and other long-term assets, net (Notes 1, 10 and 15) ... 12,355,000 11,394,000
-----------------------------
$206,110,000 $153,529,000
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .............................................. $ 9,287,000 $ 10,486,000
Accrued expenses .............................................. 12,531,000 16,805,000
Accrued commissions ........................................... 1,315,000 2,364,000
Loans, notes and bonds payable, current portion (Note 6)....... 9,396,000 8,812,000
Capital lease obligations, current portion (Note 7)............ 2,493,000 2,828,000
Income taxes payable (Note 8) ................................. 1,911,000 2,794,000
Deferred income taxes (Note 8) ................................ 61,000 563,000
-----------------------------
Total current liabilities .................................. 36,994,000 44,652,000
Loans, notes and bonds payable, less current portion (Note 6).... 8,813,000 13,525,000
Capital lease obligations (Note 7) .............................. 3,746,000 6,238,000
Deferred income taxes (Note 8) .................................. 2,703,000 4,423,000
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 27,484,000 in 1998, and 25,068,000 in 1997 ........... 275,000 251,000
Additional paid-in capital .................................... 118,516,000 53,860,000
Retained earnings ............................................. 35,082,000 30,646,000
Accumulated other comprehensive income ........................ (1,153,000) (1,454,000)
-----------------------------
Total stockholders' equity ................................. 152,720,000 83,303,000
-----------------------------
$206,110,000 $153,529,000
=============================
</TABLE>
See accompanying notes.
9
<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)............................. $165,106,000 $192,012,000 $154,390,000
Cost of revenues ..................................... 83,419,000 92,561,000 73,673,000
--------------------------------------------
Gross profit ......................................... 81,687,000 99,451,000 80,717,000
Operating expenses:
Research and development ........................... 16,630,000 14,336,000 12,314,000
Selling, general and administrative ................ 56,523,000 60,593,000 48,435,000
Merger related costs and other expenses
(Notes 10 and 12) ................................ 2,102,000 9,000,000 2,000,000
--------------------------------------------
75,255,000 83,929,000 62,749,000
--------------------------------------------
Operating income ..................................... 6,432,000 15,522,000 17,968,000
Interest income ...................................... 4,210,000 1,732,000 1,726,000
Interest expense (Note 6) ............................ (1,723,000) (2,609,000) (2,101,000)
Other income, net .................................... 539,000 340,000 94,000
--------------------------------------------
Income before taxes and minority interest ............ 9,458,000 14,985,000 17,687,000
Income taxes (Note 8) ................................ 4,412,000 8,588,000 4,745,000
--------------------------------------------
Income before minority interest ...................... 5,046,000 6,397,000 12,942,000
Minority interest .................................... (111,000) (2,000) 151,000
--------------------------------------------
Net income ........................................... $ 4,935,000 $ 6,395,000 $ 13,093,000
============================================
Net income per share--basic (Notes 1 and 9) .......... $0.19 $0.27 $0.58
--------------------------------------------
Net income per share--assuming dilution (Notes 1 and 9) $0.18 $0.25 $0.54
--------------------------------------------
Weighted average shares outstanding--basic
(Notes 1 and 9) ...................................... 25,645,000 23,617,000 22,700,000
--------------------------------------------
Weighted average shares outstanding--assuming dilution
(Notes 1 and 9) ...................................... 27,423,000 25,660,000 24,318,000
--------------------------------------------
</TABLE>
See accompanying notes.
10
<PAGE>
ATMI, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
-----------
Additional Other
---------- ----
Common Paid-in Retained Comprehensive
------ ------- -------- -------------
Stock Capital Earnings Income Total
----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 .................... $238,000 $ 41,064,000 $13,268,000 $ 91,000 $ 54,661,000
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 ...................................... -- -- 13,093,000 -- 13,093,000
Cumulative translation adjustment ............... -- -- -- (169,000) (169,000)
---------------
Comprehensive income ............................ 12,924,000
------------------------------------------------------------------------
Balance at December 31, 1996 .................... 239,000 41,438,000 24,450,000 (78,000) 66,049,000
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 shares to pooled entity ...... 10,000 4,284,000 -- -- 4,294,000
Issuance of common and preferred shares by
pooled entity .................................. -- 5,046,000 -- -- 5,046,000
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 ...................................... 6,395,000 6,395,000
Cumulative translation adjustment ............... -- -- -- (1,376,000) (1,376,000)
---------------
Comprehensive income ............................ 5,019,000
------------------------------------------------------------------------
Balance at December 31, 1997 .................... 251,000 53,860,000 30,646,000 (1,454,000) 83,303,000
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 ......................................... -- 372,000 -- -- 372,000
Tax benefit related to nonqualified stock
options ........................................ -- 1,099,000 -- -- 1,099,000
Distributions to stockholders ................... -- (397,000) -- (397,000)
Adjustment to reflect change in pooled entity
fiscal year .................................... -- -- (102,000) -- (102,000)
Net income ...................................... -- -- 4,935,000 -- 4,935,000
Unrealized loss on available-for-sale securities
(net of tax benefit of $281,000) ............... -- -- -- (500,000) (500,000)
Cumulative translation adjustment ............... -- -- -- 801,000 801,000
---------------
Comprehensive income ............................ 5,236,000
------------------------------------------------------------------------
Balance at December 31, 1998 .................... $275,000 $118,516,000 $35,082,000 $(1,153,000) $152,720,000
------------------------------------------------------------------------
</TABLE>
See accompanying notes.
11
<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 ............................................................. $ 4,935,000 $ 6,395,000 $ 13,093,000
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization .......................................... 9,900,000 7,957,000 6,325,000
Stock option compensation .............................................. 372,000 272,000 -
Effect of change of fiscal year of pooled entity ....................... (102,000) - -
Provision for bad debt ................................................. 399,000 1,251,000 426,000
Deferred income taxes .................................................. (1,891,000) 2,369,000 1,107,000
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 ........................... 10,667,000 (11,624,000) (2,462,000)
(Increase) in inventory .............................................. (796,000) (4,085,000) (5,115,000)
(Increase) in other assets ........................................... (4,394,000) (2,990,000) (525,000)
Increase (decrease) in accounts payable .............................. (1,187,000) (628,000) 1,673,000
Increase (decrease) in accrued expenses .............................. (5,156,000) 4,055,000 2,852,000
Increase (decrease) in other liabilities ............................. (672,000) 473,000 (1,883,000)
--------------------------------------------
Total adjustments ................................................. 8,350,000 (2,270,000) 2,247,000
--------------------------------------------
Net cash provided (used) by operating activities .................. 13,285,000 4,125,000 15,340,000
--------------------------------------------
Investing activities
Capital expenditures .................................................... (15,023,000) (9,084,000) (14,729,000)
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 ............................................... - (5,551,000) (4,000,000)
Proceeds from sale of assets ............................................ 199,000 - 648,000
--------------------------------------------
Net cash used by investing activities ............................. (62,695,000) (14,108,000) (14,750,000)
--------------------------------------------
Financing activities
Borrowings from loans, notes, and bonds payable ......................... 2,232,000 4,630,000 7,074,000
Payments on loans, notes, and bonds payable ............................. (6,747,000) (4,411,000) (3,610,000)
Distribution to stockholders ............................................ (397,000) (199,000) (1,911,000)
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...... - 8,549,000 186,000
Investment by stockholder ............................................... - 251,000 160,000
Proceeds from exercise of stock options and warrants .................... 783,000 2,144,000 189,000
--------------------------------------------
Net cash provided by financing activities ......................... 55,466,000 7,839,000 612,000
--------------------------------------------
Effects of exchange rate changes on cash ................................ 120,000 (142,000) (40,000)
--------------------------------------------
Net increase (decrease) in cash and cash equivalents .................... 6,176,000 (2,286,000) 1,162,000
Cash and cash equivalents, beginning of year ............................ 15,442,000 17,728,000 16,566,000
--------------------------------------------
Cash and cash equivalents, end of year .................................. $ 21,618,000 $ 15,442,000 $ 17,728,000
============================================
Supplemental disclosure of noncash financing activities
Conversion of note payable to preferred stock by pooled entity $ -- $ 685,000 $ --
============================================
</TABLE>
See accompanying notes.
12
<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 financial statements
give retroactive effect to the acquisitions of NewForm N.V. ("NewForm") and MST
Analytics, Inc. ("MST") (which commenced operations January 3, 1997) which have
been accounted for using the pooling-of-interests method. The acquisition of
NewForm occurred on November 24, 1999, and the acquisition of MST occurred on
November 29, 1999, as 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 materials and equipment used in the manufacture of semiconductor
devices. The Company focuses on proprietary and patented products that are used
in the manufacture of the thin films that are deposited on semiconductor wafers
to make them functional as complex devices. ATMI provides:
. a broad range of ultrahigh-purity semiconductor materials;
. semiconductor materials packaging and delivery systems that bring materials
to the processing equipment;
. sensors for the workplace and environment that detect materials as they
move through the workplace;
. point-of-use environmental equipment that abates materials; and
. specialty thin film deposition services that provide coated wafers directly
to customers.
Revenue Recognition
Revenues are recognized upon the shipment of goods. Contract revenues under
fixed-price contracts and cost-reimbursement-type contracts are recognized using
the percentage-of-completion method based upon costs incurred and estimated
future costs. Provisions for expected losses on contracts are recorded in the
period when 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. External funding
provided to the Company through cost-reimbursement contracts with the U.S.
Government, are expensed as cost of contract revenues.
13
<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.
14
<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 of $4.1 million and $4.4 million at December 31,
1998 and 1997 is amortized over periods of ten to twenty years and is stated net
of accumulated amortization of $1.9 million and $1.0 million at December 31,
1998 and 1997, respectively.
Stock Based Compensation
The Company accounts for employee stock compensation 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.
15
<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
Common stock investments....................... 2,187,000 $(781,000) 1,406,000
----------------------------------------------
Total marketable securities ................. $65,332,000 $(781,000) $64,551,000
==============================================
</TABLE>
Marketable securities are comprised of the following at December 31, 1997:
Estimated
---------
Fair
----
Cost Value
---- -----
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
============================
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.
16
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Inventories
Inventories are comprised of the following:
December 31,
--------------------------
1998 1997
------------ ------------
Raw materials ........................ $14,335,000 $12,478,000
Work in process ...................... 2,392,000 3,948,000
Finished goods ....................... 4,350,000 3,723,000
---------------------------
21,077,000 20,149,000
Obsolescence reserve ................. (1,861,000) (1,737,000)
---------------------------
$19,216,000 $18,412,000
===========================
5. Property and Equipment
Property and equipment is comprised of the following:
December 31,
----------------------------
1998 1997
------------- -------------
Land.................................. $ 1,944,000 $ 1,793,000
Buildings............................. 10,522,000 10,025,000
Machinery and equipment............... 63,624,000 52,413,000
Furniture and fixtures................ 5,657,000 4,314,000
Leasehold improvements................ 8,094,000 6,194,000
-----------------------------
89,841,000 74,739,000
Accumulated depreciation and
amortization ......................... (35,158,000) (26,134,000)
-----------------------------
$ 54,683,000 $ 48,605,000
=============================
Depreciation expense for the years ended December 31, 1998, 1997 and 1996,
was $9,068,000, $7,416,000, and $5,894,000, respectively.
17
<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 August 2000 and June 2002................. 2,212,000 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 primarily with commercial banks and leasing companies,
bearing interest ranging between 2.5%-11.52%, due between April 1997
and June 2006........................................................ 7,466,000 11,830,000
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
----------- -----------
18,209,000 22,337,000
Less current portion.................................................. (9,396,000) (8,812,000)
----------- -----------
$ 8,813,000 $13,525,000
=========== ===========
</TABLE>
The approximate aggregate debt maturities are as follows as of December 31,
1998:
1999.................................................... $ 7,096,000
2000.................................................... 3,283,000
2001.................................................... 2,804,000
2002.................................................... 1,992,000
2003.................................................... 693,000
Thereafter.............................................. 2,341,000
-----------------
$18,209,000
=================
The balance of loans and notes payable at December 31, 1998 and 1997,
respectively include amounts due in foreign currencies as follows: Belgian
Francs 1,994,000 and 1,694,000 and Deutschmarks 3,599,000 and 4,358,000.
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.
18
<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.
Interest paid was $2,298,000, $2,824,000 and $2,186,000, for the years
ended December 31, 1998, 1997, and 1996, respectively.
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.
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:
December 31,
-------------------------------
1998 1997
------------- -------------
Machinery and equipment ............. $12,269,000 $14,556,000
Accumulated depreciation ............ (3,109,000) (3,549,000)
----------- -----------
$ 9,160,000 $11,007,000
=========== ===========
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1998:
Capital Leases
--------------
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
============
The Company leases office and manufacturing facilities, and certain
manufacturing equipment under several operating leases expiring between 1999 and
2005. Rental expense was $5,001,000, $4,569,000, and $3,663,000, for the years
ended December 31, 1998, 1997 and 1996, respectively.
19
<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:
Operating
---------
Leases
------
1999 .................................................... $ 3,844,000
2000 .................................................... 2,858,000
2001 .................................................... 2,293,000
2002 .................................................... 1,866,000
2003 .................................................... 833,000
Thereafter .............................................. 810,000
-----------
Total minimum lease payments................................ $12,504,000
===========
8. Income Taxes
Pretax income was taxed in the following jurisdictions:
Year Ended December 31,
------------------------------------
1998 1997 1996
---------- ----------- -----------
Domestic ............................ $5,989,000 $13,677,000 $17,041,000
Foreign ............................. 3,358,000 1,306,000 797,000
---------- ----------- -----------
Total pretax income ................... $9,347,000 $14,983,000 $17,838,000
---------- ----------- -----------
Significant components of the provision for income taxes for the periods
presented are as follows:
December 31,
------------------------------------
1998 1997 1996
------------ ---------- ----------
Current:
Federal ............................. $ 4,539,000 $5,305,000 $2,698,000
State ............................... 1,116,000 740,000 865,000
Foreign ............................. 648,000 174,000 75,000
----------- ---------- ----------
Total current ......................... 6,303,000 6,219,000 3,638,000
----------- ---------- ----------
Deferred:
Federal ............................. (1,816,000) 1,896,000 658,000
State ............................... (536,000) 321,000 275,000
Foreign ............................. 461,000 152,000 174,000
----------- ---------- ----------
Total deferred ........................ (1,891,000) 2,369,000 1,107,000
----------- ---------- ----------
$ 4,412,000 $8,588,000 $4,745,000
=========== ========== ==========
20
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes (continued)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
December 31,
--------------------------
1998 1997
------------ ------------
Deferred tax assets:
Accrued liabilities .............................. $ 1,234,000 $ 660,000
Inventory reserves ............................... 1,183,000 592,000
Net operating loss carryforward and tax credits... 2,045,000 1,150,000
Other, net ....................................... 479,000 914,000
--------------------------
4,941,000 3,316,000
Valuation allowance ................................ (2,154,000) (1,298,000)
--------------------------
2,787,000 2,018,000
Deferred tax liabilities:
Depreciation ..................................... (3,430,000) (2,659,000)
Capital leases ................................... (1,184,000) (1,182,000)
Other, net ....................................... (937,000) (3,163,000)
--------------------------
(5,551,000) (7,004,000)
--------------------------
Net deferred tax liabilities ....................... $(2,764,000) $(4,986,000)
==========================
As of December 31, 1998, the Company has federal net operating loss
carryforwards of $4,808,000. The net operating loss and tax credit carryforwards
will expire at various dates beginning in 2007 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 $2,045,000 and $1,150,000,
respectively have been offset by a valuation allowance. The increase in the net
valuation allowance in 1998 of $855,000 was a result of the acquisition of
ACSI. The decrease in the net valuation allowance in 1997 of $1,497,000 was
primarily due to the Company's continued profitability.
Income taxes paid for the years ended December 31, 1998, 1997, and 1996
were $9,371,000, $6,160,000, and $4,552,000.
21
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes (continued)
The reconciliation of income tax computed at the U.S. federal statutory tax
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 ................................ $3,178,000 $ 5,176,000 $ 6,066,000
State income taxes ................................. 266,000 662,000 833,000
Foreign income taxes................................ 228,000 (24,000) (4,000)
Effect of nondeductible acquisition expenses ....... 599,000 3,548,000 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 .................... 855,000 (954,000) 320,000
Tax credits ........................................ (244,000) -- --
Other, net ......................................... (107,000) 551,000 373,000
----------------------------------------
$4,412,000 $ 8,588,000 $ 4,745,000
========================================
</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 $11,610,000 and $0.48,
respectively.
22
<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.
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 (see Note
10). While the possible exposures 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.
During the second quarter 1999 the Company was notified by the Internal Revenue
Service of an assessment of $2.1 million for certain of these tax matters. The
Company believes that such assessment is without merit and intends to vigorously
defend its position in these tax matters. Although the former securityholders of
the ADCS Group have agreed to indemnify the Company against losses arising out
of such tax matters, any assessments, if ultimately determined against the
Company, would result in a charge to the Company's results of operations.
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, stock appreciation rights and restricted
stock awards 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 ISOs. The 1987 Plan expired in 1997.
23
<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.
Number of Option Price
--------- ------------
Shares Per Share
------ ---------
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 ..................................... 1,023,506 $ 2.10 - $40.13
Canceled .................................... (348,250) $ 0.53 - $40.13
Exercised ................................... (82,520) $ 0.28 - $13.50
--------- ---------------
Options outstanding at December 31, 1997........ 1,550,952 $ 0.28 - $29.38
Granted ..................................... 752,440 $14.00 - $33.00
Canceled .................................... (110,130) $ 5.63 - $33.00
Exercised ................................... (158,918) $ 0.28 - $17.63
--------- ---------------
Options outstanding at December 31, 1998........ 2,034,344 $ 0.44 - $40.13
========= ---------------
At December 31, 1998, 1997, and 1996 options for 896,257, 782,409, and
567,066 shares, respectively, were exercisable, and at December 31, 1998 options
for 1,822,277 shares were available for grant. Exercise prices for 784,167
options outstanding ranged from $0.44-$10.00; for 525,057 options outstanding
ranged from $10.01-$20.00; and for 725,120 options outstanding ranged from
$20.01- $40.13 as of December 31, 1998.
The weighted average exercise price and remaining contractual life of
options outstanding at December 31, 1998 was $14.28 and 7.5 years, respectively.
As a result of the NOW merger in 1998 (see Note 10), 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.
As a result of the MST merger in 1999 (see Note 10), stock options of MST
were converted into 123,016 of ATMI stock options. These stock options were
converted into ATMI stock options at historical prices ranging from $2.10 to
$15.74.
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................................. $2,984,000 $5,556,000 $12,772,000
Net income per share--basic................ $ 0.12 $ 0.24 $ 0.56
Net income per share--assuming dilution.... $ 0.11 $ 0.22 $ 0.53
</TABLE>
24
<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
----------- ----------- -----------
Numerator:
<S> <C> <C> <C>
Net income $ 4,935,000 $ 6,395,000 $13,093,000
---------------------------------------
Denominator:
Denominator for basic earnings per share-
Weighted-average share 25,645,000 23,617,000 22,700,000
Dilutive effect of contingent shares related to
acquisitions subject to escrow arrangements 1,289,000 1,289,000 1,190,000
Dilutive effect of employee stock options 489,000 754,000 428,000
---------------------------------------
Denominator for diluted earnings per share 27,423,000 25,660,000 24,318,000
---------------------------------------
Net income per share--basic $ 0.19 $ 0.27 $ 0.58
=======================================
Net income per share--assuming dilution $ 0.18 $ 0.25 $ 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.
25
<PAGE>
ATMI, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Mergers and Acquisitions
On November 29, 1999, pursuant to an Agreement and Plan of Merger, the
Company issued 993,282 shares of its common stock in exchange for all of the
ownership interests of MST. MST (which commenced its operations January 3, 1997)
manufactures and sells semiconductor gas monitoring system products.
On November 24, 1999, pursuant to a Share Purchase Agreement, the Company
issued 550,000 shares of its common stock in exchange for all of the ownership
interests of NewForm. NewForm provides high-purity flexible ultra clean
packaging used predominately in the semiconductor industry.
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, Delatech, NewForm and MST 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, Delatech,
NewForm and MST delivered 120,000, 234,000, 55,000 and 99,000 shares,
respectively, of the Company's Common Stock which they received into escrow in
connection with these acquisitions.
The acquisitions of NewForm, MST, TeloSense, ACSI and Delatech were treated
as a pooling of interests. Both TeloSense and Delatech's fiscal year ended on
November 30. The Company's consolidated financial statements have been restated
to combine TeloSense and Delatech's fiscal year-end November 30 and ATMI, ACSI,
MST and NewForm'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, Delatech, NewForm and MST included in the financial statements
are as follows:
Revenues: 1998 1997 1996
--------- -----------------------------------------
ATMI........................ $97,874,000 $116,732,000 $98,772,000
TeloSense, ACSI and Delatech $42,994,000 $ 62,043,000 $51,516,000
NewForm and MST $24,238,000 $ 13,237,000 $ 4,102,000
Net Income (Loss): 1998 1997 1996
------------------ -----------------------------------------
ATMI........................ $ 6,465,000 $ 5,929,000 $12,202,000
TeloSense, ACSI and Delatech $(2,024,000) $ 1,228,000 $ 539,000
NewForm and MST $ 494,000 $ (762,000) $ 352,000
26
<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,
revenues and net income of ATMI and NOW included in the financial statements are
as follows:
Six Months Ended
Revenues: ----------------
June 30, 1998 1997 1996
------------- ------------ -----------
ATMI......................... $ 49,006,000 $101,877,000 $88,661,000
NOW.......................... $ 6,043,000 $ 14,855,000 $10,111,000
Six Months Ended
Net Income: ----------------
June 30, 1998 1997 1996
------------- ------------ -----------
ATMI......................... $ 5,999,000 $ 4,421,000 $12,017,000
NOW.......................... $ 240,000 $ 1,508,000 $ 185,000
On October 10, 1997, pursuant to an Agreement and Plan of Merger and
Exchange dated April 7, 1997, 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.
27
<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 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.
Non-recurring costs of approximately $9,000,000, primarily related to
investment banker, legal, accounting fees, and a break-up fee in connection with
a 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, revenues and net income of ATMI, the ADCS Group and LSL
included in the financial statements are as follows:
Nine Months Ended
-----------------
Revenues: September 30, 1997 1996
- --------- ------------------ -----------
ATMI............................ $41,286,000 $46,350,000
ADCS and LSL.................... $32,262,000 $42,311,000
Nine Months Ended
-----------------
Net Income: September 30, 1997 1996
- ----------- ------------------ -----------
ATMI............................ $ 3,979,000 $ 3,321,000
ADCS and LSL.................... $ 5,134,000 $ 8,696,000
On July 15, 1997, MST Analytics, Inc. ("MST") acquired 100% of the
outstanding capital stock of four operating companies (i) Environmental
Monitoring Technology S.A. ("EMT"), a Swiss holding company which owns 100% of
the stock of MST Measurement Systems, Inc. ("MST U.S."), based in Wheeling,
Illinois; (ii) Micro-Sensor Technologie GmbH ("MST GmbH"), based in Munich,
Germany; (iii) FPM Analytics, Inc. ("FPM"), based in Wheeling, Illinois; and
(iv) Sensoric GmbH ("Sensoric"), based in Bonn Germany ("four operating
companies"). The aggregate purchase price for the four operating companies was
$18.8 million which was composed of cash of $5.6 million, the issuance of MST's
stock, and a two-year promissory note totaling $0.1 million.
The acquisition has been accounted for as a purchase and, accordingly, the
operating results of the four operating entities described above have been
included in the Company's consolidated financial statements since the date of
acquisition (July 15, 1997). The excess of the aggregate purchase price over the
fair market value of the net assets acquired of $4.4 million is being amortized
over 10 years. The following unaudited pro forma consolidated results of
operations for the years ended December 31, 1997 and 1996 assume that the
acquisition of the four operating companies occurred as of January 1, 1996:
1997 1996
------------------------------
Net sales $200,256,000 $169,504,000
Income before taxes and minority interest $ 15,485,000 $ 18,830,000
Net income 6,893,000 13,779,000
Net income per share assuming dilution $ 0.27 $ 0.54
==============================
28
<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 ................ $ (78,000) -- $ (78,000)
Cumulative translation adjustment ........... (1,376,000) -- (1,376,000)
------------------------------------------------------------
Balance at December 31, 1997 ................ (1,454,000) -- (1,454,000)
Unrealized loss on available-for-sale
securities, (net of tax benefit of $281,000) -- $(500,000) (500,000)
Cumulative translation adjustment ........... 801,000 -- 801,000
------------------------------------------------------------
Balance at December 31, 1998 ................ $ (653,000) $(500,000) $(1,153,000)
------------------------------------------------------------
</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 results of operations.
29
<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:
United
In Thousands States Pacific Rim Europe Elimination Total
- --------------------------------------------------------------------------------
December 31, 1998
Total revenues $112,445 $34,451 $20,779 $(2,569) $165,106
Long-lived assets 56,757 1,373 653 -- 58,783
December 31, 1997
Total revenues 136,453 42,829 14,572 (1,842) 192,012
Long-lived assets 50,773 1,734 498 -- 53,005
December 31, 1996
Total revenues 102,953 41,023 10,414 -- 154,390
Long-lived assets 39,968 2,195 463 -- 42,626
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. 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 8% and 7% of revenues in 1998 and 1997, respectively.
15. Subsequent Events
In connection with the investigation, analysis and May 1999 closings of the
TeloSense, Delatech, and ACSI transactions (see Note 10), the Company has
recorded merger and related costs of approximately $6.8 million in the second
quarter ended June 30, 1999 which include $2.4 million of investment banker
fees, legal and accounting fees. The acquisition of Delatech also resulted in a
charge of $4.4 million to recognize the impaired value of certain inventory ($1
million) and goodwill ($3.4 million) associated with existing EcoSys product
lines. These charges were based on the estimate of future cash flows on a
discounted basis compared with the carrying value of these assets.
In connection with the investigation, analysis and November 1999 closings
of the NewForm and MST transactions (see Note 10), the Company has recorded
merger and related costs of approximately $2.5 million in the fourth quarter
ended December 31, 1999 which include investment banker fees, legal and
accounting fees.
30
<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........................................ $ 52,047 $ 44,446 $ 35,161 $ 33,452 $ 165,106
Gross profit.................................... 28,528 21,294 14,907 16,958 81,687
Net income (loss)............................... 5,748 1,498 (2,351) (1) 40 4,935
Net income (loss) per share--basic.............. $ 0.24 $ 0.07 $ (0.09) (1) $ 0.00 $ 0.19
Net income (loss) per share--assuming dilution.. $ 0.22 $ 0.05 $ (0.09) (1) $ 0.00 $ 0.18
<CAPTION>
Quarter Year
----------------------------- ---------
1997 First Second Third Fourth 1997
- ---- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 40,122 $ 42,849 $ 53,585 $ 55,456 $ 192,012
Gross profit.................................... 20,256 22,396 28,529 28,270 99,451
Net income (loss)............................... 2,642 3,385 5,042 (4,674) (2) 6,395
Net income (loss) per share--basic.............. $ 0.11 $ 0.14 $ 0.21 $ (0.19) (2) $ 0.27
Net income (loss) per share--assuming dilution.. $ 0.11 $ 0.13 $ 0.20 $ (0.19) (2) $ 0.25
</TABLE>
(1) Includes merger related costs of $1.7 million incurred in completing the
NOW acquisition, and a restructuring charge of $0.4 million for severance
for employees. The restructuring was completed by December 31, 1998.
(2) Includes merger related costs of $9.0 million incurred in investigating,
analyzing and completing the ADCS Group and LSL acquisitions.
31
<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....... $1,487,000 $ 399,000 $ 927,000 $ 959,000
Obsolescence reserve.................. 1,737,000 1,365,000 1,241,000 1,861,000
Restructuring reserve................. 0 402,000 402,000 0
December 31, 1997
Allowance for doubtful accounts....... 682,000 1,251,000 446,000 1,487,000
Obsolescence reserve.................. 952,000 1,608,000 823,000 1,737,000
December 31, 1996
Allowance for doubtful accounts....... 284,000 426,000 28,000 682,000
Obsolescence reserve.................. 376,000 576,000 0 952,000
</TABLE>
32
<PAGE>
ATMI, Inc.
Supplemental Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 26,139,000 $ 21,618,000
Marketable securities 60,597,000 64,551,000
Accounts receivable, net of allowance for doubtful accounts of
$1,267,000 in 1999 and $959,000 in 1998 37,355,000 25,708,000
Inventories 20,785,000 19,216,000
Other 6,979,000 7,979,000
--------------- ---------------
Total current assets 151,855,000 139,072,000
Property and equipment, net 54,567,000 54,683,000
Goodwill and other long-term assets, net 8,724,000 12,355,000
--------------- ---------------
$215,146,000 $206,110,000
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 9,930,000 $ 9,287,000
Accrued expenses 12,263,000 12,531,000
Accrued commissions 2,250,000 1,315,000
Loans, notes and bonds payable, current portion 5,477,000 9,396,000
Capital lease obligations, current portion 2,271,000 2,493,000
Income taxes and other current payables 6,612,000 1,972,000
--------------- ---------------
Total current liabilities 38,803,000 36,994,000
Loans, notes payable, less current portion 5,045,000 8,813,000
Capital lease obligations 2,296,000 3,746,000
Deferred income taxes 3,790,000 2,703,000
Other long-term liabilities 391,000 288,000
Minority interest 1,037,000 846,000
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 27,593,000 in 1999 and 27,484,000 in
1998 277,000 275,000
Additional paid-in capital 120,502,000 118,516,000
Retained earnings 41,526,000 35,082,000
Accumulated other comprehensive income 1,479,000 (1,153,000)
--------------- ---------------
Total stockholders' equity 163,784,000 152,720,000
--------------- ---------------
$215,146,000 $206,110,000
=============== ===============
</TABLE>
See accompanying notes.
33
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Income
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues $138,618,000 $131,654,000
Cost of revenues 66,583,000 66,925,000
---------------- ----------------
Gross profit 72,035,000 64,729,000
Operating expenses:
Research and development 13,494,000 12,577,000
Selling, general and administrative 41,360,000 42,841,000
Merger related costs and other expenses 6,800,000 2,102,000
---------------- ----------------
61,654,000 57,520,000
---------------- ----------------
Operating income 10,381,000 7,209,000
Interest income 3,343,000 2,898,000
Interest expense (983,000) (1,381,000)
Other income (11,000) 277,000
---------------- ----------------
Income before taxes and minority interest 12,730,000 9,003,000
Income taxes 5,750,000 4,037,000
---------------- ----------------
Income before minority interest 6,980,000 4,966,000
Minority interest (191,000) (71,000)
---------------- ----------------
Net income $ 6,789,000 $ 4,895,000
================ ================
Net income per share-basic $0.26 $0.19
================ ================
Net income per share-assuming dilution $0.24 $0.18
================ ================
Weighted average shares outstanding 26,413,000 25,397,000
================ ================
Weighted average shares outstanding-assuming dilution 28,256,000 27,374,000
================ ================
</TABLE>
See accompanying notes.
34
<PAGE>
ATMI, Inc.
Supplemental Consolidated Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities
Net income $ 6,789,000 $ 4,895,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,216,000 7,123,000
Write-down of goodwill 3,386,000 --
Effect of change of fiscal year of pooled entity (163,000) --
Provision for bad debt 470,000 181,000
Deferred income taxes 241,000 124,000
Stock compensation 86,000 --
Minority interest in net earnings of consolidated subsidiaries 191,000 71,000
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable (12,196,000) 10,363,000
(Increase) in inventory (1,579,000) (1,188,000)
(Increase) decrease in other assets 1,065,000 (2,429,000)
Increase (decrease) in accounts payable 640,000 (1,228,000)
Increase (decrease) in accrued expenses 341,000 (5,262,000)
Increase (decrease) in other liabilities 4,051,000 (1,268,000)
------------- --------------
Total adjustments 4,749,000 6,487,000
------------- --------------
Net cash provided by operating activities 11,538,000 11,382,000
------------- --------------
Investing activities
Capital expenditures (7,650,000) (12,062,000)
(Purchase) sale of marketable securities, net 8,142,000 (57,585,000)
------------- --------------
Net cash used by investing activities 492,000 (69,647,000)
------------- --------------
Financing activities
Borrowings from loans, notes, and bonds payable. 134,000 1,183,000
Payments on loans, notes, and bonds payable. (7,819,000) (1,179,000)
Payment on capital lease obligations (1,672,000) (2,080,000)
Proceeds from sale of common stock, net -- 62,426,000
Proceeds from exercise of stock options and warrants 1,905,000 590,000
------------- --------------
Net cash provided (used) by financing activities (7,452,000) 60,940,000
------------- --------------
Effects of exchange rate changes on cash (57,000) 66,000
Net increase in cash and cash equivalents 4,521,000 2,741,000
Cash and cash equivalents, beginning
of period 21,618,000 15,442,000
------------- --------------
Cash and cash equivalents, end of period $26,139,000 $18,183,000
============= ==============
</TABLE>
See accompanying notes.
35
<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, TeloSense, NewForm and MST which have been
accounted for using the pooling-of-interests method. The acquisition of MST and
NewForm occurred on November 29, 1999 and November 24, 1999, respectively. The
acquisitions of ACSI and Delatech occurred on May 31, 1999, and the acquisition
of TeloSense occurred on May 5, 1999. All five transactions are described in
Notes 6 and 7.
The balance sheet at December 31, 1998 has been derived from the audited
supplemental 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
supplemental financial statements contained in the Company's Current Report on
Form 8-K/A 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 nine months ended September 30:
1999 1998
---- ----
Numerator:
Net income $ 6,789,000 $ 4,895,000
=========================
Denominator:
Denominator for basic earnings per share-
weighted-average share 26,413,000 25,397,000
Dilutive effect of contingent shares related
to acquisitions subject to escrow arrangements 1,209,000 1,289,000
Dilutive effect of employee stock options,
net of tax benefit 634,000 688,000
-------------------------
Denominator for diluted earnings per share $28,256,000 $27,374,000
=========================
Net income per share--basic $ 0.26 $ 0.19
=========================
Net income per share--assuming dilution $ 0.24 $ 0.18
=========================
36
<PAGE>
3. Inventory
Inventory is comprised of the following:
September 30, December 31,
1999 1998
---------------- ----------------
Raw materials $17,258,000 $14,335,000
Work in process 2,218,000 2,392,000
Finished goods 3,484,000 4,350,000
---------------- ----------------
22,960,000 21,077,000
Obsolescence reserve (2,175,000) (1,861,000)
---------------- ----------------
$20,785,000 $19,216,000
================ ================
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
September 30:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 6,789,000 $ 4,895,000
------------- -------------
Cumulative translation adjustment (1,201,000) (1,031,000)
Unrealized gain on available-for-sale securities
(net of taxes of $11,000) 2,680,000 --
------------- -------------
Comprehensive income $ 8,268,000 $ 3,564,000
============= =============
</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.
In connection with the investigation, analysis and May 1999 closings of the
TeloSense, Delatech, and ACSI transactions, the Company has recorded merger and
related costs of approximately $6.8 million in the second quarter ended June 30,
1999 which include $2.4 million of investment banker fees, legal and accounting
fees. The acquisition of Delatech also resulted in a charge of $4.4 million to
recognize the impaired value of certain inventory ($1 million) and goodwill
($3.4 million) associated with existing EcoSys product lines. These charges were
based on the estimate of future cash flows on a
37
<PAGE>
discounted basis compared with the carrying value of these assets.
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 234,000 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.
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 $163,000 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 nine months ended September 30, 1999 and 1998:
Three months ended Nine months ended
March 31, September 30,
Revenues: 1999 1998
--------- --------------------------------------
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
7. Subsequent Events
On November 29, 1999, pursuant to an Agreement and Plan of Merger, the
Company issued 993,282 shares of its common stock in exchange for all of the
ownership interests of MST. MST (which commenced its operations January 3, 1997)
manufactures and sells semiconductor gas monitoring system products.
On November 24, 1999, pursuant to a Share Purchase Agreement, the Company
issued 550,000 shares of its common stock in exchange for all of the ownership
interests of NewForm. NewForm provides high-purity flexible ultra clean
packaging used predominately in the semiconductor industry.
The former securityholders of NewForm and MST 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 NewForm and MST
delivered 55,000 and 99,000 shares, respectively, of the Company's Common Stock
which they received into escrow in connection with these acquisitions.
The acquisitions of NewForm and MST were treated as a pooling of interests
and as a result, the Company's consolidated financial statements have been
restated. For the nine months ended September 30, 1999 and 1998, prior to the
acquisitions, revenues and net income of ATMI, NewForm and MST included in the
financial statements are as follows:
38
<PAGE>
Nine months ended September 30,
Revenues: 1999 1998
--------- -------------------------------
ATMI........................ $121,168,000 $113,026,000
NewForm and MST 17,450,000 18,628,000
Net Income (Loss):
------------------
ATMI........................ 5,620,000 4,239,000
NewForm and MST 1,169,000 656,000
In connection with the investigation, analysis and November 1999 closings
of the NewForm and MST transactions, the Company has recorded in the fourth
quarter ended December 31, 1999 merger and related costs of approximately $2.5
million which include investment banker fees, legal and accounting fees.
39
