SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number: 0-30130
ATMI, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1481060
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 Commerce Drive, Danbury, CT 06810
(Address of principal executive offices) (Zip Code)
203-794-1100
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No __
The number of shares outstanding of the registrant's common stock as of
November 7, 2000 was 30,203,129.
<PAGE>
ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2000
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets ........................... 3
Consolidated Statements of Income............................ 4
Consolidated Statements of Cash Flows........................ 6
Notes to Consolidated Interim Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk... 17
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K............................. 18
Signatures............................................................ 19
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ATMI, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
September 30, December 31,
2000 1999
Assets (unaudited)
------------ -----------
Current assets:
Cash and cash equivalents $ 31,006 $ 31,773
Marketable securities 115,994 60,555
Accounts receivable, net of allowance
for doubtful accounts of $1,526 in
2000 and $1,367 in 1999 61,454 42,958
Inventories 34,540 21,772
Deferred income taxes 5,277 5,277
Other 14,221 6,313
-------- --------
Total current assets 262,492 168,648
Property and equipment, net 69,495 55,871
Deferred income taxes 2,090 2,090
Goodwill and other long-term assets, net 7,441 8,766
-------- --------
$341,518 $235,375
======== ========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 16,152 $ 11,181
Accrued liabilities 9,992 10,272
Accrued salaries and related benefits 8,580 9,341
Loans, notes and bonds payable,
current portion 4,509 5,601
Capital lease obligations, current portion 2,903 1,936
Income taxes payable 8,548 4,592
Deferred income taxes 3,647 4,436
-------- --------
Total current liabilities 54,331 47,359
Loans, notes and bonds payable, less
current portion 3,124 4,487
Capital lease obligations, less current portion 5,667 1,832
Deferred income taxes 1,484 3,754
Other long-term liabilities 1,053 478
Minority interest 1,513 1,109
Stockholders' equity:
Preferred stock, par value $.01: 2,000
shares authorized; none issued and
outstanding - -
Common stock, par value $.01: 50,000
shares authorized; issued and
outstanding 30,195 in 2000 and 28,144
in 1999 302 281
Additional paid-in capital 194,392 124,574
Retained earnings 77,957 44,995
Accumulated other comprehensive income 1,695 6,506
-------- --------
Total stockholders' equity 274,346 176,356
-------- --------
$341,518 $235,375
======== ========
See accompanying notes.
<PAGE>
ATMI, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Three months ended September 30,
2000 1999
-------- --------
Revenues $ 78,948 $ 53,678
Cost of revenues 36,974 25,545
-------- --------
Gross profit 41,974 28,133
Operating expenses:
Research and development 7,580 5,021
Selling, general and administrative 18,636 14,654
Merger and related costs 1,500 --
-------- --------
27,716 19,675
-------- --------
Operating income 14,258 8,458
Interest income 2,434 1,054
Interest expense (307) (403)
Other expense, net (54) (33)
-------- --------
Income before taxes and minority interest 16,331 9,076
Provision for income taxes 6,546 2,978
-------- --------
Income before minority interest 9,785 6,098
Minority interest (134) (110)
-------- --------
Net income $ 9,651 $ 5,988
======== ========
Net income per share-basic $ 0.33 $ 0.22
======== ========
Net income per share-assuming dilution $ 0.32 $ 0.21
======== ========
Weighted average shares outstanding-basic 29,388 26,969
======== ========
Weighted average shares outstanding-assuming
dilution 30,611 28,789
======== ========
See accompanying notes.
<PAGE>
ATMI, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Nine months ended September 30,
2000 1999
--------- ---------
Revenues $ 213,118 $ 143,142
Cost of revenues 99,892 67,848
--------- ---------
Gross profit 113,226 75,294
Operating expenses:
Research and development 20,570 13,513
Selling, general and administrative 50,794 44,112
Merger and related costs 1,500 6,800
--------- ---------
72,864 64,425
--------- ---------
Operating income 40,362 10,869
Interest income 5,686 3,343
Interest expense (981) (1,120)
Other income, net 8,638 10
--------- ---------
Income before taxes and minority interest 53,705 13,102
Provision for income taxes 20,244 5,754
--------- ---------
Income before minority interest 33,461 7,348
Minority interest (404) (193)
--------- ---------
Net income $ 33,057 $ 7,155
========= =========
Net income per share-basic $ 1.18 $ 0.27
========= =========
Net income per share-assuming dilution $ 1.09 $ 0.25
========= =========
Weighted average shares outstanding-basic 28,019 26,900
========= =========
Weighted average shares outstanding-assuming
dilution 30,342 28,544
========= =========
See accompanying notes.
<PAGE>
ATMI, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Nine months ended September 30,
2000 1999
-------- ---------
Operating activities
Net income $ 33,057 $ 7,155
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,727 8,034
Long-lived asset impairment -- 3,386
Provision for bad debt 240 524
Deferred income taxes (789) 241
Effect of change of fiscal year of pooled
entity (95) (163)
Realized gain on sale of investment (9,520) --
Realized loss on investments 1,250 --
Minority interest in net earnings of
consolidated subsidiaries 404 191
Changes in operating assets and liabilities
(Increase) in accounts receivable (18,736) (12,442)
(Increase) in inventory (12,768) (1,732)
(Increase) decrease in other assets (8,405) 951
Increase in accounts payable 4,971 688
Increase (decrease) in accrued expenses (1,041) 434
Increase in other liabilities 4,112 3,962
-------- --------
Total adjustments (31,650) 4,074
-------- --------
Net cash provided by operating activities 1,407 11,229
-------- --------
Investing activities
Capital expenditures (21,780) (7,593)
(Purchase) sale of marketable securities, net (52,286) 8,142
-------- --------
Net cash (used) provided by investing activities (74,066) 549
-------- --------
Financing activities
Borrowings from capital lease obligations 6,840 --
Payments on loans, notes and bonds payable (2,455) (7,608)
Payments on capital lease obligations (2,038) (1,672)
Proceeds from sale of common shares, net 63,500 --
Proceeds from exercise of stock options and warrants 6,339 1,905
------- --------
Net cash provided (used) by financing activities 72,186 (7,375)
-------- --------
Effects of exchange rate changes on cash (294) 124
-------- --------
Net (decrease) increase in cash and cash equivalents (767) 4,527
Cash and cash equivalents, beginning of period 31,773 21,702
-------- --------
Cash and cash equivalents, end of period $ 31,006 $ 26,229
======== ========
See accompanying notes.
<PAGE>
ATMI, Inc.
Notes To Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated interim financial statements of
ATMI, Inc. ("ATMI" or the "Company") have been prepared in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X and do not include
all of the financial information and disclosures required by generally accepted
accounting principles. In addition, these unaudited consolidated interim
financial statements give retroactive effect to the five acquisitions
consummated by the Company in 1999 and the single acquisition consummated in
2000 which have been accounted for using the pooling-of-interests method. These
acquisitions are more fully described in the Company's audited financial
statements for the year ended December 31, 1999 included in the Company's Form
8-K/A dated July 7, 2000 (the "Form 8-K/A").
In the opinion of the management of ATMI, the financial information
contained herein has been prepared on the same basis as the audited consolidated
financial statements contained in the Company's Form 8-K/A, and includes
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the unaudited quarterly results set forth herein. These unaudited
consolidated interim financial statements should be read in conjunction with the
December 31, 1999 audited consolidated financial statements and notes thereto
included in the Company's Form 8-K/A. The Company's quarterly results have, in
the past, been subject to fluctuation and, thus, the operating results for any
quarter are not necessarily indicative of results for any future fiscal period.
2. Per Share Data
The following table presents the computation of basic and diluted earnings
per share for the periods indicated (in thousands, except per share data):
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------- ------- ------- -------
Numerator:
Net income $ 9,651 $ 5,988 $33,057 $ 7,155
======= ======= ======= =======
Denominator:
Denominator for basic earnings per
share 29,388 26,969 28,019 26,900
Dilutive effect of contingent
shares related to acquisitions 737 1,092 737 1,092
Dilutive effect of employee stock
options and warrants, net of tax
benefit 486 728 1,586 552
--- --- --- -----
Denominator for diluted earnings per
share 30,611 28,789 30,342 28,544
====== ====== ====== ======
Net income per share-basic $ 0.33 $ 0.22 $ 1.18 $ 0.27
====== ======= ====== =======
Net income per share-assuming dilution $ 0.32 $ 0.21 $ 1.09 $ 0.25
====== ======= ====== =======
<PAGE>
3. Inventory
Inventory is comprised of the following (in thousands):
September 30, December 31,
2000 1999
-------- --------
Raw materials $ 25,967 $ 16,127
Work in process 3,987 3,059
Finished goods 6,409 4,115
-------- --------
36,363 23,301
Obsolescence reserve (1,823) (1,529)
-------- --------
$ 34,540 $ 21,772
======== ========
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 for the three and nine months
ended September 30 (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------------- -------- --------
Net income $ 9,651 $ 5,988 $ 33,057 $ 7,155
-------- -------- -------- --------
Cumulative translation adjustment (505) 76 (733) 400
Unrealized (loss) gain on
available-for-sale securities (net
of taxes of $524 and ($201) in
2000 and $911 and $922 in 1999) 932 1,620 (398) 1,640
Reclassification adjustment for
realized gain on securities sold -- -- (3,680) --
-------- -------- -------- ------
Comprehensive income $ 10,078 % 7,684 $ 28,246 $ 9,195
======== ======== ======== =======
5. Segment Data
Segment information included under the caption "Segment Data" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated herein by reference and is an integral part of these
unaudited interim financial statements.
6. Income Taxes
During the second quarter of 1999, the Company was notified by the Internal
Revenue Service of an assessment of $2.1 million for certain tax matters. The
Company believes that such assessment is without merit and intends to vigorously
defend its position in these tax matters.
<PAGE>
7. Public Offering
On April 4, 2000, the Company completed a registered underwritten public
offering of 2,800,000 shares of the Company's common stock at $45.00 per share.
Of such shares, the Company sold 1,500,000 shares and certain stockholders sold
1,300,000 shares. The Company received net proceeds from the offering of
approximately $63.5 million.
8. Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. In June 2000,
the SEC delayed the implementation of this Staff Accounting Bulletin until no
later than the fourth quarter of 2000. At this time, the Company is still
assessing the impact of SAB 101 on its financial position and results of
operations.
9. Merger and Acquisition
On July 7, 2000, pursuant to an Agreement and Plan of Merger, the Company
issued 369,505 shares of its common stock in exchange for all of the ownership
interests of Environmentally Safe Cleaning Alternatives, Inc. ("ESCA"). This
transaction has been accounted for as a pooling of interests. ESCA is a provider
of environmentally safe cleaning services to the global microelectronics
industry.
The former securityholders of ESCA 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 ESCA delivered into escrow 37,000
shares of the Company's Common Stock which they received in connection with this
acquisition.
ESCA's fiscal year ended on September 30. The financial statements of ATMI
have been restated to combine ESCA's fiscal year-end September 30 and ATMI's
fiscal year-end December 31. Certain adjustments have been made to the financial
statements to combine their operations. An adjustment of $95,000 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 ESCA
entity for the six months ended June 30, 2000 and the nine months ended
September 30, 1999:
Six Months Ended Nine Months Ended
June 30, 2000 September 30, 1999
---------------- -------------------
Revenues:
ATMI................................... $ 130,592 $ 138,619
ESCA................................... $ 3,577 $ 4,523
Net Income:
ATMI................................... $ 23,284 $ 6,792
ESCA................................... $ 122 $ 363
.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
ATMI is a leading supplier of materials, equipment and related services
used worldwide in the manufacture of semiconductor devices. ATMI specifically
targets the "front-end" semiconductor materials market. This market includes the
processes used to convert a bare silicon wafer into a fully functional wafer
that contains many copies of a semiconductor device or "chip." ATMI's customers
include most of the leading semiconductor manufacturers in the world.
ATMI has organized its operations along two business segments: Materials
and Technologies. The Materials segment ("Materials") provides products that are
used in the semiconductor manufacturing process and related packaging and
delivery systems. The Technologies segment ("Technologies") provides products
and services that sense and environmentally control these materials while also
providing specialized thin film deposition services to semiconductor device
manufacturers. Technologies' also conducts the Company's venture and government
funded research and development activities.
ATMI has completed several acquisitions since 1997, each of which has been
accounted for as a pooling of interests. As a result, the Company's consolidated
financial statements have been restated to reflect the results of these acquired
companies.
Results of Operations
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------------- --------------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 46.8 47.6 46.9 47.4
---- ---- ---- ----
Gross profit 53.2 52.4 53.1 52.6
Operating expenses:
Research and development 9.6 9.4 9.7 9.4
Selling, general and administrative 23.6 27.3 23.8 30.8
Merger and related costs 1.9 0.0 0.7 4.8
--- --- --- ---
Total operating expenses 35.1 36.7 34.2 45.0
---- ---- ---- ----
Operating income 18.1 15.7 18.9 7.6
Other income, net 2.6 1.2 6.3 1.5
--- --- --- ---
Income before taxes and minority interest 20.7 16.9 25.2 9.1
Provision for income taxes 8.3 5.5 9.5 4.0
--- --- --- ---
Income before minority interest 12.4 11.4 15.7 5.1
Minority interest (0.2) (0.2) (0.2) (0.1)
==== ==== ==== ====
Netincome 12.2% 11.2% 15.5% 5.0%
==== ==== ==== ===
<PAGE>
Segment Data
The Company has two reportable operating segments: Materials and
Technologies. The reportable operating 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 segment operating profit or loss, not including interest and other
income or expense and income taxes. The accounting policies of the reportable
operating segments are the same as those described in the summary of significant
accounting policies in the Company's Consolidated Financial Statements.
Intercompany sales are not material among operating segments. The general
corporate assets include primarily cash and marketable securities, goodwill and
other long-lived assets.
The following tables provide reported results for each of these segments
for the three and nine month periods ended September 30 (in thousands):
Three Months Ended Nine Months Ended
Revenues 2000 1999 2000 1999
-------- ---- ---- ---- ----
Materials $ 35,520 $ 25,810 $ 99,025 $ 68,865
Technologies 43,428 27,868 114,093 74,277
-------- -------- -------- --------
Consolidated Revenues $ 78,948 $ 53,678 $213,118 $143,142
======== ======== ======== ========
Three Months Ended Nine Months Ended
Operating Income 2000 1999 2000 1999
---------------- ---- ---- ---- ----
Materials $ 8,834 $ 5,980 $ 25,607 $ 14,581
Technologies 6,924 2,478 16,255 3,088
Merger and Related Costs (1,500) --- (1,500) (6,800)
------ ------ ------ ------
Consolidated Operating
Income $14,258 $ 8,458 $ 40,362 $ 10,869
======== ======= ======== ========
Three Months Ended Nine Months Ended
Net Income 2000 1999 2000 1999
---------- ---- ---- ---- ----
Operating Income from
Reportable Segments $ 14,258 $ 8,458 $ 40,362 $ 10,869
Other Income 2,073 618 13,343 2,233
Income Taxes (6,546) (2,978) (20,244) (5,754)
Minority Interest (134) (110) (404) (193)
---- ---- ---- ----
Consolidated Net Income $ 9,651 $ 5,988 $ 33,057 $ 7,155
========= ======= ======== =========
The following table provides reported balance sheet data for each of the
segments:
September 30, December 31,
Identifiable Assets 2000 1999
------------------- ---- ----
Materials $ 77,771 $ 60,717
Technologies 116,195 81,466
General Corporate Assets 147,552 93,192
------- ------
Total Consolidated Assets $ 341,518 $ 235,375
========== =========
Comparison of Three Months Ended September 30, 2000 and 1999.
Revenues. Total revenues increased 47.0% to approximately $78.9 million in
the three months ended September 30, 2000 from approximately $53.7 million in
the same period in 1999. The increase in revenues was primarily attributable to
the semiconductor industry's growth for both segments of the business. The
Materials and Technologies segments experienced revenue growth of 37.6% and
55.8% for the three months ended September 30, 2000, respectively, as compared
to the same period in the prior year. Materials' experienced significant revenue
gains related to the materials and delivery systems product lines, liquid and
chemical delivery systems product lines, and high purity packaging product lines
as compared to the same period in the prior year. In the Technologies segment,
significant revenue gains were achieved in the environmental and sensing
products and thin film deposition services product lines, as unit demand
continued to increase over 1999 levels due to continued industry capacity
expansion in the third quarter of 2000.
Gross Profit. Gross profit increased 49.2% to approximately $42.0 million
in the quarter ended September 30, 2000 from approximately $28.1 million in the
quarter ended September 30, 1999. The growth in gross profit was primarily
attributable to the increased sales levels experienced by both segments of the
Company. Gross margin increased to 53.2% of revenues in the quarter ended
September 30, 2000 compared to 52.4% in the prior year quarter, as a result of
favorable shifts in product mix within the high purity packaging, environmental
and sensing products, and better fixed cost absorption within the thin film
deposition services product lines. This margin improvement was partially offset
by the increasing share of Emosyn product sales which have a lower gross margin
profile than ATMI's historical product mix.
Research and Development Expenses. Research and development expenses
increased 51.0% to approximately $7.6 million in the three months ended
September 30, 2000 from approximately $5.0 million in the same quarter of 1999.
As a percentage of revenues, research and development expenses increased to 9.6%
in the three months ended September 30, 2000 quarter from 9.4% in the same 1999
quarter. The increase in the third quarter of 2000 was principally due to
continued development efforts in the sensing and abatement, and materials and
delivery systems product lines. The Company also continued to support
development efforts in the Emosyn venture.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 27.2% to approximately $18.6 million in the
three months ended September 30, 2000 from approximately $14.7 million in the
same period in 1999. Selling, general and administrative expenses as a
percentage of revenues decreased to 23.6% in the three months ended September
30, 2000, compared to 27.3% in the same quarter a year ago. Administration costs
increased as a result of legal costs associated with defending and protecting
the Company's intellectual property and costs associated with implementation of
an enterprise-wide software system. Offsetting the cost increases were cost
savings initiatives tied to the integration activities of business acquisitions,
and lower executive compensation paid to members of management of certain
acquired businesses.
Merger and Related Costs. The third quarter 2000 operating results include
merger and related costs of approximately $1.5 million in connection with the
investigation, analysis and July 2000 closing of the ESCA transaction.
Operating Income. Operating income, excluding one-time merger and related
costs, increased approximately 86.3% to $15.8 million for the three months ended
September 30, 2000 from $8.5 million in the same quarter a year ago. Materials'
and Technologies' operating income for the three months ended September 30, 2000
increased approximately 47.7% and 179.4%, respectively, to $8.8 million and $6.9
million from $6.0 million and $2.5 million, respectively, in the same period in
1999. The increase reflects gains due to continued strong market conditions
within the industry and continued demand for ATMI products and services during
the third quarter of 2000.
Materials' and Technologies' operating income, as a percentage of revenues,
was 24.9% and 15.9% for the three months ended September 30, 2000, respectively,
compared to 23.2% and 8.9% for the three months ended September 30, 1999,
respectively. The significant revenue increase in the third quarter of 2000,
combined with stronger margins and the business integration initiatives,
resulted in higher operating income within the Materials and Technologies
segments.
Other Income, Net. Other income, including interest income and expense,
increased to approximately $2.1 million in the quarter ended September 30, 2000
from approximately $0.6 million in the quarter ended September 30, 1999. The
increase for the three months ended September 30, 2000 was largely attributable
to an increase in interest income to $2.4 million from $1.1 million for the same
period in 1999. This increase was the result of increased cash levels resulting
primarily from the net proceeds of the stock offering completed early in the
second quarter of 2000, the sale of certain investments by the Company during
the first quarter of 2000, increased interest rates compared to 1999, and
improved operating results.
Income Taxes. Income tax expense increased 119.8% to $6.5 million for the
three months ended September 30, 2000 from $3.0 million for the three months
ended September 30, 1999. The Company's income tax expense related primarily to
United States federal, state and foreign tax liabilities, which were partially
offset by various foreign sales corporation benefits and research and
development credits. The effective tax rate for the three months ended September
30, 2000 was 40.4% compared to an effective tax rate of 33.2% for the three
months ended September 30, 1999. The difference between the consolidated
effective income tax rate and the U.S. federal statutory rate for 2000 was
primarily attributed to state income taxes and the effects of certain
non-deductible merger related costs. Excluding merger and related costs, the
effective tax rate for the three months ended September 30, 2000 was 37%. The
effective tax rate for the three months ended September 30, 1999 reflected the
restated tax rate for the acquisitions completed in 1999.
Minority Interest. Minority interest represents the 30.0% interest held by
K.C. Tech Co., Ltd. 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. On a pro-forma basis, excluding the $1.5 million charge
related to the acquisition closed during the third quarter of 2000, net income
improved to $11.2 million, or $0.36 per diluted share in the third quarter of
2000 compared with $6.0 million or $0.21 per diluted share for the third quarter
of 1999. Earnings per share, assuming dilution, including the merger and related
cost charge, was $0.32 for the third quarter of 2000 compared to $0.21 for the
third quarter of 1999. Weighted average shares outstanding for the third quarter
of 2000 were approximately 30.6 million compared to approximately 28.8 million
for the third quarter of 1999, primarily due to the public offering of 1.5
million shares during the second quarter of 2000.
Comparison of Nine Months Ended September 30, 2000 and 1999
Revenues. Total revenues increased 48.9% to approximately $213.1 million in
the nine months ended September 30, 2000 from approximately $143.1 million in
the same period in 1999. The Materials and Technologies segments experienced
revenue growth of 43.8% and 53.6% for the nine months ended September 30, 2000,
respectively, as compared to the same period in the prior year. The increase in
revenues was primarily attributable to the continued growth of the semiconductor
industry during this time period, as well as increased market penetration and
the introduction of new products.
Gross Profit. Gross profit increased 50.4% to approximately $113.2 million
in the nine months ended September 30, 2000 from approximately $75.3 million in
the nine months ended September 30, 1999. As a percentage of revenues, gross
margin increased to 53.1% in the first nine months of 2000 from 52.6% of
revenues in the same period in 1999. The increase was due principally to
favorable product mix shifts in the high purity packaging product lines within
the Materials segment and increased manufacturing efficiencies from increased
sales volume in the thin film deposition services and abatement and sensing
equipment business lines in the Technologies segment. Partially offsetting the
benefits of favorable shifts in product mix and manufacturing efficiencies was
the addition of manufacturing capacity to support future growth in these
operating segments.
Research and Development Expenses. Research and development expenses
increased 52.2% to approximately $20.6 million in the first nine months of 2000
from approximately $13.5 million in the first nine months of 1999. The increase
in the first nine months of 2000 represented the Company's continued efforts to
develop advanced materials, including development efforts on the SDS and
chemicals product lines, and continued development work in the sensing and
abatement product lines. Additionally, the Company continued to support
development efforts in the Emosyn venture. As a percentage of revenues, research
and development expenses were 9.7% in the first nine months of 2000 compared to
9.4% in the first nine months of 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 15.1% to approximately $50.8 million for the
nine months ended September 30, 2000 from approximately $44.1 million in the
same period in 1999. As a percentage of revenues, these expenses declined to
23.8% for the nine months ended September 30, 2000 compared to 30.8% for the
same period a year ago. Administration costs increased as a result of legal
costs associated with defending and protecting the Company's intellectual
property and costs associated with implementation of an enterprise-wide software
system. Offsetting the cost increases, were cost savings initiatives tied to the
integration activities of business acquisitions, and lower executive
compensation paid to members of management of certain acquired businesses.
Merger and Related Costs. For the nine months ended September 30, 2000 the
Company recorded merger and related costs of approximately $1.5 million in
connection with the investigation, analysis and July 2000 closing of the ESCA
transaction. For the nine months ended September 30, 1999 the Company recorded
merger and related costs of approximately $6.8 million, including $2.4 million
of investment banker fees, legal fees and accounting fees recorded 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 for inventory ($1.0 million) and goodwill ($3.4
million) associated with certain existing environmental abatement systems
product lines which were determined to be impaired based on the Company's
assessment of estimated net cash flows from such product lines.
Operating Income. Operating income increased 136.9% to $41.9 million for
the nine months ended September 30, 2000 from $17.7 million, excluding one-time
merger and related costs in the third quarter of 2000 and the second quarter of
1999. Materials' operating income for the nine months ended September 30, 2000
increased approximately 76% to $25.6 million, and Technologies' operating income
for the nine months ended September 30, 2000 increased more than four fold to
$16.3 million from approximately $3.1 million compared with the same period in
1999. The increases reflect gains due to continued strong market conditions
within the industry and continued demand for ATMI products and services during
the first nine months of 2000.
Other Income, Net. Other income, net, increased to approximately $13.3
million for the nine months ended September 30, 2000 from $2.2 million for the
nine months ended September 30, 1999. The first quarter of 2000 included a gain
of approximately $9.5 million on the sale of certain equity investments by the
Company, offset by a write-off of an equity investment of approximately $1.3
million. Interest income increased to $5.7 million for the nine months ended
September 30, 2000 from $3.3 million for the same nine month period in 1999 due
to proceeds received of approximately $63.5 million related to the Company's
public stock offering in April 2000, increased interest rates compared to 1999,
and increased cash balances derived from improved operating results of the
Company.
Income Taxes. Income tax expense for the nine months ended September 30,
2000 was $20.2 million which was an increase of $14.5 million from $5.8 million
for the same nine month period in 1999. The Company's income tax expense related
primarily to United States federal, state and foreign tax liabilities, which are
partially offset by various foreign sales corporation benefits and research and
development credits. The effective tax rate for the nine months ended September
30, 2000 was 38%, compared to 44.6% for the nine months ended September 30,
1999. Excluding merger and related costs, the effective tax rate for the nine
months ended September 30, 2000 and 1999 was 36.9% and 31.3%, respectively. The
effective tax rate for the nine months ended September 30, 2000 reflected the
restated tax rate for acquisitions completed in 1999 and did not reflect various
credits and foreign tax benefits that the Company would have experienced on a
consolidated tax basis. The difference between the consolidated effective income
tax rate and the U.S. federal statutory rate, for the nine months ended
September 30, 1999, was primarily attributed to state income taxes and the
effects of certain non-deductible merger related costs.
Earnings per Share. On a pro-forma basis, excluding the after-tax charges
related to acquisitions closed during the first nine months of 2000 and 1999 of
$1.5 million and $5.5 million, respectively, net income improved to $34.6
million, or $1.14 per diluted share in the first nine months of 2000 compared
with $12.6 million or $0.44 per diluted share for the same period in 1999.
Earnings per share, assuming dilution, including the merger and related cost
charges, were $1.09 for the nine months ended September 30, 2000 and $0.25 for
same nine-month period in 1999. Earnings per share, assuming dilution in the
2000 period reflected a 6.3% increase in weighted average shares outstanding,
assuming dilution to approximately 30.3 million in the first nine months of 2000
from approximately 28.5 million in the first nine months of 1999, primarily due
to the Company's public stock offering in April 2000.
Liquidity and Capital Resources
To date, the Company has financed its activities through cash from
operations, the sale of equity, external research and development funding, and
various lease and debt instruments. The Company's working capital increased to
$208.2 million at September 30, 2000 from $121.3 million at December 31, 1999.
Net cash provided by operations was approximately $1.4 million for the
nine-month period ended September 30, 2000, compared to $11.2 million provided
during the first nine months of 1999. This resulted primarily from increased
operating profitability of the Company offset by increased working capital
requirements in the nine month period ended September 30, 2000 compared to the
same period in 1999. The increase in working capital was primarily caused by
increases in accounts receivable, inventories and other assets, partially offset
by an increase in accounts payable.
Net cash used by investing activities was approximately $74.1 million
during the nine months ended September 30, 2000, compared to net cash provided
by investing activities of approximately $0.5 million during the nine months
ended September 30, 1999. On April 4, 2000, the Company completed a registered
underwritten public stock offering of 2,800,000 shares of the Company's common
stock at $45.00 per share. Of such shares, the Company sold 1,500,000 shares and
certain stockholders sold 1,300,000 shares. The Company received net proceeds
from the offering of approximately $63.5 million. The Company also received net
proceeds of $10.6 million related to the sale of certain investments in the
first nine months of 2000. The Company invested approximately $52.3 million of
the proceeds raised from the sale of its common stock and certain investments in
marketable securities for future working capital requirements and potential
merger and acquisition activities. Capital expenditures were $21.8 million and
$7.6 million for the nine months ended September 30, 2000 and 1999,
respectively. The 2000 expenditures primarily related to installation of
additional manufacturing capacity at the Company's epitaxial services facility
in Mesa, Arizona. In 1999, the expenditures primarily related to installation of
additional manufacturing capacity in Danbury, Connecticut.
Net cash provided by financing activities was approximately $72.2 million
during the nine months ended September 30, 2000. Net cash used by financing
activities was approximately $7.4 million during the nine months ended September
30, 1999. As of September 30, 2000, the Company had financed portions of its
capital equipment purchases, particularly the silicon epitaxial capacity
expansion, through capital leases with approximately $8.6 million of capital
lease obligations outstanding. During the first nine months of 2000, the Company
entered into approximately $6.8 million of new capital lease obligations to fund
the epitaxial capacity expansion. During the first nine months of 2000 and 1999,
the Company made payments on capital leases of approximately $2.0 million and
$1.7 million, respectively. In the first nine months of 2000 and 1999, the
Company made payments on notes of approximately $2.5 million and $7.6 million,
respectively.
ATMI believes its existing cash balances, marketable securities, and
anticipated funds from operations will satisfy its projected working capital and
other cash requirements through at least the end of 2001. 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.
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 and market segment growth. 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.
The cautionary statements made in this report should be read as being applicable
to all related forward-looking statements wherever they appear in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk. As of September 30, 2000 the Company's cash included
money market securities and commercial paper. Due to the short duration of the
Company's investment portfolio, an immediate 10% change in interest rates would
not have a material effect on the fair value of the Company's portfolio;
therefore, the Company would not expect the operating results or cash flows to
be affected to any significant degree by the effect of a sudden change in market
interest rates on the Company's securities portfolio.
Foreign Currency Exchange Risk. A substantial portion of the Company's
sales are denominated in U.S. dollars and, as a result, the Company has
relatively minimal exposure to foreign currency exchange risk with respect to
sales made. This exposure may change over time as business practices evolve and
could have a material impact on the Company's financial results in the future.
The Company does not use forward exchange contracts to hedge exposures
denominated in foreign currencies or any other derivative financial instruments
for trading or speculative purposes. The effect of an immediate 10% change in
exchange rates would not have a material impact on the Company's future
operating results or cash flows.
<PAGE>
PART II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit No. Description
27.01 Financial Data Schedule (Filed herewith)
b. Reports on Form 8-K.
On July 21, 2000, the Company filed a Current Report on Form 8-K dated July
7, 2000 reporting in Item 5 the merger of the Company's subsidiaries into ESCA,
Inc. and ESCA Ireland, Inc. pursuant to which the latter became wholly-owned
subsidiaries of the Company. On September 20, 2000, the Company filed an
amendment to the Current Report on Form 8-K dated July 7, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATMI, Inc.
November 14, 2000
By _____________________________________
Eugene G. Banucci, Ph.D.,
Chief Executive Officer, Chairman
of the Board and Director
By _____________________________________
Daniel P. Sharkey, Vice President, Chief
Financial Officer and Treasurer
(Chief Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATMI, Inc.
November 14, 2000
By________ /S/ Eugene G. Banucci_______
Eugene G. Banucci, Ph.D.,
Chief Executive Officer, Chairman
of the Board and Director
By _______/S/ Daniel P. Sharkey_________
Daniel P. Sharkey, Vice President, Chief
Financial Officer and Treasurer
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
27.01 Financial Data Schedule (Filed herewith)
