<PAGE>
Selected Financial Data. Exhibit 99.2
The following selected supplemental consolidated statements of income for the
three years ended December 31, 1999 and the supplemental consolidated balance
sheet data as of December 31, 1999 and 1998 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, 1996 and 1995 and the six month periods ended June 30, 2000
and 1999 are derived from unaudited supplemental consolidated financial
statements. The balance sheet data as of December 31, 1997, 1996 and 1995 and
June 30, 2000 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, related
notes and other financial information included elsewhere herein. The table
below includes the effect of the ESCA acquisition.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Fiscal Year Ended December 31,
-------------------------- -------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- ----------- --------- --------- --------- ---------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements of Income:
Revenues.......................... $ 134,169 $ 89,464 $ 202,506 $ 168,061 $ 192,381 $ 154,390 $115,984
Cost of revenues.................. 62,918 42,303 95,456 84,864 92,658 73,673 56,780
--------- --------- --------- --------- --------- ---------- --------
Gross profit...................... 71,251 47,161 107,050 83,197 99,723 80,717 59,204
Operating expenses:
Research and development......... 12,990 8,493 18,359 16,630 14,336 12,314 7,892
Selling, general and
administrative.................. 32,157 29,458 63,820 (3) 59,093 60,920 48,435 37,162
Merger costs and related
expenses........................ - 6,800 (2) 9,914 (4) 1,700 (5) 9,000 (6) 2,000 (7) -
--------- --------- --------- --------- --------- ---------- --------
Total operating expenses........ 45,147 44,751 92,093 77,423 84,256 62,749 45,054
--------- --------- --------- --------- --------- ---------- --------
Operating income.................. 26,104 2,410 14,957 5,774 15,467 17,968 14,150
Interest income (expense), net.... 2,578 1,572 3,117 2,487 (912) (375) (338)
Other income (expense), net....... 8,692 (1) 44 733 539 340 94 (474)
--------- --------- --------- --------- --------- ---------- --------
Income before income taxes and
minority interest................ 37,374 4,026 18,807 8,800 14,895 17,687 13,338
Income taxes...................... 13,698 2,777 7,720 4,412 8,588 4,745 4,947
--------- --------- --------- --------- --------- ---------- --------
Income before minority interest... 23,676 1,249 11,087 4,388 6,307 12,942 8,391
Minority interest................. (270) (83) (263) (111) (2) 151 10
--------- --------- --------- --------- --------- ---------- --------
Net income........................ $ 23,406 $ 1,166 $ 10,824 $ 4,277 $ 6,305 $ 13,093 (8) $ 8,401
========= ========= ========= ========= ========= ========== ========
Net income per share--assuming
dilution......................... $ 0.78 $ 0.04 $ 0.38 $ 0.15 $ 0.24 $ 0.54 (8) $ 0.36
========= ========= ========= ========= ========= ========== ========
Weighted average shares
outstanding--assuming
dilution......................... 30,081 28,443 28,689 27,793 26,030 24,318 23,051
<CAPTION>
June 30, December 31,
--------- ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- --------- ---------- --------- --------- ----------
Consolidated Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents and
marketable securities............. $ 152,971 $ 92,328 $ 86,253 $ 32,949 $ 35,966 $ 38,256
Working capital.................... 200,653 121,289 104,177 48,987 37,118 35,093
Total assets....................... 332,007 235,375 210,617 154,456 125,873 105,545
Long-term debt, less current
portion........................... 10,317 6,319 12,572 19,763 18,499 12,461
Minority interest.................. 1,379 1,109 846 595 545 535
Total stockholders' equity......... 262,835 176,356 154,306 84,170 66,049 54,661
</TABLE>
(1) Includes $9.5 million gain on sale of certain equity investments in the
first quarter of 2000, offset by a loss of $1.3 million in the same quarter
on certain other investments.
(2) Represents merger related costs incurred in connection with the Delatech,
Advanced Chemical Systems International ("ACSI") and Telosense acquisitions.
(3) Includes $2.3 million of severance expense for several former executives
within Materials and Technologies.
(4) Represents $3.3 million incurred in connection with the completion of the
acquisitions of MST Analytics and NewForm, and $7.2 million incurred in
connection with the acquisitions of Delatech, ACSI, and Telosense offset by
a reversal of $0.6 million for previously accrued merger costs.
(5) Represents costs incurred in connection with completing the NOW acquisition.
(6) Represents costs incurred in investigating, analyzing and completing the
Advanced Delivery and Chemical Systems Group ("ADCS Group") and Lawrence
Semiconductor Laboratories ("LSL") acquisitions.
(7) 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.
(8) 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.
1
<PAGE>
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:
<TABLE>
<CAPTION>
Six Months Ended
June 30, Fiscal Year Ended December 31,
--------------------- -----------------------------------------
2000 1999 1999 1998 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................... 46.9 47.3 47.1 50.5 48.2
----- ----- ----- ----- -----
Gross profit....................... 53.1 52.7 52.9 49.5 51.8
Operating expenses:
Research and development..... 9.7 9.5 9.1 9.9 7.4
Selling, general and 24.0 32.9 31.5 35.2 31.7
administrative..............
Merger costs and related 0.0 7.6 4.9 1.0 4.7
expenses.................... ----- ----- ----- ----- -----
Total operating 33.7 50.0 45.5 46.1 43.8
expenses.......... ----- ----- ----- ----- -----
Operating income................... 19.4 2.7 7.4 3.4 8.0
Interest income (expense), net..... 1.8 1.8 1.5 1.5 (0.5)
Other income, net.................. 6.5 0.0 0.4 0.3 0.2
----- ----- ----- ----- -----
Income before income taxes and 27.7 4.5 9.3 5.2 7.7
minority interest..............
Income taxes....................... 10.2 3.1 3.8 2.6 4.4
----- ----- ----- ----- -----
Income before minority interest.... 17.5 1.4 5.5 2.6 3.3
Minority interest.................. (0.2) (0.1) (0.2) (0.1) 0.0
----- ----- ----- ----- -----
Net income......................... 17.3% 1.3% 5.3% 2.5% 3.3%
===== ===== ===== ===== =====
</TABLE>
2
<PAGE>
Segment Data
During 1998, the Company adopted FASB Statement No. 131 "Disclosure About
Segments of an Enterprise and Related Information". 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 Supplemental Consolidated Financial Statements. Intercompany sales are
not material among segments or operating divisions. ESCA has been included in
the Technologies operating segment.
The following tables provide reported results for each of these segments for the
periods indicated (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30, Fiscal Year Ended December 31,
-------------------- -----------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues
--------
Materials $ 63,505 $43,055 $ 96,711 $ 71,279 $ 83,060
Technologies 70,664 46,409 105,795 96,782 109,321
-------- ------- -------- -------- --------
Consolidated revenues $134,169 $89,464 $202,506 $168,061 $192,381
======== ======= ======== ======== ========
Operating Income
----------------
Materials $ 16,773 $ 8,601 $ 19,335 $ 11,373 $ 17,757
Technologies 9,331 609 5,536 (3,899) 6,710
Merger costs and
related expenses - (6,800) (9,914) (1,700) (9,000)
-------- ------- -------- -------- --------
Consolidated operating income $ 26,104 $ 2,410 $ 14,957 $ 5,774 $ 15,467
======== ======= ======== ======== ========
</TABLE>
Comparison of Six Months Ended June 30, 2000 and 1999
Revenues. Total revenues increased 50.0% to approximately $134.2
million in the six months ended June 30, 2000 from approximately $89.5 million
in the same period in 1999. The Materials and Technologies segments experienced
revenue growth of 47.5% and 52.2% for the six months ended June 30, 2000,
respectively, as compared to the same period in the prior year. The increase in
revenues was primarily attributable to the semiconductor industry's growth
during this time period, as well as the introduction of new products and
increased market penetration.
Gross Profit. Gross profit increased 51.0% to approximately $71.3
million in the six months ended June 30, 2000 from approximately $47.2 million
in the six months ended June 30, 1999. As a percentage of revenues, gross
margin increased to 53.1% in the first half of 2000 from 52.7% of revenues in
the same period in 1999. The increase was due principally to favorable product
mix shifts in the product lines within the Materials segment and increased
manufacturing efficiencies from increased sales volume in the abatement and
sensing equipment and deposition services business lines in the Technologies
segment. The favorable changes in mix and volumes were partially offset by the
addition of manufacturing capacity to support future growth in these operating
segments.
Research and Development Expenses. Research and development expenses
increased 52.9% to approximately $13.0 million in the first six months of 2000
from approximately $8.5 million in the first six months of 1999. The increase in
the first six 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 half of 2000 and 9.5% in the
first half of 1999.
-3-
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 9.2% to approximately $32.2 million for the
six months ended June 30, 2000 from approximately $29.5 million in the same
period in 1999. As a percentage of revenues, these expenses declined to 24.0%
for the six months ended June 30, 2000 compared to 32.9% for the same period a
year ago. The decrease was due to decreased administrative costs resulting from
continued cost savings initiatives tied to the integration activities of
business acquisitions, and the decrease in executive compensation paid to
members of management of certain acquired businesses. Offsetting the cost
savings were increases in legal costs associated with defending and protecting
the Company's intellectual property and costs associated with implementation of
an enterprise-wide software system.
Merger and Related Costs. During the second quarter of 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 almost three fold to $26.1
million for the six months ended June 30, 2000 from $9.2 million, excluding one-
time merger and related costs of $6.8 million in the second quarter of 1999.
Materials' operating income for the six months ended June 30, 2000 increased
approximately 95.0% to $16.8 million from approximately $8.6 million compared
with the same period in 1999, and Technologies' operating income for the six
months ended June 30, 2000 increased to $9.3 million from approximately $0.6
million compared with the same period in 1999. This increase reflected the gains
primarily due to the increased product sales within the Materials segment,
related to higher demand for the SDS product line, and within the Technologies
segment's epitaxial services business, due to the higher demand for thin film
deposition services.
Other Income, Net. Other income, net, increased to approximately $11.3
million for the six months ended June 30, 2000 from $1.6 million for the six
months ended June 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 $3.3 million for the six months ended
June 30, 2000 from $2.3 million for the same six month period in 1999 due to
proceeds received of approximately $63.5 million related to the Company's public
stock offering in April 2000 and increased cash balances derived from improved
operating results of the Company.
Income Taxes. Income tax expense for the six months ended June 30, 2000 was
$13.7 million, which was an increase of $10.9 million from $2.8 million for the
same six 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 six months ended June 30,
2000 was 36.7%, compared to 69.0% for the six months ended June 30, 1999. The
effective tax rate for the six months ended June 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 six months ended
June 30, 1999, was primarily attributed to state income taxes and the effects of
certain non-deductible merger related costs.
Net Income Excluding Transaction Related Costs and Other Expenses. On a
pro-forma basis, excluding the after-tax $5.5 million charge related to
acquisitions closed during the first six months of 1999 and the after-tax net
investment gain of $5.2 million during the first six months of 2000, net income
improved to $18.2 million, or $0.60 per diluted share in the first six months of
2000 compared with $6.7 million or $0.23 per diluted share for the same period
in 1999. Earnings per share-assuming dilution, including the merger costs and
related expenses, were $0.04 for the six months ended June 30, 1999. Earnings
per share-assuming dilution in the 2000 period reflected a 5.8% increase in
weighted average shares outstanding-assuming dilution to approximately $30.1
million in the first six months of 2000 from approximately $28.4 million in the
first six months of 1999, due to the Company's public stock offering in April
2000.
-4-
<PAGE>
Comparison of Years Ended December 31, 1999, 1998 and 1997
Revenues. Revenues increased 20.5% to $202.5 million in 1999 from $168.1
million in 1998, following a decrease of 12.6% in 1998 from $192.4 million in
1997. The 1999 increase in revenues was primarily attributable to the
semiconductor industry's recovery, particularly for consumable products, as seen
by Materials' 35.7% growth in revenue. Materials experienced significant gains
related to the materials and delivery systems product lines and high purity
packaging product lines in 1999 as compared to 1998. Technologies' revenues for
1999 increased 9.3% from 1998 levels. Semiconductor manufacturing capacity
expansion began to rebound in the middle of 1999 leading to improved sales of
environmental and sensing products and thin film deposition services.
Soft market conditions in 1998, evidenced by a decline in semiconductor
unit demand in the second and third quarters of 1998 and a significant reduction
in semiconductor equipment spending during most of 1998, were the primary causes
for the 12.6% revenue decline for both Materials and Technologies when comparing
1998 with 1997. The decline in semiconductor unit demand during 1998 slowed
sales of many of Materials' product offerings. In Technologies', Semiconductor
manufacturing capacity expansion substantially declined during 1998, which
caused a decrease in environmental and sensing products and thin film deposition
services revenues.
Gross Profit. Gross profit increased 28.7% to $107.1 million in 1999 from
$83.2 million in 1998. Gross margin increased to 52.9% in 1999 from 49.5% in
1998. This increase was due principally to margin growth related to
manufacturing efficiencies from increased sales and a shift in product mix
towards materials and delivery systems, high purity packaging and liquid
materials product lines. Gross profit decreased 16.6% to $83.2 million in 1998
from $99.7 million in 1997. Gross margin decreased to 49.5% in 1998 from 51.8%
in 1997, primarily as a result of less efficient fixed cost absorption in
connection with the decrease in revenues experienced in 1998, particularly
within the materials and delivery systems, thin film deposition services and
high purity packaging product lines. Volume declines within the photoresist
stripping product lines, driven by the softening semiconductor industry
conditions, also contributed to the reduction in gross margins in 1998.
Research and Development Expenses. Research and development expenses
increased 10.4% to $18.4 million in 1999 from $16.6 million in 1998. Increased
efforts to expand SDS technology beyond ion implant applications into CVD, etch
and bulk gas delivery, and continued product development activities within
Materials and the Emosyn venture resulted in growth of the research and
development efforts. As a percentage of revenues, research and development
expenses decreased to 9.1% in 1999 from 9.9% in 1998. Research and development
expenses increased 16.0% to $16.6 million in 1998 from $14.3 million in 1997.
Similar to the increase in 1999, the 1998 increase was due to the development
efforts to extend the SDS technology beyond existing applications, as well as
the development of new chemical mechanical polishing materials and increased
research efforts to expand our sensing and monitoring product lines.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8.0% to $63.8 million in 1999 from $59.1
million in 1998. Despite decreases in expenses associated with decreased
administrative costs and cost savings resulting from the integration of recent
business acquisitions, expenses related to the organization of our Taiwanese
subsidiary and the commencement of our enterprise system software implementation
caused selling, general and administrative expenses to increase in 1999.
Additionally, the 1999 expenses included $2.3 million in severance for several
former executives within Materials and Technologies. As a percentage of
revenues, these expenses decreased to 31.5% in 1999 from 35.2% in 1998.
Selling, general and administrative expenses decreased 3.0% to $59.1 million in
1998 from $60.9 million in 1997. The 1998 decrease was primarily due to a
significant reduction in executive compensation paid to members of management of
certain acquired businesses (Delatech, ACSI and TeloSense) due to weaker
operating performance, a reduction of administrative costs resulting from
reductions in personnel and decreased commissions on lower product revenues.
-5-
<PAGE>
Merger Costs and Related Expenses. The 1999 operating results included
merger and related costs of $9.9 million, including $3.3 million of professional
fees and transactions costs related to our November 1999 acquisitions of MST and
NewForm and $2.8 million of investment banking fees, legal fees and accounting
fees in connection with the investigation, analysis and May 1999 closing of the
TeloSense, Delatech and ACSI transactions. The 1999 merger related costs also
included a $0.6 million reversal of previously accrued merger costs for prior
acquisitions. 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 an existing environmental equipment
product line which was determined to be impaired. The 1998 operating results
included merger related charges of $1.7 million incurred in completing the NOW
acquisition.
Operating Income. Operating income, including the recognition of merger
related costs, increased 159.0% in 1999 to $15.0 million from $5.8 million in
1998 which was a 62.7% decrease from $15.5 million in 1997. Materials'
operating income for 1999 increased 70.0% to $19.3 million from $11.4 million in
1998. This increase reflected 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
Materials. Materials' operating income, as a percentage of revenues, was 20.0%
and 16.0% for 1999 and 1998, respectively. Technologies' operating income
improved to $5.5 million in 1999 compared to a $3.9 million loss in 1998. The
profitability increase was attributable to the growth in both environmental and
sensing products and thin film deposition services revenues, the attendant
product margin improvements and a favorable product mix shift along with an
improvement in profitability of various contract programs. Investments in
research and product development within Emosyn and the Company's other ventures
are reflected in Technologies' operating income. Technologies' operating income
(loss), as a percentage of revenues, was 5.2% and (4.0)% in 1999 and 1998,
respectively.
Materials' operating income declined 36.0% to $11.4 million in fiscal 1998
from $17.8 million in 1997. The revenue decline in 1998 reduced gross margins
within Materials and, combined with an increase in research and development
spending, drove the operating income decline. Materials' operating income, as a
percentage of revenues, was 21.4% in 1997. Technologies' operating income
declined to a loss of $3.9 million in fiscal 1998 compared to operating income
of $6.7 million in 1997. These losses were attributable to the severe decline
in sales of environmental and sensing products, reduced thin film deposition
services operating results caused by revenue declines on a relatively fixed cost
base and an increase in research and development efforts focused on our Emosyn
business and other new business ventures.
Other Income, Net. Other income, net increased to approximately $3.9
million in 1999 from $3.0 million in 1998. The increase in 1999 related to a
significant increase in interest income due to increased cash levels on hand
throughout all of 1999 compared to only part of 1998. These increased cash
levels resulted from a public stock offering that was completed at the beginning
of the second quarter of 1998. Increased interest rate levels in 1999 also
resulted in increased interest income. Interest expense declined in 1999 due to
lower levels of debt outstanding at December 31, 1999 compared to December 31,
1998. Other income, net increased to $3.0 million in 1998 from a net expense of
$0.6 million in 1997 as a direct result of the increased cash and marketable
securities that resulted from our public stock offering in the first quarter of
1998. Interest expense decreased 26.5% to $1.3 million in 1999 from $1.7
million in 1998, and decreased 34.8% in 1998 from $2.6 million in 1997. The
1999 decrease related to the retirement of a significant debt balance related to
the Delatech acquisition as well as final payments on several equipment leases
within the thin film deposition services business. 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.
-6-
<PAGE>
Income Taxes. Income tax expense increased 75.0% to $7.7 million in 1999
from $4.4 million in 1998. Income tax expense decreased 48.6% to $4.4 million
in 1998 from $8.6 million in 1997. ATMI'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 1999 effective tax rate 41.0%. While no tax benefit
was taken for a significant amount of merger related costs in 1999, benefit was
recognized based on changes in estimates regarding the realizability of net
operating loss and tax credit carryforwards of certain acquired companies. The
1998 effective tax rate of 50.1% 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 1997 effective tax rate of 57.6% was due in part
to the 1997 operating results including the $9.0 million for merger costs
related to the ADCS and Lawrence Semiconductor acquisitions for which no tax
benefit was taken.
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.
Net Income Excluding Transaction Related Costs and Other Expenses. Over the
last three years, the Company has used mergers and acquisitions to accelerate
its growth and broaden its product lines. As a result of this strategy, the
Company has incurred expenses to consummate these transactions and merge these
acquired businesses into existing operations. Excluding these merger costs and
certain severance charges related to reorganizing the business pursuant to these
acquisitions, net income from recurring operations would have been $19.6
million, or $0.68 per share-assuming dilution in 1999. This represents a 211.1%
increase over $6.3 million, or $0.23 per share-assuming dilution in 1998. On a
comparable basis, 1997 net income from recurring operations was $15.3 million,
or $0.59 per share-assuming dilution.
Liquidity and Capital Resources
Six Months Ended June 30, 2000
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
$200.7 million at June 30, 2000 from $121.3 million at December 31, 1999.
Net cash provided by operations was approximately $2.2 million during the
six months ended June 30, 2000 compared to $9.4 million provided during the
first half of 1999. This resulted primarily from increased operating
profitability of the Company offset by increased working capital in the first
half of 2000 as compared to the first half of 1999. The increase in working
capital was primarily caused by increases in accounts receivable and
inventories, partially offset by increases in accounts payable and other
liabilities. The $6.8 million of merger and related costs expensed in the first
half of 1999 reduced cash generated from operations by approximately $2.0
million during the six-month period ended June 30, 1999.
Net cash used by investing activities was approximately $74.8 million
during the six months ended June 30, 2000, and approximately $1.2 million during
the six months ended June 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 six months of 2000. The Company invested
approximately $58.9 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 $15.9 million and $4.1 million for the six months ended June
30, 2000 and 1999, respectively. The 2000 expenditures primarily related to
installation of additional manufacturing capacity at the Company's expitaxial
services facility in Meza, Arizona. In 1999, the expenditures primarily related
to installation of additional manufacturing capacity in Danbury, Connecticut.
-7-
<PAGE>
Net cash provided by financing activities was approximately $72.9 million
during the six months ended June 30, 2000 including the net proceeds of $63.5
million from the public stock offering described above. Net cash used by
financing activities was approximately $6.8 million during the six months ended
June 30, 1999. As of June 30, 2000, the Company had financed portions of its
capital equipment purchases, particularly the silicon epitaxial capacity
expansion, through capital leases with approximately $9.3 million of capital
lease obligations outstanding. During the first six months ended June 30, 2000,
the Company entered into approximately $6.8 million of new capital lease
obligations to fund the epitaxial capacity expansion. During the first six
months of 2000 and 1999, the Company received proceeds from the exercise of
stock options and warrants of $5.0 million and $1.0 million, respectively.
During the first six months of 2000 and 1999, the Company made payments on
capital leases of approximately $1.3 million and $1.2 million, respectively. In
the first six months of 2000 and 1999, the Company made payments on notes of
approximately $1.1 million and $6.5 million, respectively.
ATMI believes its existing cash and marketable securities balances,
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 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 the Company's current business. There are no present agreements
with respect to any such acquisitions. However, any such transactions may
affect the Company's future capital needs.
Years ended December 31, 1999, 1998 and 1997
To date, ATMI 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 $121.3 million at
December 31, 1999 from $104.2 million at December 31, 1998 and $49.0 million at
December 31, 1997.
Net cash provided by operations was approximately $13.2 million during
1999, resulting primarily from improvements in working capital, as compared to
cash provided from operations of $13.0 million during 1998. The cash flow from
operations for 1999 related primarily to net income adjusted for non-cash
charges partially offset by the increase in working capital items, primarily
accounts receivable. In addition, the $9.9 million of merger costs and related
expenses in 1999 reduced the cash generated from operations by approximately
$4.3 million, as $4.4 million were non-cash charges and approximately $1.2
million remained unpaid at December 31, 1999. The improvement in working
capital for 1999 was primarily caused by a decrease in other assets and
increases in accounts payable, accrued expenses and other liabilities. The $1.7
million of merger costs and related expenses 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 cash
provided by operations in 1997 was approximately $3.9 million. Additionally,
the $9.0 million of merger costs and related expenses 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.
ATMI's investing activities included capital expenditures of $10.7 million,
$15.7 million, and $9.8 million in the years 1999, 1998 and 1997, respectively.
The 1999 expenditures were made primarily to support the growth experienced at
several of the Company's 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 the Company's Arizona facilities.
-8-
<PAGE>
Among other investing activities, in 1998 ATMI invested approximately $47.9
million 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, prior to ATMI's MST
acquisition, MST used $5.6 million to purchase four businesses. In addition,
ATMI sold $0.8 million in marketable securities in 1997.
ATMI's financing activities included a March 1998 registered underwritten
public offering of 5,428,000 shares of its common stock. Of such shares, ATMI
sold 2,257,000 shares and certain of its stockholders sold 3,171,000 shares.
ATMI received net proceeds from the offering of approximately $62.4 million.
At December 31, 1999, ATMI financed a significant portion of its capital
equipment purchases, particularly the silicon epitaxial capacity, through
capital leases with about $3.8 million of capital lease obligations outstanding.
During 1999 and 1998, the Company made payments on capital leases of
approximately $2.5 million and $2.8 million, respectively. Financial
institutions also provided collateral-based loans for other equipment purchases.
In 1999, the Company made $9.6 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
facility. The Company's high purity packaging business has an industrial revenue
bond arrangement outstanding in the amount of $2.3 million, which was used for
equipment and improvements at its manufacturing facility and corporate office.
At December 31, 1999, $13.9 million of loans, bonds and financing remained
outstanding. Management believes that the Company's debt service obligations can
be adequately satisfied by cash flows from operations.
ATMI believes that the Company's existing cash and marketable securities
balances, existing sources of liquidity and anticipated funds from operations
will satisfy the Company's projected working capital and other cash requirements
through at least the end of 2001. However, management also believes the level of
financing resources available to the Company is an important competitive factor
in our industry and management may seek additional capital prior to the end of
that period. Additionally, management considers, on a continuing basis,
potential acquisitions of technologies and businesses complementary to the
Company's current business. There are no present agreements with respect to any
such acquisitions. However, any such transactions may affect the Company's
future capital needs.
Operations Outside the United States
For the years ended December 31, 1999, 1998 and 1997, sales outside the
United States, including Asia and Europe, accounted for 38.9%, 32.9%, and 29.8%,
respectively, of the Company's revenues. Management anticipates that the
Company's sales outside the United States will continue to account for a
significant percentage of total revenues. The July 2000 acquisition of ESCA and
the November 1999 acquisitions of MST and NewForm have increased the Company's
European operations. In addition, the Company has a wholly-owned subsidiary in
Taiwan where the Company sells and services several product lines. The Company
also 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 the Company has a 70.0% 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
Management formed an internal compliance team to evaluate ATMI's internal
information technology infrastructure and application systems and other non-IT
infrastructure systems to determine whether such systems would 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, and to evaluate the Year 2000 issue with respect to the
systems of third party partners and suppliers with which ATMI has a material
relationship.
-9-
<PAGE>
ATMI completed an inventory analysis and risk assessment. As previously
planned and budgeted, ATMI 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, ATMI expects that the Company's core IT Systems are Year 2000
compliant, and no significant issues have arisen to date from the calendar
change to January 2000. ATMI does not expect that any additional costs of
addressing the Year 2000 issue will have a material adverse impact on its
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. Management 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 these systems will have a material adverse
impact on the Company's operations, financial position, results of operations or
cash flows.
ATMI completed a third party inventory and risk assessment and verified
material Year 2000 compliance of these systems by December 31, 1999. Management
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 the Company's operations and any additional costs relating to these
systems is unknown. Management believes that any problems that might arise
would involve third party systems rather than the Company's internal systems.
Management believes that the majority of the risks associated with Year 2000
non-compliance have been averted as the calendar turned. Any further risk might
involve the partial shutdown of a supplier or strategic partner and its
inability to provide supplies and services to us on a timely basis. ATMI
developed a contingency plan addressing potential issues, ensuring that adequate
levels of critical supplies used in the Company's manufacturing processes were
on hand at the end of 1999.
ATMI tested its products for Year 2000 compliance and determined that all
of the Company's 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.
ATMI incurred approximately $600,000 relating to inventory analysis and
risk assessment of potential Year 2000 difficulties. The funds to cover the
costs 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 costs of reviewing key operating systems. No IT
Systems projects were deferred because of problems associated with the Year 2000
Issue.
Forward-Looking Statements
The statements contained in this report which are not historical are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Examples of forward-looking statements include, without limitation,
statements by us 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 us or our 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 our
products, product and market competition, delays or problems in the development
and commercialization of products and technological changes affecting our
competencies. 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.
-10-
