ATMI 10Q 2008 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008


o		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: 1-16239

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. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):


Large accelerated filerþ		Accelerated filero		Non-accelerated filero		Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Noþ

The number of shares outstanding of the registrant’s common stock as of June 30, 2008 was 31,252,024.

ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2008

TABLE OF CONTENTS


	Page
Part I — Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets (unaudited)		3

Consolidated Statements of Income (unaudited)		4

Consolidated Statements of Stockholders’ Equity (unaudited)		6

Consolidated Statements of Cash Flows (unaudited)		7

Notes to Consolidated Interim Financial Statements (Unaudited)		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

Item 3. Quantitative and Qualitative Disclosures About Market Risk		26

Item 4. Controls and Procedures		28

Part II — Other Information

Item 1. Legal Proceedings		28

Item 1A. Risk Factors		29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30

Item 4. Submission of Matters to a Vote of Security Holders		30

Item 5. Other Information		30

Item 6. Exhibits		31

Signatures		32

Exhibits		33

Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ATMI, Inc.

Consolidated Balance Sheets
(in thousands, except per share data)


	June 30,			December 31,
	2008			2007
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	46,105		$	104,807
Marketable securities, current portion		51,752			88,890
Accounts receivable, net of allowances of $672 and $670, respectively		59,130			61,405
Inventories, net		56,630			48,885
Income taxes receivable		—			1,104
Deferred income taxes		11,095			9,577
Prepaid expenses and other current assets		12,532			12,755

Total current assets		237,244			327,423

Property, plant, and equipment, net		127,127			106,171
Goodwill		33,339			13,730
Other intangibles, net		24,338			17,407
Other long-term assets		30,288			27,510

Total assets	$	452,336		$	492,241


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	22,339		$	22,735
Accrued liabilities		6,480			8,380
Accrued salaries and related benefits		7,461			10,961
Income taxes payable		164			2,647
Other current liabilities		3,910			2,479

Total current liabilities		40,354			47,202
Deferred income taxes, non-current		2,374			912
Other long-term liabilities		10,232			9,744
Commitments and contingencies (Note 5)

Stockholders’ equity:
Preferred stock, par value $.01 per share: 2,000 shares authorized; none issued		—			—
Common stock, par value $.01 per share: 100,000 shares authorized; 39,182 and 38,981 issued and 31,252 and 33,164 outstanding in 2008 and 2007, respectively		392			390
Additional paid-in capital		418,121			412,423
Treasury stock at cost, 7,930 and 5,817 shares in 2008 and 2007, respectively		(227,080	)		(168,844	)
Retained earnings		201,037			180,973
Accumulated other comprehensive income		6,906			9,441

Total stockholders’ equity		399,376			434,383

Total liabilities and stockholders’ equity	$	452,336		$	492,241

See accompanying notes.

ATMI, Inc.

Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)


	Three Months Ended
	June 30,
	2008			2007

Revenues	$	89,487		$	92,432
Cost of revenues		43,199			47,247

Gross profit		46,288			45,185
Operating expenses:
Research and development		9,583			7,298
Selling, general and administrative		23,330			26,238

Total operating expenses		32,913			33,536

Operating income		13,375			11,649
Interest income		818			1,963
Other expense, net		(291	)		(47	)

Income before income taxes		13,902			13,565
Provision for income taxes		4,223			4,294

Net income	$	9,679		$	9,271


Earnings per common share — basic	$	0.31		$	0.27

Weighted average shares outstanding — basic		31,234			34,455

Earnings per common share — diluted	$	0.30		$	0.26

Weighted average shares outstanding — diluted		32,091			35,369

See accompanying notes.

ATMI, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)


	Six Months Ended
	June 30,
	2008			2007

Revenues	$	182,284		$	174,586
Cost of revenues		89,630			90,127

Gross profit		92,654			84,459
Operating expenses:
Research and development		18,075			14,544
Selling, general and administrative		46,035			50,790

Total operating expenses		64,110			65,334

Operating income		28,544			19,125
Interest income		1,771			3,809
Other expense, net		(982	)		(2	)
	��
Income before income taxes		29,333			22,932
Provision for income taxes		9,269			7,338

Net income	$	20,064		$	15,594


Earnings per common share — basic	$	0.63		$	0.45

Weighted average shares outstanding — basic		31,621			34,562

Earnings per common share — diluted	$	0.62		$	0.44

Weighted average shares outstanding — diluted		32,453			35,486

See accompanying notes.

ATMI, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)


											Accumulated
											Other
			Additional								Comprehensive
	Common		Paid-in			Treasury			Retained		Income
	Stock		Capital			Stock			Earnings		(Loss)			Total

Balance at December 31, 2007	$	390	$	412,423		$	(168,844	)	$	180,973	$	9,441		$	434,383
Issuance of 65 shares of common stock pursuant to the exercise of employee stock options		1		1,486			—			—		—			1,487
Purchase of 2,112 treasury shares		—		—			(58,236	)		—		—			(58,236	)
Equity based compensation		—		4,163			—			—		—			4,163
Income tax benefit from equity-based compensation		—		50			—			—		—			50
Other		1		(1	)		—			—		—			—
Net income		—		—			—			20,064		—			20,064
Reclassification adjustment related to marketable securities sold in unrealized gain position, net of $859 tax provision		—		—			—			—		(1,462	)		(1,462	)
Change in fair value on available-for-sale securities net of deferred income tax of $483		—		—			—			—		(823	)		(823	)
Change in fair value of derivative financial instruments, net of deferred income tax of $96		—		—			—			—		(164	)		(164	)
Cumulative translation adjustment		—		—			—			—		(86	)		(86	)

Comprehensive income		—		—			—			—		—			17,529

Balance at June 30, 2008	$	392	$	418,121		$	(227,080	)	$	201,037	$	6,906		$	399,376

See accompanying notes.

ATMI, Inc.

Consolidated Statements of Cash Flows
(unaudited)
(in thousands)


	Six Months Ended
	June 30,
	2008			2007

Operating activities
Net income	$	20,064		$	15,594
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		11,259			10,891
Provision for inventory obsolescence		686			361
Deferred income taxes		944			(930	)
Income tax benefit from share-based payment arrangements		50			627
Excess tax benefit from share-based payment arrangements		(239	)		(412	)
Equity-based compensation expense		4,163			4,261
Realized gain on sale of marketable securities		(1,967	)		—
Loss from equity-method investments		785			319
Impairment on investments		1,791			—
Other		10			13
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		3,494			(4,131	)
Inventories		(7,487	)		1,504
Other assets		(284	)		(891	)
Accounts payable		(690	)		876
Accrued expenses		(6,115	)		(5,560	)
Income taxes		(1,273	)		2,907
Other liabilities		1,600			5,438

Net cash provided by operating activities		26,791			30,867

Investing activities
Capital expenditures		(30,841	)		(13,742	)
Equity-basis investment		—			(1,362	)
Acquisition, net of cash acquired		(27,673	)		—
Purchases of marketable securities		(14,875	)		(131,718	)
Proceeds from sales or maturities of marketable securities		44,810			121,287

Net cash used for investing activities		(28,579	)		(25,535	)

Financing activities
Excess tax benefit from share-based payment arrangements		239			412
Purchases of treasury stock		(59,212	)		(22,872	)
Proceeds from exercise of stock options		1,487			7,392
Credit line borrowings		2,948			—
Credit line repayments		(1,802	)		—
Other		(249	)		(37	)

Net cash used for financing activities		(56,589	)		(15,105	)

Effects of exchange rate changes on cash and cash equivalents		(325	)		(606	)

Net decrease in cash and cash equivalents		(58,702	)		(10,379	)

Cash and cash equivalents, beginning of period		104,807			73,596

Cash and cash equivalents, end of period	$	46,105		$	63,217

See accompanying notes.

ATMI, Inc.

Notes To Consolidated Interim Financial Statements
(unaudited)

1. Description of Business

ATMI, Inc. (the “Company,” “ATMI,” or “we”) believes it is a leading supplier of high performance materials, materials packaging and materials delivery systems used worldwide in the manufacture of microelectronics devices. ATMI targets both semiconductor and flat-panel display manufacturers, whose products form the foundation of microelectronics technology rapidly proliferating through the information technology, automotive, communication, and consumer products industries. The market for microelectronics devices is growing and continually changing, which drives demand for new products and technologies at lower cost. ATMI’s objective is to meet the demands of microelectronics manufacturers with solutions that maximize the efficiency of their manufacturing processes, reduce capital costs, and minimize the time to ramp new processes and deliver new products. ATMI’s customers include many of the leading semiconductor and flat-panel display manufacturers in the world who target leading edge technologies. ATMI also addresses an increasing number of critical materials handling needs for the life sciences markets. Our proprietary high-purity materials handling and dispensing systems now include the biotechnology and laboratory markets, which we believe offer significant growth potential.

2. Significant Accounting Policies and Other Information

Basis of Presentation

The accompanying consolidated interim financial statements of ATMI, Inc. at June 30, 2008 and for the quarters and six-month periods ended June 30, 2008 and 2007 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. These unaudited consolidated interim financial statements included herein should be read in conjunction with the December 31, 2007 audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The Company’s quarterly results are subject to fluctuation and, thus, the operating results for any quarter are not necessarily indicative of results to be expected for any future fiscal period.

The consolidated Balance Sheet at December 31, 2007 has been derived from the audited financial statements at that date, but does not include all of the financial information and disclosures required by GAAP for complete financial statements.

Earnings Per Share

This table shows the computation of basic and diluted earnings per share (in thousands, except per share data):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Numerator:
Net income	$	9,679	$	9,271	$	20,064	$	15,594

Denominator:
Denominator for basic earnings per share - - weighted average shares		31,234		34,455		31,621		34,562
Dilutive effect of employee stock options		465		558		446		587
Dilutive effect of restricted stock		392		356		386		337


Denominator for diluted earnings per common share - weighted average shares		32,091		35,369		32,453		35,486


Earnings per share-basic	$	0.31	$	0.27	$	0.63	$	0.45
Earnings per share-assuming dilution	$	0.30	$	0.26	$	0.62	$	0.44

Stock options for 610,000 shares and 766,000 shares for the quarter and six months ended June 30, 2008, respectively, were excluded in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock. Stock options for 333,000 shares and 325,000 shares for the quarter and six months ended June 30, 2007, respectively, were excluded in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

Inventories, Net

Inventories at June 30, 2008 and December 31, 2007 were (in thousands):


	June 30,			December 31,
	2008			2007
Raw materials	$	14,979		$	16,005
Work in process		1,286			1,063
Finished goods		42,568			34,134

Gross inventories		58,833			51,202
Excess and obsolescence reserve		(2,203	)		(2,317	)

Inventories, net	$	56,630		$	48,885

Credit Line

During the second quarter of 2008, our wholly-owned Japanese subsidiary entered into a revolving line of credit agreement with a major Japanese bank for approximately $8.5 million (900 million Japanese Yen) for the primary purpose of cost-effectively funding the purchase of high productivity development tools and related equipment and local working capital needs in a favorable interest rate environment. The line of credit is guaranteed by ATMI, Inc. At June 30, 2008, we had a balance outstanding on this line of credit of $1.1 million.

Income Taxes

We have not provided for U.S. federal income and foreign withholding taxes on approximately $38.0 million of undistributed earnings from non-U.S. operations as of June 30, 2008, because such earnings are intended to be reinvested indefinitely outside of the United States. These earnings could become subject to additional tax if they are remitted as dividends, loaned to ATMI, or upon sale of subsidiary stock. It is not practicable to estimate the amount or timing of the additional tax, if any, that eventually might be paid on the foreign earnings.

Our effective income tax rate was 30.4% and 31.6% for the three and six month periods ended June 30, 2008, respectively. The effective income tax rates differ from the U.S. federal statutory income tax rate of 35.0% primarily due to the mix of income attributable to the various countries in which we conduct business, tax-exempt interest income, and research and development tax credits in Taiwan.

It is reasonably possible that in the next three months, because of changes in facts and circumstances, the unrecognized tax benefits for tax positions taken related to previously filed tax returns may decrease. The range of possible decrease is $0.3 million to $4.4 million. The Company has been audited by the Internal Revenue Service through tax year 2005.

Goodwill and Other Intangible Assets

Goodwill and Other intangibles balances at June 30, 2008 and December 31, 2007 were (in thousands):


			Patents &						Total Other
	Goodwill		Trademarks			Other			Intangibles

Gross amount as of December 31, 2007	$	13,730	$	27,533		$	5,969		$	33,502
Accumulated Amortization		—		(11,367	)		(4,728	)		(16,095	)

Balance as of December 31, 2007	$	13,730	$	16,166		$	1,241		$	17,407


Gross Amount as of June 30, 2008	$	33,339	$	35,142		$	7,270		$	42,412
Accumulated Amortization		—		(13,056	)		(5,018	)		(18,074	)

Balance as of June 30, 2008	$	33,339	$	22,086		$	2,252		$	24,338

Changes in carrying amounts of Goodwill and Other intangibles for the six months ended June 30, 2008 were (in thousands):


				Patents &						Total Other
	Goodwill			Trademarks			Other			Intangibles

Balance at December 31, 2007	$	13,730		$	16,166		$	1,241		$	17,407
Acquisition		19,677			7,600			1,300			8,900
Amortization		—			(1,688	)		(281	)		(1,969	)
Other, including foreign currency translation		(68	)		8			(8	)		—

Balance at June 30, 2008	$	33,339		$	22,086		$	2,252		$	24,338

On January 4, 2008, ATMI acquired all of the outstanding capital stock of LevTech, Inc. (“LevTech”), a market-leading provider of disposable mixing technologies to the biotechnology and pharmaceutical industries based in Lexington, Kentucky, for a cash payment of approximately $27.7 million, including direct acquisition costs. The acquisition was recorded under the purchase method of accounting and, accordingly, LevTech’s results of operations are included in the Company’s financial statements from the date of acquisition (January 4, 2008). The purchase price was allocated to assets acquired and liabilities assumed based on a preliminary evaluation of their respective fair values at the date of acquisition as summarized below (in thousands).


Identified intangible assets	$	8,900
Net deferred taxes		(1,052	)
Net assets acquired		148
Goodwill		19,677

Purchase price, net of cash acquired	$	27,673

The excess of the purchase price over the preliminary assessment of fair value of identifiable net assets acquired has been recorded as goodwill. Net assets acquired is presented net of cash acquired of $0.3 million. $7.6 million of the identified intangible assets is included in patents and trademarks and will be amortized using the straight-line method over periods ranging from 7 to 10 years. $1.3 million of identified intangible assets, related to customer relationships, is included in other intangibles and will be amortized using the straight-line method over 13 years. Goodwill acquired is not deductible for income tax purposes.

Recently Issued Accounting Pronouncements

In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”). This new standard requires enhanced disclosures for derivative instruments, including those used in hedging activities. It is effective for fiscal years and interim periods beginning after November 15, 2008, and will be applicable to the Company in the first quarter of fiscal 2009. We have determined that it will not have a significant effect on the determination or reporting of our financial results.

Recently Adopted Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS 157). This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements. On February 6, 2008, the FASB deferred the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. These nonfinancial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities assumed in a business combination. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and was adopted by the Company effective January 1, 2008. The effect of adoption of SFAS No. 157 is discussed in Note 6 — Fair Value.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115,” which permits entities to elect to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This election is irrevocable. SFAS No. 159 was effective in the first quarter of fiscal 2008. The Company did not elect to apply the fair value option to any of its financial instruments.

Other

As a result of the redirection of certain supply chain and operations activities associated with the 2007 organizational realignment (which we announced in September 2007, but which became effective in January 2008), certain associated expenses have been redirected from selling, general, and administrative expense (“SG&A”) to cost of revenues in 2008. Redirected activities include those functions in two of our locations that were previously focused on supporting and administering plant operations, whereas in the current organization, those activities have been redirected and realigned to improve our global supply chain capabilities to improve overall customer satisfaction. This change reduced gross margin and SG&A as a percentage of revenues by approximately 1.8 percentage points. We expect this change to have a 1.5 percentage point effect on gross margins and SG&A, as a percentage of revenues, for the full-year 2008.

During 2007, a fire at a contract manufacturer in Taiwan destroyed approximately $1.8 million of ATMI’s assets, which has been recovered from our insurers. As a result of the fire, we filed a business interruption claim with our insurance carrier during the second quarter of 2008. However, at this time we are unable to estimate the amount or timing of any potential recoveries against that claim.

3. Equity-Based Compensation

Summary of Plans

This table shows the number of shares approved by shareholders for each equity-based compensation plan and the number of shares that remain available for equity awards at June 30, 2008 (in thousands):


	# of Shares		Shares
Stock Plan	Approved		Available

2000 Stock Plan (1)		2,000		313
2003 Stock Plan (1)		3,000		1,132
Employee Stock Purchase Plan (2)		1,000		291

Totals		6,000		1,736


(1)		Exercise prices for ISOs and non-qualified stock options granted under this plan may not be less than 100 percent of the fair market value for the Company’s common stock on the date of grant.

(2)		Effective January 1, 2007, this plan was amended such that employees may purchase shares at 95 percent of the closing price on the day previous to the last day of each six-month offering period. This plan is not considered to be compensatory, as that term is defined by SFAS No. 123(R).

The Company issued 57,460 and 305,148 shares of common stock as a result of exercises by employees under its employee stock option plans in the first six months of 2008 and 2007, respectively. The Company issued 252,632 and 226,354 shares of restricted stock that include only a time-based vesting requirement in the first six months of 2008 and 2007, respectively.

The Company issued 144,187 and 92,041 shares of restricted stock to its executive officers that include performance-based as well as time-based vesting requirements in the first six months of 2008 and 2007, respectively. During 2007, 14,740 of the 2007 awards were forfeited due to terminations of employment by two executive officers. In the first six months of 2008, 73,630 of the 2007 awards were forfeited as a result of the failure to achieve the operating income growth targets established by the Board of Directors for 2007.

4. Comprehensive Income

The components of comprehensive income are (in thousands):


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2008			2007		2008			2007

Net income	$	9,679		$	9,271	$	20,064		$	15,594

Cumulative translation adjustment		(1,541	)		512		(86	)		500

Change in fair value of available-for-sale securities (net of tax benefit of $421 and $483 in 2008 and tax provision of $493 and $554 in 2007)		(716	)		840		(823	)		943
Change in fair value of derivative financial instruments (net of tax provision (benefit) of $194 and ($96) in 2008 and $0 and $0 in 2007)		331			—		(164	)		—
Reclassification adjustment related to marketable securities sold (net of tax benefit of $857 and $859 in 2008 and tax provision of $35 and $52 in 2007) (1)		(1,460	)		60		(1,462	)		89


Comprehensive income	$	6,293		$	10,683	$	17,529		$	17,126


(1)		Determined based on the specific identification method.

5. Commitments and Contingencies

In July 2003, a subsidiary of ATMI filed suit against Praxair, Inc., the parent company of Praxair Electronics, in the United States District Court for the Southern District of New York, charging it with infringing two patents ATMI holds for certain gas storage and delivery systems based on the marketing of Praxair’s UpTime system. In April 2006, the New York District Court granted Praxair’s request for summary judgment that all asserted claims in two of ATMI’s patents are invalid, and that decision was upheld on appeal in April 2007.

In December 2003, Praxair, Inc. and Praxair Technology, Inc. filed suit against ATMI, Inc. and Advanced Technology Materials, Inc. in the United States District Court for the District of Delaware alleging infringement of three patents owned by Praxair Technology, Inc. related to certain gas storage and delivery systems. Praxair was seeking damages and an injunction against ATMI marketing its VAC system. In 2005, the Delaware District Court invalidated one of Praxair’s patents by summary judgment. In June 2007, the Delaware District Court held that the two remaining Praxair patents were unenforceable due to inequitable conduct. This positive outcome triggered ATMI’s payment obligation pursuant to a limited contingent fee arrangement with certain outside counsel. As a result, we recognized $1.1 million of expense in the second quarter of 2007, which was recorded in selling, general and administrative expenses. In July 2007, Praxair appealed the decision to the Federal Circuit Court.

In 2005, a subsidiary of ATMI filed suit against Praxair, Inc. and Praxair GmbH in Dusseldorf, Germany, charging infringement of a patent ATMI holds for certain gas storage and delivery systems. Since the third quarter of 2006, a preliminary injunction against Praxair selling or supplying its UpTime system in Germany was in effect. In March 2007, ATMI voluntarily withdrew the preliminary injunction in view of customer concerns, among other considerations. A decision in favor of Praxair was rendered by the trial court in November 2006 on one of the asserted patent claims, which was appealed.

In August 2006, a subsidiary of ATMI filed suit in Belgium against Praxair, Inc. and Belgian affiliates of Praxair, Inc. charging infringement of a patent ATMI holds for certain gas storage and delivery systems. A preliminary injunction is in place against the public marketing of the UpTime system worldwide and, in September 2007, ATMI was awarded EUR 207,000 for Praxair’s violation of that injunction. The award was received by ATMI during the first quarter of 2008 and has been recorded as an offset to selling, general and administrative expenses in the consolidated statement of income. In addition, a preliminary injunction has been in place against Praxair’s supply of UpTime in several European countries.

In February 2008, Praxair, Inc. filed suit against ATMI, Inc. and Advanced Technology Materials, Inc. in the United States District Court for the Northern District of California alleging violations of federal antitrust law and state law relating to a gas supply arrangement and patent litigation activities in the U.S. and Europe. Praxair was seeking a preliminary injunction and other damages, which preliminary injunction was denied by the court in June.

On July 11, 2008, ATMI entered into a global settlement agreement with Praxair, Inc. that resolved the foregoing actions between the parties. The Delaware litigation is continuing by agreement of the parties, with damages stipulated so that each party’s maximum liability would be $100,000, depending on the form of the decision. The parties will be free to market and sell worldwide their respective mechanical, sub-atmospheric delivery container products that were the subject of the disputes.

ATMI is, from time to time, subject to legal actions, governmental audits, and proceedings relating to various matters incidental to its business including contract disputes, product liability claims, employment matters, export and trade matters, and environmental claims. While the outcome of such matters cannot be predicted with certainty, in the opinion of management, after reviewing such matters and consulting with ATMI’s counsel and considering any applicable insurance or indemnifications, any liability which may ultimately be incurred is not expected to materially affect ATMI’s consolidated financial position, cash flows or results of operations.

During 2007, ATMI entered into a pledge agreement with Anji Microelectronics Co., Ltd. (“Anji”), an equity-method investee, for the issuance of a 3-year standby letter of credit up to $3.1 million in order to assist Anji in securing bank financing. The standby letter of credit has been secured by Anji’s assets and additional equity interests in Anji’s operating subsidiaries. Included in “Other long-term liabilities” at June 30, 2008 is $0.2 million representing the fair value of the guarantee. As of June 30, 2008, Anji has drawn down $1.9 million against the line of credit secured by the letter of credit.

6. Fair Value

The Company adopted SFAS No. 157 effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. SFAS No. 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. There was no impact upon adoption of SFAS No. 157 to the consolidated financial statements. SFAS No. 157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1- Quoted prices in active markets for identical assets and liabilities. Level 1 assets and liabilities consist of cash, certificates of deposit, money market fund deposits, certain of our marketable equity instruments, and forward foreign currency exchange contracts that are traded in an active market with sufficient volume and frequency of transactions.

Level 2- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets include certain of our marketable debt instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments, including forward foreign currency exchange contracts that are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers.

Level 3- Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. Level 3 assets consisted of one Massachusetts Educational Financing Authority auction rate security, comprising part of a student loan portfolio, with a par value of $5.0 million, a stated maturity date in 2038, and a reset date of March 12, 2009. During March 2008, the annual auction for this security failed, and as a result, the tax-exempt coupon rate of interest was reset to the default interest rate of 6.55% from its previous rate of 3.75%. We will not have access to these funds until a future auction for this auction-rate security is successful, the security has been called by the issuer, or until we sell the security in a secondary market. Currently, despite a AA credit rating and a premium coupon rate, no secondary market is active given the current turmoil in the credit markets. At June 30, 2008 we recorded a temporary impairment charge of $0.7 million within Accumulated Other Comprehensive Income based upon an independent third-party valuation we received for this auction-rate security. The valuation of this security incorporated assumptions about the anticipated term and the yield that a market participant would require to purchase such a security in the current market environment.

Assets / Liabilities Measured at Fair Value on a Recurring Basis

This table summarizes the Company’s assets (liabilities) measured at fair value on a recurring basis at June 30, 2008 (in thousands):


				Fair Value Measured Using
				Quoted			Other
				Prices in			Observ-		Unobser-
				Active			able		vable
				Markets			Inputs		Inputs
	Total			(Level 1)			(Level 2)		(Level 3)

Cash, cash equivalents, and available-for-sale marketable securities	$	102,206		$	58,885		$	38,972	$	4,349
Derivative liabilities	$	(236	)	$	(236	)		—		—

The company recorded gains of $0.8 million and $0.2 million for the three and six-month periods ended June 30, 2008, respectively, and gains of $0.4 million and $0.1 million for the three and six-month periods ended June 30, 2007, respectively, under the caption “Other expense, net” in the consolidated statements of income related to changes in the fair value of its financial instruments for forward foreign currency exchange contracts accounted for as fair value hedges.

This table presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six-months ended June 30, 2008 (in thousands). There were no gains or losses due to changes in fair value, including both realized and unrealized gains and losses, recorded in net income for Level 3 assets and liabilities for the three and six-month periods ended June 30, 2008.


	Six Months Ended June 30,
	2008
	Fair Value Measurements Using
	Significant Unobservable Inputs
	(Level 3)
	Available-For-
	Sale
	Marketable
	Securities			Total

Balance at December 31, 2007	$	—		$	—
Total gains (losses), realized and unrealized
Included in net income		—			—
Included in other comprehensive income		(651	)		(651	)
Purchases, issuances, and settlements, net		—			—
Transfers in (out) of Level 3		5,000			5,000

Balance at June 30, 2008	$	4,349		$	4,349

Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis

This table presents losses recorded during the six months ended June 30, 2008 for financial instruments that are recorded at fair value on a nonrecurring basis (in thousands):

Fair Value Measured Using

Other

Total

Quoted Prices

Observ-

Unobser-

Balance as

in Active

able

vable

Total

of June 30,

Markets

Inputs

Gains

2008

(Level 1)

(Level 2)

(Level 3)

(Losses)

Non-marketable securities

—

(1,791

)

In the second quarter of 2008, due to changes in events and circumstances related to a convertible note due from an early-stage semiconductor materials venture, the fair value of this investment was significantly impacted, resulting in a $1.8 million impairment charge, representing the full value of the note. ATMI’s interest in this note, in the event of default, is secured by certain technology owned by the venture, but recoverability of amounts due have become unlikely. The fair value measurement was calculated using unobservable inputs, classified as Level 3, requiring significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of this investment.

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Three and Six Months Ended June 30, 2008 as Compared to 2007

Cautionary Statements Under the Private Securities Litigation Reform Act of 1995

Disclosures included in this Form 10-Q contain “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. Forward-looking statements may be identified by words such as “anticipate,” “plan,” “believe,” “seek,” “estimate,” “expect,” “could,” and words of similar meanings and include, without limitation, statements about the expected future business and financial performance of ATMI such as financial projections, expectations for demand and sales of new and existing products, customer and supplier relationships, research and development programs, market and technology opportunities, international trends, business strategies, business opportunities, objectives of management for future operations, microelectronics industry (including wafer start) growth, and trends in the markets in which the Company participates. Forward-looking statements are based on management’s current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially. These forward-looking statements only reflect present expectations as of the time of the filing of this Quarterly Report. Actual outcomes and results may differ materially from these expectations and assumptions because of changes in political, economic, business, competitive, market, regulatory, and other factors. Certain factors that could cause such a difference include:

•

cyclicality in the markets in which we operate;

•

variation in profit margin performance caused by decreases in shipment volume, reductions in, or obsolescence of, inventory, inefficiencies in production facilities and shifts in product mix;

•

availability of supply from a single or limited number of suppliers or from suppliers in a single country;

•

intensely competitive markets for our products;

•

changes in export controls and other laws or policies, as well as the general political and economic conditions, exchange rate fluctuations, security risks, health conditions and possible disruptions in transportation networks, of the various countries in which we operate;

•

potential natural disasters in locations where we, our customers, or our suppliers operate;

•

loss, or significant curtailment, of purchases by one or more of our largest customers;

•

inability to meet customer demand from quarter to quarter, causing us to incur expedited shipping costs or hold excess or obsolete inventory;

•

taxation and audit by taxing authorities in several different countries;

•

intense competition for highly skilled scientific, technical, managerial and marketing personnel;

•

inability to continue to anticipate rapidly changing technologies and market trends, to enhance our existing products and processes, to develop, commercialize, sell and deliver new products and processes, and to expand through selected acquisitions of technologies or businesses or other strategic alliances;

•

inability to protect our competitive position via our patents, patent applications, and licensed technology in the United States and other countries; restrictions on our ability to make and sell our products as a result of competitors’ patents; costly and time-consuming patent litigation;

•

risk of product liability claims beyond existing insurance coverage levels resulting from the manufacture and sale of our products, which include thin film and other toxic materials;

•

inability to realize the anticipated benefits of acquisitions due to difficulties integrating acquired businesses with our current operations;

•

governmental regulations related to the storage, use, and disposal of certain toxic or otherwise hazardous chemicals in our manufacturing, processing and research and development activities, as well as potential exposure for pre-existing contamination of our facilities, which may not be covered completely by existing indemnification arrangements; and

•

uncertainty regarding compliance matters and higher costs resulting from changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, and new regulations from the SEC.

These risks and uncertainties are described in more detail in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and other subsequent filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings. These cautionary statements are not meant to be an exhaustive discussion of risks that apply to companies like ATMI with broad international operations. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and our performance and the performance of our customers. Similarly, the price of our common stock is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control. ATMI undertakes no obligation to update publicly or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law.

Company Overview

ATMI believes it is a leading supplier of high performance materials, materials packaging and materials delivery systems used worldwide in the manufacture of microelectronics devices. ATMI targets both semiconductor and flat-panel display manufacturers, whose products form the foundation of microelectronics technology rapidly proliferating through the information technology, automotive, communication and consumer products industries. The market for microelectronics devices is growing and continually changing, which drives demand for new products and technologies at lower cost. ATMI’s objective is to meet the demands of microelectronics manufacturers with solutions that maximize the efficiency of their manufacturing processes, reduce capital costs, and minimize the time to ramp new processes and deliver new products. ATMI’s customers include many of the leading semiconductor and flat-panel display manufacturers in the world who target leading edge technologies.

Results of Operations

Executive Summary

In the second quarter of fiscal 2008, ATMI’s revenues declined by 3.2 percent compared to the second quarter of 2007, despite $1.2 million of favorable foreign currency translation, primarily the result of a delay in the shipment of certain SDS products, reduced materials and equipment sales to the memory sector, customer material usage efficiencies as customers continue to improve their own internal processes, and slower-than-anticipated adoption of new products. Our gross margin improved to 51.7 percent in the second quarter of 2008 compared to 48.9 percent in the second quarter of 2007 given improved product mix from lower deposition equipment revenues and continued operational efficiency improvements. This improvement came despite increased costs reflected in cost of revenues as a result of the redirection of certain supply chain and operations activities associated with our 2007 organizational realignment, which became effective in 2008 (such costs were previously reflected in selling, general, and administrative expenses (“SG&A”)). Redirected activities include those functions in two of our locations that were previously focused on supporting and administering plant operations, whereas in the current organization those activities have been redirected and realigned to improve our global supply chain to improve overall customer satisfaction. This change reduced gross margins and SG&A as a percentage of revenues by approximately 1.8 percentage points and is expected to have approximately a 1.5 percentage point effect on gross margins and SG&A, as a percentage of revenues, throughout 2008. Research and development (“R&D”) expenses increased 31.3 percent to $9.6 million in the second quarter of 2008 from $7.3 million in the second quarter of 2007. The increase was driven entirely by the continued investment in our high productivity development activities. At 10.7 percent, R&D spending as a percent of revenues was higher than expected primarily because of the revenue shortfall vs. expectations. SG&A decreased by 11.1 percent in the second quarter of 2008 from the second quarter of 2007. As a percent of revenues, SG&A decreased to 26.1 percent in the second quarter of 2008 compared to 28.4 percent in the same period a year ago.

Our effective tax rate was 30.4 percent in the second quarter of 2008 compared to 31.7 percent in the second quarter of 2007. The reduction was primarily a result of R&D tax credits in Taiwan related to our investment in high productivity development tools and related equipment. Operating profit for the second quarter increased 14.8 percent from the prior year to $13.4 million. Interest income was down 58.3% from the prior year due to lower invested balances given the repurchase of $59.2 million of our common stock in the first quarter of 2008. Net income for the quarter increased 4.4 percent to $9.7 million ($0.30 per diluted share, a 15.4 percent increase) compared to $9.3 million ($0.26 per diluted share) in the second quarter of 2007.

In the first half of fiscal 2008, ATMI’s revenues grew by 4.4 percent compared to the first half of 2007, including $3.1 million (or 1.8 percent) related to favorable foreign currency translation. Our gross margin improved to 50.8 percent in the first half of 2008 compared to 48.4 percent in the first half of 2007. This improvement occurred despite the increased costs associated with redirected activities discussed above. R&D increased 24.3 percent in the first half of 2008 compared to the first half of 2007. As a percent of revenues, R&D increased to 9.9 percent in the first half of 2008 compared to 8.3 percent in the first half of 2007. SG&A decreased 9.4 percent in the first half of 2008 compared to the first half of 2007. As a percent of revenues, SG&A decreased to 25.3 percent from 29.1 percent in the first half of 2007 for the reasons noted above. Our effective tax rate was 31.6 percent in the first half of 2008 compared to 32.0 percent in the first half of 2007. The reduction was primarily related to R&D tax credits in Taiwan. Net income for the first six months of 2008 increased 28.7 percent to $20.1 million ($0.62 per diluted share, a 40.9 percent increase) compared to $15.6 million ($0.44 per diluted share) in the first six months of 2007.

In the first quarter of 2008, we repurchased 2.1 million shares of our common stock, for $59.2 million under our share repurchase program. There were no repurchases during the second quarter of 2008.

Going forward, business and market uncertainties may affect results. See “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995” above and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 for a full discussion of the key factors which affect our business and operating results.

Revenues


	2008		2007		% Change
Quarter ended June 30,	$	89,487	$	92,432		(3.2	%)
Six Months Ended June 30,	$	182,284	$	174,586		4.4	%

Revenues decreased 3.2 percent to $89.5 million in the second quarter of 2008 from $92.4 million in the second quarter of 2007. The decrease in revenues was primarily the result of a delay in the shipment of certain SDS products, reduced materials and equipment sales to the memory sector, customer material usage efficiencies as customers continue to improve their own internal processes, and slower-than-anticipated adoption of new products. A significant SDS product shipment to China at the end of June was delayed because of customs and security procedures associated with the upcoming Olympic Games. Management expects this shipment to be completed in the third quarter. Had currency values been unchanged from the second quarter of 2007, revenues would have been $1.2 million lower than the reported revenues of $89.5 million, or 4.4 percent lower than the second quarter of 2007. The majority of benefit we received from currency translation came from the weakening of the U.S. dollar against both the Euro and Japanese Yen.

Revenues increased 4.4 percent to $182.3 million in the first six months of 2008 from $174.6 million in the first six months of 2007. The increase in revenues was driven primarily by stronger volumes in Asia for our SDS and flat-panel display applications, and in our life sciences product lines as new products gained traction with several significant customers, including revenues contributed by the LevTech acquisition. As noted above, a significant SDS product shipment to China at the end of June was delayed because of customs and security procedures associated with the Olympic Games. Had currency values been unchanged from the first half of 2007, revenues would have been $3.1 million lower than the reported revenues of $182.3 million, or 2.7 percent higher than the first half of 2007. The majority of benefit we received from currency translation came from the weakening of the U.S. dollar against both the Euro and Japanese Yen.

Gross Profit


	2008					2007
			% of					% of
	Amount		Revenues			Amount		Revenues
Quarter ended June 30	$	46,288		51.7	%	$	45,185		48.9	%
Six Months Ended June 30	$	92,654		50.8	%	$	84,459		48.4	%

Gross profit increased 2.4 percent to $46.3 million in the second quarter of 2008 from $45.2 million in the second quarter of 2007. Our gross margin percentage increased to 51.7 percent in 2008 from 48.9 percent in 2007, despite the increase in cost of revenues associated with the organization realignment described above, primarily because of favorable revenue mix in our SDS and flat-panel display product lines, reduced lower margin deposition equipment revenues, and manufacturing efficiencies in our U.S. plants.

Gross profit increased 9.7 percent to $92.7 million in the first six months of 2008 from $84.5 million in the first six months of 2007. Our gross margin percentage increased during this time period to 50.8 percent in 2008 from 48.4 percent in 2007 due to the reasons described above.

Research and Development Expenses


	2008					2007
			% of					% of
	Amount		Revenues			Amount		Revenues
Quarter ended June 30	$	9,583		10.7	%	$	7,298		7.9	%
Six Months Ended June 30	$	18,075		9.9	%	$	14,544		8.3	%

R&D expenses increased 31.3 percent to $9.6 million in the second quarter of 2008 from $7.3 million in the second quarter of 2007. The increase in R&D spending was primarily caused by planned increases in spending associated with high productivity development activities related to cleans chemistries (including staffing-related expenses and equipment depreciation costs), and higher costs associated with patents. As a percentage of revenues, R&D spending was 10.7 percent in the second quarter of 2008, which is higher than what we had expected primarily because revenues were lower than expected for the reasons noted above.

R&D expenses increased 24.3 percent to $18.1 million in the first six months of 2008 from $14.5 million in the first six months of 2007. The increase in R&D spending was primarily caused by planned increases in spending associated with high-productivity development activities related to cleans chemistries (including staffing-related expenses and equipment depreciation costs), and higher costs associated with patents.

Selling, General and Administrative Expenses


	2008					2007
			% of					% of
	Amount		Revenues			Amount		Revenues
Quarter ended June 30	$	23,330		26.1	%	$	26,238		28.4	%
Six Months Ended June 30	$	46,035		25.3	%	$	50,790		29.1	%

SG&A decreased 11.1 percent to $23.3 million in the second quarter of 2008 from $26.2 million in the second quarter of 2007. Most of the reduction was a result of the organizational realignment described above, with the associated redirection of costs to cost of revenues. Litigation expenses were also considerably lower in 2008 compared to 2007, as the 2007 results included a $1.1 million legal fee (associated with a contingent fee arrangement). We expect litigation costs to be significantly reduced in future quarters due to the recent settlement of the litigation with Praxair.

SG&A decreased 9.4 percent to $46.0 million in the first half of 2008 from $50.8 million in the first half of 2007. Most of the reduction was a result of the organizational realignment described above, with the associated redirection of costs to cost of revenues. Litigation expenses were also considerably lower in 2008 compared to 2007, due to the reasons mentioned above.

Operating Income


	2008					2007
			% of					% of
	Amount		Revenues			Amount		Revenues
Quarter ended June 30	$	13,375		14.9	%	$	11,649		12.6	%
Six Months Ended June 30	$	28,544		15.7	%	$	19,125		11.0	%

Operating income increased 14.8 percent to $13.4 million in the second quarter of 2008 (representing 14.9 percent of revenues) from $11.6 million in the second quarter of 2007 (representing 12.6 percent of revenues). Operating income increased 49.2 percent to $28.5 million in the first half of 2008 (representing 15.7 percent of revenues) from $19.1 million in the first half of 2007 (representing 11.0 percent of revenues). These changes are from a variety of factors, as noted above.

Interest Income

Interest income decreased to $0.8 million in the second quarter of 2008 from $2.0 million in the second quarter of 2007 and decreased to $1.8 million in the first half of 2008 from $3.8 million in the first half of 2007. The primary reasons for the decreases were lower invested cash and marketable securities balances as a result of the Company’s share repurchase program, the acquisition of LevTech, and lower rates of return given recent market interest rate declines.

Other Expense, Net

During the second quarter of 2008, due to changes in events and circumstances related to a convertible note due from an early-stage semiconductor materials venture that is in bankruptcy, we recognized an impairment charge of $1.8 million to fully write down the value of this convertible note. Also during the second quarter of 2008, we recognized a $2.0 million gain from the sale of a marketable equity security.

Provision for Income Taxes


	Effective Rate
	2008			2007
Quarter ended June 30		30.4	%		31.7	%
Six Months Ended June 30		31.6	%		32.0	%

Our effective income tax rates are impacted by the change in the mix of income attributed to the various countries in which we conduct business, changes in the levels of tax-exempt interest income, and R&D tax credits in Taiwan. As of June 30, 2008, the Company had a net deferred tax asset on the balance sheet of $8.7 million, primarily because of temporary differences (i.e., accrued liabilities, inventory adjustments, equity-based compensation, and depreciation and amortization), state tax credit carry forwards, federal and state net operating loss carry forwards, and R&D tax credits in Taiwan.

Liquidity and Capital Resources

We assess liquidity in terms of our ability to generate cash to fund our operating and investing activities. Of particular importance to the management of liquidity are cash flows generated by operating activities, cash used for capital expenditures, cash used to repurchase common stock, cash obtained through lines of credit, and cash generated from the sale of common stock through exercises of employee stock options.

We manage our worldwide cash requirements considering the cost effectiveness of the funds available from the many subsidiaries through which we conduct our business, including the use of revolving lines of credit in countries where interest rates are favorable. We believe that our existing cash and cash equivalents and marketable securities positions at this time, and our future operating cash flows will be sufficient to meet our operating cash needs for the foreseeable future. Further, we expect to be able to obtain debt or equity financing to provide additional sources of liquidity should they be required.

We continue to invest in R&D to provide future sources of revenue through the development of new products, as well as through additional uses for existing products. We consider R&D and the development of new products and technologies an integral part of our growth strategy and a core competency of the Company. Likewise, we continue to make capital expenditures in order to expand and modernize manufacturing facilities around the globe and to drive efficiencies throughout the organization. Additionally, management considers, on a continuing basis, potential acquisitions of strategic technologies and businesses complementary to the Company’s current business.

A summary of our Cash Flows follows (in thousands):


	Six Months Ended
	June 30,
	2008			2007
Cash provided by (used for):

Operating Activities	$	26,791		$	30,867
Investing Activities		(28,579	)		(25,535	)
Financing Activities		(56,589	)		(15,105	)
Effects of exchange rate changes on cash		(325	)		(606	)

Net cash provided by operating activities decreased by $4,076 comprised primarily of the following components:

•

Increase in net income of $4,470

•

Increase in cash provided by changes in accounts receivable of $7,625, primarily because of increased focus on reduction of days’ sales outstanding in Asia and also due to timing of collections in general

•

Cash used related to changes in inventories of $7,487 compared to cash provided by changes in inventories of $1,504, due to revenue growth and safety stock builds in 2008

•

Decrease in cash provided by changes in our income taxes payable, primarily due to timing, of $4,180

•

Increase in cash used by other operating or working capital accounts of $5,352

Net cash used by investing activities increased by $3,044 primarily from:

•

Increase in capital spending of $17,099 primarily because of the purchase of research tools used in our high productivity development activities

•

$27,673 of cash paid for the purchase of LevTech, Inc. on January 4, 2008

•

Decrease in cash used for purchases of marketable securities of $116,843

•

Decrease in cash proceeds from sales and maturities of marketable securities of $76,477

Net cash used for financing activities increased by $41,484 primarily from:

•

Increase in treasury stock purchases of $36,340

•

Decrease of $5,905 in proceeds from stock option exercises in 2008

•

Increase in credit line borrowings of $2,948

•

Increase in credit line repayments of $1,802

Critical Accounting Estimates

There have been no material changes from the methodologies applied by management for critical accounting estimates previously disclosed in ATMI’s most recent Annual Report on Form 10-K.

Off-Balance Sheet Arrangements and Contractual Obligations

We have extended standby letters of credit to certain third parties for, a leased facility, in connection with a litigation matter in Europe, and to guarantee the debt of an equity-method investee. Circumstances that could cause the contingent obligations and liabilities arising from these letters of credit are primarily related to nonperformance under a contract or deterioration in the financial condition of the guaranteed party.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk.As of June 30, 2008, the Company’s cash and cash equivalents and marketable securities included money market securities, government and government-sponsored bond obligations, corporate bond obligations, and commercial paper. As of June 30, 2008, an increase of 100 basis points in interest rates on securities with maturities greater than one year would reduce the fair value of the Company’s marketable securities portfolio by approximately $0.5 million. Conversely, a reduction of 100 basis points in interest rates on securities with maturities greater than one year would increase the fair value of the Company’s marketable securities portfolio by approximately $0.6 million.

Foreign Currency Exchange Risk.Most of the Company’s sales are denominated in U.S. dollars and as a result, the Company doesn’t have any significant exposure to foreign currency exchange risk with respect to sales made. Approximately 28 percent of the Company’s revenues for the quarter and six month periods ended June 30, 2008 were denominated in Japanese Yen (“JPY”), Korean Won, and Euros, but a majority of the product is sourced in U.S. dollars. Management periodically reviews the Company’s exposure to currency fluctuations. This exposure may change over time as business practices evolve and could have a material effect on the Company’s financial results in the future. We use forward foreign exchange contracts to hedge specific exposures relating to intercompany payments and anticipated, but not yet committed, intercompany sales (primarily parent company export sales to subsidiaries at pre-established U.S. dollar prices). The terms of the forward foreign exchange contracts are generally matched to the underlying transaction being hedged, and are typically under one year.

Because such contracts are directly associated with identified transactions, they are an effective hedge against fluctuations in the value of the foreign currency underlying the transaction. We recognize in earnings (other income (expense), net) changes in the fair value of all derivatives designated as fair value hedging instruments that are highly effective and recognize in accumulated other comprehensive income any changes in the fair value of all derivatives designated as cash flow hedging instruments that are highly effective. We generally do not hedge overseas sales denominated in foreign currencies or translation exposures. Further, we do not enter into derivative instruments for trading or speculative purposes and all of our derivatives were highly effective throughout the periods reported.

At June 30, 2008, we held forward foreign currency exchange contracts designated as fair value hedges with notional amounts totaling $6.9 million and forward foreign currency exchange contracts designated as cash flow hedges with notional amounts totaling $4.0 million, which are being used to hedge recorded foreign denominated assets and forecasted inter-company transactions, respectively, all of which will be settled in JPY. Holding other variables constant, if there were a 10 percent decline in foreign exchange rates for the JPY, the fair market value of the JPY contracts outstanding at June 30, 2008 would decrease by approximately $1.2 million ($0.8 million would be expected to be fully offset by foreign exchange gains on the amounts being hedged, and the remaining $0.4 million would be reported in accumulated other comprehensive income, until the forecasted hedged transactions were recognized). The effect of an immediate 10 percent change in other foreign exchange rates would not be expected to have a material effect on the Company’s future operating results or cash flows.

Changes in Market Risk. Other than the recent turmoil in the markets associated with sub-prime credit investments, there have been no material quantitative changes in market risk exposure between December 31, 2007 and June 30, 2008. At June 30, 2008, we held one Massachusetts Educational Financing Authority auction rate security, comprising part of a student loan portfolio, with a stated maturity date in 2038, a par value of $5.0 million and a reset date of March 12, 2009. During March 2008, the annual auction for this security failed, and as a result, the tax-exempt coupon rate of interest was reset to the default interest rate of 6.55% from its previous rate of 3.75%. We will not have access to these funds until a future auction for this auction-rate security is successful, the security has been called by the issuer, or until we sell the security in a secondary market. Currently, despite a AA credit rating and a premium coupon rate, no secondary market is active given the current turmoil in the credit markets. At June 30, 2008, we recorded a temporary impairment charge of $0.7 million within Accumulated Other Comprehensive Income based upon an independent third-party valuation we received for this auction-rate security. The valuation of this security incorporated assumptions about the anticipated term and the yield that a market participant would require to purchase such a security in the current market environment.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO and CFO concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective in that they provide reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. There have been no changes to our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the second quarter of fiscal 2008 that we believe materially affected, or will be reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

There have been no material changes to our Risk Factors in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 4. Submission of Matters to a Vote of Security Holders

We held our annual meeting of stockholders on May 22, 2008. As of April 14, 2008, the record date for the meeting, 32,095,224 shares of ATMI common stock were outstanding. A quorum consisting of 30,864,285 shares of common stock were present or represented at the meeting. The following actions were approved at the meeting: (1) two Class II directors were elected for a term expiring at the annual meeting of stockholders in 2011; and (2) the appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2008 was ratified.

This table represents the votes tabulated for the election of the two Class II directors:


Director	In Favor		Withheld

Mark A. Adley		30,342,024		522,261
Eugene G. Banucci		30,353,540		510,745

This table represents the votes tabulated for the ratification of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2008:


Votes For	Votes Against		Abstentions

30,794,867		66,733		2,685

Item 5. Other Information

None.

Item 6. Exhibits


	31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.
July 23, 2008

	By	/s/ Douglas A. Neugold
		Douglas A. Neugold
		President and Chief Executive Officer

	By	/s/ Timothy C. Carlson
		Timothy C. Carlson
		Executive Vice President, Chief Financial
		Officer and Treasurer

EXHIBIT INDEX


	31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

ATMI (ATMI) Inactive 10-Q2008 Q2 Quarterly report

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