SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number: 0-30130
ATMI, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1481060
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7 Commerce Drive, Danbury, CT 06810
----------------------------- -----
(Address of principal executive offices) (Zip Code)
203-794-1100
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No __
The number of shares outstanding of the registrant's common stock as of August
3, 2000 was 29,686,102.
ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2000
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 6
Notes to Consolidated Interim Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ATMI, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
June 30, December 31,
2000 1999
---- ----
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 31,563 $ 31,619
Marketable securities 121,203 60,555
Accounts receivable, net of allowance for
doubtful accounts of $1,481 in
2000 and $1,366 in 1999 55,885 41,989
Inventories 30,199 21,733
Deferred income taxes 5,277 5,277
Other 10,587 6,256
====== =====
Total current assets 254,714 167,429
Property and equipment, net 65,032 54,675
Deferred income taxes 2,090 2,090
Goodwill and other long-term assets, net 6,915 8,462
-------- --------
$328,751 $232,656
======== ========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 16,922 $ 10,971
Accrued liabilities 9,423 10,146
Accrued salaries and related benefits 6,227 9,185
Loans, notes and bonds payable, current portion 4,626 4,964
Capital lease obligations, current portion 3,059 1,936
Income taxes payable 10,367 4,592
Deferred income taxes 3,647 4,436
-------- --------
Total current liabilities 54,271 46,230
Loans, notes and bonds payable, less current portion 3,669 4,448
Capital lease obligations, less current portion 6,253 1,832
Deferred income taxes 959 3,754
Other long-term liabilities 925 478
Minority interest 1,379 1,109
Stockholders' equity:
Preferred stock, par value $.01: 2,000 shares
authorized; none issued and outstanding -- --
Common stock, par value $.01: 50,000 shares
authorized; issued and outstanding 29,661 in
2000 and 27,794 in 1999 297 278
Additional paid-in capital 190,933 122,536
Retained earnings 68,749 45,465
Accumulated other comprehensive income 1,318 6,526
-------- --------
Total stockholders' equity 261,297 174,805
-------- --------
$328,751 $232,656
======== ========
See accompanying notes.
ATMI, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Three months ended June 30,
2000 1999
-------- --------
Revenues $ 69,419 $ 49,323
Cost of revenues 32,431 23,005
-------- --------
Gross profit 36,988 26,318
Operating expenses:
Research and development 6,932 4,462
Selling, general and administrative 16,465 15,251
Merger and related costs -- 6,800
-------- --------
23,397 26,513
-------- --------
Operating income (loss) 13,591 (195)
Interest income 2,094 1,220
Interest expense (316) (270)
Other income (expense), net 300 (74)
-------- --------
Income before taxes and minority interest 15,669 681
Provision for income taxes 5,743 1,418
-------- --------
Income (loss) before minority interest 9,926 (737)
Minority interest 165 82
-------- --------
Net income (loss) $ 9,761 $ (819)
======== ========
Net income (loss) per share-basic $ 0.34 $ (0.03)
======== ========
Net income (loss) per share-assuming dilution $ 0.32 $ (0.03)
======== ========
Weighted average shares outstanding-basic 28,914 26,402
======== ========
Weighted average shares outstanding-assuming dilution 30,479 26,402
======== ========
See accompanying notes.
ATMI, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Six months ended June 30,
2000 1999
---- ----
Revenues $ 130,592 $ 86,563
Cost of revenues 61,388 41,248
--------- ---------
Gross profit 69,204 45,315
Operating expenses:
Research and development 12,833 8,485
Selling, general and administrative 30,523 28,192
Merger and related costs -- 6,800
--------- ---------
43,356 43,477
--------- ---------
Operating income 25,848 1,838
Interest income 3,252 2,289
Interest expense (561) (631)
Other income, net 8,700 22
--------- ---------
Income before taxes and minority interest 37,239 3,518
Provision for income taxes 13,685 2,776
--------- ---------
Income before minority interest 23,554 742
Minority interest 270 83
--------- ---------
Net income $ 23,284 $ 659
========= =========
Net income per share-basic $ 0.83 $ 0.03
========= =========
Net income per share-assuming dilution $ 0.78 $ 0.02
========= =========
Weighted average shares outstanding-basic 28,104 26,378
========= =========
Weighted average shares outstanding-assuming dilution 29,711 28,073
========= =========
See accompanying notes.
ATMI, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six months ended June 30,
2000 1999
---- ----
Operating activities
Net income $ 23,284 $ 659
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization 5,514 5,301
Long-lived asset impairment -- 3,386
Provision for bad debt 186 290
Deferred income taxes (789) 1,409
Effect of change of fiscal year of pooled entity -- (163)
Realized gain on sale of investment (9,520) --
Realized loss on investments 1,250 --
Minority interest in net earnings of
consolidated subsidiaries 269 81
Changes in operating assets and liabilities
Increase in accounts receivable (14,082) (8,106)
(Increase) decrease in inventory (8,466) 398
(Increase) decrease in other assets (4,416) 1,703
Increase (decrease) in accounts payable 5,951 (26)
Increase (decrease) in accrued expenses (3,681) 1,128
Increase in other liabilities 6,221 2,827
-------- --------
Total adjustments (21,563) 8,228
-------- --------
Net cash provided by operating activities 1,721 8,887
-------- --------
Investing activities
Capital expenditures (15,489) (3,900)
(Purchase) sale of marketable securities, net (58,933) 2,852
-------- --------
Net cash used by investing activities (74,422) (1,048)
-------- --------
Financing activities
Borrowings from capital lease obligations 6,840 --
Payments on loans, notes and bonds payable (1,117) (6,381)
Payments on capital lease obligations (1,296) (1,212)
Proceeds from sale of common shares, net 63,500 --
Proceeds from exercise of stock options and warrants 4,916 987
-------- --------
Net cash provided (used) by financing activities 72,843 (6,606)
-------- --------
Effects of exchange rate changes on cash (198) 231
Net (decrease) increase in cash and cash equivalents (56) 1,464
Cash and cash equivalents, beginning of period 31,619 21,618
-------- --------
Cash and cash equivalents, end of period $ 31,563 $ 23,082
======== ========
See accompanying notes.
ATMI, Inc.
Notes To Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated interim financial statements of
ATMI, Inc. ("ATMI" or the "Company") have been prepared in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X and do not include
all of the financial information and disclosures required by generally accepted
accounting principles. In addition, these unaudited consolidated interim
financial statements give retroactive effect to the five acquisitions
consummated by the Company in 1999 which have been accounted for using the
pooling-of-interests method. These acquisitions are more fully described in the
Company's Form 10-K/A for the year ended December 31, 1999.
In the opinion of the management of ATMI, Inc., the financial information
contained herein has been prepared on the same basis as the audited consolidated
financial statements contained in the Company's Form 10-K/A for the year ended
December 31, 1999, and includes adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the unaudited quarterly results set
forth herein. These unaudited consolidated interim financial statements should
be read in conjunction with the December 31, 1999 audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K/A. The Company's quarterly results have, in the past, been subject to
fluctuation and, thus, the operating results for any quarter are not necessarily
indicative of results for any future fiscal period.
2. Per Share Data
The following table presents the computation of basic and diluted earnings
per share for the periods indicated (in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------ ------ ------ ------
Numerator:
Net income (loss) $ 9,761 $ (819) $ 23,284 $ 659
======== ======== ======== ========
Denominator:
Denominator for basic earnings per share 28,914 26,402 28,104 26,378
Dilutive effect of contingent shares related
to acquisitions 700 -- 700 1,209
Dilutive effect of employee stock options
and warrants, net of tax benefit 865 -- 907 486
-------- -------- -------- --------
Denominator for diluted earnings per share 30,479 26,402 29,711 28,073
======== ======== ======== ========
Net income (loss) per share--basic $ 0.34 $ (0.03) $ 0.83 $ 0.03
======== ======== ======== ========
Net income (loss) per share--assuming dilution $ 0.32 $ (0.03) $ 0.78 $ 0.02
======== ======== ======== ========
3. Inventory
Inventory is comprised of the following (in thousands):
June 30, December 31,
2000 1999
---------- ------------
Raw materials $ 22,490 $ 16,088
Work in process 3,929 3,059
Finished goods 5,631 4,115
-------- --------
32,050 23,262
Obsolescence reserve (1,851) (1,529)
-------- --------
$ 30,199 $ 21,733
======== ========
4. Comprehensive Income
Comprehensive income is a more inclusive financial reporting methodology
that includes disclosure of certain financial information that historically has
not been recognized in the calculation of net income. The following table
presents the computation of comprehensive income (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
Net income (loss) $ 9,761 $ (819) $ 23,284 $ 659
-------- -------- -------- --------
Cumulative translation adjustment (571) 369 324 (198)
Unrealized (loss) gain on
available-for-sale securities (net of
taxes of $1,294 and $1,346 in 2000 and
$911 and $922 in 1999) (1,470) 1,620 (1,330) 1,640
Reclassification adjustment for
realized gain on securities sold -- -- (3,680) --
-------- -------- -------- --------
Comprehensive income $ 7,720 $ 1,170 $ 18,076 $ 2,623
======== ======== ======== ========
5. Segment Data
Segment information included under the caption "Segment Data" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations is incorporated herein by reference and is an integral part of these
unaudited interim financial statements.
6. Income Taxes
During the second quarter 1999, the Company was notified by the Internal
Revenue Service of an assessment of $2.1 million for certain tax matters. The
Company believes that such assessment is without merit and intends to vigorously
defend its position in these tax matters.
7. Public Offering
On April 4, 2000, the Company completed a registered underwritten public
offering of 2,800,000 shares, of the Company's common stock at $45.00 per share.
Of such shares, the Company sold 1,500,000 shares and certain stockholders sold
1,300,000 shares. The Company received net proceeds from the offering of
approximately $63.5 million.
8. Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. In June 2000,
the SEC delayed the implementation of this Staff Accounting Bulletin until no
later than the fourth quarter of 2000. At this time, the Company is still
assessing the impact of SAB 101 on its financial position and results of
operations.
9. Subsequent Event
On July 7, 2000, pursuant to an Agreement and Plan of Merger, the Company
issued 369,505 shares of its common stock in exchange for all of the ownership
interests of Environmentally Safe Cleaning Alternatives, Inc. ("ESCA"). This
transaction will be accounted for as a pooling of interests. ESCA is a provider
of environmentally safe cleaning services to the global microelectronics
industry.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company is a leading supplier of materials, equipment and related
services used worldwide in the manufacture of semiconductor devices. The Company
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."
The Company's customers include most of the leading semiconductor manufacturers
in the world.
The Company has organized its operations along two business segments:
Materials and Technologies. Materials provides products that are used in the
semiconductor manufacturing process and related packaging and delivery systems.
Technologies provides products 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.
The Company has completed several acquisitions since 1997, each of which
has been accounted for as a pooling of interests. As a result, our consolidated
financial statements have been restated to reflect the results of these acquired
companies.
Results of Operations
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 46.7 46.6 47.0 47.7
----- ----- ----- -----
Gross profit 53.3 53.4 53.0 52.3
Operating expenses:
Research and development 10.0 9.0 9.8 9.8
Selling, general and administrative 23.7 30.9 23.4 32.6
Merger and related costs 0.0 13.8 0.0 7.8
----- ----- ----- -----
Total operating expenses 33.7 53.7 33.2 50.2
----- ----- ----- -----
Operating income (loss) 19.6 (0.3) 19.8 2.1
Other income, net 3.0 1.7 8.7 2.0
----- ----- ----- -----
Income before taxes and minority interest 22.6 1.4 28.5 4.1
Provision for income taxes 8.3 2.9 10.5 3.2
----- ----- ----- -----
Income (loss) before minority interest 14.3 (1.5) 18.0 0.9
Minority interest (0.2) (0.2) (0.2) (0.1)
===== ===== ===== =====
Net income (loss) 14.1% (1.7)% 17.8% 0.8%
===== ===== ===== =====
Segment Data
The Company has two reportable operating segments: Materials and
Technologies. The reportable segments are each managed separately because they
manufacture and distribute distinct products with different production
processes. The Company evaluates performance and allocates resources based on
operating profit or loss, not including interest and other income or expense and
income taxes. The accounting policies of the reportable segments are the same as
those described in the summary of significant accounting policies in the
Company's consolidated financial statements. Intercompany sales are not material
among segments or operating divisions. The general corporate assets include
primarily cash and marketable securities, goodwill and other long-lived assets.
The following tables provide reported results for each of these segments
for the three and six months ended June 30 (in thousands):
Three Months Ended Six Months Ended
Revenues 2000 1999 2000 1999
- --------- ---- ---- ---- ----
Materials $ 33,255 $ 23,942 $ 63,505 $ 43,055
Technologies 36,164 25,381 67,087 43,508
------ ------ ------ ------
Consolidated Revenues $ 69,419 $ 49,323 $ 130,592 $ 86,563
========= ========= ========= =========
Three Months Ended Six Months Ended
Operating Income (Loss) 2000 1999 2000 1999
- ---------------------- ---- ---- ---- ----
Materials $ 8,446 $ 5,005 $ 16,773 $ 8,601
Technologies 5,145 1,600 9,075 37
Merger and Related Costs -- (6,800) -- (6,800)
----- ------ ----- ------
Consolidated Operating (Loss) $ 13,591 $ (195) $ 25,848 $ 1,838
========= ========= ========= ==========
Three Months Ended Six Months Ended
Net Income (Loss) 2000 1999 2000 1999
- ----------------- ---- ---- ---- ----
Operating Income (Loss) from
Reportable Segments $ 13,591 $ (195) $ 25,848 $ 1,838
Other Income 1,913 794 11,121 1,597
Income Taxes (5,743) (1,418) (13,685) (2,776)
------ ------ ------- ------
Consolidated Net Income (Loss) $ 9,761 $ (819) $ 23,284 $ 659
========= ========= ========= =========
The following table provides reported balance sheet data for each of the
segments:
June 30, December 31,
Identifiable Assets 2000 1999
- -------------------- ---- ----
Materials $ 73,092 $ 60,717
Technologies 102,659 78,747
General Corporate Assets 153,000 93,192
------- ------
Total Consolidated Assets $ 328,751 $232,656
========== ========
Comparison of Three Months Ended June 30, 2000 and 1999.
Revenues. Total revenues increased 40.7% to approximately $69.4 million in
the three months ended June 30, 2000 from approximately $49.3 million in the
same period in 1999. The increase in revenues was primarily attributable to the
semiconductor industry's growth for both segments of the business. The Materials
and Technologies segments experienced revenue growth of 38.9% and 42.5% for the
three months ended June 30, 2000, respectively, as compared to the same period
in the prior year. Materials experienced significant revenue gains related to
the materials and delivery systems product lines and high purity packaging
product lines as compared to the same period in the prior year. Semiconductor
manufacturing capacity expansion began to rebound in mid 1999 leading to
improved sales in the Technologies segment, and demand continues to increase for
environmental and sensing products and thin film deposition services.
Gross Profit. Gross profit increased 40.6% to approximately $37.0 million
in the quarter ended June 30, 2000 from approximately $26.3 million in the
quarter ended June 30, 1999. The growth in gross profit was primarily
attributable to the increased sales levels experienced by both segments of the
Company. Gross margin remained at 53.3% of revenues in the quarter ended June
30, 2000 consistent with the prior year quarter, as favorable shifts in product
mix were offset by the impact of ramping additional manufacturing capacity to
support future growth.
Research and Development Expenses. Research and development expenses
increased 55.4% to approximately $6.9 million in the three months ended June 30,
2000 from approximately $4.5 million in the same quarter of 1999. The increase
in the second quarter of 2000 was principally due to continued efforts to
develop advanced materials, including development efforts on the SDS and
chemicals product lines, and continued development efforts 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 increased to 10.0% in the 2000 quarter from 9.0% in the
1999 quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8.0% to approximately $16.5 million in the
three months ended June 30, 2000 from approximately $15.3 million in the same
period in 1999. Selling, general and administrative expenses as a percentage of
revenues decreased to 23.7% in the three months ended June 30, 2000, compared to
30.9% in the same quarter a year ago. Administration costs decreased as a result
of continued cost savings initiatives tied to the integration activities of
business acquisitions, and lower executive compensation paid to members of
management of certain acquired businesses. Offsetting the cost savings noted
above 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. The second quarter 1999 operating results
included merger and related costs of approximately $6.8 million, including $2.4
million of investment banker fees, legal fees and accounting fees recorded in
the quarter ended June 30, 1999 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 line.
Operating Income. Operating income increased approximately 106% to $13.6
million for the three months ended June 30, 2000 from $6.6 million, excluding
one-time merger and related costs, in the second quarter 1999. Materials' and
Technologies' operating income for the three months ended June 30, 2000
increased approximately 69% and 221%, respectively, to $8.4 million and $5.1
million from $5.0 million and $1.6 million, respectively, from the same period
in 1999. This increase reflected gains due to strong market conditions within
the industry and continued market penetration of products during the second
quarter of 2000.
The significant revenue increase in the second quarter of 2000, combined
with stronger margins and the business integration initiatives, resulted in
higher operating income within the Materials and Technologies segments.
Materials' and Technologies' operating income, as a percentage of revenues, was
25.4% and 14.2% for the three months ended June 30, 2000, respectively, compared
to 20.9% and 6.3% for the three months ended June 30, 1999, respectively.
Other Income, Net. Other income, including interest income and expense
increased to approximately $2.1 million in the quarter ended June 30, 2000 from
approximately $0.9 million in the quarter ended June 30, 1999. The increase for
the three months ended June 30, 2000 was attributable to an increase in interest
income to $2.1 million from $1.2 million for the same period in 1999. This
increase was the result of increased cash from the net proceeds of the stock
offering completed early in the second quarter of 2000, and the sale of certain
investments by the Company during the first quarter of 2000.
Income Taxes. Income tax expense increased approximately 305% to $5.7
million for the three months ended June 30, 2000 from $1.4 million for the three
months ended June 30, 1999. The Company's income tax expense related primarily
to United States federal, state and foreign tax liabilities, which were
partially offset by various foreign sales corporation benefits and research and
development credits. The effective tax rate for the three months ended June 30,
2000 was 37%, in line with the statutory rate for the Company. The difference
between the consolidated effective income tax rate and the U.S. federal
statutory rate for 1999 was primarily attributed to state income taxes and the
effects of certain non-deductible merger related costs.
Minority Interest. Minority interest represents the 30.0% interest held by
K.C. Tech Co., Ltd. in the operations of ADCS-Korea, a South Korean chusik
hoesa, which is a joint venture established to manufacture, sell and distribute
chemicals to the semiconductor and related industries in South Korea.
Earnings per Share. On a pro-forma basis, excluding the after-tax $5.5
million charge related to acquisitions closed during the second quarter of 1999,
net income improved to $9.8 million, or $0.32 per diluted share in the second
quarter of 2000 compared with $4.6 million or $0.17 per diluted share for the
second quarter of 1999. Loss per share-assuming dilution, including the merger
and related cost charge, was ($0.03) for the second quarter of 1999. Weighted
average shares outstanding for the second quarter of 2000 were approximately
30.5 million compared to approximately 26.4 million for the second quarter of
1999, primarily due to the public offering of 1.5 million shares during the
second quarter of 2000, and that common stock equivalents were not included in
the 1999 number due to their anti-dilutive effect.
Comparison of Six Months Ended June 30, 2000 and 1999
Revenues. Total revenues increased 50.9% to approximately $130.6 million in
the six months ended June 30, 2000 from approximately $86.6 million in the same
period in 1999. The Materials and Technologies segments experienced revenue
growth of 47.5% and 54.2% 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 52.7% to approximately $69.2 million
in the six months ended June 30, 2000 from approximately $45.3 million in the
six months ended June 30, 1999. As a percentage of revenues, gross margin
increased to 53.0% in the first half of 2000 from 52.3% 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 51.2% to approximately $12.8 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 9.8% in the first half of 2000 and the first half
of 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8.3% to approximately $30.5 million for the
six months ended June 30, 2000 from approximately $28.2 million in the same
period in 1999. As a percentage of revenues, these expenses declined to 23.4%
for the six months ended June 30, 2000 compared to 32.6% 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
the quarter ended June 30, 1999 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 line.
Operating Income. Operating income increased approximately three fold to
$25.8 million for the six months ended June 30, 2000 from $8.6 million,
excluding one-time merger and related costs, in the second quarter 1999.
Materials' operating income for the six months ended June 30, 2000 increased
approximately 95% to $16.8 million, and Technologies' operating income for the
six months ended June 30, 2000 increased to $9.1 million from approximately $0.1
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 $11.4
million for the six months ended June 30, 2000 from $1.7 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 $3.2 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 37%, in line with the statutory rate of the Company, compared to 80.8%
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.
Earnings per Share. On a pro-forma basis, excluding the after-tax $5.5
million charge related to acquisitions closed during the first six months of
1999, net income improved to $23.3 million, or $0.78 per diluted share in the
first six months of 2000 compared with $6.1 million or $0.22 per diluted share
for the same period in 1999. Earnings per share-assuming dilution, including the
merger and related cost charge, were $0.02 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 29.7 million in the first six months of 2000 from approximately
28.1 million in the first six months of 1999.
Liquidity and Capital Resources
To date, the Company has financed its activities through cash from
operations, the sale of equity, external research and development funding, and
various lease and debt instruments. The Company's working capital increased to
$200.4 million at June 30, 2000 from $121.2 million at December 31, 1999.
Net cash provided by operations was approximately $1.7 million during the
six months ended June 30, 2000 compared to $8.9 million provided during the
first half of 1999. This resulted primarily from increased operating
profitability of the Company and improved working capital in the first half of
2000 as compared to the first half of 1999. The improvement in working capital
was primarily caused by an increase in accounts payable and an increase in other
liabilities, offset by significant increases in accounts receivable and
inventory. 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 $74.4 million
during the six months ended June 30, 2000, and approximately $1.0 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 invested approximately $58.9 million of the proceeds raised from the
sale of its common stock in marketable securities for future working capital
requirements and potential merger and acquisition activities. The Company also
received net proceeds of $10.6 million related to the sale of certain
investments in the first six months of 2000. Capital expenditures were $15.5
million and $3.9 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.
Net cash provided by financing activities was approximately $72.8 million
during the six months ended June 30, 2000. Net cash used by financing activities
was approximately $6.6 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 of 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 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 $6.4 million,
respectively.
ATMI believes its existing cash balances, marketable securities, existing
sources of liquidity and anticipated funds from operations will satisfy its
projected working capital and other cash requirements through at least the end
of 2001. However, ATMI believes the level of financing resources available to it
is an important competitive factor in its industry and may seek additional
capital prior to the end of that period. Additionally, ATMI considers, on a
continuing basis, potential acquisitions of technologies and businesses
complementary to its current business.
Forward-Looking Statements
The statements contained in this report which are not historical are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Examples of forward-looking statements include, without limitation,
statements by ATMI regarding financial projections, expectations for demand and
sales of new and existing products, market and technology opportunities,
business strategies, business opportunities, objectives of management for future
operations and semiconductor industry and market segment growth. In addition,
when used in this report, the words "anticipate," "plan," "believe," "estimate,"
"expect" and similar expressions as they relate to the Company or its management
are intended to identify forward-looking statements. All forward-looking
statements involve risks and uncertainties. Actual results may differ materially
from those discussed in, or implied by, the forward-looking statements as a
result of certain factors including, but not limited to, changes in the pattern
of semiconductor industry growth, the markets for or customer interest in the
products of ATMI, product and market competition, delays or problems in the
development and commercialization of products, technological changes affecting
the competencies of ATMI and unanticipated internal and/or third party delays.
The cautionary statements made in this report should be read as being applicable
to all related forward-looking statements wherever they appear in this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk. As of June 30, 2000 the Company's cash included money
market securities and commercial paper. Due to the short duration of the
Company's investment portfolio, an immediate 10% change in interest rates would
not have a material effect on the fair value of the Company's portfolio;
therefore, the Company would not expect the operating results or cash flows to
be affected to any significant degree by the effect of a sudden change in market
interest rates on the Company's securities portfolio.
Foreign Currency Exchange Risk. A substantial portion of the Company's
sales are denominated in U.S. dollars and, as a result, the Company has
relatively little exposure to foreign currency exchange risk with respect to
sales made. This exposure may change over time as business practices evolve and
could have a material impact on the Company's financial results in the future.
The Company does not use forward exchange contracts to hedge exposures
denominated in foreign currencies or any other derivative financial instruments
for trading or speculative purposes. The effect of an immediate 10% change in
exchange rates would not have a material impact on the Company's future
operating results or cash flows.
PART II- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Stockholders of the Company was held on May 24,
2000. At the annual meeting, the stockholders elected the following persons to
the Board of Directors of the Company: Stephen H. Mahle and C. Douglas Marsh.
There were 23,545,820 votes for and 1,906,505 votes withheld for Mr. Mahle, and
25,349,373 votes for and 102,952 votes withheld for Mr. Marsh. Both individuals
were elected for a term that expires at the 2003 Annual Meeting of Stockholders.
The terms of the following directors continued after the 2000 Annual Meeting:
Robert S. Hillas, Michael J. Yamazzo, Mark A. Adley and Eugene G. Banucci.
The stockholders also approved the Company's 2000 Stock Plan. There were
17,305,671 votes for, 3,487,836 against, 466,007 abstentions, and 4,192,811
Broker non-votes with respect to such approval.
The stockholders also ratified the appointment by the Board of Directors of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 2000. There were 25,391,453 votes for, 58,560 against, and
2,212 abstentions with respect to such ratification.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit No. Description
27.01 Financial Data Schedule (Filed herewith)
b. Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three months ended
June 30, 2000. On July 21, 2000, the Company filed a Current Report on Form 8-K
dated July 7, 2000 reporting in Item 5 the merger of the Company's subsidiaries
into ESCA, Inc. and ESCA Ireland, Inc. pursuant to which the latter became
wholly-owned subsidiaries of the Company.
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.
August 11, 2000
By _____________________________
Eugene G. Banucci, Ph.D.,
President, Chief Executive Officer, Chairman of the Board and Director
By _____________________________
Daniel P. Sharkey, Vice President, Chief Financial Officer and
Treasurer (Chief Accounting Officer)
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.
August 11, 2000
By ______/S/ Eugene G. Banucci_______
Eugene G. Banucci, Ph.D.,
President, Chief Executive Officer, Chairman of the Board and Director
By _______/S/ Daniel P. Sharkey_________
Daniel P. Sharkey, Vice President, Chief Financial Officer and
Treasurer (Chief Accounting Officer)
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
27.01 Financial Data Schedule (Filed herewith)