1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] 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: 0-22756
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
October 31, 1997 was 18,101,898.
ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1997
TABLE OF CONTENTS
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet...............................................3
Consolidated Statement of Operations.....................................4
Consolidated Statement 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...14
Part II - Other Information
Item 5. Other Information............................................15
Pro Forma Condensed Combined Balance Sheet..............................16
Pro Forma Condensed Combined Statement of Operations....................17
Notes to Pro Forma Combined Financial Statements........................22
Item 6. Exhibits and Reports on Form 8-K.............................23
Signatures...................................................................24
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Advanced Technology Materials, Inc.
Consolidated Balance Sheet
September 30, December 31,
1997 1996
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents .................... $ 2,319,838 $ 4,437,015
Marketable securities ........................ 15,828,954 16,969,073
Accounts receivable, net of allowance
for doubtful accounts of $204,458 in
1997 and $141,504 in 1996 ................... 12,258,232 9,377,777
Inventories .................................. 5,355,484 4,541,282
Other ........................................ 3,007,176 500,324
--------- -------
Total current assets ......................... 38,769,684 35,825,471
Property and equipment, net .................. 9,378,428 8,102,218
Long-term investment ......................... 1,250,003 1,000,000
Goodwill and other intangibles ............... 5,119,895 5,190,758
--------- ---------
$54,518,010 $50,118,447
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable ................................. $ 2,364,441 $ 3,469,530
Accrued expenses ................................. 2,063,965 1,996,587
Accrued commissions .............................. 1,940,470 1,378,888
Accrued payroll and benefits ..................... 977,134 465,280
Notes payable .................................... 619,184 621,463
Other ............................................ 1,123,686 790,261
--------- -------
Total current liabilities ........................ 9,088,880 8,722,009
Notes payable, less current portion .............. 4,507,070 4,944,517
Other long-term liabilities ...................... 56,324 59,382
Stockholders' equity:
Preferred stock, par value $.01:
1,000,000 shares authorized; none issued
and outstanding ............................ - -
Common stock, par value $.01: 15,000,000
shares authorized; issued
8,838,655 in 1997 and 8,775,810 in 1996 .... 88,387 87,758
Additional paid-in capital ................... 37,727,492 37,234,277
Retained earnings (accumulated deficit) ...... 3,049,857 (929,496)
--------- --------
Total stockholders' equity ....................... 40,865,736 36,392,539
---------- ----------
$54,518,010 $ 50,118,447
=========== ============
See accompanying notes.
Advanced Technology Materials, Inc.
Consolidated Statement of Operations
(unaudited)
Three months ended September 30,
1997 1996
---- ----
Revenues:
Product revenues ........................ $ 12,968,047 $ 9,361,238
Contract revenues ....................... 2,220,193 2,783,966
--------- ---------
Total revenues ............................. 15,188,240 12,145,204
Cost of revenues:
Cost of product revenues ................ 5,360,956 3,956,454
Cost of contract revenues ............... 1,935,485 2,402,663
--------- ---------
Total cost of revenues ..................... 7,296,441 6,359,117
--------- ---------
Gross profit ............................... 7,891,799 5,786,087
Operating expenses:
Research and development ................ 2,320,242 1,648,901
Selling, general, and administrative .... 3,646,580 3,224,417
--------- ---------
5,966,822 4,873,318
--------- ---------
Operating income ........................... 1,924,977 912,769
Interest income ............................ 280,569 276,851
Interest expense ........................... (103,986) (124,983)
-------- --------
Income before taxes ........................ 2,101,560 1,064,637
Income taxes ............................... 568,372 90,019
------- ------
Net income ................................. $ 1,533,188 $ 974,618
============ ============
Net income per share ....................... $ 0.16 $ 0.10
------------ ------------
Weighted average shares outstanding ........ 9,741,879 9,375,964
============ ============
See accompanying notes.
Advanced Technology Materials, Inc.
Consolidated Statement of Operations
(unaudited)
Nine months ended September 30,
1997 1996
---- ----
Revenues:
Product revenues ........................ $ 34,165,363 $ 27,104,746
Contract revenues ....................... 7,120,843 7,478,717
--------- ---------
Total revenues ............................. 41,286,206 34,583,463
Cost of revenues:
Cost of product revenues ................ 14,690,618 11,563,699
Cost of contract revenues ............... 5,974,430 6,331,271
--------- ---------
Total cost of revenues ..................... 20,665,048 17,894,970
---------- ----------
Gross profit ............................... 20,621,158 16,688,493
Operating expenses:
Research and development ................ 6,432,348 5,697,116
Selling, general, and administrative .... 9,835,484 9,144,365
--------- ---------
16,267,832 14,841,481
---------- ----------
Operating income ........................... 4,353,326 1,847,012
Interest income ............................ 835,750 826,777
Interest expense ........................... (309,414) (387,684)
-------- --------
Income before taxes ........................ 4,879,662 2,286,105
Income taxes ............................... 900,309 201,593
------- -------
Net income ................................. $ 3,979,353 $ 2,084,512
============ ============
Net income per share ....................... $ 0.41 $ 0.22
------------ ------------
Weighted average shares outstanding ........ 9,632,741 9,362,307
========= =========
See accompanying notes.
Advanced Technology Materials, Inc.
Consolidated Statement of Cash Flows
(unaudited)
Nine months ended September 30,
1997 1996
---- ----
Operating activities
Net income ..................................... $ 3,979,353 $ 2,084,512
Adjustments to reconcile net income
to net cash (used) provided
by operating activities:
Depreciation and amortization ............. 1,919,700 1,745,116
Changes in operating assets and liabilities
Increase in accounts receivable ........ (2,880,455) (1,217,488)
Increase in inventory .................. (814,202) (1,522,235)
Increase in other assets ............... (2,653,434) (156,514)
Decrease in accounts payable ........... (1,105,089) (9,597)
Increase in accrued expenses ........... 1,140,814 1,745,059
Increase in other liabilities .......... 330,367 233,562
----------- -----------
Total adjustments .............................. (4,062,299) 817,903
---------- -------
Net cash (used) provided by operating activities (82,946) 2,902,415
------- ---------
Investing activities
Capital expenditures ........................... (2,978,465) (3,243,346)
Long term investment ........................... (250,003) --
Sale of marketable securities .................. 1,140,119 4,994,822
----------- -----------
Net cash (used) provided by investing activities (2,088,349) 1,751,476
---------- ---------
Financing activities
Proceeds from issuance of notes payable ........ - 727,217
Principal payments on notes payable ............ (439,726) (4,579,975)
Proceeds from the exercise of stock options .... 493,844 38,819
------- ------
Net cash provided (used) by financing activities 54,118 (3,813,939)
------ ----------
Net (decrease) increase in cash
and cash equivalents ........................ (2,117,177) 839,952
Cash and cash equivalents, beginning
of period ................................... 4,437,015 3,609,265
----------- -----------
Cash and cash equivalents, end of period ....... $ 2,319,838 $ 4,449,217
=========== ===========
See accompanying notes.
Advanced Technology Materials, Inc.
Notes To Consolidated Interim Financial Statements
(unaudited)
1. Basis of Presentation
On October 10, 1997, as part of the consummation of the transactions
described in Note 5 below, Advanced Technology Materials, Inc. underwent a
reorganization involving the creation of a new holding company (ATMI, Inc. - the
successor registrant of Advanced Technology Materials, Inc.) by means of a
merger resulting in the prior registrant becoming a wholly owned subsidiary of
the holding company. The accompanying unaudited interim financial statements are
those of Advanced Technology Materials, Inc. ("ATM") the registrant prior to the
reorganization and have been prepared in accordance with the instructions to
Form 10-Q and Rule 10.01 of Regulation S-X and do not include all of the
financial information and disclosures required by generally accepted accounting
principles.
In the opinion of the management of ATMI, Inc. ("ATMI" or the "Company"),
the successor registrant to ATM, the financial information contained herein has
been prepared on the same basis as the audited Consolidated Financial Statements
contained in ATM's Form 10-K for the year ended December 31, 1996, and includes
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the unaudited quarterly results set forth herein. ATM'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
Earnings per common share is computed using the treasury stock method based
on the weighted average number of common and common equivalent shares
outstanding during the period. Shares from the assumed exercise of options and
warrants granted by ATM have been included in the computation of earnings per
share for all periods, unless their inclusion would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. This Statement simplifies the computation of earnings per share and makes
the computation more consistent with those of other countries. The
implementation will require the disclosure of basic and diluted earnings per
share. The Company will adopt this Statement during the fourth quarter of 1997.
Pro forma basic earnings per share under the new computation are $.17 and $.45
for the three months and nine months ended September 30, 1997, respectively.
3. Inventories
Inventories are comprised of the following:
September 30, December 31,
1997 1996
---- ----
Raw materials ...... $ 4,574,609 $ 4,143,818
Work in process .... 1,228,593 686,898
Finished goods ..... 295,606 369,846
------- -------
6,098,808 5,200,562
Obsolescence reserve (743,324) (659,280)
-------- --------
$ 5,355,484 $ 4,541,282
=========== ===========
4. Income taxes
ATM's income tax expense relates to federal taxes and state taxes on income
generated, partially offset by the utilization of loss carryforwards and
available state tax credits. Federal taxes in 1997 relate to income earned
primarily in the third quarter of 1997. Prior to the third quarter of 1997, ATM
had utilized substantially all of its federal net operating loss carryforwards
to offset taxable income. Minimal federal taxes in 1996 relate to alternative
minimum taxes arising from the use of net operating loss carryforwards.
5. Mergers and Acquisitions
On October 10, 1997, pursuant to an Agreement and Plan of Merger and
Exchange dated April 7, 1997 (the "Merger and Exchange Agreement"), the Company
issued 5,468,747 of its Common Stock in exchange for all the ownership interests
of Advanced Delivery & Chemical Systems Nevada, Inc. and its affiliates (the
"ADCS Group"). The ADCS Group manufactures, markets, and designs ultrahigh
purity specialty thin film materials and related delivery equipment for the
semiconductor and semiconductor equipment manufacturing industries. The Company
is continuing the business of the ADCS Group and integrating its semiconductor
thin film and delivery systems product lines of the NovaMOS division into the
ADCS business.
In order to accomplish the tax-free and pooling of interest treatment of
the transaction contemplated by the Merger and Exchange Agreement, Advanced
Technology Materials, Inc. underwent a reorganization involving the creation of
a new holding company (ATMI, Inc. - the successor registrant of Advanced
Technology Materials, Inc.) by means of a merger resulting in the prior
registrant becoming a wholly-owned subsidiary of the holding company. Pursuant
to the reorganization, each outstanding share of common stock of Advanced
Technology Materials, Inc. was converted into one share of the Company's Common
Stock. The reorganization is intended to be a tax-free transaction under the
Internal Revenue Code of 1986, as amended (the "Code"), and will be accounted
for as a pooling of interests.
Also on October 10, 1997, pursuant to an Agreement and Plan of Merger,
dated as of May 17, 1997, as amended (the "Lawrence Merger Agreement"), the
Company issued 3,628,571 shares of the Company's Common Stock in exchange for
all of the outstanding common stock of Lawrence Semiconductor Laboratories, Inc.
("LSL") in a merger transaction. As a result, LSL became a wholly-owned
subsidiary of the Company. The amount of shares issued in connection with this
merger may be subject to adjustment based on the change in the net book value of
LSL since December 31, 1996. LSL is an outsourcer of epitaxial processing of
silicon wafers using chemical vapor deposition technology to meet customer
specifications. The Company is continuing the business of LSL by integrating it
with the Epitronics division of the Company which develops, manufactures,
distributes and sells high performance substrates and thin film deposition
services to the semiconductor industry.
The acquisition of LSL is also intended to be a tax-free transaction under
the Code and will be accounted for as a pooling of interests.
As of September 30, 1997, approximately $2,600,000 of non-recurring
transaction costs have been classified on the balance sheet as other current
assets. This amount will be expensed, as part of approximately $9,000,000 of
non-recurring costs, as a one-time charge in the fourth quarter in conjunction
with the October closing of the transactions.
5. Mergers and Acquisitions (continued)
The pro forma unaudited results of operations of the Company for the three
and nine months ended September 30, 1997 and 1996 (see Part II Item 5 for pro
forma condensed combined financial statements), assuming the pooling of
interests of the above businesses had been consummated as of the beginning of
each period presented, are as follows:
Three Months Ended September 30, 1997 1996
- - -------------------------------- ---- ----
Revenues ....................... $27,513,000 $23,056,000
Net income ..................... $ 3,981,000 $ 3,410,000
Net income per share ........... $ 0.21 $ 0.19
Nine Months Ended September 30, 1997 1996
- - ------------------------------- ---- ----
Revenues ....................... $73,548,000 $67,076,000
Net income ..................... $ 9,113,000 $ 9,045,000
Net income per share ........... $ 0.49 $ 0.49
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
ATMI was incorporated in Delaware in 1997 and is the successor registrant
to ATM, which was incorporated in Connecticut in 1986 and reincorporated in
Delaware in 1987. As used in this report, "ATMI" and the "Company" mean either
ATMI, Inc. itself, or ATMI, Inc. and its consolidated subsidiaries, as the
context may indicate. The Company primarily generates its revenues from sales of
products in various niche markets in the semiconductor industry. The three
principal niche markets the Company serves are: point-of-use environmental
equipment, specialty thin film materials and delivery systems, and epitaxial
processing services for the semiconductor industry.
The Company has used a targeted acquisition strategy to assist in building
critical mass and market position in the niches the Company serves. In 1994, ATM
acquired Vector Technical Group, Inc. ("Vector"), and in conjunction with the
sale of certain Novapure product lines to Millipore Corporation in September
1994, formed ATMI EcoSys Corporation ("EcoSys") by merging the retained
operations of Novapure with those of Vector. In 1995, ATM acquired the Guardian
product line from Messer Griesheim Industries, Inc. and folded that product line
into EcoSys. In 1995, ATM acquired Epitronics Corporation, and in early 1996,
combined that business with the ATM's former Diamond Electronics division under
the Epitronics name. In October 1997, ATMI acquired the ADCS Group and LSL. The
ADCS Group manufactures and distributes ultra-high purity semiconductor thin
film materials. LSL is an outsourcer of epitaxial processing of silicon wafers
using chemical vapor deposition technology to meet customer specifications. The
operations of the ADCS Group are being integrated with the operations of ATMI's
NovaMOS division under the ADCS name and the operations of LSL with the
operations of ATMI's Epitronics division under the Epitronics name.
The following table sets forth, for the periods indicated, the percentage
relationship to total revenues of certain items in ATM's Consolidated Statement
of Operations:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Product revenues ............... 85.4% 77.1% 82.8% 78.4%
Contract revenues .............. 14.6 22.9 17.2 21.6
---- ---- ---- ----
Total revenues ................. 100.0 100.0 100.0 100.0
Cost of revenues ............... 48.0 52.4 50.1 51.8
---- ---- ---- ----
Gross profit ................... 52.0 47.6 49.9 48.2
Operating expenses:
Research and development ....... 15.3 13.6 15.6 16.5
Selling, general, and
administrative ............ 24.0 26.5 23.8 26.4
---- ---- ---- ----
Total operating expenses ....... 39.3 40.1 39.4 42.9
---- ---- ---- ----
Operating income ............... 12.7 7.5 10.5 5.3
Other income, net .............. 1.1 1.3 1.3 1.3
--- --- --- ---
Income before taxes ............ 13.8 8.8 11.8 6.6
Income taxes ................... 3.7 .8 2.2 0.6
--- -- --- ---
Net income ..................... 10.1% 8.0% 9.6% 6.0%
The following tables set forth revenues, cost of revenues, and gross profit
for products and contracts, as a percentage of each category:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Products:
Revenues .................. 100.0% 100.0% 100.0% 100.0%
Cost of revenues .......... 41.3 42.3 43.0 42.7
----- ----- ----- -----
Gross profit ................... 58.7% 57.7% 57.0% 57.3%
Contracts:
Revenues .................. 100.0% 100.0% 100.0% 100.0%
Cost of revenues .......... 87.2 86.3 83.9 84.7
----- ----- ----- -----
Gross profit ................... 12.8% 13.7% 16.1% 15.3%
Results of Operations
Three Months Ended September 30, 1997 and 1996.
Revenues. Total revenues increased 25% to approximately $15,188,000 in the
three months ended September 30, 1997 from approximately $12,145,000 in the same
three month period in 1996. Product revenues increased 39% to approximately
$12,968,000 in the three months ended September 30, 1997 from approximately
$9,361,000 in the comparable period in 1996. The increases in product revenues
resulted primarily from continued growth in sales of effluent treatment systems
by EcoSys and the continued expansion of SDS product sales. Contract revenues
decreased 20% to approximately $2,220,000 in the quarter ended September 30,
1997 from approximately $2,784,000 in the same three month period in 1996. The
general decrease in the government funding of contract research activities was a
result of the completion of funding for the development of next-generation
capacitor thin films for dynamic random access memory chips ("DRAMS"), which
began in 1993.
Gross Profit. Gross profit increased 36% to approximately $7,892,000 in the
quarter ended September 30, 1997 from approximately $5,786,000 in the quarter
ended September 30, 1996. Gross margin increased to 52% of revenues in the three
month period in 1997 compared with 48% for the same period in 1996. Gross profit
from product revenue increased 41% to approximately $7,607,000 in the quarter
ended September 30, 1997 from approximately $5,405,000 in the quarter ended
September 30, 1996. As a percentage of product revenues, gross margin increased
to 59% in 1997 from 58% in 1996 due principally to higher margin on the product
mix within the EcoSys product lines.
Gross profit on contract revenues decreased 25% to approximately $285,000
in the quarter ended September 30, 1997 from approximately $381,000 in the same
quarter last year. As a percentage of contract revenues, gross margin decreased
to 13% in the 1997 quarter from 14% in the 1996 quarter. Contract margins varied
slightly from quarter to quarter based on the mix of cost-type, firm fixed price
and cost share arrangements.
Research and Development Expenses. Research and development expenses
increased 41% to approximately $2,320,000 in the third quarter of 1997 from
approximately $1,649,000 in the third quarter of 1996. The increase in the 1997
quarter was principally due to new product development within EcoSys and
technology development within Epitronics. As a percentage of revenues, research
and development expenses increased to 15% in the 1997 quarter from 14% in the
1996 quarter.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased 13% to approximately $3,647,000 in the three
months ended September 30, 1997 from approximately $3,224,000 in the same three
month period in 1996. The increase in the 1997 quarter was primarily due to an
increase in variable selling expenses, most notably commissions, which directly
relate to increased product revenue. In addition, administrative expenses
increased slightly with the continued growth of the Company. As a percentage of
revenues, these expenses decreased to 24% in the 1997 quarter from 27% in the
1996 quarter.
Other Income, Net. Other income increased 16% to approximately $177,000 in
the quarter ended September 30, 1997 from approximately $152,000 in the quarter
ended September 30, 1996. The increase in net other income is principally caused
by the decrease in interest expense on smaller debt balances in 1997 compared to
1996.
Earnings per Share. Earnings per share improved to $.16 for the third
quarter of 1997 compared with earnings per share of $.10 in the third quarter of
1996. Earnings per share in the 1997 period reflect the 4% increase in weighted
average shares outstanding from approximately 9,376,000 in the third quarter of
1996 to approximately 9,742,000 in the third quarter of 1997, a result of
exercised stock options under the Company's existing stock plans and the
dilutive effect of a higher stock price when calculating common stock
equivalents.
Nine Months Ended September 30, 1997 and 1996.
Revenues. Total revenues increased 19% to approximately $41,286,000 in the
nine months ended September 30, 1997 from approximately $34,583,000 in the same
period in 1996. Product revenues increased 26% to approximately $34,165,000 in
the nine months ended September 30, 1997 from approximately $27,105,000 in the
comparable period in 1996. The product revenue growth was primarily attributable
to the continued expansion of SDS product sales and higher sales levels at
EcoSys. Contract revenues decreased 5% to approximately $7,121,000 in the nine
months ended September 30, 1997 from approximately $7,479,000 in the same period
in 1996. The decline in 1997 was from a general decrease in the government
funding of the Company's contract research activities.
Gross Profit. Gross profit increased 24% to approximately $20,621,000 in
the nine months ended September 30, 1997 from approximately $16,688,000 in the
nine months ended September 30, 1996. Gross margin increased to 50% of revenues
in the first nine months of 1997 from 48% of revenues in the first nine months
of 1996. As a percentage of product revenues, gross margin remained constant at
57% from the first nine months of 1996 to the first nine months of 1997. The
constancy of product margins when comparing the two nine month periods somewhat
masks the improved margin profile of the Company's overall product mix in 1997
due to the fact that the SDS revenue stream was a smaller but higher margin
royalty stream in the 1996 period. As a percentage of contract revenues, gross
margin increased to 16% in the first nine months of 1997 from 15% in the first
nine months of 1996. Contract margins varied slightly for the nine month periods
due to different fee arrangements and indirect cost absorption.
Research and Development Expenses. Research and development expenses
increased 13% to approximately $6,432,000 in the first nine months of 1997 from
approximately $5,697,000 in the first nine months of 1996. Increased development
efforts pertaining to the Company's ferroelectric thin film technology and
related applications were the primary cause for the increase, offsetting reduced
spending related to other technology development efforts. As a percentage of
revenues, research and development expenses remained constant at 16% from the
first nine months of 1996 to the first nine months of 1997.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased 8% to approximately $9,835,000 in the nine
months ended September 30, 1997 from approximately $9,144,000 in the same period
in 1996. The increase in the 1997 period was primarily due to increased
corporate administrative costs, increased commissions on higher product revenues
and increased product marketing activity. As a percentage of revenues, these
expenses decreased to 24% in the first nine months of 1997 from 26% in the
comparable period in 1996.
Other Income, Net. Other income increased 20% to approximately $526,000 in
the nine months ended September 30, 1997 from approximately $439,000 in the nine
months ended September 30, 1996. The increase in the first nine months of 1997
related primarily to a decrease in interest expense as a result of decreases in
outstanding debt balances.
Earnings per Share. Earnings per share improved to $.41 for the first nine
months of 1997 compared with earnings per share of $.22 in the first nine months
of 1996. The 1997 earnings per share reflect a 3% increase in weighted average
shares outstanding from approximately 9,362,000 in the first nine months of 1996
to approximately 9,633,000 in the first nine months of 1997.
Liquidity and Capital Resources
For the nine months ended September 30, 1997, operations utilized cash of
approximately $83,000 compared to the generation of approximately $2,902,000 for
the comparable 1996 period despite a substantial increase in net income to
approximately $3,979,000 in 1997 compared to $2,085,000 in 1996. Working capital
fluctuations, most notably in accounts receivable, other assets and accounts
payable were responsible for significant uses of cash. Certain transaction costs
approximating $2.6 million incurred in association with the reorganization and
the acquisitions of the ADCS Group and LSL are included as other current assets
at September 30, 1997 and account for a portion of these fluctuations. These
transaction costs will be expensed in the fourth quarter of 1997 as part of a
non-recurring charge of approximately $9,000,000.
For the nine month period ended September 30, 1997, investing activities
utilized approximately $2,088,000 in cash compared with the generation of
approximately $1,751,000 in the nine months ended September 30, 1996. Capital
expenditures of $2,978,000 for the first nine months of 1997 include both the
installation of SDS manufacturing capacity in the Danbury facility and an
increase in epitaxial capacity at Epitronics' Phoenix facility. This was offset
by the sale of approximately $1,140,000 in marketable securities. In the 1996
period, ATM incurred approximately $3,243,000 in capital expenditures, primarily
related to the expansion of the manufacturing and laboratory capacity in the
Company's Danbury facility, and sold approximately $4,995,000 of marketable
securities.
ATM generated approximately $54,000 of cash in financing activities during
the nine months ended September 30, 1997 compared with the use of approximately
$3,814,000 for the same period in 1996. Debt payments of approximately
$4,580,000 during the 1996 period included the payment of a $4,000,000
promissory note related to the acquisition of the Guardian Systems product line.
ATMI believes the combination of existing cash balances, marketable
securities, existing sources of liquidity and anticipated funds from operations,
including those of the newly acquired businesses, will satisfy its projected
working capital and other cash requirements through at least the end of 1998.
However, ATMI believes the level of financing resources available to it is an
important competitive factor in its industry and may seek additional capital
prior to the end of that period. Additionally, ATMI considers, on a continuing
basis, potential acquisitions of technologies and businesses complementary to
its current business. There are no present understandings, commitments or
agreements with respect to any such acquisition. However, any such transaction
may affect ATMI's future capital needs.
Safe Harbor Statement
Statements which are not historical facts in this report are forward
looking statements, made on a good faith basis. Such forward looking statements,
including those concerning the Company's expectations for demand and sales of
new and existing products, semiconductor industry and market segment growth, and
market and technology opportunities, all involve risk and uncertainties. Actual
results may differ materially from forward looking statements, for reasons
including, but not limited to, changes in the pattern of semiconductor industry
growth or the markets the Company sells products for, customer interest in the
Company's products, product and market competition, delays or problems in the
development and commercialization of the Company's products, or technological
change affecting the Company's core thin film competencies.
Item 3. Quantitative and Qualitative Disclosures about Market Risk - Not
Applicable
PART II- OTHER INFORMATION
Item 5. Pro Forma Financial Statements
The following unaudited pro forma condensed combined balance sheet at
September 30, 1997 and the unaudited pro forma condensed combined statements of
operations for the nine months ended September 30, 1997 and 1996 and for the
years ended December 31, 1996, 1995, and 1994 give effect to the transactions
completed on October 10, 1997, under the Merger and Exchange Agreement pursuant
to which ATM became a wholly-owned subsidiary of the Company and each share of
ATM Common Stock was converted into one share of the Company's Common Stock and
the ADCS Interests were simultaneously exchanged for 5,468,747 shares of the
Company's Common Stock as if the Reorganization had occurred on January 1, 1994
for purposes of the combined statements of operations and at September 30, 1996
for the combined balance sheet. The unaudited pro forma condensed combined
balance sheet at September 30, 1997 and the unaudited pro forma condensed
combined statements of operations for the nine months ended September 30, 1997
and 1996 and for the years ended December 31, 1996, 1995, and 1994 also give
effect to the Lawrence Acquisition pursuant to which each outstanding shares of
LSL Common Stock was converted at October 10, 1997 into 3,628,571 shares of the
Company's Common Stock. The pro forma information gives effect to the
Reorganization and the Lawrence Acquisition under the pooling-of-interests
method and to the adjustments described in the accompanying notes to the
unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements may not be
indicative of the results that would have occurred if the Reorganization and the
Lawrence Acquisition had been consummated as of the dates indicated or the
operating results which may be obtained by the Company in the future. The
unaudited pro forma condensed combined financial statements should be read in
conjunction with the consolidated financial statements, including the related
notes thereto, and other financial information included in ATM's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 and in other parts of
this Quarterly Report on Form 10-Q; in the ADCS Group's combined financial
statements and Lawrence's combined financial statements for the fiscal year
ended December 31, 1996, included in the Company's Current Report on Form 8-K
dated October 10, 1997.
ATMI, Inc.
Pro Forma Condensed Combined Balance Sheet (unaudited)
September 30, 1997
(in thousands)
Pro Forma Pro Forma
ATM ADCS Lawrence Adjustments ATMI,
--- Group -------- ----------- Inc.
----- ----
Assets
Current assets:
Cash and cash equivalents .. $18,149 $ 3,816 $ 2,271 $ 24,236
Accounts receivable, net ... 12,258 4,541 5,674 22,473
Inventories ................ 5,356 1,882 1,631 8,869
Other ...................... 3,007 1,039 1,045 (4,400) 691
----- ----- ----- ---
Total current assets ....... 38,770 11,278 10,621 56,269
Property and equipment, net . 9,378 5,424 21,346 36,148
Goodwill and other
long-term assets, net ...... 6,370 424 1,197 7,991
----- --- ----- -----
$54,518 $ 17,126 $ 33,164 $ 100,408
======= ======== ======== =========
Liabilities and
stockholders' equity
Current liabilities:
Accounts payable ........... $ 2,364 $ 1,499 $ 769 $ 4,632
Accrued expenses ........... 4,982 448 676 4,600 10,706
Notes payable,
current portion ............ 619 8 4,702 5,329
Other ...................... 1,124 276 969 2,369
----- --- --- -----
Total current liabilities .. 9,089 2,231 7,116 23,036
Notes payable,
less current portion
4,507 145 10,859 15,511
Other long-term liabilities . 56 32 5,123 5,211
Minority Interest .......... 0 578 0 578
Stockholders' equity:
Common stock ............... 88 227 (88)
(227)
179 179
Additional paid-in capital . 37,728 0 60 136 37,924
Retained earnings .......... 3,050 13,913 10,006 (9,000) 17,969
----- ------ ------ ------
Total stockholders' equity . 40,866 14,140 10,066 56,072
------ ------ ------ ------
$54,518 $ 17,126 $ 33,164 $ 100,408
======= ======== ======== =========
See accompanying notes.
ATMI, Inc.
Pro Forma Combined Statement of Operations (unaudited)
Nine Months Ended September 30, 1997
(in thousands, except per share data)
ATM ADCS Lawrence Pro Forma
--- Group -------- ATMI
----- ----
Revenues:
Product revenues ........... $34,165 $ 17,583 $14,679 $ 66,427
Contract revenues .......... 7,121 0 0 7,121
----- - - -----
Total revenues ................ 41,286 17,583 14,679 73,548
Cost of revenues:
Cost of product revenues ... 14,691 6,141 8,636 29,468
Cost of contract revenues .. 5,974 0 0 5,974
----- - - -----
Total cost of revenues ........ 20,665 6,141 8,636 35,442
------ ----- ----- ------
Gross profit .................. 20,621 11,442 6,043 38,106
Operating expenses:
Research and development ... 6,432 1,431 0 7,863
Selling, general,
and administrative 9,836 5,292 2,064 17,192
----- ----- ----- ------
16,268 6,723 2,064 25,055
------ ----- ----- ------
Operating income .............. 4,353 4,719 3,979 13,051
Interest income (expense), net 526 162 (796) (108)
--- --- ---- ----
Income before taxes
and minority interest
4,879 4,881 3,183 12,943
Income taxes .................. 900 1,653 1,229 3,782
--- ----- ----- -----
Income before minority interest 3,979 3,228 1,954 9,161
Minority interest ............. 0 (48) 0 (48)
- --- - ---
Net income .................... $ 3,979 $ 3,180 $ 1,954 $ 9,113
======= ======== ======= ========
Net income per share .......... $ 0.49
--------
Weighted average
shares outstanding 18,730
======
See accompanying notes.
ATMI, Inc.
Pro Forma Combined Statement of Operations (unaudited)
Nine Months Ended September 30, 1996
(in thousands, except per share data)
ATM ADCS Lawrence Pro Forma
--- Group -------- ATMI
----- ----
Revenues:
Product revenues ........... $27,105 $16,745 $15,747 $ 59,597
Contract revenues .......... 7,479 0 0 7,479
----- - - -----
Total revenues ................ 34,584 16,745 15,747 67,076
Cost of revenues:
Cost of product revenues ... 11,564 5,208 7,763 24,535
Cost of contract revenues .. 6,331 0 0 6,331
----- - - -----
Total cost of revenues ........ 17,895 5,208 7,763 30,866
------ ----- ----- ------
Gross profit .................. 16,689 11,537 7,984 36,210
Operating expenses:
Research and development ... 5,697 1,230 0 6,927
Selling, general,
and administrative 9,144 4,897 1,840 15,881
----- ----- ----- ------
14,841 6,127 1,840 22,808
------ ----- ----- ------
Operating income .............. 1,848 5,410 6,144 13,402
Interest income (expense), net 439 216 (682) (27)
--- --- ---- ---
Income before taxes
and minority interest 2,287 5,626 5,462 13,375
Income taxes .................. 202 2,155 2,102 4,459
--- ----- ----- -----
Income before minority interest 2,085 3,471 3,360 8,916
Minority interest ............. 0 129 0 129
- --- - ---
Net income .................... $ 2,085 $ 3,600 $ 3,360 $ 9,045
======= ======= ======= ========
Net income per share .......... $ 0.49
--------
Weighted average
shares outstanding 18,460
======
See accompanying notes.
ATMI, Inc.
Pro Forma Combined Statement of Operations (unaudited)
Year Ended December 31, 1996
(in thousands, except per share data)
ATM ADCS Lawrence Pro Forma
--- Group -------- ATMI
----- ----
Revenues:
Product revenues ........... $36,504 $22,041 $20,271 $78,816
Contract revenues .......... 9,846 0 0 9,846
----- - - -----
Total revenues ................ 46,350 22,041 20,271 88,662
Cost of revenues:
Cost of product revenues ... 15,939 6,567 10,384 32,890
Cost of contract revenues .. 8,341 0 0 8,341
----- - - -----
Total cost of revenues ........ 24,280 6,567 10,384 41,231
------ ----- ------ ------
Gross profit .................. 22,070 15,474 9,887 47,431
Operating expenses:
Research and development ... 7,627 2,212 0 9,839
Selling, general,
and administrative 11,510 6,365 4,715 22,590
------ ----- ----- ------
19,137 8,577 4,715 32,429
------ ----- ----- ------
Operating income .............. 2,933 6,897 5,172 15,002
Interest income (expense), net 627 210 (835) 2
Other income, net ............. 0 18 0 18
- -- - --
Income before taxes
and minority interest 3,560 7,125 4,337 15,022
Income taxes .................. 239 2,732 1,669 4,640
--- ----- ----- -----
Income before minority interest 3,321 4,393 2,668 10,382
Minority interest ............. 0 151 0 151
- --- - ---
Net income .................... $ 3,321 $ 4,544 $ 2,668 $10,533
======= ======= ======= =======
Net income per share .......... $ 0.57
-------
Weighted average
shares outstanding
18,456
======
See accompanying notes.
ATMI, Inc.
Pro Forma Combined Statement of Operations (unaudited)
Year Ended December 31, 1995
(in thousands, except per share data)
ATM ADCS Lawrence Pro Forma
--- Group -------- ATMI
----- ----
Revenues:
Product revenues .............. $21,336 $ 15,715 $ 14,409 $ 51,460
Contract revenues ............. 8,712 0 0 8,712
----- - - -----
Total revenues ................... 30,048 15,715 14,409 60,172
Cost of revenues:
Cost of product revenues ...... 9,609 4,860 7,764 22,233
Cost of contract revenues ..... 7,490 0 0 7,490
----- - - -----
Total cost of revenues ........... 17,099 4,860 7,764 29,723
------ ----- ----- ------
Gross profit ..................... 12,949 10,855 6,645 30,449
Operating expenses:
Research and development ...... 4,206 1,491 0 5,697
Selling, general,
and administrative 8,558 5,407 1,921 15,886
----- ----- ----- ------
12,764 6,898 1,921 21,583
------ ----- ----- ------
Operating income ................. 185 3,957 4,724 8,866
Interest income (expense), net ... 503 54 (914) (357)
Other expense, net ............... 0 (51) (493) (544)
- ---- ---- ---
Income before taxes
and minority interest ....... 688 3,960 3,317 7,965
Income taxes ..................... 134 1,389 1,364 2,887
--- ----- ----- -----
Income before minority interest .. 554 2,571 1,953 5,078
Minority interest ................ 0 10 0 10
- -- - --
Net income ....................... $ 554 $ 2,581 $ 1,953 $ 5,088
======= ======== ======== ========
Net income per share ............. $ 0.30
--------
Weighted average
shares outstanding
17,171
======
See accompanying notes.
ATMI, Inc.
Pro Forma Combined Statement of Operations (unaudited)
Year Ended December 31, 1994
(in thousands, except per share data)
ATM ADCS Lawrence Pro Forma
--- Group -------- ATMI
----- ----
Revenues:
Product revenues ................. $ 12,539 $7,821 $ 7,178 $ 27,538
Contract revenues ................ 7,222 0 0 7,222
----- - - -----
Total revenues ...................... 19,761 7,821 7,178 34,760
Cost of revenues:
Cost of product revenues ......... 5,839 1,806 3,943 11,588
Cost of contract revenues ........ 6,151 0 0 6,151
----- - - -----
Total cost of revenues .............. 11,990 1,806 3,943 17,739
------ ----- ----- ------
Gross profit ........................ 7,771 6,015 3,235 17,021
Operating expenses:
Research and development ......... 3,415 566 0 3,981
Selling, general,
and administrative 5,588 2,539 1,181 9,308
----- ----- ----- -----
9,003 3,105 1,181 13,289
----- ----- ----- ------
Operating income .................... (1,232) 2,910 2,054 3,732
Interest income (expense), net ...... 390 23 (663) (250)
Other income, net ................... 3,594 0 167 3,761
----- - --- -----
Income before taxes
and minority interest 2,752 2,933 1,558 7,243
Income taxes ........................ 124 970 634 1,728
--- --- --- -----
Income before minority interest ..... 2,628 1,963 924 5,515
Minority interest ................... 8 12 0 20
- -- - --
Net income .......................... $ 2,636 $1,975 $ 924 $ 5,535
======== ====== ======= ========
Net income per share ................ $ 0.33
--------
Weighted average
shares outstanding 16,693
======
See accompanying notes.
ATMI, Inc.
Notes To Pro Forma Combined Financial Statements
(unaudited)
1. Basis of Presentation
Pursuant to the Merger and Exchange Agreement, ATM became a wholly-owned
subsidiary of the Company. Each outstanding share of ATM Common Stock was
converted into the right to receive one share of the Company's Common Stock. The
Company also issued 5,468,747 shares of the Company's Common Stock for the
interests in the ADCS Group and 3,628,571 shares of the Company's Common Stock
for the LSL Common Stock. The effect of this transaction is to decrease the
stated common stock of ATM, and the ADCS Group by $88,000 and $227,000,
respectively and to increase the combined stated common stock of the Company by
$179,000 and additional paid in capital by $136,000 to reflect the par value of
the Company Common Stock outstanding after the reorganization and the
acquisitions of the ADCS Group and LSL on October 10, 1997.
2. Pro Forma Per Share Data
Pro forma earnings per common share have been computed for the nine month
periods ended September 30, 1997 and 1996 and for the years ended December 31,
1996, 1995, and 1994 based upon the weighted average number of common shares
outstanding of ATM combined with the merger consideration in the pooling of
interests for the acquisition of the ADCS Group of 5,468,747 common shares and
for the acquisition of 3,628,571 common shares.
3. Income taxes
Net income and earnings per common share for the nine month period ended
September 30, 1996 and the year ended December 31, 1996 have been presented to
include tax amounts as if the ADCS Group were a C Corporation for the full year
although for a portion of 1996 the ADCS Group had the status of an
S-Corporation. The pro forma combined income taxes were increased by
approximately $1,517,000 and $1,483,000, respectively.
4. Transaction Costs
As of September 30, 1997, approximately $4,400,000 of transaction costs
were included in other current assets. The pro forma condensed combined balance
sheet has been adjusted to eliminate such costs and to recognize additional
accrued expenses equivalent to the expected transaction costs of $9,000,000
associated with the reorganization and the acquisitions of the ADCS Group and
LSL. Retained earnings have been adjusted to reflect a charge to earnings as if
the transactions had occurred prior to September 30, 1997.
The unaudited pro forma combined statements of operations do not include
costs associated with the reorganization and the acquisitions of the ADCS Group
and LSL, which are expected to be approximately $9,000,000 in the aggregate and
will be charged to earnings in the fourth quarter of 1997 as a non-recurring
charge.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit No. Description
3.01 Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to Post-Effective Amendment No. 1 to Registration Statement on Form S-8,
Registration No. 33-93048) (1)
11.01 Statement re: computation of per share earnings (Filed herewith)
27.01 Financial Data Schedule (Filed herewith)
(1) Incorporated by reference
b. Reports on Form 8-K.
On October 10, 1997, the Company filed a Current Report on Form 8-K dated
October 10, 1997 reporting in Item 2 thereof the consummation of the
reorganization and acquisitions of the ADCS Group and LSL.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATMI, Inc.
November 11, 1997
By /S/ Eugene G. Banucci
----------------------
Eugene G. Banucci, Ph.D., President
By /S/ Daniel P. Sharkey
---------------------
Daniel P. Sharkey, Treasurer (Chief Accounting Officer)
EXHIBIT INDEX
Exhibit Description
No. -----------
- - -------
3.01 Certificate of Amendment to Certificate of Incorporation (Exhibit
4.1(b) to Post- Effective Amendment No. 1 to Registration Statement on Form S-8,
Registration No. 33-93048) (1)
11.01 Statement re: computation of per share earnings
Financial Data Schedule
(1) Incorporated by reference.