ATMI INC - 10-Q Quarterly Report

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, 2003


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: 0-30130

ATMI, Inc.

(Exact name of registrant as specified in its charter)



Delaware		06-1481060

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes x No o

The number of shares outstanding of the registrant’s common stock as of July 28, 2003 was 30,885,350.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Operations
		Consolidated Statements of Cash Flows
		Notes To Consolidated Interim Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.
	Item 4. Controls and Procedures
PART II- OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATE OF AMENDMENT
SECTION 302 CERTIFICATION
SECTION 906 CERTIFICATION

ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2003

TABLE OF CONTENTS

Page

Part I — Financial Information

Item 1.

Financial Statements (unaudited)

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Notes to Consolidated Interim Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II — Other Information

Item 1.

Legal Proceedings

Item 4.

Submission of Matters to a Vote of Security Holders

Item 5.

Other Information

Item 6.

Exhibits and Reports on Form 8-K

Signatures

Exhibits

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

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


				June 30,		December 31,
				2003		2002

				(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	58,568	$	78,784
	Marketable securities				78,719		87,394
	Accounts receivable, net of allowances of $1,034 in 2003 and $1,646 in 2002				42,496		36,756
	Inventories, net				39,080		31,467
	Deferred income taxes				5,773		4,955
	Income taxes receivable				13,968		14,096
	Other current assets				11,986		14,646

			Total current assets		250,590		268,098
Property, plant, and equipment, net					117,357		118,156
Goodwill, net					8,077		7,916
Deferred income taxes					7,380		4,853
Other long-term assets, net					35,135		17,459

Total assets				$	418,539	$	416,482

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable			$	13,553	$	13,395
	Accrued liabilities				15,217		15,330
	Accrued salaries and related benefits				7,681		7,524
	Loans, notes, and bonds payable, current portion				1,079		1,285
	Capital lease obligations, current portion				266		19
	Income taxes payable				639		448
	Other current liabilities				7,920		6,568

			Total current liabilities		46,355		44,569
Loans, notes, and bonds payable, less current portion					115,184		115,177
Capital lease obligation, less current portion					274		31
Other long-term liabilities					115		315
Commitments and contingencies					—		—
Stockholders’ equity:
		Preferred stock, par value $.01: 2,000 shares authorized; none issued			—		—
	Common stock, par value $.01: 100,000 shares authorized; 30,809 and 30,673 issued and outstanding in 2003 and 2002, respectively				308		307
		Additional paid-in capital			209,964		207,412
		Retained earnings			43,776		48,168
		Accumulated other comprehensive income			2,563		503

Total stockholders’ equity					256,611		256,390

Total liabilities and stockholders’ equity				$	418,539	$	416,482

See accompanying notes.

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


		Three months ended June 30,

		2003			2002

Revenues		$	57,467		$	57,790
Cost of revenues			33,822			34,182

Gross profit			23,645			23,608
Operating expenses:
	Research and development		8,100			7,859
	Selling, general and administrative		16,482			17,445

			24,582			25,304

Operating loss			(937	)		(1,696	)
Interest income			725			1,291
Interest expense			(1,705	)		(1,576	)
Other income (loss), net			(2,417	)		456

Loss before income taxes			(4,334	)		(1,525	)
Benefit for income taxes			(1,560	)		(533	)

Net loss		$	(2,774	)	$	(992	)

Net loss per share-basic		$	(0.09	)	$	(0.03	)

Net loss per share-assuming dilution		$	(0.09	)	$	(0.03	)

Weighted average shares outstanding-basic			30,081			29,874

Weighted average shares outstanding-assuming dilution			30,081			29,874

See accompanying notes.

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


		Six months ended June 30,

		2003			2002

Revenues		$	111,311		$	106,163
Cost of revenues			65,364			63,219

Gross profit			45,947			42,944
Operating expenses:
	Research and development		16,224			14,858
	Selling, general and administrative		32,829			33,511
	Restructuring charges and other items		(340	)		—

			48,713			48,369

Operating loss			(2,766	)		(5,425	)
Interest income			2,028			2,488
Interest expense			(3,391	)		(3,742	)
Other income (loss), net			(2,733	)		951

Loss before income taxes			(6,862	)		(5,728	)
Benefit for income taxes			(2,470	)		(2,004	)

Net loss		$	(4,392	)	$	(3,724	)

Net loss per share-basic		$	(0.15	)	$	(0.12	)

Net loss per share-assuming dilution		$	(0.15	)	$	(0.12	)

Weighted average shares outstanding-basic			30,053			29,829

Weighted average shares outstanding-assuming dilution			30,053			29,829

See accompanying notes.

ATMI, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)


			Six months ended June 30,

			2003			2002

Operating activities
Net loss			$	(4,392	)	$	(3,724	)
Adjustments to reconcile net loss to net cash used by operating activities:
	Depreciation and amortization			10,642			9,367
	Restructuring charge			(340	)		—
	Provision for bad debt			(7	)		83
	Provision for inventory obsolescence			225			1,440
	Deferred income taxes			(3,641	)		800
	Tax benefit from nonqualified stock options			246			656
	Realized gain on available-for-sale securities			—			(958	)
	Realized loss on long term investments			—			332
	Impairment of investment			2,190			—
	Loss on sale of property, plant and equipment			390			—
	Other			—			10
	Changes in operating assets and liabilities
		Accounts receivable		(5,733	)		(5,893	)
		Inventory		(7,838	)		2,661
		Other assets		2,111			(6,298	)
		Accounts payable		158			(3,512	)
		Accrued expenses		824			427
		Other liabilities		1,472			(2,154	)

Net cash used by operating activities				(3,693	)		(6,763	)

Investing activities
Capital expenditures				(9,665	)		(20,325	)
Purchase of intangible assets				(20,027	)		—
Sales of property, plant and equipment				41			—
Purchase of marketable securities				(46,366	)		(126,330	)
Sale of marketable securities				55,815			83,763

Net cash used by investing activities				(20,202	)		(62,892	)

Financing activities
Payments on loans, notes and bonds payable				(199	)		(14,229	)
Payments on capital lease obligations				(9	)		(5,112	)
Proceeds from exercise of stock options and employee stock purchase plan shares				2,307			3,130

Net cash provided (used) by financing activities				2,099			(16,211	)

Effects of exchange rate changes on cash				1,580			1,089

Net decrease in cash and cash equivalents				(20,216	)		(84,777	)
Cash and cash equivalents, beginning of period				78,784			167,677

Cash and cash equivalents, end of period			$	58,568		$	82,900

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 generally accepted accounting principles (“GAAP”) for interim financial information and 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 GAAP in the United States.

In the opinion of the management of ATMI, the financial information contained herein has been prepared on the same basis as the audited consolidated financial statements contained in the Company’s Form 10-K, and includes adjustments (consisting 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, 2002 audited consolidated financial statements and notes thereto included in the Company’s Form 10-K. 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.

The consolidated Balance Sheet at December 31, 2002 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.

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

2. Inventories

Inventories are comprised of the following (in thousands):


	June 30,			December 31,
	2003			2002

Raw materials	$	19,113		$	20,305
Work in process		4,832			4,210
Finished goods		17,783			11,000

		41,728			35,515
Excess and Obsolescence reserve		(2,648	)		(4,048	)

	$	39,080		$	31,467

3. Goodwill and Other Intangibles

Intangibles consisted of the following (in thousands):


	June 30,			December 31,
	2003			2002

Goodwill, gross	$	11,616		$	11,415
Accumulated amortization		(3,539	)		(3,499	)

Goodwill, net	$	8,077		$	7,916

Debt issuance costs, gross	$	4,257		$	4,257
Accumulated amortization		(1,432	)		(1,012	)

Debt issuance costs, net	$	2,825		$	3,245

Other intangibles, gross	$	26,884		$	6,314
Accumulated amortization		(2,352	)		(1,882	)

Other intangibles, net	$	24,532		$	4,432

On May 16, 2003, ATMI entered into a strategic partnership with Enthone, Inc., a Cookson Electronics Company, whereby ATMI purchased the exclusive worldwide selling and distribution rights to Enthone’s copper electrochemical deposition (ECD) products, including its ViaForm® products, for a period of ten years, subject to automatic renewal upon satisfaction of certain conditions. Under the terms of the agreement, Enthone will continue to manufacture the ViaForm® products for ATMI. The asset related to these purchased rights is included in other intangibles and will be amortized using the straight-line method over a period of 14 years.

4. Guarantees

ATMI’s equipment products are generally sold with a 12-month warranty period. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product type. Changes in the warranty reserves during the first half of 2003 were as follows (in thousands):


	Accrual for Product
	Warranty Costs

Balance December 31, 2002	$	1,016
Charged to expense		393
Warranty service costs charged against accrual		(382	)

Balance June 30, 2003	$	1,027

5. Equity

On May 21, 2003, the stockholders approved the proposed amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of the Company’s common stock from 50,000,000 to 100,000,000.

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