UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended September 30, 2004

For the transition period from                     to                    

Commission file Number: 1-16239

ATMI, Inc.

203-794-1100

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

The number of shares outstanding of the registrant’s common stock as of November 1, 2004 was 31,403,095.

ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2004

TABLE OF CONTENTS

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     PART I — FINANCIAL INFORMATION

     Item 1. Financial Statements

ATMI, Inc.

See accompanying notes.

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ATMI, Inc.

See accompanying notes.

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

See accompanying notes.

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ATMI, Inc.

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

See accompanying notes.

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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 Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the “Annual Report”), 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 Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2003 included in the Company’s Annual Report. 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, 2003 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. Discontinued Operations

     In September 2004, the Company completed the sale of its Emosyn smartcard business for $15.1 million in cash and a 16.4% investment in the entity that acquired the Emosyn smartcard business. The investment of $2.6 million has been accounted for on the cost basis. A gain of $3.3 million, net of taxes, was recognized on the sale of the Emosyn smartcard business.

     In July 2004, the Company completed the sale of its epitaxial services business for proceeds of $38.0 million and contingent consideration of $3.0 million, which has not yet been recognized, based on the satisfaction of certain conditions. A gain of $0.1 million, net of taxes, was recognized on the sale of the epitaxial services business.

     In June 2004, the Company completed the sale of its semiconductor parts cleaning services business, “Fab Services,” for total proceeds of $6.8 million, including $4.9 million of cash, and a note for the balance. Additional contingent consideration of up to $0.3 million, which has not yet been recognized, may be recognized based on the achievement of certain operating targets. A gain of $0.2 million, net of taxes, was recognized on the sale of the Fab Services business.

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     In May 2004, the Company completed the sale of its life safety sensors business for total proceeds of $11.0 million. A gain of $0.2 million, net of taxes, was initially recognized on the sale of the life safety sensors business, but that gain was adjusted in the third quarter of 2004 to $0.1 million, net of taxes, due to an adjustment of the sale price as a result of changes in working capital accounts actually sold.

     In March 2004, the Company completed the sale of its gallium nitride materials business for total proceeds of $10.3 million. A gain of $1.0 million, net of taxes, was initially recognized on the sale of the gallium nitride materials business. The gain was subsequently adjusted in the third quarter of 2004 to $1.1 million to reflect the actual transaction costs incurred.

     The aggregate gains from the sales of the business units noted above are included in the accompanying statement of operations as a gain on disposal of discontinued operations, net of income taxes. Cash generated from the discontinued operations is recorded in the cash account on the continuing operations balance sheet.

     Revenues and losses from discontinued operations were as follows (in thousands):

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     The assets and liabilities of the discontinued operations, which at September 30, 2004 relates entirely to the Company’s environmental abatement equipment business, were as follows (in thousands):

     Management expects to receive proceeds in excess of the net carrying value of the environmental abatement equipment business and expects a sale to be consummated during the fourth quarter of 2004.

     The one-year holding period for the classification as held for sale, as prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” will expire during the fourth quarter of 2004. In the event the Company is unable to complete a sale of the environmental abatement equipment business within the one-year holding period prescribed by, and subject to the exceptions set forth in, SFAS No. 144, the assets and liabilities would be reclassified to assets held and used. The associated results of operations of such business would be reclassified to income (loss) from continuing operations for all periods presented in the financial statements.

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3. Inventories

     Inventories are comprised of the following (in thousands):

4. Goodwill and Other Intangibles

     Other intangibles consisted of the following (in thousands):

     Changes in the carrying amounts of goodwill and other intangibles for the nine-month period ended September 30, 2004 were as follows:

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5. Warranty Accrual

     ATMI’s equipment products are generally sold with a 12 to 24-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 accrual during the first nine months of 2004 were as follows (in thousands):

     A warranty reserve of approximately $1.4 million related to discontinued operations is included in liabilities held for sale, but is not included in the table above.

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6. Net Income (Loss) Per Share

     Basic earnings (loss) per share from continuing operations is determined by dividing the Company’s income (loss) from continuing operations by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share also includes dilutive common stock equivalents outstanding after applying the “treasury stock” method to outstanding stock options, unvested restricted stock, and warrants and the “if converted” method to convertible debt. A reconciliation of the numerator and denominator of the diluted earnings per share from continuing operations computation is as follows:

     The following common stock equivalents have been excluded from the calculation of weighted average shares outstanding because their impact is antidilutive:

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7. Stock-Based Compensation

     The Company has several stock-based employee compensation plans, which are described more fully in the Annual Report. The Company accounts for these stock-based compensation plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. ATMI has charged to expense approximately $0.2 million of stock-based compensation, net of taxes, including deferred compensation related to the issuance of restricted shares of ATMI common stock during the three and nine-month periods ended September 30, 2004, respectively.

     The following table sets forth the effect on net income (loss) and income (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting For Stock-Based Compensation”, to stock-based employee compensation (in thousands, except per share data):

8. Other Comprehensive Income (Loss)

     The components of other comprehensive income (loss) are as follows (in thousands):

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9. Commitments and Contingencies

     On July 14, 2003, ATMI acquired all of the outstanding capital stock of ESC, Inc. (“ESC”) of Bethlehem, PA, for total proceeds of $16.4 million, net of cash acquired, plus a possible future payment of up to $27.0 million which is contingent on future product revenues through the end of 2005. Of the initial purchase price, $3.6 million remains in escrow in accordance with the purchase agreement in order to secure certain indemnity obligations of the sellers.

     On July 11, 2003, ATMI’s subsidiary, Advanced Technology Materials, Inc., filed suit against Praxair, Inc., the parent company of Praxair Electronics, in the United States District Court for the Southern District of New York, charging it with infringing two patents ATMI holds for certain gas storage and delivery systems. ATMI is seeking damages and an injunction against Praxair marketing its UpTime system. On December 22, 2003, Praxair, Inc. and Praxair Technology, Inc. filed suit against ATMI, Inc. and Advanced Technology Materials, Inc. in the United States District Court for the District of Delaware alleging infringement of three patents owned by Praxair Technology, Inc. related to gas storage and delivery systems. Praxair is seeking damages and an injunction against ATMI marketing its VAC system.

     In addition, in the normal course of business, ATMI is involved in various proceedings and claims. Although the Company cannot determine the ultimate outcome of any of these legal proceedings at this time, management, including internal counsel, does not believe that the outcome of these proceedings, individually or in the aggregate, will have a material adverse effect on ATMI’s financial position or results of operations.

10. Income Taxes

     The Company’s income tax provision is not significantly different than the U.S. federal statutory tax rate for periods presented in 2004. The significant difference between the U.S. federal statutory tax rate and the Company’s income tax benefit for periods presented in 2003 is the result of in-process research and development expenses, extra-territorial income (“ETI”) exclusion benefits, and changes in the valuation allowance of deferred tax assets. For detail of the reconciliation of the U.S. federal statutory tax rate to the income tax benefit recognized in 2003, see the Company’s December 31, 2003 Form 10-K.

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11. Recent Accounting Standards

     On October 13, 2004, the Financial Accounting Standards Board (“FASB”) concluded that its proposed new standard, called “Share Based Payment,” which would require all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, would be effective for interim or annual periods beginning after June 15, 2005, with earlier application encouraged. There are two proposed transition methods of adoption in the forthcoming statement: (1) the modified prospective method; or (2) the modified retrospective method. If chosen, the modified prospective method would result in recognition of compensation cost only for those awards granted, modified or settled after the effective date and to any awards that were not fully vested as of the effective date. The modified retrospective method would result in a compensation charge being recognized for all outstanding awards as of the effective date. The Company is studying the adoption alternatives and the effect adoption will likely have on the Company’s financial position and results of operations. The FASB expects to issue the final standard in December 2004.

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Item 2.

Overview

     The descriptive analysis contained herein compares the financial results of the three months and nine months ended September 30, 2004 (“Third Quarter-2004” and “Nine months-2004”, respectively) to the three months and nine months ended September 30, 2003 (“Third Quarter-2003” and “Nine months-2003”, respectively).

     ATMI is a leading supplier of materials, materials delivery systems and high-purity materials packaging products used worldwide in the manufacture of semiconductor devices. ATMI specifically targets the “front-end” semiconductor materials market. This market includes the processes used to convert a bare silicon wafer into a fully functional wafer that contains many copies of a semiconductor device or “chip.” To complete the manufacturing process, this functional wafer is taken through a “back-end” manufacturing process that includes wafer dicing into chips, packaging and testing. ATMI’s customers include many of the leading semiconductor manufacturers in the world.

     During 2003, ATMI announced its intention to exit its non-core businesses by sale. During the first nine months of 2004, the Company completed the sale of five of the six businesses held for sale. The Company expects to complete a sale of the remaining non-core business (the environmental abatement business) during the fourth quarter of 2004.

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Results of Operations

     The following table sets forth selected financial data as a percentage of total revenues for the periods indicated:

Revenues

     Revenues increased 52.4% to $64.4 million in the Third Quarter-2004 from $42.3 million in the Third Quarter-2003, primarily due to increased sales of SDS® and photoresist strip products, as well as volume sales increases in all other materials products as a result of the increase in wafer starts during this period. In addition, revenues from our high purity packaging business increased primarily as a result of increased production in the flat panel display market.

     Revenues increased 52.1% to $181.4 million in the Nine months-2004 from $119.3 million in the Nine months-2003, primarily due to increased wafer starts driving increased sales of SDS® and photoresist strip products. Wafer starts in copper advanced interconnect applications increased at a faster pace than industry-wide wafer starts, which drove higher growth rates for our advanced materials and high-purity packaging products. Strength in the flat panel display market and a recovery in dispenser sales also contributed to a significant increase in our high-purity packaging business. Revenues increased approximately 13.2% in the Nine months-2004 as a result of the acquisitions of the Enthone and the ESC product lines, in June and July 2003, respectively.

Gross Profit

     Gross profit increased 96.6% to $32.6 million in the Third Quarter-2004 from $16.6 million in the Third Quarter-2003. Gross margin increased to 50.6% in the Third Quarter-2004 from 39.2% in the Third Quarter-2003. The increase in gross profit was a result of increased revenues and improved manufacturing efficiencies. The Third Quarter-2004 included a positive

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cost adjustment of $0.9 million associated with inventories purchased in the first half of 2004 relating to a third party manufacturing agreement, while the Third Quarter-2003 included a $2.7 million charge for excess and obsolete inventories as a result of outsourcing and standardization of materials delivery equipment products.

     Gross profit increased 64.6% to $90.5 million in the Nine months-2004 from $55.0 million in the Nine months-2003. Gross margin increased to 49.9% in the Nine months-2004 from 46.1% in the Nine months-2003. The increase in gross profit was a result of increased revenues and improved manufacturing efficiencies partially offset by costs incurred to ramp production and expedite shipments of our ST-250™ photoresist strip product to Asia in the first and third quarters of 2004 as a result of greater than expected demand. The Nine months-2004 included cumulative positive cost adjustments of $1.5 million related to a third party manufacturing agreement, offset by a $0.7 million charge related to excess and obsolete inventories. The Nine months-2003 included a $2.7 million charge for excess and obsolete inventories as described above.

Research and Development Expenses

     Research and development expenses decreased 2.1% to $5.2 million in the Third Quarter-2004 from $5.3 million in the Third Quarter-2003. Excluding a $0.6 million charge in the Third Quarter-2003 to write off acquired in-process research and development from the ESC acquisition, research and development expenses increased 10.3% in the Third Quarter-2004. The increase, excluding the one-time $0.6 million charge in 2003, was mainly attributable to research and development efforts to support new product development in advanced interconnect and the SDS® product lines, with a specific focus on development of copper applications and the new SDS3® sub-atmospheric gas delivery system. As a percentage of revenues, research and development expenses decreased to 8.1% in the Third Quarter-2004 from 12.6% in the Third Quarter-2003, due to a significant increase in revenues. The Third Quarter-2004 research and development expense, as a percentage of revenues is in line with the Company’s long-term target range.

     Research and development expenses increased 6.8% to $14.8 million in the Nine months-2004 from $13.8 million in the Nine months-2003. The Nine months-2003 included a $0.6 million charge related to acquired in-process research and development, as noted above. Excluding this 2003 charge, research and development expenses increased 11.7% in the Nine months-2004 compared to the comparable 2003 period. The increase was mainly attributable to research and development efforts to support new product development in advanced interconnect and the SDS® product lines. As a percentage of revenues, research and development expenses decreased to 8.1% in the Nine months-2004 from 11.6% in the Nine months-2003, due to a significant increase in revenues.

Selling, General and Administrative Expenses

     Selling, general and administrative (“SG&A”) expenses increased 20.2% to $16.7 million in the Third Quarter-2004 from $13.9 million in the Third Quarter-2003, primarily related to the increased infrastructure costs related to the Enthone and ESC product lines acquired in June and July, respectively, of 2003, increased incentive compensation costs based on the improved company performance, costs associated with Sarbanes-Oxley compliance and costs associated

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with defending the Company’s patents. As a percentage of revenues, SG&A expenses decreased to 25.9% in the Third Quarter-2004 from 32.8% in the Third Quarter-2003.

     SG&A expenses increased 24.3% to $48.6 million in the Nine months-2004 from $39.1 million in the Nine months-2003, as a result of the factors noted above. As a percentage of revenues, SG&A expenses decreased to 26.8% in the Nine months-2004 from 32.7% in the Nine months-2003.

Restructuring and Other Charges

     The Third Quarter-2003 included a $2.4 million impairment charge for abandoned assets in the Company’s former materials and liquid delivery systems manufacturing facility in Burnet, Texas, including $1.1 million of liquid chemistry canisters, which have not been returned to the Company by various customers. The Company has since implemented a barcode system to track the location of liquid chemistry canisters to prevent future losses. This charge was partially offset by a $0.7 million gain from the collection of expense reimbursements from a former sub-lease tenant and former joint development partner.

     The Nine months-2003 included a $2.4 million asset impairment charge, partially offset by a $0.7 million gain, as described above.

Operating Income

     Operating income was $10.7 million in the Third Quarter-2004 as compared to an operating loss of $4.4 million in the Third Quarter-2003. The favorable change in income is primarily the result of increased wafer starts driving increased demand for advanced interconnect materials, SDS® and high purity packaging products, together with market share gains across many product lines, partially offset by the operating expense increases noted above.

     Operating income increased to $27.2 million in the Nine months-2004 from $0.4 million in the Nine months-2003. Similar to the explanation for the Third Quarter-2004, the favorable change in income is primarily the result of increased wafer starts and increased new materials technology adoption, which drove increased demand for advanced interconnect materials, SDS® and high purity packaging products, market share gains across many product lines, and the incremental contribution margin from the Enthone and ESC product lines, partially offset by the operating expense increases noted above.

Interest Income

     Interest income was $1.0 million in the Third Quarter-2004 compared to $0.5 million in the Third Quarter-2003. The increase was primarily the result of significantly increased cash and marketable securities balances and an increase in interest rates.

     Interest income was $2.2 million in the Nine months-2004 compared to $2.6 million in the Nine months-2003. The decrease was primarily the result of lower cash balances in the first quarter of 2004 compared to the first quarter of 2003 due to cash having been used during the second half of 2003 to fund acquisition activities, coupled with lower overall yields on the Company’s cash and marketable securities portfolio in this same comparative period.

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Interest Expense

     Interest expense was $1.7 million in both the Third Quarter-2004 and the Third Quarter-2003, due primarily to the fixed interest rate on the Company’s convertible debt.

     Interest expense was $5.2 million in the Nine months-2004 compared to $5.1 million in the Nine months-2003. Interest expense remained relatively flat given the fixed interest rate on the Company’s convertible debt.

Impairment of Cost-Basis Investment

     The Third Quarter-2003 results included a $2.2 million pre-tax asset impairment charge related to the Company’s cost-basis strategic investment portfolio.

     The Nine months-2003 included a $4.4 million pre-tax asset impairment charge related to the Company’s cost-basis strategic investment portfolio.

Other Income (Expense), Net

     Other expense, net, was $0.3 million of expense in the Third Quarter-2004 compared to $0.2 million of expense in the Third Quarter-2003. Other Expense, net, was primarily the result of foreign currency transaction losses.

     Other income, net, was $0.4 million in the Nine months-2004, compared to other expense, net, of $0.1 million in the Nine months-2003. The favorable change in 2004 compared to 2003 is the result of favorable changes in foreign currency exchange rates in Europe and Asia.

Provision (benefit) for Income Taxes

     Provision for income taxes was $3.3 million in the Third Quarter-2004, compared to a benefit of $3.4 million in the Third Quarter-2003. The turnaround from benefit to provision was the result of generating pre-tax income in 2004 compared to incurring a pre-tax loss in 2003. The effective tax rate for the Third Quarter-2004 was 34.0%, while a tax benefit of 41.8% was recorded in the Third Quarter-2003. The effective tax rate of 41.8% in the Third Quarter-2003 differs from the Federal statutory rate of 35.0% primarily because of state and foreign income taxes, ETI exclusion benefits, in-process research and development expenses, and the change in valuation allowances of deferred tax assets.

     Provision for income taxes was $8.4 million in the Nine months-2004, compared to a benefit of $3.1 million in the Nine months-2003. The turnaround from benefit to provision was the result of generating pre-tax income in 2004 compared to incurring a pre-tax loss in 2003. The effective tax rate for the Nine months-2004 was 34.2%, while a tax benefit of 45.8% was recorded in the Nine months-2003. The effective tax rate of 45.8% in the Nine months-2003 differs from the Federal statutory rate of 35.0% primarily because of state and foreign income taxes, ETI exclusion benefits, in-process research and development expenses, and the change in valuation allowances of deferred tax assets As of September 30, 2004, the Company had a net deferred tax asset on its balance sheet of $11.1 million, primarily due to temporary differences

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and state net operating loss and tax credit carry forwards, which are anticipated to be used to offset future taxable income. The minimum amount of future taxable income that needs to be generated to realize the net deferred tax assets is approximately $33.0 million.

Income (Loss) from Operations of Discontinued Operations

     In the Third Quarter-2004, income from operations of discontinued operations, net of income taxes, was $0.8 million, compared to a loss, net of income taxes, of $6.1 million in the Third Quarter-2003. The difference was primarily attributable to the improved contribution margin realized on increased revenues for environmental abatement equipment, combined with a favorable product ramp in the Company’s Emosyn smart card venture, and the absence of negative operating margins from the thin-film deposition services, life safety systems and fab services businesses, which were sold either prior to or during the Third Quarter-2004.

     In the Nine months-2004, income from operations of discontinued operations, net of income taxes, was $3.6 million, compared to a loss, net of income taxes, of $11.5 million in the Nine months-2003 for the reasons noted above.

Gain on Disposal of Discontinued Operations

     In the Third Quarter-2004, a $3.5 million gain, net of income taxes, was recognized on the disposal of discontinued operations attributable to the sale of the Company’s epitaxial services and Emosyn smartcard businesses.

     In the Nine months-2004, a gain of $4.8 million, net of income taxes, was recognized on the disposal of discontinued operations. The gain was attributable to the sale of the Company’s gallium nitride materials, life safety systems, fab services, epitaxial services and Emosyn smartcard businesses.

Diluted Earnings (Loss) per Share

     In the Third Quarter-2004, diluted earnings per share was $0.32, which includes $0.02 per share from discontinued operations and a gain of $0.10 per share relating to the sale of the Company’s epitaxial services business and Emosyn smartcard business. In the Third Quarter-2003, diluted net loss per share was $0.36, which includes a diluted net loss of $0.20 per share from discontinued operations. Diluted weighted average shares outstanding were approximately 36.8 million and 30.2 million for the Third Quarter-2004 and the Third Quarter-2003, respectively. The increase in diluted weighted average shares outstanding is primarily the result of the exercise of employee stock options, the issuance of employee stock purchase plan shares, and the application of the “if-converted” method to account for the underlying common shares related to the 5.25% convertible notes, which had a dilutive effect in the Third Quarter-2004 for the first time.

     In the Nine months-2004, diluted earnings per share was $0.78, which includes $0.12 per share from discontinued operations and a gain of $0.15 per share relating to the sale of five of the Company’s discontinued businesses. In the Nine months-2003, diluted net loss per share was $0.50, which included a loss of $0.38 per share from discontinued operations. Diluted weighted average shares outstanding were approximately 31.7 million and 30.1 million for the Nine

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months-2004 and the Nine months-2003, respectively. The increase in diluted weighted average shares outstanding is primarily the result of the exercise of employee stock options and the issuance of employee stock purchase plan shares.

Liquidity and Capital Resources

     The Company finances its activities principally through cash from operations and the sale of equity. In addition, the Company has received proceeds from the sale of five of its six discontinued operations and expects the sale of the sixth discontinued operation, the environmental abatement equipment business, to be consummated before the end of 2004. The assets and liabilities associated with the discontinued operations are classified as held for sale in the consolidated balance sheets. The Company’s working capital increased to $275.7 million at September 30, 2004 from $244.9 million at December 31, 2003 as a result of cash generated from the sales of discontinued operations and increased foreign VAT receivable balances.

     Net cash provided by operating activities of continuing operations increased to $27.9 million for the Nine months-2004 from $13.7 million for the Nine months-2003 primarily as a result of increased operating earnings of the business. Increases in the net working capital accounts associated with increases in inventories for the Company’s copper-based materials products in Asia and liquid packaging products in Japan, increases in accounts receivable and changes in other net working capital accounts were largely offset by non-cash expenses during the period. Net cash used by operating activities of discontinued operations was approximately $1.4 million and $18.4 million for the Nine months-2004 and Nine months-2003, respectively. The significant cash use in the Nine months-2003 was mainly attributable to operating losses and increased inventories.

     Net cash used by investing activities of continuing operations was approximately $84.9 million and $25.3 million for the Nine months-2004 and Nine months-2003, respectively. Capital expenditures were $11.6 million and $12.7 million for the Nine months-2004 and Nine months-2003, respectively. The Company invested $2.1 million during the Nine months-2004 to purchase equity in an entity that is developing advanced materials for implant applications. The Company invested $36.4 million in acquisitions and other equity investments during the Nine months-2003, including entering into a strategic alliance with Enthone, Inc., which included purchasing the exclusive worldwide selling and distribution rights to Enthone’s copper electrochemical deposition products for $20.0 million and the acquisition of all of the outstanding capital stock of ESC, Inc., a developer of novel surface preparation and cleaning materials for copper and advanced interconnect microelectronic fabrication processes for $16.4 million. The Company had net investments of $71.2 million and net proceeds from the sale of marketable securities of $23.8 million during the Nine months-2004 and Nine months-2003, respectively. The Company’s marketable securities consist mainly of short-term corporate and municipal debt obligations. Net cash provided by investing activities of discontinued operations was approximately $79.2 million for the Nine months-2004, as a result of the proceeds received from the sales of the Company’s discontinued operations.

     Net cash provided by financing activities of continuing operations was approximately $6.5 million and $4.1 million for the Nine months-2004 and Nine months-2003, respectively, largely as a result of proceeds received from the exercise of stock options and employee stock purchase plan shares of $7.1 million and $4.5 million, respectively.

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     The outstanding convertible notes are due on November 15, 2006. If these notes are not converted pursuant to their terms prior to the due date, the Company will repay them in full, or refinance them, if management deems it more desirable to use the Company’s cash balances for other strategic purposes. Management believes that the Company could obtain refinancing for the convertible notes, though there can be no assurance that the Company would be successful in its efforts to obtain such refinancing on acceptable terms or at all. Failure to obtain refinancing could have an adverse effect on the financial condition of the Company. However, management expects to maintain sufficient liquidity to allow for repayment of the notes in the event no such refinancing could be completed successfully.

     The Company believes that the Company’s existing cash and cash equivalents and marketable securities balances, existing sources of liquidity, available lines of credit and anticipated proceeds from disposal of assets and liabilities held for sale will satisfy the Company’s projected working capital and other cash requirements through at least the end of 2004. Additionally, the Company believes that cash from operations generated through the period ending when our outstanding convertible notes become due on November 15, 2006 when combined with existing balances, should be sufficient to repay the notes when due, if they are not converted to equity prior to that time. However, management also believes the level of financing resources available to the Company is an important competitive factor in its industry, and may seek additional capital prior to the end of that period. Additionally, management considers, on a continuing basis, potential acquisitions of strategic technologies and businesses complementary to the Company’s current business. There are presently no definitive agreements with respect to any such potential acquisitions. However, any such transactions may affect the Company’s future capital needs. The activities the Company has undertaken to exit non-core businesses by sale and reduce its exposure to the cyclical capital-equipment spending environment may also generate additional sources of liquidity and affect the Company’s future capital needs.

Forward-Looking Statements

     This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words such as “anticipate,” “plan,” “believe,” “seek,” “estimate,” “expect,” “could,” “will” and words of similar meanings and include, without limitation, statements about the expected future business and financial performance of ATMI such as financial projections, expectations for demand and sales of new and existing products, market and technology opportunities, business strategies, business opportunities, objectives of management for future operations and semiconductor industry and market segment growth. Forward-looking statements are based on management’s current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political, economic, business, competitive, market regulatory and other factors. ATMI undertakes no obligation to update publicly or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

     As of September 30, 2004, the Company’s cash and cash equivalents and marketable securities included money market securities, corporate and municipal bond obligations and commercial paper. As of September 30, 2004, an increase of 100 basis points in interest rates would reduce the fair value of our marketable securities portfolio by approximately $0.9 million. Conversely, a similar reduction in interest rates would increase the fair value of our marketable securities portfolio by approximately $0.5 million.

     As of September 30, 2004, the Company had $115.0 million of fixed rate, long-term convertible notes outstanding. Interest rate changes and changes in the value of the Company’s common stock would likely result in changes in the market value of these notes. The fair value of these notes was approximately $130.2 million at September 30, 2004. The Company performs a sensitivity analysis on its fixed rate long-term convertible debt to assess the risk of changes in fair value. The model to determine interest rate sensitivity assumes a hypothetical 100 basis point shift in interest rates, while keeping the price of ATMI’s common stock constant. At September 30, 2004, assuming a 100 basis point increase in interest rates, the fair value of the notes would decrease by $1.5 million. Conversely, a 100 basis point decrease in interest rates at September 30, 2004 would increase the fair value of the notes by $1.0 million. The model to determine equity price sensitivity assumes a hypothetical 10% change in the price of our common stock, while keeping the interest rate constant. At September 30, 2004, assuming a 10% increase in the price of ATMI’s common stock, the fair value of the notes would increase by $4.4 million. Conversely, a 10% decrease in the price of ATMI’s common stock would result in the fair value of the notes decreasing by $4.6 million.

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 minimal 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 periodically utilizes forward exchange contracts to hedge certain foreign currency exposures, but does not use any other derivative financial instruments for trading or speculative purposes. At September 30, 2004, ATMI did not have any open foreign exchange contracts.

Changes in Market Risk

     There have been no material quantitative changes in market risk exposure between the fiscal period ended December 31, 2003 and September 30, 2004.

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Item 4. Controls and Procedures

     The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2004. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2004. There were no changes in the Company’s internal control over financial reporting during the Third Quarter of 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II- OTHER INFORMATION

Item 1. Legal Proceedings

     In the normal course of business, ATMI is involved in various proceedings and claims. Although the Company cannot determine the ultimate outcome of any of these legal proceedings at this time, management, including internal counsel, does not believe that the outcome of these proceedings, individually or in the aggregate, will have a material adverse effect on ATMI’s financial position or results of operations.

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Item 5. Other Information

     Our independent auditor, Ernst & Young LLP (E&Y), has recently notified the Securities and Exchange Commission, the Public Company Accounting Oversight Board and the audit committee of the Company’s Board of Directors that certain non-audit work it has performed in Taiwan, has raised questions regarding E&Y’s independence with respect to its performance of audit services.

     With respect to the Company, during fiscal year 2001, E&Y performed tax calculation and return preparation services for an expatriate employee of the Company’s subsidiary in Taiwan. E&Y’s affiliated firm in Taiwan made payment of the relevant taxes on behalf of one of the Company’s expatriate employees. The payment of those taxes involved the handling of the employee’s tax related funds. These payment services were discontinued in 2002. The fees paid by the Company to E&Y for the payment services were approximately $800 in 2001.

     Based upon E&Y’s disclosure, the Company evaluated E&Y’s non-audit services provided to the Company during the relevant time period and the Company did not identify any additional non-audit services that may compromise E&Y’s independence for purposes herein. The Audit Committee and E&Y have considered the impact that the holding and paying of these funds may have had on E&Y’s independence with respect to the Company and the Audit Committee has concluded that there has been no impairment of E&Y’s independence. In making this determination, the Audit Committee considered the de minimis amount of funds, which were remitted to E&Y by the Company and then paid by E&Y to the related taxing authorities, the ministerial nature of the actions, and that the subsidiary involved was immaterial to the consolidated financial statements of the Company.

Item 6. Exhibits

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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 4, 2004
	By	/s/ Eugene G. Banucci
		Eugene G. Banucci, Ph.D.
		Chief Executive Officer
	By	/s/ Daniel P. Sharkey
		Daniel P. Sharkey
		Vice President, Chief Financial Officer and Treasurer (Chief Accounting Officer)

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