Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ATMI > SEC Filings for ATMI > Form 10-Q on 23-Oct-2013All Recent SEC Filings

Show all filings for ATMI INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ATMI INC


23-Oct-2013

Quarterly Report


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

Three and Nine Months Ended September 30, 2013 as Compared to 2012 Cautionary Statements Under the Private Securities Litigation Reform Act of 1995 Disclosures included in this Form 10-Q contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words such as "anticipate," "plan," "believe," "seek," "estimate," "expect," "could," and words of similar meanings and include, without limitation, statements about the expected future business and financial performance of ATMI such as financial projections, expectations for demand and sales of new and existing products, customer and supplier relationships, research and development programs, market and technology opportunities, international trends, business strategies, business opportunities, objectives of management for future operations, microelectronics industry (including wafer start) growth, and trends in the markets in which the Company participates. Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions because of changes in political, economic, business, competitive, market, regulatory, and other factors. Certain factors that could cause such positive or negative differences include:
• variation in profit margin caused by price reductions, decreases in our shipment volume, reductions or obsolescence of our inventories, shifts in our product mix and changes in foreign currency exchange rates;

• customer-driven manufacturing efficiencies resulting in the dilution of our materials on their tools or extension of the bath-life that our materials are used in, both of which could negatively impact our revenues;

• cyclicality in the markets in which we operate;

• on an ongoing basis, our business may be affected by economic down-turns which could impact the volatility and liquidity of financial and credit markets, the general global economy, and factors such as inflationary or deflationary pressures yielding other market or economic challenges;

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

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

• customer-driven pricing pressures adversely affecting our average selling prices and margins;

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

• availability of materials or resources from a single or limited number of suppliers or from suppliers in a single country;

• highly competitive markets for our products;

• political and economic instability, the adequacy of country infrastructure and labor resources, currency fluctuations and controls, compliance with foreign laws and intellectual property protection, changes in export controls, health conditions, and possible disruptions in transportation networks;

• climate change and associated regulatory risk and natural events in the locations in which we, our customers, and suppliers operate;

• inability to accurately forecast customer demand may cause us to incur expedited shipping costs or hold excess or obsolete inventory;

• competition for attracting and retaining highly skilled scientific, technical, managerial and marketing personnel;

• inability to realize the anticipated benefits of acquisitions due to slower than expected sales growth or difficulties integrating acquired businesses with our current operations, including risk that our SDS Direct manufacturing transition could be delayed beyond fourth quarter 2013;

• risk of product liability claims beyond existing insurance coverage levels;

• risk of information technology system failures which could lead to security breaches, loss of data or network disruptions;


Table of Contents

• governmental regulations related to the storage, use, and disposal of certain toxic or otherwise hazardous chemicals in our manufacturing, processing and research and development activities, as well as regulations applicable to both operators and owners of property where releases of hazardous substances may have occurred (including releases by prior occupants);

• changing generally accepted accounting principles and related accounting pronouncements and interpretation or changes in underlying assumptions, estimates, or judgments;

• changing tax laws, taxation and audit by taxing authorities in the various countries in which we operate; and

• Uncertainty regarding compliance matters and higher costs resulting from changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and new regulations from the SEC.

These risks and uncertainties are described in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and our other subsequent filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings. Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and our performance and the performance of our customers. The price of our common stock is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control. ATMI undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law.

Company Overview
ATMI, Inc. (together with its subsidiaries, collectively referred to as the "Company," "ATMI," "our" or "we"), a global technology company, is a leading supplier of high performance materials, materials packaging and materials delivery systems used worldwide in various industries including microelectronics and life sciences. Our Microelectronics segment products consist of "front-end" semiconductor performance materials, sub-atmospheric pressure gas delivery systems for safe handling and delivery of toxic and hazardous gases to semiconductor process equipment, and high-purity materials packaging and dispensing systems that allow for the reliable introduction of low volatility liquids to microelectronics processes. ATMI targets semiconductor and flat-panel display manufacturers, whose products form the foundation of microelectronics technology rapidly proliferating through the consumer products, information technology, automotive, and communications industries. The market for microelectronics devices is continually changing, which drives demand for new products and technologies that have improved performance at lower cost. Our customers include the leading semiconductor manufacturers in the world who target leading-edge technologies. In our LifeSciences segment, we address an increasing number of single-use development and manufacturing needs for the life sciences markets. Our proprietary containment, mixing, and bioreactor technologies are sold to biotechnology, cell therapy and pharmaceutical companies involved in the manufacture of vaccine, monoclonal antibodies and cell therapy applications, which we believe offer significant long-term growth potential. ATMI's objective is to meet the demands of our microelectronics and life sciences customers with solutions that maximize the efficiency and safety of their manufacturing processes, reduce capital or operating costs, and minimize the time to develop new products and integrate them into their processes.


Table of Contents

Results of Operations
The following table provides a summary of consolidated results of operations for
the three and nine months ended September 30, 2013 and 2012:
                              Three Months Ended                       Nine Months Ended
                                 September 30,                            September 30,
                              2013          2012       % Change        2013          2012       % Change
Revenues                   $ 100,232     $ 108,847       (7.9 )%      301,647       307,320       (1.8 )%
Cost of revenues              53,978        54,404       (0.8 )%      160,049       155,221        3.1  %
Gross profit                  46,254        54,443      (15.0 )%      141,598       152,099       (6.9 )%
Gross profit margin             46.1 %        50.0 %                     46.9 %        49.5 %
Operating expenses:
Research and development      12,771        12,272        4.1  %       39,083        40,586       (3.7 )%
Selling, general and
administrative                22,436        21,708        3.4  %       68,416        67,967        0.7  %
Total operating expenses      35,207        33,980        3.6  %      107,499       108,553       (1.0 )%
Operating income              11,047        20,463      (46.0 )%       34,099        43,546      (21.7 )%
Interest income                  240           293      (18.1 )%          896           923       (2.9 )%
Other income (expense),
net                              218           254      (14.2 )%        1,838          (509 )    461.1  %
Income before income taxes    11,505        21,010      (45.2 )%       36,833        43,960      (16.2 )%
Provision for income taxes     3,057         6,585      (53.6 )%       10,512        14,250      (26.2 )%
Effective tax rate              26.6 %        31.3 %                     28.5 %        32.4 %
Net income                 $   8,448     $  14,425      (41.4 )%   $   26,321     $  29,710      (11.4 )%

Analysis of Consolidated Results
Third quarter 2013 revenues of $100.2 million declined by 7.9 percent compared to the third quarter of 2012 driven by declines in Microelectronics primarily due to lower sales of NowPak®, copper products, Safe Delivery Source® ("SDS®"), and continued customer efficiency gains in our cleans chemistries. The third quarter of 2012 included a one-time $2.6 million royalty. This Microelectronics decline was softened by continued momentum in LifeSciences due to single-use sales.
Revenues for the nine months ended 2013 were $301.6 million, a decline of 1.8 percent compared to the nine months ended 2012, driven by Microelectronics segment weakness in copper products partially offset by SDS growth and growth in our LifeSciences segment. Revenues in Microelectronics in the nine months ended 2012 included a one-time $2.6 million royalty. Our LifeSciences segment grew 15.9 percent primarily due to single-use sales and increased license revenues. Consolidated gross profit margin in the third quarter of 2013 was 46.1 percent, a decline of 3.9 percentage points compared to the same quarter of 2012. The decline was driven by Microelectronics as a result of reduced contribution margin due to a combination of lower sales volume and pricing declines. Consolidated gross profit margin for the nine months ended 2013 was 46.9 percent, a decline of 2.6 percentage points from the same period in 2012, due to volume declines and unfavorable product mix.
Research and development ("R&D") expense increased 4.1 percent to $12.8 million in the third quarter of 2013 from $12.3 million in the third quarter of 2012. The third quarter of 2012 results include the recognition of the successful conclusion of a collaborative development agreement resulting in expense reimbursements in that quarter of $1.9 million. Excluding this item, R&D expense would have been down 10 percent from the comparable quarter in 2012. The third quarter of 2013 results include reduced spending of $0.8 million related to high-productivity development ("HPD") expenses and reduced consumables, partially offset by increased depreciation.
R&D expense for the nine months ended 2013 decreased 3.7 percent to $39.1 million due to lower HPD related spending of $2.6 million, and reductions in spending on consumables ($0.8 million), outside services ($0.7 million) and prototypes ($0.6 million), partially offset by increased depreciation ($1.0 million) and by the prior year cost reimbursements of $2.4 million related to a collaborative development agreement.


Table of Contents

Selling, general & administrative ("SG&A") expenses in the third quarter of 2013 were $22.4 million, an increase of 3.4 percent compared to the same period in 2012 driven by $1.0 million in severance costs, and increased outside services and legal fees associated with business development activities, somewhat mitigated by reduced salaries and employee incentives.
For the nine months ended September 30, 2013, SG&A expenses were $68.4 million a slight increase as compared to the same period of 2012. During the nine months ended September 30, 2013 increased employee severance of $1.6 million and legal fees of $0.6 million were partially offset by reductions in employee salaries of $0.9 million and reduced benefits costs of $0.8 million. The same period in 2012 included a $0.9 million benefit from a reduction in our Artelis contingent consideration.
Operating income for the third quarter of 2013 declined 46.0 percent to $11.0 million compared to $20.5 million in the third quarter of 2012, driven by the factors noted above.
For the nine months ended September 30, 2013, operating income declined 21.7 percent to $34.1 million driven by revenue declines and lower gross profit.

Interest income was flat in the third quarter of 2013 compared to the third quarter of 2012 and was flat for the nine months ended September 30, 2013 compared to September 30, 2012.
In the third quarter of 2013, other income of $0.2 million was essentially flat with the third quarter of 2012.
In the nine months ended 2013, other income was $1.8 million, compared to expense of $0.5 million in the nine months ended 2012. The 2013 income includes $2.1 million from the sale of marketable securities partially offset by foreign currency losses of $0.6 million compared to the prior year loss of $0.5 million on the sale of an auction-rate security.
We had an effective income tax rate of 26.6 percent and 28.5 percent for the three and nine month periods ended September 30, 2013. The effective income tax rate differs from the U.S. federal statutory income tax rate of 35.0 percent primarily due to the mix of income attributable to the various countries in which we conduct business, the increase in the valuation allowance on certain foreign losses, and the impact of our reserves. The year-to-date effective income tax rate includes a $1.2 million settlement with the South Korea taxing authority, $1.1 million of benefits for certain 2012 retroactive provisions of The American Taxpayer Relief Act of 2012 (signed into law on January 2, 2013) including the US R&D credit, $2.2 million net benefit for reversals of previously established reserves, and a $0.2 million provision related to equity-based compensation. The effective income tax rate is calculated based on full-year assumptions and is affected by the mix of income attributable to the various countries in which we conduct business. We continue to incur losses at Artelis, our iCELLis® and Xpansion™ bioreactor business, and as a result, we have not recorded a tax benefit on these losses. If a tax benefit had been reflected on the foreign losses, our effective income tax rate would have been approximately 25.6 percent and 24.5 percent for the three and nine month periods ended September 30, 2013, respectively.


Table of Contents

Segment Analysis
                                               Revenue
                      Three Months Ended                    Nine Months Ended
                         September 30,                         September 30,
                      2013          2012     % Change       2013          2012     % Change
Microelectronics   $  87,828     $  98,477    (10.8 )%   $ 265,353     $ 276,460     (4.0 )%
LifeSciences          12,307        10,388     18.5  %      35,532        30,651     15.9  %
All Other                 97           (18 )  638.9  %         762           209    264.6  %
Total Consolidated $ 100,232     $ 108,847     (7.9 )%   $ 301,647     $ 307,320     (1.8 )%

                                       Operating income (loss)
                      Three Months Ended                    Nine Months Ended
                         September 30,                         September 30,
                      2013          2012                    2013          2012
Microelectronics   $  25,301     $  34,388    (26.4 )%   $  77,469     $  85,817     (9.7 )%
LifeSciences            (909 )      (2,137 )   57.5  %      (3,849 )      (5,367 )   28.3  %
All Other            (13,345 )     (11,788 )  (13.2 )%     (39,521 )     (36,904 )   (7.1 )%
Total Consolidated $  11,047     $  20,463    (46.0 )%   $  34,099     $  43,546    (21.7 )%

Microelectronics: Revenues declined 11 percent to $87.8 million in the third quarter of 2013 compared to the third quarter of 2012 due to declines in copper products, NowPak and SDS sales, and, also the recognition of a one-time $2.6 million royalty in 2012. Our copper materials product lines declined 11 percent in the third quarter of 2013 compared to the third quarter of 2012 due in part to a weaker economic environment, customer material-usage efficiencies, and the strategic decision to stop selling certain very low margin copper plating electrolytes. Price reductions had a 3 percent impact on revenue in the third quarter of 2013. Changes in exchange rates did not have a material impact on Microelectronics in the third quarter of 2013. Gross profit margins in our microelectronics segment were approximately 48 percent in the third quarter of 2013 compared to approximately 52 percent in the third quarter of 2012. Gross profit margins in the third quarter of 2013 were lower primarily because of declining sales volume (1 percentage point), the previously mentioned price impact, and the $2.6 million one-time royalty recognized in 2012 (1 percentage point). Operating income was $25.3 million in the third quarter of 2013 compared to $34.4 million in the third quarter of 2012. The decrease was driven primarily by decreased sales volume and pricing impacts partially offset by controlled spending and a reduction in HPD-related costs.

Revenues for the nine months ended September 2013 declined 4 percent to $265.4 million compared to the same period in 2012 driven by declines in copper product sales and NowPak, partially offset by SDS growth. The first nine months of 2013 results include fully operationalized SDS product sales in contrast to the same period in 2012. The first half of 2012 was a period of transition due to the SDS Direct transaction. Strong SDS sales drove implant revenue growth of 10 percent compared to the nine months ended September 2012. Our copper materials product lines declined 10 percent for the nine months ended 2013 compared to the nine months ended 2012, driven by weak economic conditions, customer material-usage efficiencies, and, the strategic decision to stop selling certain very low margin copper plating electrolytes. Price reductions for the nine months ended September 2013 had a 3 percent impact. Negative fluctuations in the Japanese Yen decreased Microelectronics revenue approximately 2 percentage points for the nine months ended September 2013. Gross profit margins in our microelectronics segment were approximately 48 percent for the nine months ended September 2013 compared to approximately 51 percent for the same period in 2012. Gross profit margins were down primarily due to lower volumes, negative product mix, pricing declines, and the $2.6 million one-time royalty recognized in 2012. Operating income was $77.5 million for the nine months of 2013 which was down 10 percent compared to the same period in 2012 driven by lower revenue, negative product mix, and lower gross margin.
LifeSciences: Revenues grew 19 percent in the third quarter of 2013 to $12.3 million compared to $10.4 million in the third quarter of 2012 primarily as a result of sales of single-use products. Fluctuations in exchange rates and price did not have a material impact on LifeSciences in the third quarter of 2013. Gross profit margins in our LifeSciences segment were approximately 36 percent in the third quarter of 2013, an increase of 8 percentage points compared to the same period in 2012 due to increased volume and improved mix. Our operating loss was $0.9 million in the third quarter of 2013, a 58 percent decrease compared to the third quarter of 2012 driven by revenue growth and margin improvement.


Table of Contents

Revenues grew 16 percent for the nine months ended September 2013 to $35.5 million compared to $30.7 million in the nine months ended September 2012 primarily as a result of sales of single-use products and increased license revenue. The stronger Euro improved LifeSciences revenue approximately 2 percentage points for the nine months ended September 2013. Gross profit margins in our LifeSciences segment increased to 37 percent for the nine months ended September 2013 compared to 33 percent in the same period of 2012. The increase was due primarily to the increased contribution margin from higher revenues. Our operating loss was $3.9 million for the nine months ended 2013, a 28 percent improvement compared to the first nine months of 2012, driven by revenue growth, improving product mix, and lower R&D spending, partially offset by increased operating expenses in support of iCELLis® and Xpansion™ bioreactor commercialization efforts.

Liquidity and Capital Resources
We assess liquidity in terms of our ability to generate cash to fund our operating and investing activities. Of particular importance to management are cash flows generated by operating activities, and cash used for capital expenditures, acquisitions, and stock repurchases.
Until required for use in the business, we invest our cash reserves in bank deposits, certificates of deposit, money market securities, time deposits, U.S. Treasuries, government and government-sponsored enterprise bond obligations, corporate debt obligations, common shares, and other interest bearing marketable debt instruments in accordance with our investment policy. We have contracted with investment advisers to invest our funds consistent with our investment policy. The value of our investments may be adversely affected by increases in interest rates, instability in the global financial markets that reduces the liquidity of securities included in our portfolio, and by other factors which may result in other-than-temporary declines in value of the investments, which could impact our financial position and our overall liquidity. Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost. We attempt to mitigate these risks with the assistance of our investment advisors by investing in high-quality securities and monitoring the overall risk profile of our portfolio. We also maintain a well-diversified portfolio that limits our credit exposure through concentration limits set within our investment policy. We have financed our operating needs and capital expenditures through cash flows from our operations, and existing cash. We expect to continue to finance current and planned operating requirements principally through cash from operations, as well as existing cash resources. We believe that these funds will be sufficient to meet our operating requirements for the foreseeable future. We are not aware of any legal or economic restrictions which would limit or restrict our ability to transfer funds from our subsidiaries should the need arise. At September 30, 2013 approximately 56 percent of our cash was held in the United States and 44 percent was outside the United States. However, we may, from time to time, seek additional funding through a combination of equity and debt financings or from other sources.
We continue to invest in R&D to provide future sources of revenue through the development of new products, as well as through additional uses for existing products. We consider R&D and the development of new products and technologies an integral part of our growth strategy and a core competency of the Company. Likewise, we continue to make capital expenditures in order to expand and modernize manufacturing and R&D facilities around the globe and to drive efficiencies throughout the organization. Additionally, management considers, on a continuing basis, potential acquisitions of strategic technologies and businesses complementary to the Company's current business.
In the first quarter of 2013, we executed a $16.0 million commitment to purchase raw material from a strategic gas supplier over the next two years. We have purchased approximately $7.0 million in raw materials through the nine months ended September 30, 2013 and now have remaining commitments under this agreement of approximately $9.0 million.
We are continuing to construct a new South Korean manufacturing facility, in JangAn, Gyeonggi province, and have begun internal material qualifications in the third quarter of 2013. We expect to move to high volume production in the first half of 2014.


Table of Contents

A summary of our cash flows follows (in thousands):

                                                                 Nine Months Ended September 30,
                                                                    2013                 2012
Cash provided by (used for):
Operating activities                                          $       39,239       $       52,269
Investing activities                                                 (52,086 )             (5,934 )
Financing activities                                                 (10,401 )               (434 )
Effects of exchange rate changes on cash and cash equivalents         (1,046 )                 39

Operating Activities
During the nine months ended September 30, 2013, we generated $39.2 million of cash from operations, which represents a decrease of $13.0 million compared to the $52.3 million of cash generated from operations during the nine months ended September 30, 2012. The cash generated from operations was driven by net income partially offset by cash used for the purchase of inventories including certain strategic purchases to secure future supply and support planned demand increases, and also, net income tax payments of $13.6 million and changes in accounts payable.
Investing Activities
Net cash used for investing activities was $52.1 million in the nine months ended September 30, 2013, an increase of $46.2 million compared to the nine . . .

  Add ATMI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ATMI - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.