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ATMI > SEC Filings for ATMI > Form 10-Q on 24-Apr-2013All Recent SEC Filings

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Form 10-Q for ATMI INC


Quarterly Report

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

Three Months Ended March 31, 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;

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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;

fluctuations in currency exchange rates;

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;

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.

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Company Overview

ATMI, Inc. (together with its subsidiaries, collectively referred to as the "Company," "ATMI," "our" or "we"), a global technology company, believes it 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 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.

Results of Operations

The following table provides a summary of consolidated results of operations for
the three months ended March 31, 2013 and 2012:

                                             Three Months Ended
                                                  March 31,
                                             2013           2012         % Change
     Revenues                              $  99,407      $ 92,574             7.4 %
     Cost of revenues                         52,720        48,392             8.9 %

     Gross profit                             46,687        44,182             5.7 %
     Gross profit margin                        47.0 %        47.7 %
     Operating expenses:
     Research and development                 13,182        14,489            (9.0 %)
     Selling, general and administrative      23,168        23,546            (1.6 %)

     Total operating expenses                 36,350        38,035            (4.4 %)

     Operating income                         10,337         6,147            68.2 %
     Interest income                             354           325             8.9 %
     Other income (expense), net                 373          (306 )         221.9 %

     Income before income taxes               11,064         6,166            79.4 %
     Provision for income taxes                2,638         2,304            14.5 %

     Effective tax rate                         23.8 %        37.4 %
     Net income                            $   8,426      $  3,862           118.2 %

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Analysis of Consolidated Results

First quarter 2013 revenues of $99.4 million increased by 7.4 percent compared to the first quarter of 2012 driven by strong Microelectronics growth, primarily in our implant product line as well as by continued momentum in LifeSciences due to strong single-use bioreactor and mixing product revenues.

Consolidated gross profit margin in the first quarter of 2013 was 47.0 percent, a decline of 0.7 percentage points compared to the same quarter of 2012. The decline resulted from a combination of less favorable product mix and the first quarter 2012 capitalization of certain costs into inventory ($1.5 million) partially offset by improved margin in LifeSciences on stronger consumables sales.

Research and development ("R&D") expense decreased 9.0 percent to $13.2 million in the first quarter of 2013 from $14.5 million in the first quarter of 2012. The decrease in R&D spending was caused mostly by a $1.0 million reduction in high-productivity development ("HPD") related expenses and lower prototype spending.

Selling, general & administrative ("SG&A") expenses declined 1.6 percent to $23.2 million in the first quarter of 2013 from $23.5 million in the first quarter of 2012 despite a net $1.5 million of severance costs in the first quarter of this year. The decline was caused by lower employee compensation costs of $0.7 million, a reduction in capital-based state taxes ($0.6 million) and reduced outside service spending ($0.5 million) partially offset by net increased severance costs ($1.3 million).

Operating income increased 68.2 percent to $10.3 million in the first quarter of 2013 compared to $6.1 million in the first quarter of 2012, driven by the factors noted above.

Interest income was $0.4 million in the first quarter of 2013 and $0.3 million in the first quarter of 2012.

In the first quarter of 2013, other income was $0.4 million, an increase of $0.7 million from the $0.3 million of expense in the first quarter of 2012. The current quarter income includes $0.7 million from the sale of marketable securities partially offset by foreign currency losses of $0.2 million.

We had an effective income tax rate of 23.8 percent for the three month period ended March 31, 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 effective income tax rate also includes $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. 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. In the first three months of 2013, if a tax benefit had been reflected on the foreign losses, our effective income tax rate would have been below 20 percent.

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