UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
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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: 1-16239
ATMI, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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06-1481060 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.) |
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7 Commerce Drive, Danbury, CT
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06810 |
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(Address of principal executive offices)
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(Zip Code) |
203-794-1100
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange |
Title of each class
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on which registered |
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Common Stock, par value $0.01 per share
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The NASDAQ Stock Market LLC
(NASDAQ Global Select Market) |
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer,and smaller reporting company in Rule 12b-2 of the Exchange Act
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The aggregate market value of the common stock held by non-affiliates of the registrant at June 30,
2010, was approximately $455,475,000 based on the closing sale price of such stock on the NASDAQ
Global Select Market on that date.
The number of shares outstanding of the registrants common stock as of January 31, 2011 was
31,577,045.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our proxy statement for the annual meeting of stockholders to be held on May 25, 2011
(Part III).
ATMI, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2010
TABLE OF CONTENTS
PART I
References in this annual report to the Company, ATMI, we, us and our refer to ATMI, Inc.
and our wholly-owned subsidiaries on a consolidated basis.
Cautionary Statements Under the Private Securities Litigation Reform Act of 1995
Forward-Looking Statements
Disclosures included in this Form 10-K 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 managements current expectations and assumptions, which are inherently
subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Investors and others should consider the cautionary statements and risk factors discussed in Item
1A below. 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. ATMI undertakes no obligation to update publicly or review any forward-looking
statements, whether as a result of new information, future developments or otherwise, except as
required by law.
Our Business
We believe we are among the leading suppliers of high performance materials, materials packaging
and materials delivery systems used worldwide in the manufacture of microelectronics devices. Our
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 and solids to microelectronics. 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, healthcare, and communications industries. The market for microelectronics
devices is continually changing, which drives demand for new products and technologies at lower
cost. ATMIs customers include many of the leading semiconductor manufacturers in the world who
target leading-edge technologies. ATMI also addresses an increasing number of critical materials
handling needs for the life sciences markets. Our proprietary containment, mixing, and bioreactor
technologies are sold to the biotechnology and laboratory markets, which we believe offer
significant growth potential. ATMIs objective is to meet the demands of our microelectronics and
life sciences customers with solutions that maximize the efficiency of their manufacturing
processes, reduce capital costs, and minimize the time to develop new products and integrate them
into their processes.
ATMIs core competencies include:
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knowledge of the science and economics of process applications for customer needs in
markets served; |
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the ability to use a combinatorial science-based research approach and high-productivity
development (HPD) capabilities to significantly shorten our new product development life
cycle and develop next generation materials necessary as the semiconductor industry moves
toward advanced technology generations, such as 22 nanometers; |
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the materials science of packaging, delivery, and deposition of ultra-pure semiconductor
materials; |
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the ability to rapidly develop innovative technology and intellectual property that
strengthens our competitive position; |
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knowledge of high-purity materials handling, containment, dispensing, mixing and
bioreactor systems to address life sciences customers needs for drug research, development
and commercialization. |
1
Our customers manufacturing processes are increasingly complex, resulting in rapidly changing
requirements for materials and materials handling solutions. ATMI has historically capitalized on
the growth of the microelectronics and life sciences industries in general through:
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a strategy of leveraging the combination of our performance materials and materials
handling competence to provide greater process efficiency value to our customers; |
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an extensive research and development program that has produced a stream of proprietary
and patented products for these markets; |
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a key customer focus, which has included providing applications development in order to
offer materials solutions for future generation technologies and the ability to perform
electrical test measurements in our development efforts to ensure our solutions meet our
customers needs; and |
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strategic alliances and collaboration efforts that have allowed us to add complementary
technologies to our product portfolio more rapidly than through internal development. |
ATMIs operations comprise one operating business segment.
The majority of ATMIs semiconductor business generally tracks semiconductor wafer starts.
Additional financial information about the Company and related geographic information can be found
in Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
of this Form 10-K.
We believe we have achieved a leadership position in high-performance semiconductor materials,
materials packaging, and materials delivery systems for the microelectronics market by focusing on
providing solutions to our customers that allow them to make faster, more advanced, or less
expensive devices while improving their manufacturing asset productivity and production yields. We
also focus on partnering with customers to bring new technologies into high-volume production as
quickly and efficiently as possible. ATMI plans to continue to focus on leveraging our core
technologies to create new high-growth product lines, including growing our leadership position in
advanced interconnect applications, which today is focused on copper. We believe we also have
achieved a leadership position in the small but fast growing market for one-time use mixing and
bioreactor applications in the life sciences market.
As was widely reported starting in late 2008, the disruptions in global credit and financial
markets led to diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, and uncertainty about economic
stability. In response to these events and the uncertainty they caused, our customers cautiously
managed their inventories. In the second half of 2009, macroeconomic indicators began to recover,
driven by customers who had reduced their inventory levels in the face of the economic downturn and
government sponsored demand generation programs. As this recovery has gained momentum, our
quarterly sequential revenue has continued to improve. In 2010, we have seen this momentum
translate into increased customer capacity utilization and higher customer demand and greater
customer confidence.
Semiconductor Industry Background
The semiconductor industry has experienced periods of rapid growth, but has also experienced
downturns, often in connection with, or in anticipation of, maturing product cycles of both
semiconductor companies and their customers products and declines in general economic conditions.
These downturns have been characterized by diminished product demand, production overcapacity, and
high inventory levels. Historically, longer-term demand for semiconductor devices has grown as the
use of semiconductor devices proliferated in a wide variety of consumer and industrial products,
especially in computing, gaming, networking and communications equipment. In periods of growth,
demand for semiconductor devices has been fueled by the ability of semiconductor manufacturers to
deliver products with:
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consistently enhanced performance characteristics and functionality; |
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reduced size, weight, power consumption and cost; and |
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shorter product development cycles. |
These past advances have been made possible, in part, by innovations in the fabrication processes
and in the materials and delivery systems used in manufacturing advanced semiconductor devices. At
the same time, semiconductor manufacturers have continually sought to streamline their supplier
relationships while the construction and management of fabrication facilities have become more
complex and costly. Because of this trend, consolidation among the providers of semiconductor
materials and materials delivery systems is expected to continue.
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Semiconductor Manufacturing Process
Semiconductor devices are manufactured by repeating a complex series of process steps on a wafer
substrate usually made of silicon. The primary process steps include various kinds of materials
deposition (physical vapor deposition, chemical vapor deposition, electrochemical deposition,
atomic layer deposition, and ion implantation), etch, wafer preparation (chemical mechanical
planarization), patterning (photolithography), and cleaning (photoresist stripping), each of which
is described in more detail below.
The industry continues to migrate from aluminum wiring to copper wiring in advanced semiconductor
chips. Copper wiring requires many new materials to be developed, such as barriers and insulators,
planarization materials, pre- and post-deposition cleaners, pre- and post-chemical mechanical
planarization (CMP) cleaners, and post-etch photoresist and post-strip residue removers. Each
new layer of copper generates a need for additional new materials. As the migration to copper
continues, many in the industry are predicting that the number of steps required to produce a chip
will significantly increase, driving the need for as many as fifty to sixty new materials to be
developed in support of this change.
During deposition processes, several layers of conducting, semi-conducting, or insulating thin
films are formed on a wafer. Precise and reliable control of the deposition of these films is
vital to the ultimate performance of an individual device.
The most mature processes for thin film deposition and modification are physical vapor deposition,
also known as PVD or sputtering, and ion implantation. In PVD, which is used primarily for the
deposition of conducting metal layers, a high-energy beam is directed at a high-purity metal target
which in turn causes the displacement of metal atoms that are showered over the wafer, coating it
with a thin metallic film. Ion implantation is a gas-based process used principally to modify (or
dope) semi-conducting layers with a high-energy beam of material that is implanted into an
existing thin film.
Chemical vapor deposition, or CVD, is a process used in the deposition of semiconducting and
insulating thin films. In the CVD process, wafers are placed in a sophisticated reaction chamber
where specially designed gases or vaporized liquid materials are introduced. Simultaneously, a
form of energy, such as heat or plasma, is added to the chamber to cause a chemical reaction among
the materials being introduced. As a result of this reaction, a thin film of material is deposited
on the surface of the wafer. CVD-based processes have certain advantages over PVD based processes,
including:
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the relative thinness of the films applied to the wafer; |
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conformality (ability to coat evenly, especially in three-dimensional holes and trenches
designed into the device); |
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the ability to coat large areas. |
These advantages have led to periods of growth in sales of reactors and related CVD process
consumables and equipment. Consumables and related equipment include the raw materials used in the
CVD process and the delivery systems required to transport the materials around a semiconductor
plant and to a reactor.
Electrochemical deposition, or ECD, is growing rapidly as a result of the industrys desire to
use copper as the conducting layer in certain devices. The use of copper allows for smaller
circuits, because copper greatly reduces power consumption while increasing integrated circuit
(IC) speed. Nature favors copper over aluminum wiring because of its higher conductivity and
greater resistance to thermally and electrically induced short circuits. In ECD, the wafer is
placed in a bath of copper electroplating solution (the electrolyte). A power supply is connected
from the wafer substrate to a solid copper anode. When current is applied, the wafer acts as a
cathode where copper is reduced from solution and deposited onto the wafer resulting in a thin film
of copper on the wafer.
Atomic layer deposition (ALD) is a deposition method in which deposition of each atomic layer of
material is controlled by a pre-deposited layer of precursor; precursors and various components of
the film are introduced alternately; this method is used in deposition of alternative dielectrics.
Etch is a process that selectively erodes away certain thin film materials. It is carried out
either dry with corrosive gases or wet with energized liquids.
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CMP is used to prepare a wafer for patterning photolithography. As wafers are processed, thin film
thicknesses vary across the surface of the wafer. Because of the fine line widths used in
photolithography, wafers need to have more consistent topography. CMP planarizes the processed
wafer by polishing the wafer using a mechanical polishing pad and slurry, an abrasive solution
containing abrasive particles and liquids and chemicals which selectively erode away the
appropriate excess materials. CMP residue remains after the planarization process and removing
this residue has become an important manufacturing step in overall device fabrication. Given the
migration to copper, precision surface preparation and cleaning materials become more critical in
the fabrication of advanced interconnect devices. High precision, high performance surface
preparation and cleaning materials have been proven to improve device reliability, lifetime and
overall electrical performance.
Photolithography is the process whereby patterns are developed on the wafer surface. The process
is begun by applying a photosensitive material called photoresist or resist onto the wafer
surface and shining light through a patterned photomask to selectively harden the resist.
Photoresist strip is the process of stripping away or otherwise removing excess resist material
which allows for the fabrication of the wafers circuitry.
Because thin film materials are consumables, the market for these materials, materials packaging,
and materials delivery systems generally tracks wafer starts. The thin film materials market is
also segmented into a wide variety of material types and forms. For example, many thin film
precursors are now sold as pressurized gases, which allows for easy transport around a typical
semiconductor manufacturing plant. However, many of these gases are toxic and/or hazardous,
leading to the development of safer alternatives, including the use of liquid or solid materials
and the adoption of gas handling technologies and delivery systems that minimize the danger of a
catastrophic release of toxic gas. In addition, many of the materials used are complex compounds
that have stability issues related to the form and environment in which they are made, stored and
used. Innovations in material selection, manufacturing, packaging and delivery are required to
insure reliable supply of consistently pure materials.
The extraordinarily precise process requirements for making integrated circuits dictate exceptional
purity and consistency requirements in the materials used to fabricate semiconductors. Liquids and
solids used in making devices require special packaging and dispensing solutions to minimize
exposure to air, contamination, and degradation during temperature fluctuations and varying process
conditions.
The market for semiconductor thin film materials has expanded and contracted with the growth and
contractions of the market for semiconductor devices. The design of new thin film materials,
materials packaging, and materials delivery systems to transport these materials around a
semiconductor plant undergoes continuous innovation. This innovation has been driven by the demand
for expanding semiconductor device capabilities and corresponding decreases in circuit dimensions.
While we do expect growth in this segment, our growth may not necessarily track future wafer starts
as our customers continue to focus on improving their own manufacturing processes, which may result
in less material used per wafer processed.
Flat-Panel Industry Background
The flat-panel industry has experienced periods of rapid growth, but is also exposed to rapid
downturns in anticipation of maturing product cycles, reductions in consumer demand and declines in
general economic conditions. These downturns have been characterized by diminished product demand,
production overcapacity, and high inventory levels.
Flat-panel displays have become the standard for computer monitors, hand-held consumer devices,
televisions, and commercial display applications. Similar to semiconductors, the demand for
flat-panel displays has been fueled by the ability of manufacturers to deliver products with:
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consumer affordability through manufacturing and materials cost efficiencies; |
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larger display screen sizes; |
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improved performance and reliability; and |
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shorter product development cycles. |
The advances in flat-panel display technology have been made possible because manufacturers have
learned to leverage many of the technologies developed for the semiconductor industry as well as
improve processes that are unique to the flat-panel display industry, such as slit coating instead
of spin coating material onto the substrate to dramatically reduce material usage per substrate
processed. In some cases, because of the large volume of materials used in flat-panel
manufacturing, rapid advances in liquid materials handling and dispense applications have also
contributed to manufacturing efficiencies. Like the semiconductor industry, construction and
management of fabrication facilities have become more complex and costly, and flat-panel display
manufacturers continue to search for opportunities to bring efficiencies to their process to meet
the increasing demand for lower cost consumer products.
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Flat-Panel Manufacturing Process
Flat-panel display manufacturing is fundamentally similar to semiconductor manufacturing with a
manufacturing cycle that includes photolithography and deposition process steps. The primary
difference is the size of the substrate with which the devices are made. Whereas the semiconductor
industry has standardized on 12 inch (300mm) silicon wafers as the leading technology, flat-panel
display manufacturers work with glass panels as large as ten feet across or more, which can cause
unique challenges in product handling. The scale of flat-panel manufacturing also leads to the
requirement for larger volumes of materials and, although capital costs are rapidly increasing,
materials remain a significant cost of manufacturing. As such, performance materials, materials
packaging, and materials delivery solutions that provide manufacturing process efficiencies are in
demand. While we do expect growth in this segment, our growth will not necessarily track future
glass starts as our customers are moving to larger package sizes that generate less packaging
revenue per liter of material packaged and our customers continued focus on improving their own
manufacturing processes result in less material used per substrate processed.
Life Sciences Industry Background
For several decades, the pipeline for new drugs was dominated by small molecule-based drugs or
drugs manufactured from synthetic chemical molecules. In the last few years there has been a shift
in the pipeline of the most promising drugs to large molecule-based drugs, or drugs manufactured
through biotechnology processes. In addition, the pipeline contains fewer blockbuster drugs (i.e.,
drugs with more than $1 billion of revenues per year) and more niche-market drugs to address
patient-specific treatments. This creates the need, from the research and development (R&D) and
manufacturing perspectives, for more flexible and multi-product R&D and manufacturing sites. As a
result of the high manufacturing and R&D costs in this industry, there is intense pressure by
manufacturers to improve efficiencies.
This market shift has led to an industry-wide trend towards beginning to use disposable process
technology (e.g., films and polymers) in place of traditional stainless steel processes, which we
believe is a more sustainable approach to manufacturing by reducing time to market for new
products, reducing capital investments, reducing cleaning and recertification costs, and reducing
contamination risk associated with multi-product manufacturing facilities.
Life Sciences Manufacturing Process
Manufacturing in the life sciences markets is similar to semiconductor manufacturing, in that both
processes:
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produce high-purity materials; |
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must be reliable and repeatable; and |
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demand continued process automation and efficiencies in manufacturing in order to reduce
costs and to deliver value to the customers. |
ATMI is able to leverage its semiconductor manufacturing expertise in the life sciences arena by:
(1) utilizing its expertise in handling, storing, and delivering materials in a reliable manner,
and (2) utilizing its understanding of key interactions between materials and related packaging,
and life sciences one-time use applications. This is particularly the case, because the disposable
life sciences manufacturing process market maturity is about 10 years behind the semiconductor
market.
ATMIs Strategy
ATMIs strategic intent is to be the source of process efficiency solutions to technology-driven
customers by providing innovative materials and related delivery systems and technologies to:
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Focus development and application engineering initiatives with the leading manufacturers
to provide next generation performance materials and process solutions. |
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Target high-growth, high-margin specialty markets that use ATMIs core materials and
packaging technologies and require products that are consumed in the production process. |
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Add value through performance materials packaging, dispensing, and process technologies
designed to meet the demands of users for greater levels of purity, productivity, safety,
environmental responsiveness, and speed. |
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Significantly shorten new product development time lines and the development of next
generation materials through the use of a combinatorial science-based research approach and
HPD capabilities. |
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Leverage ATMIs technology leadership by investing extensively to develop proprietary
and patented materials and process solutions, which the Company uses to quickly
commercialize new offerings for customers. |
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Form strategic alliances, including joint development programs and collaborative
marketing efforts, to accelerate the introduction of ATMIs products into existing and new
markets. |
In summary, ATMIs strategy does not encompass a traditional materials supplier-to-customer
relationship. In those relationships, suppliers tend to provide materials to customers based
solely on the cost, quantity, and quality of the materials being supplied. Instead, ATMI works to
develop partnerships with its customers based on our ability to improve the process efficiency of
customers development, scale-up, manufacturing and supply chain processes, thereby reducing
customers total cost of ownership. ATMI seeks to provide value to its customers through the use
of its technical capabilities, and applications knowledge in a manner that changes its commercial
relationship with those customers to a value-sharing relationship.
Products
ATMI believes it is among the most innovative suppliers of high-purity materials and related
delivery systems and technologies. ATMI has sought to take advantage of the changes in the market
for materials, packaging and delivery systems by:
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developing and commercializing a broad range of front-end semiconductor performance
materials; |
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developing and commercializing sub-atmospheric pressure gas storage and delivery systems
for safe handling and delivery of toxic and hazardous gases to semiconductor process
equipment; |
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developing and commercializing innovative high-purity materials packaging and dispensing
systems that allow for the reliable introduction of low volatility liquids and solids to
semiconductor processes; |
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developing manufacturing processes to meet the critical purity and integrity
requirements of the microelectronics manufacturers; and |
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developing and commercializing single-use technologies for the life sciences industry
using our experience in high-purity materials packaging and dispensing systems. |
In meeting the needs of our customers, which include semiconductor device manufacturers, flat-panel
display manufacturers, chemical suppliers, semiconductor original equipment manufacturers, or OEMs,
and life sciences entities, located throughout the world, and anticipating their future
requirements, we seek to:
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utilize our global HPD capabilities incorporating high-productivity combinatorial
science-based research tools to shorten the development cycle to create new materials that
resolve current process issues, which meet the needs of advanced technology roadmaps of our
key customers; |
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maintain close relations with our customers in order to quickly understand their needs
and issues; |
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offer a complete line of performance materials, and related materials packaging,
dispensing and process technologies, and disposable containment, mixing, and bioreactor
systems; |
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provide a high level of customer service and applications support in all global markets; |
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meet customer needs for statistical quality and process control and dock-to-stock
programs; and |
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meet the industrys needs for advanced materials required for future generation devices. |
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Solutions
ATMI serves and provides applications and analytical support services to three primary markets:
integrated circuit (IC) fabrication (including ion implant and interconnect materials and
delivery systems), flat-panel displays (including advanced high-purity materials packaging and
dispensing systems), and life sciences.
IC Fabrication
The IC fabrication market represents the largest portion of ATMIs business and development
activities. The principal drivers for this market are cost, yield, speed, utilization of capital,
and risk reduction. The success of an electronic component or device is driven by the increased
functionality it can deliver at a lower cost. Yield and capital utilization are significant
drivers for the IC industry due to the implications on throughput and financial return, and the
challenge is compounded by the requirement to manufacture devices for increasingly complex advanced
technology generations. In an industry where the capital infrastructure is significant and product
life cycles are short, the ability to bring the next generation technology rapidly to market can
make a significant difference in our customers success. ATMIs ability to shorten deployment of
production-ready solutions is critical to our success. And finally, the IC fabrication industry
involves extremely complex manufacturing processes where the mechanisms of advanced materials
interactions are not always fully understood. ATMIs ability to characterize and control process
input variables helps to meet the need for risk reduction.
Ion Implant Module
The primary issues within the ion implant module are production throughput, cost, and safety
because of the hazardous properties of the implant gases used. ATMIs patented SDS®
solutions use a standard gas cylinder containing an adsorbent material. The cylinder is filled
with gas under conditions such that the gas is adsorbed onto the adsorbent material at
sub-atmospheric pressure. Sub-atmospheric storage of hazardous gases minimizes potential leaks of
gas during transportation and use, thus providing significant safety and environmental improvements
over traditional high-pressure cylinders. In addition, SDS products allow more process gas to be
stored in the cylinder, providing significantly higher rates of productivity than traditional
methods of gas delivery used in ion implantation manufacturing processes. Because ion implantation
processes operate at reduced pressures, the gas can be desorbed or released from the SDS gas
sources using the ion implanters vacuum pumps. SDS gas sources can be installed and operated like
conventional high-pressure gas cylinders with minimal maintenance. These advantages have led the
majority of significant chip manufacturers to adopt this technology as the industry standard for
dopant gas delivery.
ATMI invests significant resources in developing solutions that can increase throughput and which
can provide customers a return on their investment while continuing to control the risks associated
with hazardous gases for the ion implant module. An example of these developments for ion implant
is SDS3. Materials packaged in SDS systems include primarily arsine, phosphine, and boron
trifluoride. The third generation of SDS products, called SDS3, maintains all the inherent safety
features of previous generation SDS products, but dramatically increases the gas storage capacity
by using a new adsorbent. The two to three times capacity improvement over the previous SDS
products allows ion implanter users to reduce tool down time, resulting in significant cost savings
for our customers.
Advanced Interconnect Solutions
ATMI has developed several solutions for the advanced interconnect of IC fabrication. Millions of
transistors on an integrated circuit are connected with a system of conducting wires in an
insulating media. As demand for higher electronic components capabilities and performance grows,
the need for more transistors and faster speeds is met through shrinkage. This poses problems for
IC designers since smaller devices and features result in delays of signal transfer because fewer
electrons can travel down a smaller path, and the potential for signals to short circuit increases
with the proximity of these smaller wires. The primary drivers for advanced interconnect are to
reduce the resistance of the wires (make them more conductive) and to improve the permittivity of
the dielectric (provide them with better insulation).
These issues have been solved through the adoption of copper interconnects replacing aluminum, and
the use of low-k dielectrics. (The lower the k-value, the greater the insulation). Any particle
or defect can result in a short (where the dielectric fails and two adjacent wires connect) or an
open (where the wire fails to transmit the signal). Almost all of the development work within
ATMIs advanced interconnect capability is focused on one of two areas: 1) Providing materials and
technology that prevent particles and defects; and 2) providing materials and technology that help
to manage the film properties of the conductor and the insulator. Developments in these areas have
enabled the industry to develop advanced interconnects that are reliable and provide high yields
quickly.
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Surface Preparation. ATMIs AP and ST brand wafer photoresist strip cleaning materials are
proprietary chemistries used for applications such as semiconductor post-etch residue removal,
wafer etching, organics removal, negative resist removal, edge bead removal, and corrosion
prevention. Our SPP and Planar Clean- brands are proprietary chemistries used in copper post-CMP
cleaning applications. Our surface preparation solutions are being used in some of the most
advanced copper IC fabrication plants (fabs) around the world for various surface preparation
applications such as post-CMP cleaning and pre-nitride deposition surface treatment. The
applications for these products are expanding rapidly as the advanced IC device designs drop to 45
nanometers and below. Customers using ATMIs surface preparation solutions are able to benefit
from higher yield and more reliable interconnects that result from fewer particles and defects.
Copper Plating. ATMI believes it is a market leader in materials used in copper ECD applications
with the ViaForm® copper materials that it offers. ViaForm materials include inorganic and
proprietary organic molecules that provide the wiring for copper interconnects. The ViaForm
solution is used by manufacturers to eliminate processing steps by applying two layers of copper in
a single step known as dual damascene. Dual damascene copper processing in semiconductor devices
is a rapidly growing market with leading logic segment semiconductor companies in volume production
at 130-, 90-, 65-, 45-, and 3x-nm technology generations; in initial production ramps for 2x-nm
generations; and in research at 22-nm and below generations. The memory segment is also
experiencing growth in use of copper interconnects, with most leading memory companies in
production at the 4x-nm generation, and ramping production at 3x-nm generations.
Deposition. The advanced interconnects also include several processes for depositing thin films
such as CVD and atomic layer deposition (ALD) processes that are enabled by advanced liquid,
gaseous and solid precursors. The technology development of chemical synthesis and manufacturing
techniques provide ATMI with a competitive advantage in this area. ATMI markets its UltraPur-
materials for pre-metal dielectric, dielectric and barrier applications. ATMI is well-positioned
for the incorporation of ALD processes by the semiconductor industry with its ProE-Vap® ampoule.
This proprietary container allows for reliable delivery of low volatility solid precursors required
for processes that demand ALD, like high-k gates.
ATMI has successfully adopted the carbon adsorption technology used in SDS and introduced products
for semiconductor deposition processes marketed under the SAGE® brand. These applications include:
low-k plasma-enhanced deposition, or PE-CVD, processes using low-k materials, pre-metal
dielectric high-density plasma, or HDP-CVD, and films using phosphine gases and thermal
deposition processes using germane gases. ATMI sells a silane product in a VAC® package used in
processes such as HDP-CVD, for improved safety.
Materials Packaging. ATMIs NOWPak® liner technologies and container assemblies form the basis for
its high-purity liquid materials packaging and dispensing system product portfolio. For
applications in IC fabrication, this product line includes the: Bag-in-a-Bottle and
Bag-in-a-Drum container systems, each with its own companion dispense connection system. Each
package features a pre-cleaned collapsible inner liner, or bag, inside a rugged, high-density
polyethylene overpack. The standard liner films are made of polytetrafluoroethylene and other
polymers, which allow chemicals to be delivered to the manufacturing process without compromising
their inherent purity. The empty inner liner is easily removed for waste consolidation, and the
outer shell is recyclable or returnable for insertion of a new replacement liner. The dispensing
system promotes full use of the chemical, chemical isolation from environmental contamination, and
improved safety during dispense by sealing and isolating the chemical from the environment to
further protect the chemical and the operator.
The largest current market for NOWPak packaging products is photoresist and related chemicals used
to pattern integrated circuits and flat-panel displays. For integrated circuit patterning, these
materials are typically packaged in Bag-in-a-Bottle containers that range in size from 1 to 10
liters. Recently, applications have expanded beyond photolithography chemicals in the
semiconductor market to include photolithography ancillary chemicals, CMP slurries, and other
critical process chemicals using the recently developed 200 liter Bag-in-a-Drum container system.
Flat-Panel Display Market
The flat-panel display market has the potential for further growth because of the demand for flat
screen televisions and various display applications. Manufacturers in this market compete by
driving down costs and keeping yields high. To address these needs, ATMI has developed novel
high-purity materials packaging and dispensing systems.
ATMIs NOWPak® liner technologies and container assemblies also address the needs of the
flat-panel display market through the Bag-in-a-Can product, which has its own companion dispense
connection system, as described above, and uses larger 10 to 200 liter containers. The
Bag-in-a-Can features a cleaned collapsible inner liner, or bag, inside a rugged stainless steel
over pack. The standard liner films are made of proprietary multi-ply films of polyolefin and other
polymers, which allow chemicals to be delivered to the manufacturing process without compromising
their inherent purity. The empty inner liner is easily removed for waste
consolidation, and the outer shell is returned for insertion of a new replacement liner. The
dispensing system promotes full use of the chemical. The fundamentally unique advantage of the
Bag-in-a-Can for the flat-panel display market is that the drive gas used to transfer the chemical
from the supply container to the process tool is isolated from the chemistry, thereby minimizing
defects and variation in the manufacturing process.
8
Life Sciences
ATMI is addressing an increasing number of critical materials handling needs for the life sciences
markets. Other markets for our proprietary high-purity materials handling and dispensing systems
include the biotechnology and laboratory markets, which we believe offer significant growth
potential. The biotechnology industry has been using disposable components like filters,
connectors, and disposable storage bags for several years; however, biotechnology customers have a
growing need to combine these disposable components and integrate them into disposable systems.
ATMI has responded to this trend by launching a complete offering of scalable disposable
containment, dispensing, mixing and bioreactor systems.
ATMIs NewMix-Levtech proprietary disposable mixing technology is the market leading technology for
disposable mixing applications within the life sciences market. The solutions delivered to our
customers consist of a hardware system that is compatible with a one-time use mixing bag
container; the technology delivers unique particle-free mixing and is scalable to an industrial
scale. A typical biotech manufacturing process has over 20 different mixing steps starting from a
cell culture process through the final-fill drug solutions. ATMI mixing technology is typically
used for preparing buffers and media solutions for feeding the cell culture and chromatography
applications, but also other process steps like virus inactivation and final-fill solutions.
In November 2010, we acquired the Belgian biotechnology firm Artelis S.A., an innovator in the area
of highly-efficient bioprocesses and technologies for cell culture research and manufacturing
scale-up. The acquisition complements ATMIs leadership in ultra-pure single-use films,
bioreactors, and mixing systems for characterizing, developing, and manufacturing
biopharmaceuticals and extends our global capabilities to a broad range of biopharmaceutical
process expertise.
Raw Materials
We use a broad range of specialty and commodity chemicals and polymers in the development of our
products, including parts and sub-assemblies that are obtained from outside suppliers. We seek,
where possible, to have several sources of supply for all of these materials. Although we may, in
some instances, rely on a single or a limited number of suppliers, or upon suppliers in a single
country, for certain of these materials, we have not experienced any sustained interruption in
production or the supply of these materials and do not anticipate any significant difficulties in
obtaining the materials necessary to manufacture our products.
Working Capital
In the ordinary course of our business, we maintain an adequate level of working capital at all
times to support business needs. In accordance with microelectronics, flat panel display and life
sciences industry practices, we do not need to carry significant amounts of inventory to meet the
delivery requirements of our customers. We generally do not provide customers with rights of
return (with the exception of standard warranty provisions, which historically have not been
material) and we generally do not provide customers extended payment terms beyond 90 days.
Customers, Sales, and Marketing
ATMI sells and distributes its products worldwide primarily through a direct global sales and
service organization. For a breakdown of revenue by geography, see Note 16 in the Notes to the
Consolidated Financial Statements (Part II, Item 8 of this Form 10-K). Also, for detail regarding
revenue by product type, see Note 15 in the Notes to the Consolidated Financial Statements (Part
II, Item 8 of this Form 10-K). ATMI markets and sells its materials products to end-use customers,
chemical suppliers, and original equipment manufacturers (OEMs) through its direct sales force in
North America, Europe, Taiwan, South Korea, Japan, China, and Singapore, with limited use of
regional manufacturing representatives in certain parts of Asia and Europe. NOWPak containers are
generally sold to chemical suppliers, who sell their high-purity chemicals in NOWPak containers at
the request of end-users. ATMIs life sciences products are sold directly and through a global
distribution agreement to life sciences and certain semiconductor companies, predominately in
Europe and to an increasing extent in the United States. ATMI sells its SDS products for ion
implant applications directly to certain end-users and through an exclusive distribution agreement
with Matheson Tri-Gas, Inc. (Matheson). During the years ended December 31, 2010, 2009 and 2008,
respectively, ATMI recognized $79.9 million, $37.9 million, and $83.8 million of revenues from
Matheson, which represented 21.8 percent, 14.9 percent and 24.7 percent of our revenues for these
periods. During the years ended December 31, 2010, 2009 and 2008, respectively, ATMI recognized
revenues from a Taiwanese foundry of $46.8 million,
9
$36.2 million and
$36.6 million, which
represented 12.7 percent, 14.2 percent and 10.8 percent of our revenues for these periods.
There are no material seasonal effects on our business. The global nature of our business and the
significance of our foreign operations expose us to certain risks in the countries in which we
operate, including political and economic stability, the adequacy of country infrastructure and
labor resources, currency fluctuations and controls, compliance with foreign laws and intellectual
property protection. Investors and others should consider the cautionary statements and risk
factors discussed in Item 1A below.
Manufacturing
This table summarizes the locations, products manufactured and size of ATMIs various manufacturing
facilities as of December 31, 2010.
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Location |
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Products |
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Square Footage |
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Anseong, South Korea |
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CVD materials (Microelectronics) |
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13,000 |
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Anseong, South Korea |
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high-purity materials packaging systems (Microelectronics) |
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10,000 |
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Brussels, Belgium |
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high efficiency bioprocess manufacturing (Life sciences) |
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22,000 |
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Burnet, TX |
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liquid materials and delivery systems (Microelectronics) |
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77,000 |
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Bloomington, MN |
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high-purity materials packaging systems (Microelectronics / Life sciences) |
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68,000 |
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Danbury, CT |
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gas delivery systems and liquid materials (Microelectronics) |
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73,000 |
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Hoegaarden, Belgium |
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high-purity materials packaging and mixing systems (Life sciences) |
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74,000 |
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We use an exclusive contract manufacturer, Matheson, for the manufacture and distribution of our
SDS products. Under the terms of the manufacturing agreement, ATMI retains the right to
manufacture 25 percent of all SDS Products, which we manufacture in our Danbury, CT facility, while
the contract manufacturer has the right to manufacture 75 percent of all SDS Products. We also use
contract manufacturers for certain of our other materials and delivery equipment products both in
the U.S. and in Asia.
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Competition
ATMIs primary competitors in the semiconductor materials product lines include Air Products and
Chemicals (Electronics Division), DuPont Electronic Technologies, Dow Chemical Company (including
Rohm and Haas), BASF and Air Liquide as well as several smaller companies that specialize in niche
markets.
ATMIs SDS products (using adsorbent-based delivery technology) face competition from Praxair,
Inc., and others, who have a mechanical-based product approach to delivering gas at sub-atmospheric
pressure which currently comprise a small portion of the market. Several companies compete with
high-pressure gas cylinders and solid sources. There are numerous domestic and foreign companies
that offer products that compete with ATMIs materials, materials packaging and materials delivery
systems.
ATMI believes that its ability to compete in the markets for containers and dispensing systems is
dependent largely upon its patented NOWPak technology and its proven ability to enhance and improve
its products and technologies. Our NOWPak product line primarily competes with glass bottle
manufacturers.
ATMIs primary competitors in the life sciences product line include Sartorius Stedim Biotech S.A.,
Thermo Scientific HyClone, Millipore, and Xcellerex.
ATMI competes in established markets based on our ability to innovate and on product performance,
process efficiency, safety and price. In new and emerging markets we compete based on our ability
to develop innovative products that fulfill new and changing customer needs in an efficient,
cost-effective manner. Increased competition has, and may continue to, affect the prices we are
able to charge for our products. In addition, our competitors could own or could obtain
intellectual property rights which could restrict our ability to market our existing products
and/or to innovate and develop new products.
Research and Development
The Companys R&D expenses consist of personnel and other direct and indirect costs for internally
funded project development, including the use of outside service providers. ATMI also participates
in joint development efforts with certain semiconductor manufacturers, advanced technology
developers, and semiconductor equipment manufacturers. Total expenses for R&D for the years ended
December 31, 2010, 2009 and 2008 were $48.6 million, $37.2 million and $37.8 million, respectively.
Total research and development expenditures represented 13.2 percent, 14.6 percent, and 11.2
percent of revenues in 2010, 2009 and 2008, respectively.
ATMI has made significant investments to create global HPD capabilities that incorporate
high-productivity combinatorial science-based research tools to shorten the new product development
life cycle and more rapidly create new materials needed by our customers for their advanced
technology roadmaps. While conventional R&D methods allow for one process experiment to be
conducted on a single wafer, HPD capabilities enable engineers to evaluate up to 192 different test
chemistries on a wafer at once. This technique allows independent control of formulation; stir rate
and exposure time at each independent site on a test surface yielding a rich source of data
regarding materials choices in a fraction of the time and at lower cost than conventional research
methods. Beyond the improvements in speed and data quality during the evaluation period, results
are also subjected to both automated and human experience-driven understanding of semiconductor
manufacturing process flows. The union of these forces produces much faster learning cycles, and
makes it possible to rapidly narrow substantial volumes of data to a most promising subset of
chemical formulations. The process is iterative, concurrently assessing large numbers of precisely
selected, newly designed test variations.
Since production of the earliest ICs, a readily identifiable group of the same dielectrics, dopants
and metals were applied with only limited refinements or modifications. The introduction of copper
has changed that dynamic; now, virtually every new technology generation requires no fewer than a
dozen new materials. Looking into the future, the industry evolution to 22 nanometer will
encompass approximately 45 new materials in a process involving nearly 1,200 steps, dramatically
increasing the need to have a capability which enables more rapid feedback for the determination of
materials that would be appropriate for individual processes. There is a significant and growing
need among our customers to have access to HPD capabilities to enable them to keep pace with these
market changes. The fundamental obstacle to overcome in trying to develop optimal chemistries in
this environment is that conducting experiments in the conventional serial fashion will not produce
answers rapidly enough to meet technology node insertion deadlines or competitive needs. Our HPD
capabilities allow us to pursue more new product opportunities, in a shorter time, and using fewer
resources compared to previous methods. By performing a higher rate of experiments and identifying
promising routes for integrating these materials in actual production flows, and in certain
instances, learning about device characteristics, including electrical performance, much earlier in
the process than traditional approaches should differentiate ATMIs materials development
capabilities from our competition. We have demonstrated reductions in cycle time of up to 70
percent in the development of certain customer solutions. We are currently using our HPD
capabilities to solve customers materials challenges in applications such as post-CMP cleaning, high-dose implant strip, copper post-etch residue removal, high-k/metal gate cleaning
and others all areas that pose substantial development hurdles for our customers in the race to
transition to the next technology node.
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While we initially focused ATMIs HPD programs primarily on wet chemistry applications, in 2009 we
added dry chemistry capabilities, which expanded our customer interactions and partnerships to
materials, such as high-k metal gate precursors, in advanced memory applications.
Strategic Alliances
ATMI forms strategic alliances, including joint development programs and collaborative marketing
efforts, to develop new products and to accelerate the introduction of its products. These
programs have led to significant technological advances, including the development of proprietary
advanced materials and semiconductor manufacturing processes. ATMI has entered into an exclusive
license, manufacture, and distribution agreement with Matheson, whereby ATMI has granted licensing
rights for the manufacturing and worldwide distribution of certain SDS products to Matheson. Both
ATMI and Matheson manufacture SDS products for worldwide distribution under this exclusive
agreement. ATMI also has a strategic alliance with Enthone, Inc. (Enthone), a subsidiary of
Cookson Electronics, pursuant to which, ATMI purchased the exclusive worldwide selling and
distribution rights to Enthones copper ECD products, including its ViaForm products, through 2013,
subject to automatic renewal upon satisfaction of certain conditions. Under the terms of the
agreement, Enthone continues to manufacture the ViaForm products for ATMI. ATMI holds a minority
interest in the equity of Intermolecular Inc., has purchased HPD tools from Intermolecular, Inc.,
and has dedicated development resources with multiple key customers using this technology platform.
ATMI has a cost basis interest in Anji Microelectronics Co., Ltd., with operations in Shanghai,
China, with marketing agreements and licensing agreements around advanced semiconductor materials.
These programs enhance ATMIs core technology base and promote the introduction of targeted
products. In 2010, ATMI formed a new strategic alliance with Lake LED Materials, Co., Ltd., a
materials technology start-up focused on providing metal organic precursors to the light emitting
diodes (LED) market to accelerate commercial LED materials introductions to customers outside of
Asia using our strong sales and distribution abilities.
Backlog
Substantial portions of our business are conducted with open-ended supply contracts and / or
consignment agreements that do not specify quantities. Also, the SDS gas delivery source product
carries no backlog. Therefore, the Company does not believe that backlog as of any particular date
is indicative of future results.
Patents and Proprietary Rights
ATMI has made, and continues to make, a significant investment in securing intellectual property
protection for its technology and products. ATMI seeks to protect its technology by, among other
things, filing patent applications where appropriate. The Company also relies upon trade secrets,
unpatented know-how, continuing technological innovation, and licensing opportunities to help
develop and maintain its competitive position.
As of December 31, 2010, ATMI owns or controls approximately 396 United States patents and has
approximately 230 current United States patent applications pending. Foreign counterparts of
certain of these applications have been filed, or may be filed at an appropriate time. ATMI
decides on a case-by-case basis whether, and in which countries, it will file counterparts of a
United States patent application outside the United States. ATMIs United States patents expire
between approximately 2011 and 2029. ATMI also holds approximately 23 United States registered
trademarks.
ATMI requires all employees, outside scientific collaborators, sponsored researchers, and most
other advisors and consultants to execute confidentiality agreements upon the commencement of
employment or consulting relationships with the Company. These agreements generally provide that
all confidential information developed or made known to the entity or individual during the course
of the entitys or individuals relationship with ATMI is to be kept confidential and not disclosed
to third parties except in specific circumstances. All of ATMIs employees have entered into
agreements providing for the assignment of rights to inventions made by them while employed by the
Company.
12
Environmental Considerations
Regulation. ATMI uses hazardous materials and generates regulated waste streams as part of its
manufacturing, processing and R&D activities. As a result, the Company is subject to a variety of
governmental regulations related to the storage, use, transportation, and disposal of these
materials. ATMIs failure to comply with present or future laws could result in fines or other
liabilities being imposed on the Company, suspension of production or a cessation of operations.
Investors and others should consider the cautionary statements and risk factors discussed in Item
1A below.
Sustainability. ATMI considers the environmental sustainability of our products through our
development process with the objective of ensuring we provide our customers with solutions that
meet their needs and, to the extent possible, minimize environmental impact.
Employees and Employee Relations
As of December 31, 2010, ATMI employed 773 individuals, including 330 in sales, marketing, and
administration, 279 in operations, and 164 in research and development. Approximately 8 percent of
the Companys employees are covered by collective bargaining agreements, which expire in June 2011.
All of the employees covered by these agreements are based in Belgium. ATMI has never experienced
any work stoppages and considers its relations with its employees to be good.
Company Information
ATMI was incorporated under the laws of Delaware in 1997, and its predecessor company was
incorporated under the laws of Delaware in 1987. ATMIs headquarters is located at 7 Commerce
Drive, Danbury, Connecticut 06810, and the telephone number is (203) 794-1100.
ATMIs website can be found on the Internet at www.atmi.com. The website contains information
about the Company and its operations. We make available free of charge through our website our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and
amendments to these reports, as soon as reasonably practicable after we electronically file such
material with, or furnish such material to, the Securities and Exchange Commission (SEC). These
reports may be accessed on our website by following the link under Investor and then clicking on
Financial information.
Any of our reports filed or furnished with the SEC can also be obtained in print by any stockholder
who requests them from our Investor Relations Department:
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Investor Relations |
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ATMI, Inc. |
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7 Commerce Drive |
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Danbury, CT 06810 |
13
Cautionary Statements Regarding Future Results of Operations
You should read the following cautionary statements in conjunction with the factors discussed
elsewhere in this and other of our filings with the Securities and Exchange Commission (SEC) and in
materials incorporated by reference in these filings. These cautionary statements are intended to
highlight material factors that may affect our financial condition and results of operations. 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.
Similarly, the price of our common stock is subject to volatility because of 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.
Our profit margins may be adversely affected by a number of factors.
Our profit margins may be adversely affected in the future by a number of factors, including
decreases in our shipment volume, reductions in, or obsolescence of, our inventory and shifts in
our product mix. Many of our expenses, particularly those relating to capital equipment and
manufacturing overhead, are fixed in the short term. Accordingly, reduced demand for our products
and services can cause our fixed production costs to be allocated across reduced production
volumes, which can adversely affect our gross margin and profitability, and reduced demand could
adversely affect our performance. Our ability to reduce expenses is further constrained because we
must continue to invest in research and development to maintain our competitive position and to
maintain service and support for our existing global customer base.
Cyclicality in the markets we sell to may adversely affect our performance.
The semiconductor market has historically been cyclical and subject to significant and often rapid
increases or decreases in demand. These changes, along with cyclical changes in the flat-panel
display market, could adversely affect our results of operations and could have an adverse effect
on the market price of our common stock. Our results of operations have been adversely affected,
and may be further affected in the future, if demand for semiconductors, or devices that use
semiconductors, or flat panels decreases or grows at a significantly slower pace than has
historically occurred. Subsequent upturns in the markets which we serve have historically been
characterized by sudden increased product demand and production capacity constraints. We may have
difficulty reacting quickly enough to a sudden upturn in demand for our products and may incur
significant expediting and manufacturing costs to meet a rapid increase in customer demand.
The recent global economic crisis and continuing uncertainty in the financial markets could
materially and adversely affect our business and results of operations.
The recent disruptions in markets led to diminished liquidity and credit availability, declines in
consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty
about economic stability. In response to these events and the uncertainty they caused, our
customers cautiously managed their inventories. In the second half of 2009, the industry began to
recover, driven by customers who had reduced their inventory levels in the face of the economic
downturn and government sponsored demand generation programs. As this recovery has gained
momentum, our quarterly sequential revenues have improved; however, until the general economy
demonstrates marked improvement, uncertainties will continue to affect businesses such as ours in a
number of ways, making it difficult to accurately forecast and plan our future business activities.
In addition, financial difficulties experienced by our suppliers, distributors or customers could
result in product delays, increased accounts receivable defaults and inventory challenges.
Similarly, 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.
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. There
can be no assurance that there will not be deterioration in credit and financial markets affecting
consumer confidence in economic conditions.
Our business could be adversely affected if we cannot protect our proprietary technology or if
we infringe on the proprietary technology of others.
Our proprietary technology aids our ability to compete effectively with other companies. Although
we have been awarded, have filed applications for or have been licensed under numerous patents in
the United States and other countries, these patents may not fully
protect our technology or competitive position. Further, our competitors may apply for and obtain
patents that will restrict our ability to make and sell our products.
14
Our competitors may intentionally infringe our patents. Third parties may also assert infringement
claims against us in the future. Litigation may be necessary to enforce patents issued to us, to
protect our trade secrets or know-how, to defend ourselves against claimed infringement of the
rights of others or to determine the scope and validity of the proprietary rights of others. The
defense and prosecution of patent suits are both costly and time consuming, even if the outcome is
favorable to us. Outside the United States, in particular, such proceedings can be extremely
expensive and their outcome very unpredictable. An adverse outcome in the defense of a patent suit
could cause us to lose proprietary rights, subject us to significant liabilities to third parties
or require us to license rights from third parties or to cease selling our products. Any of these
events could have a material adverse effect on our business, operating results and financial
condition. We also rely on unpatented proprietary technology that others may independently develop
or otherwise obtain access to. Our inability to maintain the proprietary nature of our technologies
could negatively affect our revenues and earnings.
The loss of or significant curtailment of purchases by any of our largest customers could
adversely affect our results of operations.
While we generate revenue from hundreds of customers worldwide, the loss of or significant
curtailment of purchases by one or more of our top customers, including curtailments due to a
change in the design or manufacturing sourcing policies or practices of these customers or the
timing of customer inventory adjustments may adversely affect our results of operations. Our
customers and their customers aggressive management of inventory has already adversely affected our
results of operations in the past and may continue to adversely affect future results of
operations.
Customer driven pricing pressure may adversely affect our average selling prices.
We face aggressive cost-containment pressures from our customers. There can be no assurances that
we will be able to maintain current prices in the face of continuing pricing pressures. Over time,
the average price for our products may decline as the markets for these products become more
competitive. Any material reduction in product prices could negatively affect both revenues and
profits.
Our revenues and earnings could be negatively affected if we cannot anticipate market trends,
enhance our existing products and processes, develop and commercialize new products and processes,
and identify and consummate strategic acquisitions.
We believe that our future success will depend, in part, upon our ability 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. The microelectronics industry markets we
serve undergo frequent technological changes, which in turn create demand for new and improved
products and process technologies. We may not be able to improve our existing products and process
technologies or to develop and market new products and technologies that will be cost-effective or
introduced in a timely manner or accepted in the marketplace. We may not be able to leverage our
knowledge to make full use of combinatorial science and HPD capabilities as an effective market
offering for our customers. Our failure to develop or introduce enhanced and new products and
processes in a timely manner may negatively affect our revenues and earnings, and result in a
potential impairment of assets. Management considers, on a continuing basis, potential acquisitions
of technologies and businesses and other strategic alliances, some of which may be material to us.
However, we cannot be assured that we will identify or succeed in consummating transactions with
suitable acquisition candidates or alliance partners in the future.
We may have difficulty obtaining the resources or products we need for manufacturing or
assembling our products or operating other aspects of our business, which could adversely affect
our ability to meet demand for our products and may increase our costs.
We have hundreds of suppliers providing various materials that we use in the production of our
products and other aspects of our business, and we seek, where possible, to have several sources of
supply for all of these materials. However, we may rely on a single or a limited number of
suppliers, or upon suppliers in a single country, for certain of these materials. The inability of
such suppliers to deliver adequate supplies of reasonable quality production materials or other
supplies could disrupt our production process. In addition, production could be disrupted by the
unavailability of the resources used in production such as electricity, chemicals, and gases. The
unavailability or reduced availability of the materials or resources we use in our business may
require us to reduce production of products or may require us to incur additional costs in order to
obtain an adequate supply of these materials or resources. Our life sciences business is also
subject to governmental approval for products that are part of the manufacture of pharmaceuticals.
The occurrence of any of these events could adversely affect our business and results of
operations.
15
We face intense competition from a variety of sources, including larger companies.
The markets for our products are intensely competitive. A number of domestic and international
companies engage in commercial activities in the markets we serve. Many of these companies have
substantially greater financial, research and development, manufacturing and marketing resources
than we do. In addition, as this industry evolves, other competitors may emerge. To remain
competitive, we must continue to invest in and focus upon research and development and product and
process innovation. We may not be successful if we cannot compete on: price, technical
capabilities, quality, or customer service.
Our global manufacturing and sales activities subject us to risks associated with legal,
political, economic or other changes.
We have facilities in eight countries worldwide and, in 2010, more than 80 percent of our revenues
came from sales to companies outside the United States. The global nature of our business and the
significance of our foreign operations expose us to certain risks in the countries in which we
operate, including 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, which could result in an adverse effect on our business operations in such
countries and our results of operations.
Our results of operations could be adversely affected by fluctuations in exchanges rates.
Given our current operations and large customer base outside the United States, we employ the use
of forward currency exchange contracts to attempt to minimize the potentially adverse earnings
effect from exchange rate fluctuations on our net balance sheet exposures. Nevertheless, in
periods when the U.S. dollar significantly fluctuates in relation to the non-U.S. currencies in
which we transact business, such as the Euro, Japanese Yen, and the South Korean Won, fluctuations
can have an adverse effect on our revenues and results of operations.
Our results of operations could be adversely affected by climate change and natural events in
the locations in which we, our customers or our suppliers operate.
We have manufacturing and other operations in locations subject to natural events such as severe
weather and earthquakes that could disrupt operations. In addition, our suppliers and customers
also have operations in such locations. A natural disaster that results in a prolonged disruption
to our operations, or our customers or suppliers operations, may adversely affect our results of
operations and financial condition. Also, climate change poses both regulatory and physical risks
that could harm our results of operations or affect the way we conduct our businesses.
Incorrect forecasts of customer demand could adversely affect our results of operations.
Our ability to match inventory and production mix with the product mix needed to fill current
orders and orders to be delivered may affect our ability to meet our forecasts. In addition, when
responding to customers requests for shorter shipment lead times, we manufacture product based on
forecasts of customers demands. These forecasts are based on multiple assumptions. If we
inaccurately forecast customer demand, we may incur expedited shipping costs to deliver products to
meet customer demand or hold excess or obsolete inventory that would reduce our profit margins and
could adversely affect our results of operations.
We may have difficulty managing our growth and attracting and retaining highly skilled
scientific, technical, managerial and marketing personnel, which could adversely affect our
revenues and increase our operating expenses.
We have historically experienced periods of growth and intend to grow our business in the future.
The management of our growth requires qualified personnel, systems and other resources. Our future
success will depend in part on our ability to attract and retain highly skilled scientific,
technical, managerial and marketing personnel. Competition for such personnel in the industries
that we serve is intense, and our competitors are often larger and more established than we are. We
may not be successful in attracting and retaining qualified personnel. In addition, our expansion
may also significantly strain operational, management, financial, sales and marketing and other
resources. To manage growth effectively, we must continue to enhance and integrate our information
technology infrastructure, systems and controls and successfully expand, train and manage our
employee base. We may not be able to manage this expansion effectively, including by providing
satisfactory levels of customer service and technical support. Inability to manage our growth and
to attract and retain skilled personnel could have a material adverse effect on our business,
operating results and financial condition.
16
We engage in acquisitions, and may encounter difficulties integrating acquired businesses with
our current operations; therefore, we may not realize the anticipated benefits of the
acquisitions.
We seek to grow, in part, through strategic acquisitions. In the past several years, we have made
certain acquisitions intended to complement and expand our business, and may continue to do so in
the future. The success of these transactions will depend on our ability to integrate assets and
personnel acquired in these transactions, apply our internal controls processes to these acquired
businesses, and cooperate with our strategic partners. We may encounter difficulties in integrating
acquisitions with our operations, applying our internal controls processes to these acquisitions,
and in managing strategic investments. Furthermore, we may not realize the degree or timing of
benefits we anticipate when we first enter into a transaction. Any of the foregoing could adversely
affect our business and results of operations.
We face the risk of product liability claims.
The manufacture and sale of our products, which include thin film and other toxic materials,
involve the risk of product liability claims. In addition, a failure of one of our products at a
customer site could interrupt the business operations of the customer. Our existing insurance
coverage limits may not be adequate to protect us from all liabilities that we might incur in
connection with the manufacture and sale of our products if a successful product liability claim or
series of product liability claims were brought against us.
Our business is potentially subject to substantial liabilities for failure to comply with
environmental regulations.
We use, generate and discharge toxic or otherwise hazardous chemicals and waste in our
manufacturing, processing and research and development activities. As a result, we are subject to a
variety of governmental regulations related to the storage, use and disposal of these materials.
Our failure to comply with present or future laws could result in fines or other liabilities being
imposed on us, suspension of production or a cessation of operations.
In addition, under federal and state statutes and regulations, a government agency may seek to
recover its response costs and/or require future remedial measures from both operators and owners
of property where releases of hazardous substances may have occurred (including releases by prior
occupants) or are ongoing, and for which only partial indemnification may be available in some
cases.
Our activities may also result in our being subject to additional regulation. Such regulations
could require us to acquire significant additional equipment or to incur other substantial expenses
to comply with environmental laws. Our failure to control the use of hazardous substances could
subject us to substantial financial liabilities.
Our financial results or financial condition could be adversely affected by changes in
accounting standards and subjective assumptions, estimates and judgments by management related to
complex accounting matters.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines and interpretations with regard to a wide range of matters that are relevant to our
business, such as revenue recognition, business combinations, asset impairment, inventories,
self-insurance, tax matters and litigation, are highly complex and involve many subjective
assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in
underlying assumptions, estimates or judgments could significantly change our reported or expected
financial performance or financial condition.
Our results of operations could be adversely affected by changes in taxation.
Because we are a multi-national company, we have a business presence in many countries and, as a
result, are subject to taxation and audit by a number of taxing authorities. Tax rates vary among
the jurisdictions in which we operate. Our results of operations could be affected by market
opportunities or decisions we make that cause us to increase or decrease operations in one or more
countries, or by changes in applicable tax rates or audits by the taxing authorities in countries
in which we operate. In addition, we are subject to laws and regulations in various locations that
govern the determination of which is the appropriate jurisdiction to decide when and how much
profit has been earned and is subject to taxation in that jurisdiction. Changes in these laws and
regulations could affect the locations where we are deemed to earn income, which could in turn
affect our results of operations. We have deferred tax assets on our balance sheet. Changes in
applicable tax laws and regulations could affect our ability to realize those deferred tax assets,
which could also affect our results of operations. Each quarter we forecast our tax liability based
on our forecast of our performance for the year. If that performance forecast changes, our
forecasted tax liability may change.
17
Compliance with changing corporate governance regulations and public disclosures may result in
additional risks and exposures.
Changing laws, regulations and standards relating to corporate governance and public disclosure,
and new regulations from the SEC, have created uncertainty for public companies such as ours. One
such example is the current ambiguity regarding the breadth and pace of adoption of IFRS whether by
convergence or SEC mandate. These laws, regulations, and standards are subject to varying
interpretations in many cases and as a result, their application in practice may evolve over time
as new guidance is provided by regulatory and governing bodies. This could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to
disclosure and governance practices and our commitment to maintaining high standards with regard
thereto. As a result, our efforts to comply with evolving laws, regulations, and standards have
resulted in, and are likely to continue to result in, increased selling, general, and
administrative expenses and significant management time and attention. In particular, our efforts
to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding
our required assessment and, our independent registered public accounting firms audit, for fiscal
2010 have necessitated, and we expect such efforts to continue to necessitate, the commitment of
significant financial and managerial resources. We are also monitoring the evolving establishment
of SEC rules in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act to
determine the potential future effect on our disclosures and shareholders rights.
|
|
|
Item 1B. |
|
Unresolved Staff Comments |
None.
This table summarizes the location and size of ATMIs significant real properties as of December
31, 2010:
|
|
|
|
|
|
|
|
|
Location |
|
Square Footage |
|
|
Lease / Own |
|
|
|
|
|
|
|
|
|
|
Anseong, South Korea |
|
|
13,000 |
|
|
Own |
Anseong, South Korea |
|
|
10,000 |
|
|
Lease |
Bloomington, MN |
|
|
68,000 |
|
|
Lease |
Burnet, TX |
|
|
77,000 |
|
|
Own |
Brussels, Belgium |
|
|
22,000 |
|
|
Lease |
Chutung Town, Taiwan |
|
|
18,000 |
|
|
Lease |
Danbury, CT (1) |
|
|
31,000 |
|
|
Lease |
Danbury, CT |
|
|
73,000 |
|
|
Lease |
Hoegaarden, Belgium |
|
|
74,000 |
|
|
Own |
Hsin-chu, Taiwan |
|
|
30,000 |
|
|
Lease |
Lexington, KY |
|
|
6,000 |
|
|
Lease |
Round Rock, TX |
|
|
15,000 |
|
|
Lease |
Shanghai, China |
|
|
7,000 |
|
|
Lease |
Suwon-si, South Korea |
|
|
7,000 |
|
|
Lease |
Tempe, AZ |
|
|
11,000 |
|
|
Lease |
Tokyo, Japan |
|
|
6,000 |
|
|
Lease |
Toyohashi, Japan |
|
|
15,000 |
|
|
Lease |
ATMI also leases other sales offices throughout the world, each one of which occupies 5,000 or
fewer square feet.
Our fixed assets as of December 31, 2010 include the manufacturing facilities and non-manufacturing
facilities such as sales and administrative offices, including leasehold improvements made to those
facilities under non-cancelable leases, set forth in the table above and a substantial quantity of
machinery and equipment. The facilities, leasehold improvements, machinery and equipment in use as
of December 31, 2010 are in good operating condition, are well-maintained and substantially all are
in regular use.
18
We believe that the fixed assets capitalized and facilities in operation at December 31, 2010 for
the production of our products are suitable and adequate for the business conducted therein in the
current business environment and have sufficient production capacity
for their present intended purposes. Utilization of our facilities varies based on demand for our
products. We continuously review our anticipated requirements for facilities and, based on that
review, may from time to time adjust our facility plans.
|
|
|
Item 3. |
|
Legal Proceedings |
ATMI is, from time to time, involved in legal actions, governmental audits, and proceedings
relating to various matters incidental to its business including contract disputes, intellectual
property disputes, product liability claims, employment matters, export and trade matters, and
environmental claims. While the outcome of such matters cannot be predicted with certainty, in the
opinion of management, after reviewing such matters and consulting with ATMIs counsel and
considering any applicable insurance or indemnifications, any liability which may ultimately be
incurred is not expected to materially affect ATMIs consolidated financial position, cash flows or
results of operations.
|
|
|
Item 4. |
|
(Removed and Reserved) |
19
PART II
|
|
|
Item 5. |
|
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities |
The following graph compares the cumulative total stockholder return on ATMIs common stock with
the return on the Total Return Index for the NASDAQ Global Select Market (NASDAQ US Index) and the
NASDAQ Electronic Components Stock Index. The measurement assumes a $100 investment as of December
31, 2005 with all dividends, if any, reinvested. The data presented are on an annual basis for the
five years ended December 31, 2010. The performance shown is not necessarily indicative of future
performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relative Stock Performance |
|
|
|
|
|
|
|
NASDAQ |
|
|
|
|
|
|
|
|
|
|
Electronic |
|
|
|
|
|
|
NASDAQ |
|
|
Components |
|
|
|
|
Date |
|
US Index |
|
|
Stock Index |
|
|
ATMI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/30/05 |
|
|
100.000 |
|
|
|
100.000 |
|
|
|
100.000 |
|
12/29/06 |
|
|
109.838 |
|
|
|
109.933 |
|
|
|
109.153 |
|
12/31/07 |
|
|
119.141 |
|
|
|
123.252 |
|
|
|
115.302 |
|
12/31/08 |
|
|
57.414 |
|
|
|
66.477 |
|
|
|
55.166 |
|
12/31/09 |
|
|
82.526 |
|
|
|
103.880 |
|
|
|
66.571 |
|
12/31/10 |
|
|
97.946 |
|
|
|
108.240 |
|
|
|
71.291 |
|
The cumulative total stockholder return graph and related data provided in Part II Item 5 of
this Form 10-K is not soliciting material, is not deemed filed with the SEC and is not to be
incorporated by reference in any filing by us under the Securities Act of 1933, as amended (the
Securities Act), or the Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
20
The common stock of ATMI has traded on the NASDAQ Global Select Market under the symbol ATMI since
October 13, 1997, and the common stock of our predecessor company traded under that symbol from
1993 until October 12, 1997. This table sets forth, for the periods indicated, the high and low
sales price for the common stock as reported on the NASDAQ Global Select Market:
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
Low |
|
Fiscal year ended December 31, 2010 |
|
|
|
|
|
|
|
|
1st Quarter |
|
$ |
19.65 |
|
|
$ |
15.13 |
|
2nd Quarter |
|
|
22.05 |
|
|
|
14.21 |
|
3rd Quarter |
|
|
16.07 |
|
|
|
12.13 |
|
4th Quarter |
|
|
20.99 |
|
|
|
14.47 |
|
Fiscal year ended December 31, 2009 |
|
|
|
|
|
|
|
|
1st Quarter |
|
$ |
16.75 |
|
|
$ |
11.80 |
|
2nd Quarter |
|
|
18.65 |
|
|
|
13.72 |
|
3rd Quarter |
|
|
19.77 |
|
|
|
14.99 |
|
4th Quarter |
|
|
19.41 |
|
|
|
14.47 |
|
As of January 31, 2011, there were approximately 157 holders of record of our common stock.
We have never paid cash dividends on our common stock and have no current plans to do so. There are
no contractual restrictions in place that currently materially limit, or are likely in the future
to materially limit, us from paying dividends on our common stock, but applicable state law may
limit the payment of dividends. Our present policy is to retain earnings, if any, to provide funds
for the operation and expansion of our business.
The Transfer Agent and Registrar for ATMI is Continental Stock Transfer & Trust Company.
Purchases of Equity Securities This table lists all repurchases (both open market and private
transactions) during the three months ended December 31, 2010 of any of our securities registered
under Section 12 of the Exchange Act, by or on behalf of us, or any affiliated purchaser.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Dollar |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
|
Value of Shares |
|
|
|
Total Number |
|
|
Average |
|
|
as Part of Publicly |
|
|
that May Yet Be |
|
|
|
of Shares |
|
|
Price Paid |
|
|
Announced |
|
|
Purchased Under |
|
Period (1) |
|
Repurchased (2) |
|
|
per Share |
|
|
Programs (3) |
|
|
the Programs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2010 |
|
|
1,026 |
|
|
$ |
15.10 |
|
|
|
|
|
|
$ |
48,182,523 |
|
November 2010 |
|
|
1,316 |
|
|
$ |
18.96 |
|
|
|
|
|
|
$ |
48,182,523 |
|
December 2010 |
|
|
779 |
|
|
$ |
20.68 |
|
|
|
|
|
|
$ |
48,182,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,121 |
|
|
$ |
18.12 |
|
|
|
|
|
|
$ |
48,182,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There were no other repurchases of our equity securities by or on behalf of us or any
affiliated purchaser during the fiscal quarter ended December 31, 2010. |
|
(2) |
|
Share repurchases are shown on a trade-date basis. Represents shares repurchased to satisfy
employee minimum tax withholding obligations on vesting of restricted stock. |
|
(3) |
|
In August 2010, the Companys Board of Directors approved a share repurchase program for up
to $50.0 million of ATMI common stock. Share repurchases are made from time to time in open
market transactions at prevailing market prices or in privately negotiated transactions.
Management determines the timing and amount of purchases under the programs based upon market
conditions or other factors. The program, which has no expiration date, does not require the
Company to purchase any specific number or amount of shares and may be suspended or reinstated
at any time at the Companys discretion and without notice. |
21
|
|
|
Item 6. |
|
Selected Financial Data |
These selected consolidated statements of operations for the years ended December 31, 2010, 2009,
2008, 2007 and 2006 and the consolidated balance sheet data as of such dates are derived from
ATMIs audited consolidated financial statements. The data below should be read in conjunction with
the consolidated financial statements and notes thereto and other financial information included
elsewhere in this Form 10-K (in thousands, except per share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
367,256 |
|
|
$ |
254,704 |
|
|
$ |
339,063 |
|
|
$ |
364,088 |
|
|
$ |
325,913 |
|
Cost of revenues |
|
|
191,248 |
|
|
|
152,520 |
(3) |
|
|
172,551 |
(10) |
|
|
182,480 |
(14) |
|
|
162,530 |
(16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
176,008 |
|
|
|
102,184 |
|
|
|
166,512 |
(11) |
|
|
181,608 |
|
|
|
163,383 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
48,645 |
|
|
|
37,162 |
(4) |
|
|
37,809 |
|
|
|
29,879 |
|
|
|
26,217 |
|
Selling, general, and administrative |
|
|
85,425 |
|
|
|
76,359 |
(5) |
|
|
88,781 |
|
|
|
99,227 |
(15) |
|
|
90,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
134,070 |
|
|
|
113,521 |
|
|
|
126,590 |
|
|
|
129,106 |
|
|
|
116,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
41,938 |
|
|
|
(11,337 |
) |
|
|
39,922 |
|
|
|
52,502 |
|
|
|
47,017 |
|
Interest income |
|
|
949 |
|
|
|
1,196 |
|
|
|
3,126 |
|
|
|
7,689 |
|
|
|
8,353 |
|
Other income (expense), net |
|
|
7,740 |
(1) |
|
|
(3,515 |
)(6) |
|
|
(2,902 |
)(12) |
|
|
(788 |
) |
|
|
486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
50,627 |
|
|
|
(13,656 |
) |
|
|
40,146 |
|
|
|
59,403 |
|
|
|
55,856 |
|
Provision (benefit) for income taxes |
|
|
11,121 |
(2) |
|
|
(6,996 |
) |
|
|
6,819 |
(13) |
|
|
18,864 |
|
|
|
15,895 |
(17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
39,506 |
|
|
$ |
(6,660 |
) |
|
$ |
33,327 |
|
|
$ |
40,539 |
|
|
$ |
39,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share diluted |
|
$ |
1.24 |
|
|
$ |
(0.21 |
) |
|
$ |
1.04 |
|
|
$ |
1.16 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding diluted |
|
|
31,895 |
|
|
|
31,398 |
|
|
|
32,078 |
|
|
|
35,093 |
|
|
|
36,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and
marketable securities (18) |
|
$ |
152,572 |
|
|
$ |
107,978 |
|
|
$ |
96,020 |
|
|
$ |
193,697 |
|
|
$ |
219,066 |
|
Working capital |
|
|
236,263 |
|
|
|
203,760 |
(7) |
|
|
190,095 |
|
|
|
280,221 |
|
|
|
281,362 |
|
Total assets |
|
|
533,589 |
|
|
|
458,963 |
(8) |
|
|
452,449 |
(19) |
|
|
492,076 |
(19) |
|
|
487,897 |
(19) |
Long-term obligations |
|
|
28,427 |
|
|
|
17,790 |
(9) |
|
|
15,688 |
(19) |
|
|
10,491 |
(19) |
|
|
1,529 |
(19) |
Total stockholders equity |
|
|
458,425 |
|
|
|
411,490 |
|
|
|
408,897 |
|
|
|
434,383 |
|
|
|
435,496 |
|
22
The Company has never declared any cash dividends.
|
|
|
(1) |
|
Includes a $0.5 million gain from the sale of a marketable security, $2.5 million gain on
sale of shares of one of our equity-method investees, and a $5.9 million fair value
remeasurement gain on our minority interest from our acquisition of Artelis. |
|
(2) |
|
Includes $1.8 million of tax benefits (including interest) recognized to reverse previously
established reserves for uncertain tax positions due to expiration of statutes and
settlements, a $2.1 million tax benefit related to a European dividend, and a $1.9 million
charge related to changes in valuation allowances. |
|
(3) |
|
Includes $1.1 million charge for incremental excess and obsolete inventory related to product
discontinuances and a reserve to cover expected product shelf-life issues; and a $3.1 million
impairment charge for long-lived assets written down to their estimated fair values primarily
related to the planned idling of manufacturing capacity of our gas products. |
|
(4) |
|
Includes a $1.6 million impairment charge for long-lived assets written down to their
estimated fair values related primarily to idled equipment. |
|
(5) |
|
Includes a $1.4 million charge to increase our reserves for bad debt to cover exposures
related to customer bankruptcy filings and uncertainties of collections; a $2.6 million
impairment charge for long-lived assets written down to their estimated fair values primarily
related to redundant enterprise management software; and a $0.6 million charge for SG&A
severance costs. |
|
(6) |
|
Includes a $2.5 million impairment charge, primarily related to a write-down associated with
an auction-rate security. |
|
(7) |
|
Balance has been reduced by $0.1 million related to reclassification of unrecognized tax
benefits and valuation allowances. |
|
(8) |
|
Balance has been reduced by $0.6 million related to reclassification of unrecognized tax
benefits and valuation allowances. |
|
(9) |
|
Balance has been reduced by $0.6 million related to reclassification of unrecognized tax
benefits and valuation allowances. |
|
(10) |
|
Includes a $2.4 million business interruption claim recovery related to a fire at a contract
manufacturer in Taiwan. |
|
(11) |
|
Includes a $3.1 million benefit associated with the settlement of a dispute with a
distributor ($3.7 million recognized in revenues, with $0.6 million of associated costs
recognized in cost of revenues). |
|
(12) |
|
Includes a $2.0 million gain from the sale of a marketable security, $1.6 million of
impairment charges related to our strategic investment portfolio and a $1.8 million reserve on
a convertible note, and $1.1 million representing our proportionate share of gains on sales of
assets by one of our equity-method investees. |
|
(13) |
|
Includes a $3.7 million tax benefit (including interest) recognized to reverse previously
established reserves for uncertain tax positions as a result of the expiration of the
applicable statute of limitations. |
|
(14) |
|
Includes $1.1 million of increased customs expense on imported goods from the U.S. to an
overseas affiliate. |
|
(15) |
|
Includes $1.1 million associated with a contingent legal fee arrangement. |
|
(16) |
|
Includes $1.4 million one-time recovery of value-added taxes in Japan related to 2005. |
|
(17) |
|
Includes a $1.7 million tax benefit recognized to reverse previously established reserves for
uncertain tax positions as a result of the expiration of the applicable statute of
limitations. |
|
(18) |
|
Includes non-current marketable securities of $25.4 million, $10.6 million, $3.7 million, $0
million, and $14.4 million at December 31, 2010, 2009, 2008, 2007, and 2006, respectively. |
|
(19) |
|
Balances have been reduced by $0.6 million, $0.2 million, and 0.1 million for years ended
December 31, 2008, December 31, 2007, and December 31, 2006, respectively, related to
reclassification of unrecognized tax benefits from deferred tax liabilities. |
23
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results of
Operations |
This discussion and analysis of our financial condition and results of operations should be read
together with the consolidated financial statements and the related notes thereto appearing in Item
8 of this Form 10-K.
Company Overview
We believe we are among the leading suppliers of high performance materials, materials packaging
and materials delivery systems used worldwide in the manufacture of microelectronics devices. Our
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, high-purity materials packaging and dispensing systems that allow for the
reliable introduction of low volatility liquids and solids to microelectronics and
biopharmaceutical processes. ATMI targets both semiconductor and flat-panel display manufacturers,
whose products form the foundation of microelectronics technology rapidly proliferating through the
consumer products, information technology, automotive, healthcare, and communications industries.
The market for microelectronics devices is continually changing, which drives demand for new
products and technologies at lower cost. ATMIs customers include many of the leading
semiconductor and flat-panel display manufacturers in the world who target leading-edge
technologies. ATMI also addresses an increasing number of critical materials handling needs for the
life sciences markets. Our proprietary containment, mixing, and bioreactor technologies are sold
to the biotechnology and laboratory markets, which we believe offer significant growth potential.
ATMIs objective is to meet the demands of our microelectronics and life sciences customers with
solutions that maximize the efficiency of their manufacturing processes, reduce capital costs, and
minimize the time to develop new products and integrate them into their processes.
Use of Estimates
Preparation of our financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the
consolidated financial statements in Item 8 of this Form 10-K describes the significant accounting
policies used in preparation of the consolidated financial statements. Management believes the
most complex and sensitive judgments, because of their significance to the Consolidated Financial
Statements, result primarily from the need to make estimates about the effects of matters that are
inherently uncertain. The most significant areas involving management judgments and estimates are
described below. Actual results in these areas could differ from managements estimates. These
policies are determined by management and have been reviewed by ATMIs Audit Committee.
Revenue Recognition
We recognize revenue when the following four criteria are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed
or determinable; and (4) collectability is reasonably assured. Revenues from product sales are
generally recognized upon delivery to a common carrier when terms are equivalent to free-on-board
(FOB) origin and upon receipt by a customer when terms are equivalent to FOB destination. In
instances where final acceptance of equipment is specified by the purchase agreement, revenue is
deferred until all acceptance criteria have been satisfied, except when reasonable reserves for
returns can be effectively established due to substantial successful installation history for
homogenous transactions. Should changes in conditions cause management to determine these criteria
are not met for certain future transactions, revenue recognized for any reporting period could be
adversely affected. We accrue for sales returns, warranty costs, and other allowances based on a
current evaluation of our experience based on stated terms of the transactions. Should actual
product failure rates or customer return experience differ from our estimates, revisions to the
estimated accruals would be required.
We use an exclusive contract manufacturer, which is also an exclusive distribution partner, for the
manufacture and distribution of our SDS products (the Licensed Products). Under the terms of the
manufacturing agreement, ATMI retains the right to manufacture 25 percent of all Licensed Products,
while the contract manufacturer has the right to manufacture 75 percent of all Licensed Products.
Upon completion of manufacture, ATMI purchases all Licensed Products produced by the contract
manufacturer. Under the terms of the distribution agreement, we receive payment from the
distributor based upon a formula which is dependent on the sale price obtained by the distributor
to its customers. ATMI recognizes revenue from the sale of Licensed Products to this distribution
partner when the distributor sells the Licensed Products to its customers, because that is when the
sales price becomes fixed and determinable by the Company.
Accounts Receivable Allowances
The allowance for doubtful accounts is established to represent our best estimate of the net
realizable value of the outstanding accounts receivable balances. We estimate our allowance for
doubtful accounts based on past due amounts and historical write-off experience, as well as trends
and factors surrounding the credit risk of the markets we operate in and the financial viability of
specific
customers. In an effort to identify adverse trends, we assess the financial health of the markets
we operate in and perform periodic credit evaluations of our customers and ongoing reviews of
account balances and aging of receivables. Amounts are considered past due when payment has not
been received within the time frame of the credit terms extended. Write-offs are charged directly
against the allowance for doubtful accounts and occur only after all collection efforts have been
exhausted. Actual write-offs and adjustments could differ from the allowance estimates because of
unanticipated changes in the business environment as well as factors and risks surrounding specific
customers.
24
As of December 31, 2010 and 2009 we had $0.8 million and $2.3 million, respectively, of accounts
receivable allowances recorded. Although management believes these reserves are adequate, any
adverse changes in market conditions may require us to record additional reserves.
Inventory Valuation Reserves
Inventory valuation reserves are established in order to report inventories at the lower of cost or
market value on our consolidated balance sheets. The determination of inventory valuation reserves
requires management to make estimates and judgments on the future salability of inventories.
Valuation reserves for excess, obsolete, and slow-moving inventory are estimated by comparing the
inventory levels of individual parts to both future sales forecasts or production requirements and
historical usage rates in order to identify inventory where the resale value or replacement value
is less than inventory cost. Other factors that management considers in determining these reserves
include whether individual inventory parts or chemicals meet current specifications and cannot be
substituted for or reworked into a part currently being sold or used as a service part, overall
market conditions, and other inventory management initiatives.
As of December 31, 2010 and 2009, we had $2.4 million and $2.6 million, respectively, of inventory
valuation reserves recorded. Although management believes these reserves are adequate, any adverse
changes in market conditions may require us to record additional inventory valuation reserves.
Non-marketable Equity Securities
We selectively invest in non-marketable equity securities of private companies, which range from
early-stage companies that are often still defining their strategic direction to more mature
companies whose products or technologies may directly support an ATMI product or initiative. Our
non-marketable equity investments are recorded using cost basis or the equity method of accounting,
depending on the facts and circumstances of each investment. At December 31, 2010, the carrying
value of our portfolio of strategic investments in non-marketable equity securities totaled $22.3
million ($22.1 million at December 31, 2009). In certain instances, we loan funds to early-stage
investees at market interest rates to enable them to focus on product and technology development.
Non-marketable equity and debt securities are included in the consolidated balance sheets under the
caption Other non-current assets. We receive regular financial information from our investees
typically on a one month lag.
Investments in non-marketable equity securities are inherently risky, and some of these companies
are likely to fail. Their success (or lack thereof) is dependent on product development, market
acceptance, operational efficiency, attracting and retaining talented professionals, and other key
business success factors. In addition, depending on their future prospects, they may not be able to
raise additional funds when needed or they may receive lower valuations, with less favorable
investment terms than in previous financings, and the investments would likely become impaired.
We review our investments quarterly for indicators of impairment; however, for non-marketable
equity securities, the impairment analysis may require significant judgment to identify events or
circumstances that would likely have a significant adverse effect on the fair value of the
investment. The indicators that we use to identify those events or circumstances include (a) the
investees revenue and earnings trends relative to predefined milestones and overall business
prospects, (b) the technological feasibility of the investees products and technologies, (c) the
general market conditions in the investees industry or geographic area, including adverse
regulatory or economic changes, (d) factors related to the investees ability to remain in
business, such as the investees liquidity, and the rate at which the investee is using its cash,
and (e) the investees receipt of additional funding at a lower valuation.
Investments identified as having an indicator of impairment are subject to further analysis to
determine if the investment is other-than-temporarily impaired, in which case we write the
investment down to its fair value, using the framework required by Accounting Standards
Codification (ASC) 820 Fair Value Measurements and Disclosures. When an investee is not
considered viable from a financial or technological point of view, we write down the entire
investment since we consider the estimated fair market value to be nominal. If an investee obtains
additional funding at a valuation lower than our carrying amount or requires a new round of equity
funding to stay in operation and the new funding does not appear imminent, we presume that the
investment is other-than-temporarily impaired, unless specific facts and circumstances indicate
otherwise. We recognized no impairments in our portfolio of non-marketable equity securities in
2010 (none in 2009 and $1.6 million in 2008).
25
Income Taxes
The net deferred tax liability at December 31, 2010 was $1.3 million compared to a future tax
benefit of $3.2 million at December 31, 2009. For our deferred future tax benefits, we believe
that our earnings during the periods when the temporary differences become deductible will be
sufficient to realize the related future income tax benefits. For those jurisdictions where the
expiration date of tax carryforwards or the projected operating results indicate that realization
is not likely, a valuation allowance is provided.
In the ordinary course of business there is inherent uncertainty in quantifying our income tax
positions. We assess our income tax positions and record tax benefits for all years subject to
examination based upon managements evaluation of the facts, circumstances and information
available at the reporting date. For those tax positions where it is more likely than not that a
tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater
than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority. For
those income tax positions where it is not more likely than not that a tax benefit will be
sustained, no tax benefit has been recognized in the financial statements. We adjust these
unrecognized tax benefits, including any impact on the related interest and penalties, in light of
changing facts and circumstances. A number of years may elapse before a particular matter for which
we have established an unrecognized tax benefit is audited and fully resolved. To the extent we
prevail in matters for which we have recorded an unrecognized benefit or are required to pay
amounts in excess of what we have recorded our effective tax rate in a given financial statement
period could be materially affected. An unfavorable tax settlement might require use of our cash
and/or result in an increase in our effective tax rate in the year of resolution. A favorable tax
settlement would be recognized as a reduction in our effective tax rate in the year of resolution.
For a discussion of current tax matters, see Note 10 to the consolidated financial statements in
Item 8 of this Form 10-K.
In assessing the need for a valuation allowance, we estimate future taxable income, considering the
feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards.
Valuation allowances related to deferred tax assets can be affected by changes to tax laws, changes
to statutory tax rates and future taxable income levels. In the event we were to determine that we
would not be able to realize all or a portion of our deferred tax assets in the future, we would
reduce such amounts through a charge to income in the period in which that determination is made or
when tax law changes are enacted. Conversely, if we were to determine that we would be able to
realize our deferred tax assets in the future in excess of the net carrying amounts, we would
decrease the recorded valuation allowance through an increase to income in the period in which that
determination is made. With the January 1, 2009 adoption of revised business combinations rules,
changes in deferred tax asset valuation allowances recorded in a business combination and income
tax uncertainties after the acquisition date generally will affect income tax expense.
Depreciable Lives of Property, Plant and Equipment
ATMIs net property, plant and equipment at December 31, 2010 and 2009 was $119.1 million and
$124.6 million, respectively, representing 22.3 percent and 27.1 percent, respectively, of the
Companys consolidated total assets. Depreciation expense for the years ended December 31, 2010,
2009 and 2008 was $22.8 million, $22.3 million and $20.1 million, respectively. Management
judgment is required in the determination of the estimated depreciable lives that are used to
calculate annual depreciation expense and accumulated depreciation.
Property, plant and equipment are recorded at cost and depreciated over the assets useful lives on
a straight-line basis for financial reporting purposes. The estimated useful life represents the
projected period of time that the asset will be productively employed by the Company and is
determined by management based on many factors, including historical experience with similar assets
and technological life cycles. Circumstances and events relating to these assets are monitored to
ensure that changes in asset lives or impairments are identified and prospective depreciation
expense or impairment expense is adjusted accordingly. The depreciation periods used are:
buildings, 15 to 35 years; machinery and equipment, 3 to 10 years; software, 5 to 7 years;
cylinders and canisters, 7 to 10 years; furniture and fixtures, 5 years; and leasehold
improvements, over the lesser of the lease term or estimated useful life. We use accelerated
depreciation methods for tax purposes where appropriate.
Equity-Based Compensation
We account for awards of equity-based compensation under our employee stock plans using the fair
value method. Accordingly, we estimate the grant date fair value of our equity-based awards and
amortize this fair value to compensation expense over the requisite service period or vesting term.
To estimate the fair value of our stock option awards we currently use the Black-Scholes-Merton
options-pricing model. The determination of the fair value of equity-based awards on the date of
grant using an options-pricing model is affected by our then current stock price as well as
assumptions regarding a number of complex and subjective variables. Management is required to make
certain judgments for these variables which include the expected stock price volatility over the
term of the awards, the expected term of options based on employee exercise behaviors, and the
risk-free interest rate. For awards granted subsequent to January 1, 2006, expected stock price
volatility is based on the historical volatility of ATMI common stock for a period
26
shorter than the expected term of the options. We have excluded the historical stock price
volatility prior to the public announcement regarding the sale of our non-core businesses in 2004,
because those businesses that were sold represented a significant portion of ATMIs consolidated
business and were subject to considerable cyclicality associated with the semiconductor equipment
industry, which drove increased volatility in ATMIs stock price. The expected term of options
granted represents the period of time that options are expected to be outstanding. The risk-free
rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period
commensurate with the estimated expected term. We recognize expense only for those awards expected
to vest. If actual results are not consistent with our assumptions and judgments used in estimating
key assumptions, in future periods, the stock option expense that the Company records for future
grants may differ significantly from what the Company has recorded in the current period.
Equity-based compensation expense is generally recognized on a straight-line basis over the
estimated service period of the awards.
Fair Value Measurements
All of our financial assets and liabilities are measured at fair value based upon Level 1 or Level
2 inputs, as defined under ASC 820, with the exception of one auction rate security, which has been
measured using Level 3 inputs, because the security is illiquid. For Level 1 measurements, we use
quoted prices in active markets for identical assets and liabilities. For Level 2 measurements, we
use observable inputs other than Level 1 prices, such as quoted prices for similar assets and
liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which all significant inputs are observable or can
be derived principally from or corroborated by observable market data for substantially the full
term of the assets or liabilities. For Level 3 measurements, we use unobservable inputs to the
valuation methodology that are significant to the measurement of fair value of assets or
liabilities.
The calculation of fair value for our auction-rate security requires critical judgments and
estimates by management including assumptions about the anticipated term and the yield that a
market participant would require to purchase such a security in the current market environment. As
of December 31, 2010 we have recorded a temporary impairment charge of $1.1 million, net of tax,
within the caption accumulated other comprehensive income on the consolidated balance sheets. We
determine the fair value of our auction-rate security using input from an independent third-party,
and by incorporating assumptions about the anticipated term and the yield that a market participant
would require to purchase such a security in the current market environment. We did not determine
that any incremental credit loss occurred in 2010. In 2009, we recorded a credit loss of $0.3
million in our consolidated statement of operations. While we believe the valuation methodologies
are appropriate, the use of valuation methodologies is highly judgmental and changes in
methodologies or market conditions for this security can have a material impact on the values of
the related assets, our financial position, and overall liquidity.
On November 2, 2010, ATMIs Belgian subsidiary acquired the remaining 60 percent of the outstanding
shares of Artelis S.A. As part of the acquisition, we recognized a liability for the fair value of
contingent payments tied to future revenue performance for the fiscal years 2012 through 2014. The
contingent payment tied to future revenue performance has a range of possible outcomes from zero to
$23.3 million. The fair value measurements were calculated using unobservable inputs (primarily
using discounted cash flow analyses, a discount rate of 17 percent, and reliance on the market and
product knowledge of internal experts), classified as Level 3, requiring significant management
judgment due to the absence of quoted market prices or observable inputs for assets of a similar
nature.
As of December 31, 2010 and 2009, the fair value of our auction-rate security was $2.9 million and
$2.6 million, respectively. As of December 31, 2010, the fair value of our Artelis acquisition
contingent performance obligations associated with future revenue was $8.4 million. See Notes 1
and 5 for additional discussion regarding our auction-rate security and Notes 1, 5 and 7 for
additional details regarding the Artelis acquisition.
Goodwill and Other Intangible Assets
The assets and liabilities of acquired businesses are recorded under the purchase method of
accounting at their estimated fair values at the dates of acquisition. Goodwill represents costs in
excess of fair values assigned to the underlying net assets of acquired businesses.
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject
to annual impairment testing. The identification and measurement of goodwill impairment involves
the estimation of the fair value of reporting units. The estimates of fair value of reporting
units are based on the best information available as of the date of the assessment, which primarily
incorporate management assumptions about expected future cash flows and contemplate other valuation
techniques. Future cash flows can be affected by changes in the global economy and local
economies, changes in the microelectronics and biopharmaceutical industries, changes in technology,
and the execution of managements plans. We concluded that goodwill was not impaired during 2010.
A 10% decline in our projected reporting unit cash flows would not impact the conclusion we reached
in 2010. Although no goodwill impairment has been recorded to date, there can be no assurances
that future goodwill impairments will not occur.
27
Other Long-Lived Amortizable Assets
We evaluate the potential impairment of other long-lived assets when appropriate. If the carrying
value of assets exceeds the sum of the undiscounted expected future cash flows, the carrying value
of the asset is written down to fair value.
Recent Accounting Pronouncements
See Note 1 to the consolidated financial statements in Item 8 of this Form 10-K for information
concerning recently issued accounting pronouncements.
Related Party Transactions
The Companys related parties are primarily unconsolidated equity affiliates. The Company did not
engage in any material transactions involving related parties that included terms or other aspects
that differ from those which would be negotiated with independent parties.
Results of Operations
This table shows the effect of pre-tax compensation cost arising from equity-based payment
arrangements on the consolidated statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
357 |
|
|
$ |
315 |
|
|
$ |
339 |
|
Research and development |
|
|
866 |
|
|
|
523 |
|
|
|
530 |
|
Selling, general, and administrative |
|
|
6,470 |
|
|
|
4,902 |
|
|
|
5,831 |
|
|
|
|
|
|
|
|
|
|
|
Total equity-based compensation expense |
|
|
7,693 |
|
|
|
5,740 |
|
|
|
6,700 |
|
|
|
|
|
|
|
|
|
|
|
28
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
Overview
During the year ended December 31, 2010, ATMIs revenues increased by 44.2 percent compared to the
year ended December 31, 2009. Growth was seen across all of our product lines and was primarily the
result of higher customer demand driven by higher wafer starts and fab utilization and increased
demand for life sciences products. Our gross margin increased by 780 basis points to 47.9 percent
in 2010 compared to 40.1 percent in 2009, primarily because of sales volume increases as a result
of the improving global economy and favorable product mix. Research and development expenses
(R&D) grew 30.9 percent in 2010 from 2009. The increase was driven primarily by increased High
Productivity Development (HPD) licensing/maintenance and higher employee-related spending.
Selling, general and administrative expenses (SG&A) increased by 11.9 percent in 2010 from 2009.
The increase is primarily the result of increased employee-related expenses, travel and legal
expenses. SG&A, as a percent of revenues, decreased to 23.3 percent in 2010 compared to 30.0
percent in 2009. Operating income increased to $41.9 million in 2010 from a loss of $11.3 million
in 2009. In 2010, we recognized $8.4 million of gains on equity-method investments, due either to
the sale of shares or re-measurement as a result of an acquisition. Our effective tax rate was
22.0 percent in 2010, compared to an effective tax benefit rate of 51.2 percent in 2009. In 2010,
we generated net income of $39.5 million ($1.24 per diluted share) compared to a net loss of $6.7
million ($0.21 per diluted share) in 2009.
On November 2, 2010, ATMIs Belgian subsidiary acquired the remaining 60 percent of the outstanding
shares of Artelis S.A. The total accounting purchase consideration of $21.8 million included the
cash payment of $4.0 million, the fair value of contingent payments tied to future revenue
performance of $8.4 million, the carrying value of $5.9 million related to our original 40 percent
non-controlling ownership interest, and assumed debt of $3.5 million. The contingent payments tied
to future revenue performance have a range of possible outcomes from zero to a maximum of $23.3
million. In 2010, we had an effective income tax rate of 22.0 percent, compared to a 2009 effective
income tax benefit rate of 51.2 percent. The 2010 income tax rate differs from the Federal
statutory rate of 35.0 percent primarily due to the benefit of lower income tax rates in foreign
jurisdictions, a non-taxable investment remeasurement gain from the Artelis acquisition, tax
benefits on foreign dividends, an increase in certain valuation allowances, the U.S. R&D tax credit
reinstatement, state taxes, and changes in established reserves.
The following is a summary of selected consolidated earnings information (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
367,256 |
|
|
$ |
254,704 |
|
|
|
44.2 |
% |
Cost of revenues |
|
|
191,248 |
|
|
|
152,520 |
|
|
|
25.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
176,008 |
|
|
|
102,184 |
|
|
|
72.2 |
% |
Gross margin |
|
|
47.9 |
% |
|
|
40.1 |
% |
|
|
7.8 |
% |
Research and development |
|
|
48,645 |
|
|
|
37,162 |
|
|
|
30.9 |
% |
R&D as a percent of revenues |
|
|
13.2 |
% |
|
|
14.6 |
% |
|
|
(1.4 |
%) |
Selling, general, and administrative |
|
|
85,425 |
|
|
|
76,359 |
|
|
|
11.9 |
% |
SG&A as a percent of revenues |
|
|
23.3 |
% |
|
|
30.0 |
% |
|
|
(6.7 |
%) |
Operating income (loss) |
|
|
41,938 |
|
|
|
(11,337 |
) |
|
|
469.9 |
% |
Operating margin |
|
|
11.4 |
% |
|
|
(4.5 |
%) |
|
|
15.9 |
% |
Effective tax rate |
|
|
22.0 |
% |
|
|
(51.2 |
%) |
|
|
73.2 |
% |
Net income (loss) |
|
$ |
39,506 |
|
|
$ |
(6,660 |
) |
|
|
693.2 |
% |
Earnings per diluted share |
|
$ |
1.24 |
|
|
$ |
(0.21 |
) |
|
|
690.5 |
% |
Revenues. Revenues increased 44.2 percent to $367.3 million in 2010 from $254.7
million in 2009. Growth was seen across all of our product lines and was primarily the result of
higher customer demand driven by increased wafer starts and increased demand for life sciences
products. Growth occurred in both our microelectronics and life sciences product lines, but was
more pronounced in the microelectronics product lines, primarily as a result of improved wafer
starts and fab utilization rates due in large part to the macroeconomic recovery, and also driven
by strength in demand for our copper-related materials, especially in memory applications.
Revenues in 2009 were also negatively impacted by excess inventory in the SDS distribution channel.
Revenues in our microelectronics product lines grew 45.9 percent to $336.5 million in 2010 from
$230.7 million in 2009. In our life sciences product line, revenues grew 28.1 percent to $30.7
million in 2010 compared to $24.0 million in 2009. The growth in life sciences revenues was driven
by a combination of the continuing industry shift to disposables, which is driving demand for our
single-use mixing and containment technologies. While demand, in general, has been improving, given
the pressures to bring costs down in the consumer and microelectronics industries, we continue to
experience pricing pressure with several of our older products, including SDS and our
photo and copper material products. The effect of foreign currency was not significant
in 2010 as declines associated with the U.S. dollars weakness against the Japanese Yen were
partially offset by strengthening against the Euro.
29
Gross Profit. Gross profit increased 72.2 percent to $176.0 million in 2010 from $102.2 million in
2009. The increase in gross profit was driven primarily by increased revenues across our product
lines as a result of improved economic conditions and a mix benefit driven by increased sales
volumes in our copper materials, SDS, and life sciences product lines, partially offset by
continued pricing pressure. Gross profit in 2009 was reduced by $3.1 million from asset impairment
charges and by $2.1 million of expense to increase our reserves for excess and obsolete
inventories. Gross profit in our microelectronics product lines increased 74.4 percent to $165.8
million in 2010 from $95.1 million in 2009. Gross profit margin in microelectronics was
approximately 49 percent in 2010 compared to approximately 41 percent in 2009. Gross profit in our
life sciences product lines increased 43.5 percent to $10.2 million in 2010 compared to $7.1
million for 2009. Gross profit margins in our life sciences product lines also improved from
approximately 30 percent in 2009 to approximately 33 percent in 2010 driven by increased revenue
volumes.
Research and Development Expenses. R&D increased 30.9 percent to $48.6 million in 2010 compared to
$37.2 million in 2009 as we continued to fund our investments to develop advanced materials and HPD
capabilities. The increase in 2010 spending was driven by increased HPD licensing and maintenance
contract costs ($6.6 million), higher employee-related spending ($2.8 million) driven by increased
incentives of $1.3 million and higher salaries $0.6 million, and equity-based compensation of $0.3
million, increased depreciation ($0.8 million), higher outside services spending ($0.6 million),
increased travel ($0.5 million), maintenance ($0.4 million), increased consumption of materials and
consumables ($0.4 million), and higher intellectual property costs ($0.5 million), partially offset
by significantly lower asset impairments ($1.6 million). As a percentage of revenues, spending was
lower in 2010 (13.2 percent) than in 2009 (14.6 percent), because of economic improvements, growth
in wafer starts, and fab utilization rates which resulted in increased revenues. We plan to
continue to actively invest in our HPD capabilities in the foreseeable future, because we believe
this investment will be a competitive advantage for ATMI to drive significant new opportunities in
cleans chemistries and other new products.
Selling, General, and Administrative Expenses. SG&A increased 11.9 percent (or $9.1 million)
to $85.4 million in 2010 from $76.4 million in 2009. SG&A, as a percentage of revenues, decreased
to 23.3 percent in 2010 compared to 30.0 percent in 2009. The increase in 2010 spending was due to
higher employee-related costs ($8.8 million) caused primarily by higher incentive compensation of
$4.6 million, higher salaries on increased payroll of $0.9 million, and equity-based compensation
of $1.5 million. We also increased spending in the following areas: Travel and entertainment
($1.8 million), employee recruitment ($1.4 million), and legal expenses ($1.3 million) which were
driven by both business development and litigation activities. These spending increases were
partially offset by increased distributor marketing reimbursements ($1.1 million), lower
depreciation ($0.8 million) and significantly lower asset impairments ($2.2 million). The results
in 2009 included $2.5 million of asset impairment charges related primarily to redundant enterprise
management software and a $1.4 million charge to increase bad debt expense, due to customer
bankruptcies and general economic conditions.
Operating Income (Loss). In 2010, we generated operating income of $41.9 million compared to an
operating loss of $11.3 million in 2009. This change is from a variety of factors, as noted above.
Interest Income. Interest income decreased to $0.9 million in 2010 from $1.2 million in 2009. The
primary reason for the decrease was lower average yields on invested balances.
Impairment of Investments. The results for 2009 included a $2.5 million impairment charge,
primarily related to a write-down associated with an auction-rate security.
Other Income (Expense), Net. In 2010, other income (expense), net of $7.7 million was driven by a
$5.9 million non-cash investment gain on our minority interest in Artelis, a $2.5 million gain from
the sale of a portion of our equity investment in Anji, a $0.5 million gain from the sale of a
marketable equity security and the release of notes receivable reserves of $0.4 million. In 2009,
we recognized $1.2 million of losses from investments accounted for by the equity method and $0.2
million of realized and unrealized losses on foreign exchange.
Provision (Benefit) for Income Taxes. In 2010, we had an effective income tax rate of 22.0
percent, compared to a 2009 effective income tax benefit rate of 51.2 percent. The 2010 income tax
rate differs from the Federal statutory rate of 35.0 percent primarily due to the benefit of lower
income tax rates in foreign jurisdictions, a non-taxable investment remeasurement gain from the
Artelis acquisition, tax benefits on foreign dividends, an increase in certain valuation
allowances, the U.S. R&D tax credit reinstatement, state taxes, and changes in established
reserves. The 2009 income tax benefit rate of 51.2 percent differs from the Federal statutory rate
of 35.0 percent primarily due to the benefit of lower income tax rates in foreign jurisdictions,
and a net $0.7 million reversal of previously established reserves, primarily resulting from the
lapse of the applicable statutes of limitations. As of December 31, 2010,
the Company had a net deferred tax liability on the balance sheet of $1.3 million, primarily
because of temporary differences (i.e., accrued liabilities, inventory adjustments, equity-based
compensation, and depreciation and amortization), state tax credit carry forwards, foreign and
state net operating loss carry forwards, and R&D tax credits in Taiwan. The Company has been
audited in the United States by the Internal Revenue Service through tax year 2007, and is
currently being audited for tax years 2008 and 2009.
30
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Overview
During the year ended December 31, 2009, ATMIs revenues declined by 24.9 percent compared to the
year ended December 31, 2008, primarily due to the severe global economic downturn causing
reductions in wafer starts and lower fab utilization rates, which was magnified by excess inventory
in the SDS distribution channel, as well as our customers aggressive management of their
inventories. Our gross margin declined by 900 basis points to 40.1 percent in 2009 compared to
49.1 percent in 2008, primarily because of sales volume reductions as a result of the global
recession and by unfavorable product mix caused by excess inventory in the SDS distribution
channel. Research and development expenses (R&D) declined 1.7 percent to $37.2 million in 2009
from $37.8 million in 2008. The decrease was driven primarily by reduced employee and
discretionary spending partially offset by asset impairments taken in the first half of 2009.
Selling, general and administrative expenses (SG&A) decreased by 14.0 percent in 2009 from 2008.
The decrease is primarily the result of reduced employee expenses, controlled travel and
entertainment, and other discretionary spending controls. Driven by the decline in sales, SG&A, as
a percent of revenues, increased to 30.0 percent in 2009 compared to 26.2 percent in 2008.
Operating income decreased 128.4 percent in 2009 to a loss of $11.3 million, primarily due to the
decline in revenues and inclusive of non-recurring expense items. Our effective tax benefit rate
was 51.2 percent in 2009, compared to an effective tax rate of 17.0 percent in 2008. As a result
of the global recession and the charges discussed above, we incurred a net loss of $6.7 million
($0.21 per diluted share) in 2009 compared to net income of $33.3 million ($1.04 per diluted share)
in 2008.
During 2009, we recognized $7.3 million ($3.1 million in cost of revenues, $1.6 million in research
and development, and $2.6 million in selling, general and administrative) of impairment charges for
long-lived assets that are being held and used, but were deemed either redundant or idled due to
uncertainties of future demand, a $2.4 million impairment charge for an auction-rate security, $1.4
million of bad debt expense, and $2.1 million for excess and obsolete inventory expense. In
response to the economic circumstances, we implemented targeted cost-reduction actions to better
align the Companys activities with expectations for customer demand for our products and to
preserve cash, without hindering our commitment to make investments that we expect to drive future
growth. These actions resulted in lower spending in 2009 compared to 2008 in the following areas:
salaries and incentives ($12.8 million); travel and entertainment ($4.4 million), and recruiting
and relocation ($0.9 million). We also amended an alliance agreement in order to better align the
timing of certain support activities related to our HPD capabilities to the expected timing of our
customer integration activities. The amendment reduced the amount we were contractually committed
to pay for these support activities in 2009 and confirms commitments to pay for these incremental
activities in 2010.
The following is a summary of selected consolidated earnings information (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
254,704 |
|
|
$ |
339,063 |
|
|
|
(24.9 |
%) |
Cost of revenues |
|
|
152,520 |
|
|
|
172,551 |
|
|
|
(11.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
102,184 |
|
|
|
166,512 |
|
|
|
(38.6 |
%) |
Gross margin |
|
|
40.1 |
% |
|
|
49.1 |
% |
|
|
(9.0 |
%) |
Research and development |
|
|
37,162 |
|
|
|
37,809 |
|
|
|
(1.7 |
%) |
R&D as a percent of revenues |
|
|
14.6 |
% |
|
|
11.2 |
% |
|
|
3.4 |
% |
Selling, general, and administrative |
|
|
76,359 |
|
|
|
88,781 |
|
|
|
(14.0 |
%) |
SG&A as a percent of revenues |
|
|
30.0 |
% |
|
|
26.2 |
% |
|
|
3.8 |
% |
Operating income (loss) |
|
|
(11,337 |
) |
|
|
39,922 |
|
|
|
(128.4 |
%) |
Operating margin |
|
|
(4.5 |
%) |
|
|
11.8 |
% |
|
|
(16.3 |
%) |
Effective tax rate |
|
|
(51.2 |
%) |
|
|
17.0 |
% |
|
|
(68.2 |
%) |
Net income (loss) |
|
$ |
(6,660 |
) |
|
$ |
33,327 |
|
|
|
(120.0 |
%) |
Earnings (loss) per diluted share |
|
$ |
(0.21 |
) |
|
$ |
1.04 |
|
|
|
(120.2 |
%) |
Revenues. Revenues decreased 24.9 percent to $254.7 million in 2009 from $339.1 million in
2008. The decline in revenues in 2009 compared to 2008 occurred in both our microelectronics and
life sciences product lines and was primarily the result of the global economic downturn, magnified
by excess inventory in the SDS distribution channel. Revenues in our microelectronics product lines
declined 25.6 percent to $230.7 million in 2009 from $310.1 million in 2008. The primary driver of
the decline in microelectronics revenues was excess inventory in the SDS channel which was driven
by our customers aggressive management of their inventories.
Consumer electronics spending, the primary driver of wafer starts and fab utilization rates was
flat in 2009 compared to 2008 with declines in the first half of 2009 and signs of improvement in
the second half of the year. Reductions in average selling prices accounted for approximately 2
percent of the decline in microelectronics revenues in 2009. Revenues in our life sciences product
lines decreased 17.0 percent in 2009 to $24.0 million compared to $28.9 million in 2008. The
decline in life sciences revenues is primarily attributable to global macroeconomic conditions,
customer reductions in capital spending and aggressive management of inventories by
biopharmaceutical companies as a result of economic uncertainties. Reductions in average selling
prices accounted for approximately 1 percent of the decline in life sciences revenues in 2009. The
effect of foreign currency was not significant in 2009 as declines associated with the US dollar
weakness against the Japanese Yen were partially offset by strengthening against the Euro.
31
Gross Profit. Gross profit decreased 38.6 percent to $102.2 million in 2009 from $166.5 million in
2008. Gross profit in our microelectronics product lines decreased 38.7 percent to $95.1 million in
2009 from $155.0 million in 2008. Sales volume reductions as a result of the global recession and
unfavorable product mix caused by excess inventory in the SDS distribution channel were the primary
drivers of the decline in gross profit. Gross profit was also reduced by $3.1 million from asset
impairment charges, due primarily to the planned idling of manufacturing capacity of gas products
to eliminate a redundant cost structure, $2.1 million of expense to increase our reserves for
excess and obsolete inventories to cover expected chemical shelf-life issues in our
microelectronics product lines partially offset by $2.4 million in reduced employee costs. The 2008
gross profit margins included benefits from a $3.1 million settlement with a distributor and a $2.4
million business interruption claim recovery. Removing the impacts of one-time events, our 2009
gross margins were 41.9 percent compared to 48.1 percent in 2008. Gross profit margins in our
microelectronics product lines were approximately 41 percent in 2009 compared to approximately 50
percent in 2008 driven by lower volume, average selling price declines, as discussed above, and our
mix of sales. In our life sciences product line, gross profit declined 38.3 percent to $7.1
million compared to $11.5 million in 2008 driven primarily by lower revenue volumes due to the
global recession, increased fixed costs to develop a global manufacturing platform, and higher
quality control expenses. Gross profit margins in our life sciences product lines declined to
approximately 30 percent in 2009 compared to approximately 40 percent in 2008.
Research and Development Expenses. R&D decreased only 1.7 percent to $37.2 million in 2009 from
$37.8 million in 2008 because we continued our funding of investments to develop advanced materials
and HPD capabilities. The decrease in R&D spending was primarily caused by reduced employee
expenses of $1.6 million compared to 2008, cost reduction activities leading to reduced outsourced
service spending including patent and trademark services of $2.7 million compared to 2008,
partially offset by a $1.6 million asset impairment charge related to idled equipment, $0.8 million
of lower government contract reimbursements, $0.7 million of higher equipment depreciation costs,
and planned increases in spending associated with HPD licensing and outsourced development related
to cleans chemistries of $0.7 million. The spending in 2009 was higher as a percent of revenues
than 2008, driven by the decline in revenue, partially offset by our continued investments in new
product development in order to position ourselves for the future. As a result of the global
economic recession and related impact on our business, we amended an alliance agreement in 2009 in
order to better align the timing of certain HPD capabilities support activities to the expected
timing of our customer integration activities. The amendment reduced the amount we were
contractually committed to pay for support activities in 2009 and confirms commitments to pay for
these incremental activities in 2010.
Selling, General, and Administrative Expenses. SG&A decreased 14 percent (or $12.4 million) to
$76.4 million in 2009 from $88.8 million in 2008. SG&A, as a percentage of revenues, increased to
30.0 percent in 2009 compared to 26.2 percent in 2008. As a result of the economic environment, we
implemented cost reduction activities which drove the decline in SG&A. These activities included
reduced salaries and incentives ($7.5 million), travel and entertainment ($3.0 million), outside
professional services ($1.7 million), and trade show costs ($0.8 million) and savings from the
temporary suspension of the Companys discretionary 401K match ($0.6 million). Legal litigation
costs were $1.6 million lower in 2009 compared to the same period of 2008 due to the settlement of
the litigation with Praxair. The results in 2009 include $2.5 million of asset impairment charges
related primarily to redundant enterprise management software, and a $1.4 million charge to
increase our reserves for bad debt to cover exposures related to customer bankruptcy filings and
uncertainties of collections due to general macroeconomic conditions.
Operating Income (loss). We incurred an operating loss of $11.3 million in 2009 compared to
generating operating income of $39.9 million in 2008. This change is from a variety of factors, as
noted above.
Interest Income. Interest income decreased to $1.2 million in 2009 from $3.1 million in 2008. The
primary reason for the decrease was lower rates of return given the significant reduction in market
interest rates since the prior year.
Impairment of Investments. The results for 2009 included a first quarter $2.5 million impairment
charge, primarily related to a write-down associated with an auction-rate security. In 2008,
Ceradyne, Inc. completed its acquisition of SemEquip, Inc. (SemEquip), an entity in which ATMI
had previously invested. Prior to the acquisition, ATMIs cost-basis investment in SemEquip was
$2.2 million. ATMI received $0.6 million representing its share of the closing proceeds. As a
result, we wrote off the remaining $1.6 million balance from our investment in SemEquip due to the
uncertainty of collecting amounts in the future related to the earnout provisions of the deal.
Also in 2008, due to changes in events and circumstances related to a convertible note due from an
early-stage
semiconductor materials venture that is in bankruptcy, we recognized an impairment charge of $1.8
million to fully write down the value of this convertible note.
32
Other Income (Expense), Net. We recognized $1.2 million of losses from investments accounted for by
the equity method and $0.2 million of realized and unrealized losses on foreign exchange in 2009.
The 2008 results include $0.6 million of losses from investments accounted for by the equity
method, net of a $1.1 million gain representing our after-tax, proportionate share from the sale of
assets by an equity-method investee, a $2.0 million gain from the sale of a marketable security,
and $0.6 million of realized losses on foreign exchange.
Provision (Benefit) for Income Taxes. In 2009, we had an effective income tax benefit rate of 51.2
percent, compared to a 2008 effective income tax rate of 17.0 percent. The 2009 income tax benefit
rate differs from the Federal statutory rate of 35.0 percent primarily due to the benefit of lower
income tax rates in foreign jurisdictions, and a net $0.7 million reversal of previously
established reserves, primarily resulting from the lapse of the applicable statutes of limitations.
The 2008 effective income tax rate of 17.0 percent differs from the Federal statutory rate of 35.0
percent primarily due to a $3.7 million reversal of previously established reserves, as a result of
the lapse of the applicable statutes of limitations, the shift in mix of our pretax income to lower
income tax jurisdictions, and effect of R&D credits. As of December 31, 2009, the Company had a
net deferred tax asset on the balance sheet of $3.8 million, primarily because of temporary
differences (i.e., accrued liabilities, inventory adjustments, equity-based compensation, and
depreciation and amortization), state tax credit carry forwards, federal and state net operating
loss carry forwards, and R&D tax credits in Taiwan.
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 and acquisitions.
Until required for use in the business, we invest our cash reserves in bank deposits, certificates
of deposit, money market securities, government and government-sponsored bond obligations, 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, capital expenditures, acquisitions, and share buybacks
through cash flows from our operations, and existing cash. We expect to finance our 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. However, we may, from time to time, seek additional funding through a
combination of additional 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 finding 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 ATMI. Likewise, we continue to make capital expenditures in order to expand and
modernize manufacturing 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 our current business.
We have filed carry-back claims of $10.2 million related the U.S. net operating loss and tax
credits from tax year 2009. In 2010, we received an IRS cash refund of $9.2 million, and expect to
receive the remaining $1.0 million in the near future.
ATMI has entered into a pledge agreement with Anji Microelectronics Co., Ltd. (Anji) for the
issuance of a financial guarantee in order to assist Anji in retaining its bank financing. See Note
14 for further discussion.
See Part I, Item 1A, Risk Factors of this Form 10-K for risk factors that could negatively impact
our cash position and ability to fund future operations.
33
A summary of our cash flows follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
$ |
65,976 |
|
|
$ |
28,761 |
|
Investing Activities |
|
|
(58,754 |
) |
|
|
(18,596 |
) |
Financing Activities |
|
|
(3,691 |
) |
|
|
(995 |
) |
Effects of exchange rate changes on cash |
|
|
379 |
|
|
|
942 |
|
Operating Activities
During the year ended December 31, 2010, we generated $66.0 million of cash from operations, which
was $37.2 million higher than the $28.8 million generated during the year ended December 31, 2009.
The positive cash flow from operations was primarily from net income, as adjusted for non-cash
items, decreases in deferred income taxes, and increases in accounts payable, and accrued expenses.
These items were partially offset by increases in accounts receivable, inventories and other
assets, and a decrease in other liabilities. There was a $5.9 million non-cash gain on the
remeasurement of a non-controlling interest. Increases in inventories were a use of cash of $9.2
million and were driven by stronger demand and an increase to the build of required safety stock.
Accounts receivable represented a use of cash of $9.0 million primarily as a result of the increase
in revenues.
Investing Activities
Net cash used for investing activities increased by $40.2 million in the year ended December 31,
2010 to $58.8 million. Our investing activities primarily relate to purchases of property, plant
and equipment, net purchases of marketable securities, and acquisitions. The increase of cash used
for investing activities was driven by the $3.9 million acquisition of Artelis, minority equity
investments, cash used for net purchases of marketable securities of $40.8 million, and $16.2
million of capital expenditures. We generated $5.2 million of cash from the sale of shares of one
of our equity method investments.
Financing Activities
Financing activities resulted in a use of cash of $3.7 million, which was an increase of $2.7
million from 2009, primarily related to share repurchases of $2.6 million, repayment of a loan
assumed in the Artelis acquisition of $2.4 million, and net repayments of credit lines of $0.5
million, partially offset by the proceeds from the exercise of stock options of $1.8 million.
34
Summary of Contractual Obligations
The following is a summary of consolidated debt, lease, purchase and other obligations at December
31, 2010 (see Notes 3, 6, 7, 9 and 14 of the consolidated financial statements in Item 8 of this
Form 10-K), in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
4-5 Years |
|
|
Thereafter |
|
Contractual Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases |
|
$ |
53 |
|
|
$ |
41 |
|
|
$ |
12 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases (1) |
|
$ |
13,154 |
|
|
|
3,939 |
|
|
|
3,651 |
|
|
|
1,910 |
|
|
|
3,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
$ |
8,455 |
|
|
|
8,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
$ |
998 |
|
|
|
998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (2) |
|
$ |
21,180 |
|
|
|
21,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30,633 |
|
|
|
30,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank guarantee (3) |
|
$ |
2,500 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other L/T liabilities (4) |
|
$ |
4,388 |
|
|
|
|
|
|
|
4,063 |
|
|
|
|
|
|
|
325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt, lease, purchase, and
other long-term liability
obligations |
|
$ |
50,728 |
|
|
$ |
37,113 |
|
|
$ |
7,726 |
|
|
$ |
1,910 |
|
|
$ |
3,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $3.5 million of lease obligations assumed in the Artelis acquisition. |
|
(2) |
|
Includes $15.2 million commitment to purchase R&D services associated with a strategic alliance partner. |
|
(3) |
|
This guarantee on behalf of Anji Microelectronics Co., Ltd. was $4.0 million at December 31, 2010, and was reduced to
$2.5 million effective January 1, 2011. |
|
(4) |
|
Includes $3.5 million of asset retirement obligations. |
See Note 9 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion of leases.
Off-Balance Sheet Arrangements
ATMI has extended a pledge agreement with Anji Microelectronics Co., Ltd. (Anji) for the issuance
of a financial guarantee up to $4.0 million in order to assist Anji in securing bank financing. In
January 2011, we reduced our guarantee to a maximum amount of $2.5 million, which will expire no
later than December 31, 2011. ATMIs guarantee is secured by Anjis assets and additional equity
interests in Anjis operating subsidiaries. We believe that, based on independent credit rating
agency research, and our knowledge of their business, Anji continues to be an acceptable credit
risk. The fair value of the financial guarantee is $0.2 million at December 31, 2010.
In the third quarter of 2010, we extended the contract term of an existing commitment with a
strategic alliance partner to purchase R&D services. The extension maintains our current R&D
infrastructure and expense structures over the next two years. The extension resulted in an
incremental commitment to cash payments of $5.2 million, $10.2 million and $5.0 million in fiscal
years 2010, 2011 and 2012, respectively.
Operations Outside the United States
For the years ended December 31, 2010, 2009 and 2008, sales outside the United States, including
Asia and Europe, accounted for 82.3 percent, 80.2 percent and 77.3 percent, respectively, of our
revenues. Sales to Taiwan for the years ended December 31, 2010, 2009 and 2008 were 24.3 percent,
21.8 percent and 23.5 percent, respectively, of our revenues. Sales to Japan for the years ended
December 31, 2010, 2009 were 13.5 percent, 14.3 percent and 12.7 percent, respectively, of our
revenues. Sales to South Korea for the years ended December 31, 2010, 2009 were 18.4 percent, 20.2
percent and 13.8 percent, respectively, of our revenues. Management
anticipates that sales outside the United States will continue to account for a significant
percentage of our total revenues. ATMI has wholly-owned subsidiaries in Taiwan, Singapore, China,
Japan, and Germany where the Company sells and services several product lines. ATMI also has a
wholly-owned subsidiary in South Korea that manufactures, sells, and distributes materials
packaging, materials delivery equipment, and thin-film materials to the semiconductor and
flat-panel display markets in South Korea. In addition, ATMI has two wholly-owned subsidiaries in
Belgium that manufacture and sell high-purity materials packaging products primarily to the life
sciences industry.
35
|
|
|
Item 7A. |
|
Quantitative and Qualitative Disclosures about Market Risk |
Interest Rate Risk
As of December 31, 2010, the Companys cash and cash equivalents and marketable securities included
bank deposits, time deposits, money market securities, and government and government-sponsored bond
obligations. As of December 31, 2010, an increase of 100 basis points in interest rates on
securities with maturities greater than one year would reduce the fair value of the Companys
marketable securities portfolio by approximately $1.0 million. Conversely, a reduction of 100
basis points in interest rates on securities with maturities greater than one year would increase
the fair value of the Companys marketable securities portfolio by approximately $1.1 million.
Foreign Currency Exchange Risk
Most of the Companys sales are denominated in U.S. dollars and as a result, the Company has
limited exposure to foreign currency exchange risk with respect to sales made. Approximately 35
percent of the Companys revenues for the year ended December 31, 2010 were denominated in Japanese
Yen (JPY), Korean Won (KRW), and Euros (EUR), but a majority of the product is sourced in
U.S. dollars. Management periodically reviews the Companys exposure to currency fluctuations.
This exposure may change over time as business practices evolve and could have a material effect on
the Companys financial results in the future. We use forward foreign exchange contracts to hedge
specific exposures relating to intercompany payments and anticipated, but not yet committed,
intercompany sales (primarily parent company export sales to subsidiaries at pre-established U.S.
dollar prices). The terms of the forward foreign exchange contracts are generally matched to the
underlying transaction being hedged, and are typically under one year.
Because such contracts are directly associated with identified transactions, they are an effective
hedge against fluctuations in the value of the foreign currency underlying the transaction. We
recognize in earnings (other income (expense), net) changes in the fair value of all derivatives
designated as fair value hedging instruments that are highly effective and recognize in accumulated
other comprehensive income any changes in the fair value of any derivatives designated as cash flow
hedging instruments that are highly effective and meet the other related accounting requirements.
We generally do not hedge overseas sales denominated in foreign currencies or translation
exposures. Further, we do not enter into derivative instruments for trading or speculative purposes
and all of our derivatives were highly effective throughout the periods reported.
At December 31, 2010, we held forward foreign currency exchange contracts as economic hedges with
notional amounts totaling $32.7 million, which are being used to hedge recorded foreign denominated
liabilities and which will be settled in either JPY, KRW, EUR, or New Taiwan Dollars (NTD).
Holding other variables constant, if there were a 10 percent decline in foreign exchange rates
against the US dollar for the JPY, KRW, EUR and NTD, the fair market value of the foreign exchange
contracts outstanding at December 31, 2010 would increase by approximately $2.5 million, which
would be expected to be fully offset by foreign exchange gains on the amounts being hedged. The
effect of an immediate 10 percent change in other foreign exchange rates would not be expected to
have a material effect on the Companys future operating results or cash flows.
Changes in Market Risk
The recent global recession, driven initially by the crisis in global credit and financial markets,
caused extreme disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, increases in unemployment rates, and uncertainty about economic
stability. Although there has been recent economic improvement, there can be no assurance that
there will not be further deterioration in credit and financial markets and deterioration of
confidence in economic conditions. These economic uncertainties affect businesses such as ours in a
number of ways, making it difficult to accurately forecast and plan our future business activities.
36
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data |
The Reports of Independent Registered Public Accounting Firm, the consolidated financial statements
and the financial statement schedule that are listed in the Index to Consolidated Financial
Statements and Financial Statement Schedule are included herein on pages F-1 through F-35.
|
|
|
Item 9. |
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
None.
|
|
|
Item 9A. |
|
Controls and Procedures |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), has evaluated the effectiveness of our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this Form 10-K. There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure
controls and procedures can only provide reasonable assurance of achieving their control
objectives. Based upon this evaluation, our CEO and CFO concluded that, as of the end of the
period covered by this Form 10-K, our disclosure controls and procedures were effective in that
they provided reasonable assurance that the information we are required to disclose in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the applicable rules and forms, and that it is accumulated and
communicated to our management, including our CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with accounting principles
generally accepted in the United States of America. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Our management has
assessed the effectiveness of our internal control over financial reporting as of December 31,
2010. In making its assessment, management has used the criteria set forth by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission in Internal ControlIntegrated
Framework. Our management concluded that based on its assessment, our internal control over
financial reporting was effective as of December 31, 2010. The Companys internal control over
financial reporting as of December 31, 2010 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their attestation report on the Companys internal
control over financial reporting, which is included in this annual report.
There has been no change in our internal control over financial reporting during the quarter ended
December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
|
|
|
Item 9B. |
|
Other Information |
None.
37
PART III
|
|
|
Item 10. |
|
Directors, Executive Officers and Corporate Governance |
Information required by Item 10 has been omitted from this report, and is incorporated by reference
to the sections Section 16(a) Beneficial Ownership Reporting Compliance, Election of Directors,
Board Operations and Executive Officers in our definitive Proxy Statement for the 2011 Annual
Meeting of Stockholders, which we will file with the SEC pursuant to Regulation 14A within 120 days
after the end of our 2010 fiscal year.
|
|
|
Item 11. |
|
Executive Compensation |
Information required by Item 11 has been omitted from this report and is incorporated by reference
to the sections Board Operations and Compensation and Other Information Concerning Executive
Officers and Directors in our definitive Proxy Statement for the 2011 Annual Meeting of
Stockholders, which we will file with the SEC pursuant to Regulation 14A within 120 days after the
end of our 2010 fiscal year.
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters |
Information required by Item 12 has been omitted from this report and is incorporated by reference
to the sections Stock Ownership and Equity Compensation Plan Information in our definitive
Proxy Statement for the 2011 Annual Meeting of Stockholders, which we will file with the SEC
pursuant to Regulation 14A within 120 days after the end of our 2010 fiscal year.
|
|
|
Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence |
Information required by Item 13 has been omitted from this report and is incorporated by reference
to the sections Certain Relationships and Related Transactions and Board Operations in our
definitive Proxy Statement for the 2011 Annual Meeting of Stockholders, which we will file with the
SEC pursuant to Regulation 14A within 120 days after the end of our 2010 fiscal year.
|
|
|
Item 14. |
|
Principal Accountant Fees and Services |
Information required by Item 14 has been omitted from this report and is incorporated by reference
to the section Fees of Independent Registered Public Accounting Firm and Report of the Audit
Committee in our definitive Proxy Statement for the 2011 Annual Meeting of Stockholders, which we
will file with the SEC pursuant to Regulation 14A within 120 days after the end of our 2010 fiscal
year.
38
PART IV
|
|
|
Item 15. |
|
Exhibits and Financial Statement Schedules |
The following documents are filed as part of this annual report on Form 10-K:
(1) |
|
Financial Statements: |
|
|
|
|
|
Reports of Independent Registered Public Accounting Firm |
|
|
|
|
Consolidated Balance Sheets December 31, 2010 and 2009 |
|
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 |
|
|
|
|
Consolidated Statements of Stockholders Equity for the years ended December 31, 2010,
2009 and 2008 |
|
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 |
|
|
|
|
Notes to Consolidated Financial Statements |
|
|
|
|
(2) |
|
Financial Statement Schedule: |
Schedule II Valuation and Qualifying Accounts
The Reports of Independent Registered Public Accounting Firm, consolidated financial statements and
financial statement schedule listed in the Index to Consolidated Financial Statements and Financial
Statement Schedule on page F-1 hereof are filed as part of this report, commencing on page F-2
hereof.
All other financial statement schedules are omitted as the required information is not applicable
or the information is shown in the consolidated financial statements or related notes.
The documents set forth below are filed herewith or incorporated herein by reference to the
location indicated.
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
2.01 |
|
|
Agreement and Plan of Merger, dated as of January 4,
2008 by and among Advanced Technology Materials, Inc.,
ATMI Acquisition Corp., and LevTech, Inc. (Filed as
Exhibit 10.30 to ATMIs 2007 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
3.01 |
|
|
Restated Certificate of Incorporation dated as of July
30, 2005 (Filed as Exhibit 3 (i) to ATMIs Current
Report on Form 8-K on August 3, 2005, File No. 1-16239,
and incorporated herein by reference). |
|
|
|
|
|
|
3.02 |
|
|
Amended and Restated Bylaws of ATMI dated December 17,
2008 (Filed as Exhibit 3.1 to ATMIs Current Report on
Form 8-K on December 18, 2008, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
4.01 |
|
|
Specimen of ATMIs Common Stock Certificate (Filed on
September 10, 1997 as Exhibit 4.01 to the Companys
Registration Statement on Form S-4, Registration No.
333-35323). |
|
|
|
|
|
|
4.02 |
|
|
Rights Agreement, dated as of October 13, 2000, between
ATMI, Inc. and Fleet National Bank, as Rights Agent
(Filed as Exhibit 4.02 to ATMIs 2008 Annual Report on
Form 10-K, File No. 1-16239, and incorporated herein by
reference). |
39
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.01 |
* |
|
Employment Agreement between Daniel P. Sharkey and ATMI,
Inc. dated December 31, 2004 (Filed as Exhibit 10.1 to
ATMIs Current Report on Form 8-K on January 5, 2005,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.02 |
* |
|
Employment Agreement between Douglas A. Neugold and
ATMI, Inc. dated December 31, 2004 (Filed as Exhibit
10.1 to ATMIs Current Report on Form 8-K/A on January
5, 2005, File No. 1-16239, and incorporated herein by
reference). |
|
|
|
|
|
|
10.03 |
* |
|
Agreement of Lease between Melvyn J. Powers and Mary P.
Powers d/b/a/ M&M Realty and Advanced Technology
Materials, Inc., dated December 23, 1994 (Filed as
Exhibit 10.04 to ATMIs 2008 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.04 |
|
|
First Amendment to Agreement of Lease dated as of
November 22, 2000 by and between Commerce Park Realty,
LLC and Advanced Technology Materials, Inc. (Filed as
Exhibit 10.05 to ATMIs 2005 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.05 |
|
|
Second Amendment to Agreement of Lease dated as of March
24, 2003 by and between Commerce Park Realty, LLC and
Advanced Technology Materials, Inc. (Filed as Exhibit
10.05 to ATMIs 2005 Annual Report on Form 10-K, File
No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.06 |
* |
|
ATMI, Inc. 1995 Stock Plan (Filed as Exhibit 10.07 to
ATMIs 2008 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.07 |
* |
|
ATMI, Inc. 1997 Stock Plan, dated October 10, 1997
(Filed on April 6, 1998 as Exhibit 99.1 to the Companys
Registration Statement on Form S-8, Registration No.
333-49561). |
|
|
|
|
|
|
10.08 |
* |
|
ATMI, Inc. 1998 Stock Plan, dated May 20, 1998 (Filed on
June 9, 1998 as Exhibit 99.1 to the Companys
Registration Statement on Form S-8, Registration No.
333-56349). |
|
|
|
|
|
|
10.09 |
|
|
Agreement of Lease between Seymour R. Powers, Leon Griss
and Ruth Griss and Advanced Technology Materials, Inc.,
dated November 24, 2000 (Filed as Exhibit 10.10 to
ATMIs 2008 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.10 |
* |
|
ATMI, Inc. 2000 Stock Plan, dated May 24, 2000 (Filed on
September 20, 2000 as Exhibit 99.1 to the Companys
Registration Statement on Form S-8, Registration No.
333-46222). |
|
|
|
|
|
|
10.11 |
* |
|
ATMI, Inc. 2003 Stock Plan (as amended May 21, 2003),
(Filed on August 1, 2003 as Exhibit 4.6 to the Companys
Registration Statement on Form S-8, Registration No.
333-107591). |
|
|
|
|
|
|
10.12 |
* |
|
ATMI, Inc. 1998 Employee Stock Purchase Plan, (as
amended February 28, 2003), (Filed on August 1, 2003 as
Exhibit 4.7 to the Companys Registration Statement on
Form S-8, Registration No. 333-107591). |
|
|
|
|
|
|
10.13 |
|
|
Alliance Agreement dated as of May 16, 2003 by and
between Advanced Technology Materials, Inc. on its own
behalf and on behalf of its Affiliates and Enthone, Inc.
(Filed as Exhibit 10.15 to ATMIs 2003 Annual Report on
Form 10-K, File No. 1-16239, and incorporated herein by
reference). (1) |
40
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.14 |
|
|
Stock Purchase Agreement dated as of July 14, 2003 by
and among Advanced Technology Materials, Inc., Lente,
LLC and the Persons listed on the signature page thereto
(Filed as Exhibit 10.16 to ATMIs 2003 Annual Report on
Form 10-K, File No. 1-16239, and incorporated herein by
reference). (1) |
|
|
|
|
|
|
10.15 |
* |
|
Non-Employee Directors Deferred Compensation Program of
ATMI, Inc. 1998 Stock Plan (Filed as Exhibit 10.19 to
ATMIs 2005 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.16 |
* |
|
Form of ATMI, Inc. Executive Management Restricted Stock
Grant Agreement (Filed as Exhibit 10.20 to ATMIs 2006
Annual Report on Form 10-K, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
10.17 |
* |
|
Form of ATMI, Inc. Employee Non-Qualified Stock Option
Agreement (Filed as Exhibit 10.21 to ATMIs 2006 Annual
Report on Form 10-K, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.18 |
|
|
Agreement of Lease between West Real Estate and
Management, Inc. and ATMI Packaging, Inc., and ATMI,
Inc., dated October 21, 2004 (Filed as Exhibit 10.23 to
ATMIs 2004 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.19 |
* |
|
Form of ATMI, Inc. Employee Restricted Stock Grant
Agreement Non-Executive Management (Filed as Exhibit
10.23 to ATMIs 2006 Annual Report on Form 10-K, File
No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.20 |
* |
|
Form of ATMI, Inc. Non-Employee Director Restricted
Stock Grant (Filed as Exhibit 10.24 to ATMIs 2006
Annual Report on Form 10-K, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
10.21 |
|
|
First Amendment to Agreement of Lease dated as of March
24, 2003 by and between Seymour R. Powers, Trustee, and
Leon Griss and Advanced Technology Materials, Inc.
(Filed as Exhibit 10.25 to ATMIs 2005 Annual Report on
Form 10-K, File No. 1-16239, and incorporated herein by
reference). |
|
|
|
|
|
|
10.22 |
* |
|
Amendment to ATMIs 1998 Employee Stock Purchase Plan
(amended effective February 28, 2003 and January 1,
2007), (Filed as Exhibit 99 to ATMIs Form 10-Q for the
quarter ended September 30, 2006, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
10.23 |
|
|
Second Amendment to Agreement of Lease dated as of
January 18, 2007 by and between Seymour R. Powers,
Trustee, and Carole Kolsky, Deborah A. Tauber and
Stephen L. Griss (as successors to Leon Griss and Ruth
Griss) and Advanced Technology Materials, Inc. (Filed as
Exhibit 10.27 to ATMIs 2006 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.24 |
|
|
Third Amendment to Agreement of Lease dated as of
January 18, 2007 by and between Commerce Park Realty,
LLC and Advanced Technology Materials, Inc. (Filed as
Exhibit 10.28 to ATMIs 2006 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.25 |
* |
|
Form of ATMI, Inc. Non-Employee Directors Non-Qualified
Stock Option Agreement (Filed as Exhibit 10.29 to ATMIs
2006 Annual Report on Form 10-K, File No. 1-16239, and
incorporated herein by reference). |
41
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.26 |
* |
|
Employment Agreement between Timothy C. Carlson and
ATMI, Inc. dated December 31, 2004 (Filed as Exhibit
10.31 to ATMIs 2007 Annual Report on Form 10-K, File
No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.27 |
* |
|
Amendment to Employment Agreement between Timothy C.
Carlson and ATMI, Inc. dated August 1, 2005 (Filed as
Exhibit 10.32 to ATMIs 2007 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.28 |
* |
|
Employment Agreement between Ellen Harmon and ATMI, Inc.
dated January 14, 2008 (Filed as Exhibit 10.33 to ATMIs
2007 Annual Report Form 10-K, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
10.29 |
* |
|
Amendment to Employment Agreement between Timothy C.
Carlson and ATMI, Inc. dated January 31, 2008, effective
as of September 7, 2007 (Filed as Exhibit 10.34 to
ATMIs 2007 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.30 |
* |
|
Amendment to Employment Agreement between Daniel P.
Sharkey and ATMI, Inc. dated January 31, 2008, effective
as of September 7, 2007 (Filed as Exhibit 10.35 to
ATMIs 2007 Annual Report on Form 10-K, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.31 |
|
|
First Amendment to Agreement of Lease between West Real
Estate and Management, Inc. and ATMI Packaging, Inc.,
and ATMI, Inc., dated September 23, 2008 (Filed as
Exhibit 10.32 to ATMIs 2008 Annual Report on Form 10-K,
File No. 1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.32 |
* |
|
Amendment to Employment Agreement between Douglas A.
Neugold and ATMI, Inc. dated April 14, 2008 (Filed as
Exhibit 10.2 to ATMIs Current Report on Form 8-K, filed
on April 16, 2008, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.33 |
* |
|
Amendment to Employment Agreement between Daniel P.
Sharkey and ATMI, Inc. dated April 14, 2008 (Filed as
Exhibit 10.3 to ATMIs Current Report on Form 8-K, filed
on April 16, 2008, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.34 |
* |
|
Amendment to Employment Agreement between Timothy C.
Carlson and ATMI, Inc. dated April 14, 2008 (Filed as
Exhibit 10.4 to ATMIs Current Report on Form 8-K, filed
on April 16, 2008, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.35 |
* |
|
Amendment to Employment Agreement between Ellen Harmon
and ATMI, Inc. dated April 14, 2008 (Filed as Exhibit
10.5 to ATMIs Current Report on Form 8-K, filed on
April 16, 2008, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.36 |
* |
|
First Amendment to Non-Employee Directors Deferred
Compensation Program of ATMI, Inc. 1998 Stock Plan
(Filed as Exhibit 10.1 to ATMIs Current Report on Form
8-K, filed on March 6, 2008, File No. 1-16239, and
incorporated herein by reference). |
|
|
|
|
|
|
10.37 |
* |
|
Amendment to The ATMI, Inc. 1998 Stock Plan (Filed as
Exhibit 10.2 to ATMIs Current Report on Form 8-K, filed
on March 6, 2008, File No. 1-16239, and incorporated
herein by reference). |
42
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.38 |
* |
|
Amendment to The ATMI, Inc. 2000 Stock Plan (Filed as
Exhibit 10.3 to ATMIs Current Report on Form 8-K, filed
on March 6, 2008, File No. 1-16239, and incorporated
herein by reference). |
|
|
|
|
|
|
10.39 |
* |
|
ATMI, Inc. 2003 Stock Plan (as Amended May 21, 2003 and
March 2, 2008) (Filed as Exhibit 10.4 to ATMIs Current
Report on Form 8-K, filed on March 6, 2008, File No.
1-16239, and incorporated herein by reference). |
|
|
|
|
|
|
10.40 |
* |
|
ATMI, Inc. Non-Employee Directors Deferred Compensation
Program of ATMI, Inc. 2003 Stock Plan (Filed as Exhibit
10.5 to ATMIs Current Report on Form 8-K, filed on
March 6, 2008, File No. 1-16239, and incorporated herein
by reference). |
|
|
|
|
|
|
10.41 |
|
|
Third Amendment to Lease dated as of October 30, 2008 by
and between Seymour R. Powers, Trustee, and Carole
Kolsky, Deborah A. Tauber and Stephen L. Griss (as
successors to Leon Griss and Ruth Griss) and Advanced
Technology Materials, Inc. |
|
|
|
|
|
|
10.42 |
|
|
Fourth Amendment to Agreement of Lease dated as of
October 30, 2008 by and between Commerce Park Realty,
LLC and Advanced Technology Materials, Inc. |
|
|
|
|
|
|
10.43 |
* |
|
ATMI, Inc. 2010 Stock Plan, dated May 26, 2010 (Filed on
June 4, 2010 as Exhibit 4.4 to the Companys
Registration Statement on Form S-8, Registration No.
333-167318). |
|
|
|
|
|
|
10.44 |
* |
|
ATMI, Inc. Non-Employee Directors Deferred Compensation
Program of ATMI, Inc. 2010 Stock Plan. |
|
|
|
|
|
|
10.45 |
|
|
Notice of First Renewal Option of Agreement of Lease
dated as of October 27, 2010 by and between Seymour R.
Powers, Trustee, and Carole Kolsky, Deborah A. Tauber
and Stephen L. Griss (as successors to Leon Griss and
Ruth Griss) and Advanced Technology Materials, Inc. |
|
|
|
|
|
|
10.46 |
|
|
Notice of First Renewal Option of Agreement of Lease
dated as of December 13, 2010 by and between Seymour R.
Powers, Trustee, and Carole Kolsky, Deborah A. Tauber
and Stephen L. Griss (as successors to Leon Griss and
Ruth Griss) and Advanced Technology Materials, Inc. |
|
|
|
|
|
|
21 |
|
|
Subsidiaries of ATMI, Inc. |
|
|
|
|
|
|
23 |
|
|
Consent of Independent Registered Public Accounting Firm. |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended. |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities
Exchange Act, as amended. |
|
|
|
|
|
|
32 |
|
|
Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 is furnished herewith. |
|
|
|
* |
|
Indicates a management contract or compensatory plan or arrangement. |
|
(1) |
|
Portions omitted pursuant to a request for confidential treatment. |
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. |
|
|
February 18, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Douglas A. Neugold
Douglas A. Neugold
|
|
|
|
|
|
|
Chairman, President and Chief Executive Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Douglas A. Neugold
Douglas A. Neugold
|
|
Chairman, President, Chief Executive Officer and
Director (principal executive officer)
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Timothy C. Carlson
Timothy C. Carlson
|
|
Executive Vice President, Chief Financial Officer
and Treasurer (principal financial and
accounting officer)
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Mark A. Adley
Mark A. Adley
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Eugene G. Banucci, Ph.D.
Eugene G. Banucci, Ph.D.
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Robert S. Hillas
Robert S. Hillas
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Stephen H. Mahle
Stephen H. Mahle
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ C. Douglas Marsh
C. Douglas Marsh
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ George M. Scalise
George M. Scalise
|
|
Director
|
|
February 18, 2011 |
|
|
|
|
|
/s/ Cheryl L. Shavers, Ph.D.
Cheryl L. Shavers, Ph.D.
|
|
Director
|
|
February 18, 2011 |
44
ATMI, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
Audited Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-6 |
|
|
|
|
|
|
|
|
|
F-7 |
|
|
|
|
|
|
|
|
|
F-8 |
|
|
|
|
|
|
Financial Statement Schedule |
|
|
|
|
|
|
|
|
|
|
|
|
F-35 |
|
|
|
|
|
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of ATMI, Inc.
We have audited the accompanying consolidated balance sheets of ATMI, Inc. as of December 31, 2010
and 2009, and the related consolidated statements of operations, stockholders equity, and cash
flows for each of the three years in the period ended December 31, 2010. Our audits also included
the financial statement schedule listed in the Index at Item 15. These financial statements and
schedule are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ATMI, Inc. at December 31, 2010 and 2009, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set
forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), ATMI, Inc.s internal control over financial reporting as of December 31,
2010, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 18,
2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
February 18, 2011
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of ATMI, Inc.
We have audited ATMI, Inc.s internal control over financial reporting as of December 31, 2010,
based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). ATMI, Inc.s management is
responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in Item 9A,
Managements Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, ATMI, Inc. maintained in all material respects, effective internal control over
financial reporting as of December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of ATMI, Inc. as of December 31, 2010 and
2009, and the related consolidated statements of operations, stockholders equity, and cash flows
for each of the three years in the period ended December 31, 2010 and our report dated February 18,
2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
February 18, 2011
F-3
ATMI, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
68,648 |
|
|
$ |
64,738 |
|
Marketable securities, current portion |
|
|
58,495 |
|
|
|
32,650 |
|
Accounts receivable, net of allowances of $783 and $2,287, respectively |
|
|
54,518 |
|
|
|
44,184 |
|
Inventories, net |
|
|
62,832 |
|
|
|
53,761 |
|
Income taxes receivable |
|
|
4,627 |
|
|
|
10,844 |
|
Deferred income taxes |
|
|
6,801 |
|
|
|
7,883 |
|
Prepaid expenses |
|
|
14,384 |
|
|
|
10,395 |
|
Other current assets |
|
|
12,695 |
|
|
|
8,988 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
283,000 |
|
|
|
233,443 |
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment, net |
|
|
119,053 |
|
|
|
124,609 |
|
Goodwill |
|
|
46,981 |
|
|
|
33,394 |
|
Other intangibles, net |
|
|
28,948 |
|
|
|
23,202 |
|
Marketable securities, non-current |
|
|
25,429 |
|
|
|
10,590 |
|
Deferred income taxes, non-current |
|
|
2,097 |
|
|
|
2,238 |
|
Other non-current assets |
|
|
28,081 |
|
|
|
31,487 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
533,589 |
|
|
$ |
458,963 |
|
|
|
|
|
|
|
|
Liabilities and stockholders equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
21,045 |
|
|
$ |
14,788 |
|
Accrued liabilities |
|
|
5,918 |
|
|
|
4,804 |
|
Accrued salaries and related benefits |
|
|
12,163 |
|
|
|
4,480 |
|
Income taxes payable |
|
|
3,700 |
|
|
|
1,800 |
|
Other current liabilities |
|
|
3,911 |
|
|
|
3,811 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
46,737 |
|
|
|
29,683 |
|
|
|
|
|
|
|
|
|
|
Deferred income taxes, non-current |
|
|
10,245 |
|
|
|
6,886 |
|
Other non-current liabilities |
|
|
18,182 |
|
|
|
10,904 |
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $.01 per share: 2,000 shares authorized; none issued |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share: 100,000 shares authorized;
39,640 and 39,354 issued and 31,495 and 31,388 outstanding in 2010
and 2009, respectively |
|
|
396 |
|
|
|
393 |
|
Additional paid-in capital |
|
|
435,840 |
|
|
|
426,436 |
|
Treasury stock at cost (8,145 and 7,966 shares in 2010 and 2009,
respectively) |
|
|
(230,272 |
) |
|
|
(227,670 |
) |
Retained earnings |
|
|
248,433 |
|
|
|
208,927 |
|
Accumulated other comprehensive income |
|
|
4,028 |
|
|
|
3,404 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
458,425 |
|
|
|
411,490 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
533,589 |
|
|
$ |
458,963 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
ATMI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
367,256 |
|
|
$ |
254,704 |
|
|
$ |
339,063 |
|
Cost of revenues |
|
|
191,248 |
|
|
|
152,520 |
|
|
|
172,551 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
176,008 |
|
|
|
102,184 |
|
|
|
166,512 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
48,645 |
|
|
|
37,162 |
|
|
|
37,809 |
|
Selling, general and administrative |
|
|
85,425 |
|
|
|
76,359 |
|
|
|
88,781 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
134,070 |
|
|
|
113,521 |
|
|
|
126,590 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
41,938 |
|
|
|
(11,337 |
) |
|
|
39,922 |
|
Interest income |
|
|
949 |
|
|
|
1,196 |
|
|
|
3,126 |
|
Impairment of investments |
|
|
|
|
|
|
(2,486 |
) |
|
|
(3,432 |
) |
Other income (expense), net |
|
|
7,740 |
|
|
|
(1,029 |
) |
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
50,627 |
|
|
|
(13,656 |
) |
|
|
40,146 |
|
Provision (benefit) for income taxes |
|
|
11,121 |
|
|
|
(6,996 |
) |
|
|
6,819 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
39,506 |
|
|
$ |
(6,660 |
) |
|
$ |
33,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic |
|
$ |
1.26 |
|
|
$ |
(0.21 |
) |
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic |
|
|
31,413 |
|
|
|
31,398 |
|
|
|
31,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted |
|
$ |
1.24 |
|
|
$ |
(0.21 |
) |
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
31,895 |
|
|
|
31,398 |
|
|
|
32,078 |
|
See accompanying notes.
F-5
ATMI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
Treasury |
|
|
Retained |
|
|
Comprehensive |
|
|
|
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
Earnings |
|
|
Income |
|
|
Total |
|
Balance at December 31, 2007 |
|
$ |
390 |
|
|
$ |
412,423 |
|
|
$ |
(168,844 |
) |
|
$ |
180,973 |
|
|
$ |
9,441 |
|
|
$ |
434,383 |
|
Issuance of 60 shares of common stock pursuant
to the exercise of employee stock options |
|
|
1 |
|
|
|
1,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,319 |
|
Issuance of 15 shares of common stock pursuant
to the employee stock purchase plan |
|
|
|
|
|
|
324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324 |
|
Purchase of 2,113 treasury shares |
|
|
|
|
|
|
|
|
|
|
(58,257 |
) |
|
|
|
|
|
|
|
|
|
|
(58,257 |
) |
Equity based compensation |
|
|
|
|
|
|
6,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,700 |
|
Income tax benefit from equity-based compensation |
|
|
|
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276 |
|
Other |
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,327 |
|
|
|
|
|
|
|
33,327 |
|
Reclassification adjustment related to
gain position, net of $925 tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,574 |
) |
|
|
(1,574 |
) |
Change in fair value on available-for-sale
securities, net of deferred income tax of $938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,598 |
) |
|
|
(1,598 |
) |
Reclassification adjustment to earnings related to
derivative financial instruments at prior
period
end, net of deferred income tax of $46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
(78 |
) |
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,925 |
) |
|
|
(5,925 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
392 |
|
|
|
421,040 |
|
|
|
(227,101 |
) |
|
|
214,300 |
|
|
|
266 |
|
|
|
408,897 |
|
Issuance of 15 shares of common stock
pursuant to the exercise of employee stock
options |
|
|
|
|
|
|
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236 |
|
Purchase of 35 treasury shares |
|
|
|
|
|
|
|
|
|
|
(569 |
) |
|
|
|
|
|
|
|
|
|
|
(569 |
) |
Equity based compensation |
|
|
|
|
|
|
5,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,740 |
|
Income tax deficiency from equity-based
compensation |
|
|
|
|
|
|
(579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(579 |
) |
Other |
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of adoption of new
accounting standard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,287 |
|
|
|
(1,287 |
) |
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,660 |
) |
|
|
|
|
|
|
(6,660 |
) |
Reclassification adjustment related to
marketable securities sold in net unrealized
gain position, net of $32 tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55 |
) |
|
|
(55 |
) |
Change in fair value on available-for-sale
securities, net of deferred income tax of $1,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,940 |
|
|
|
1,940 |
|
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,540 |
|
|
|
2,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,235 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
393 |
|
|
|
426,436 |
|
|
|
(227,670 |
) |
|
|
208,927 |
|
|
|
3,404 |
|
|
|
411,490 |
|
Issuance of 104 shares of common stock
pursuant to the exercise of employee stock
options |
|
|
1 |
|
|
|
1,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,819 |
|
Purchase of 179 treasury shares |
|
|
|
|
|
|
|
|
|
|
(2,602 |
) |
|
|
|
|
|
|
|
|
|
|
(2,602 |
) |
Equity based compensation |
|
|
|
|
|
|
7,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,693 |
|
Income tax deficiency from equity-based
compensation |
|
|
|
|
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105 |
) |
Other |
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,506 |
|
|
|
|
|
|
|
39,506 |
|
Reclassification adjustment related to
marketable securities sold in net unrealized
gain position, net of $282 tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(481 |
) |
|
|
(481 |
) |
Change in fair value on available-for-sale
securities, net of deferred income tax of $201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
343 |
|
|
|
343 |
|
Cumulative translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
762 |
|
|
|
762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
396 |
|
|
$ |
435,840 |
|
|
$ |
(230,272 |
) |
|
$ |
248,433 |
|
|
$ |
4,028 |
|
|
$ |
458,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
ATMI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
39,506 |
|
|
$ |
(6,660 |
) |
|
$ |
33,327 |
|
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
26,718 |
|
|
|
26,799 |
|
|
|
24,141 |
|
Provision for (reversal of) bad debt |
|
|
(798 |
) |
|
|
1,381 |
|
|
|
300 |
|
Provision for inventory obsolescence |
|
|
625 |
|
|
|
2,093 |
|
|
|
1,544 |
|
Deferred income taxes |
|
|
4,587 |
|
|
|
(1,880 |
) |
|
|
2,039 |
|
Income tax benefit (deficiency) from share-based payment arrangements |
|
|
313 |
|
|
|
(579 |
) |
|
|
276 |
|
Excess tax benefit from share-based payment arrangements |
|
|
|
|
|
|
|
|
|
|
(241 |
) |
Equity-based compensation expense |
|
|
7,693 |
|
|
|
5,740 |
|
|
|
6,700 |
|
Realized gain on marketable securities |
|
|
|
|
|
|
|
|
|
|
(1,967 |
) |
Long-lived asset impairments |
|
|
544 |
|
|
|
7,298 |
|
|
|
177 |
|
Loss from equity-method investments |
|
|
1,267 |
|
|
|
1,167 |
|
|
|
649 |
|
Impairment of investments |
|
|
|
|
|
|
2,486 |
|
|
|
3,432 |
|
Gain on sale of equity investment |
|
|
(2,461 |
) |
|
|
|
|
|
|
|
|
Gain on remeasurement of non-controlling interest |
|
|
(5,923 |
) |
|
|
|
|
|
|
|
|
Other |
|
|
4 |
|
|
|
281 |
|
|
|
29 |
|
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(9,034 |
) |
|
|
(2,790 |
) |
|
|
20,608 |
|
Inventories |
|
|
(9,197 |
) |
|
|
400 |
|
|
|
(9,489 |
) |
Other assets |
|
|
(4,680 |
) |
|
|
(3,767 |
) |
|
|
2,579 |
|
Accounts payable |
|
|
5,169 |
|
|
|
1,808 |
|
|
|
(8,698 |
) |
Accrued expenses |
|
|
8,421 |
|
|
|
(2,446 |
) |
|
|
(7,821 |
) |
Income taxes |
|
|
7,942 |
|
|
|
(4,983 |
) |
|
|
(5,755 |
) |
Other liabilities |
|
|
(4,720 |
) |
|
|
2,413 |
|
|
|
(1,214 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
65,976 |
|
|
|
28,761 |
|
|
|
60,616 |
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(16,173 |
) |
|
|
(17,318 |
) |
|
|
(50,621 |
) |
Proceeds from the sale of property, plant and equipment |
|
|
142 |
|
|
|
33 |
|
|
|
26 |
|
Acquisitions of cost-basis and equity-basis investments |
|
|
(3,144 |
) |
|
|
|
|
|
|
(10,000 |
) |
Acquisitions, net of cash acquired |
|
|
(3,928 |
) |
|
|
|
|
|
|
(33,091 |
) |
Purchases of marketable securities |
|
|
(101,235 |
) |
|
|
(66,540 |
) |
|
|
(44,856 |
) |
Proceeds from sales or maturities of marketable securities |
|
|
60,432 |
|
|
|
65,243 |
|
|
|
85,886 |
|
Proceeds from sale of cost-basis and equity-basis investments |
|
|
5,175 |
|
|
|
|
|
|
|
|
|
Other |
|
|
(23 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(58,754 |
) |
|
|
(18,596 |
) |
|
|
(52,656 |
) |
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Excess tax benefit from share-based payment arrangements |
|
|
|
|
|
|
|
|
|
|
241 |
|
Purchases of treasury stock |
|
|
(2,602 |
) |
|
|
(569 |
) |
|
|
(59,234 |
) |
Proceeds from exercise of stock options |
|
|
1,819 |
|
|
|
236 |
|
|
|
1,643 |
|
Credit line borrowings |
|
|
1,724 |
|
|
|
5,675 |
|
|
|
13,917 |
|
Credit line repayments |
|
|
(2,207 |
) |
|
|
(6,291 |
) |
|
|
(12,815 |
) |
Payments of loans |
|
|
(2,379 |
) |
|
|
|
|
|
|
(229 |
) |
Other |
|
|
(46 |
) |
|
|
(46 |
) |
|
|
(64 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities |
|
|
(3,691 |
) |
|
|
(995 |
) |
|
|
(56,541 |
) |
|
|
|
|
|
|
|
|
|
|
Effects of exchange rate changes on cash and cash equivalents |
|
|
379 |
|
|
|
942 |
|
|
|
(1,600 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
3,910 |
|
|
|
10,112 |
|
|
|
(50,181 |
) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
64,738 |
|
|
|
54,626 |
|
|
|
104,807 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
68,648 |
|
|
$ |
64,738 |
|
|
$ |
54,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash interest paid |
|
$ |
82 |
|
|
$ |
188 |
|
|
$ |
229 |
|
Cash income taxes paid |
|
$ |
12,237 |
|
|
$ |
1,552 |
|
|
$ |
14,109 |
|
See accompanying notes.
F-7
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Description of Business
ATMI, Inc. (together with its subsidiaries, collectively referred to as the Company, ATMI, or
we) believes it is among the leading suppliers of high performance materials, materials packaging
and materials delivery systems used worldwide in the manufacture of microelectronics devices. Our
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, high-purity materials packaging and dispensing systems that allow for the
reliable introduction of low volatility liquids and solids to microelectronics and
biopharmaceutical 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 at lower cost. ATMIs customers include many of the leading semiconductor
manufacturers in the world who target leading edge technologies. ATMI also addresses an increasing
number of critical materials handling needs for the life sciences markets. Our proprietary
containment, mixing, and bioreactor technologies are sold to the biotechnology and laboratory
markets, which we believe offer significant growth potential. ATMIs objective is to meet the
demands of our microelectronics and life sciences customers with solutions that maximize the
efficiency of their manufacturing processes, reduce capital costs, and minimize the time to develop
new products and integrate them into their processes.
Consolidation
The consolidated financial statements include the accounts of all subsidiaries where control
exists. Equity investments generally consist of 20 percent to 50 percent owned operations which by
definition demonstrate significant influence and instances where the Company through voting and
similar rights can exercise significant influence. Operations less than 20 percent owned, where
the Company does not exercise significant influence, are generally carried at cost. Earnings from
equity investments are reported, net of income taxes, within the caption, Other income (expense),
net on the consolidated statements of operations. Intercompany transactions have been eliminated.
As of December 31, 2009, we changed the categorization of $0.6 million of unrecognized tax benefits
from Other non-current liabilities to Deferred income taxes, non-current on the consolidated
balance sheet.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (GAAP) requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, and expenses. While actual results could differ,
management believes such estimates to be reasonable.
Revenue Recognition and Accounts Receivable
We recognize revenue when the following four criteria are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed
or determinable; and (4) collectability is reasonably assured. Revenues from product sales are
generally recognized upon delivery to a common carrier when terms are equivalent to free-on-board
(FOB) origin and upon receipt by a customer when terms are equivalent to FOB destination. In
instances where final acceptance of equipment is specified by the purchase agreement, revenue is
deferred until all acceptance criteria have been satisfied, except when reasonable reserves for
returns can be effectively established due to substantial successful installation history for
homogenous transactions. Should changes in conditions cause management to determine these criteria
are not met for certain future transactions,
revenue recognized for any reporting period could be adversely affected. We accrue for sales
returns, warranty costs, and other allowances based on a current evaluation of our experience based
on stated terms of the transactions.
F-8
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We use an exclusive contract manufacturer (Matheson Tri-Gas), which is also an exclusive
distribution partner, for the manufacture and distribution of our SDS products (the Licensed
Products). Under the terms of the manufacturing agreement, ATMI retains the right to manufacture
25 percent of all Licensed Products, while the contract manufacturer has the right to manufacture
75 percent of all Licensed Products. Upon completion of manufacture, ATMI purchases all Licensed
Products produced by the contract manufacturer. Under the terms of the distribution agreement,
ATMI receives payment from the distributor based upon a formula which is dependent on the sale
price obtained by the distributor to its customer. ATMI recognizes revenue from the sale of
Licensed Products to this distribution partner when the distributor sells the Licensed Products to
its customers, because that is when the sales price becomes fixed and determinable by the Company.
During the years ended December 31, 2010, 2009 and 2008, ATMI recognized $79.9 million, $37.9
million, and $83.8 million of revenues from this distributor, respectively. During the years ended
December 31, 2010, 2009 and 2008, ATMI recognized revenues from a Taiwanese foundry of $46.8
million, $36.3 million, and $36.6 million, respectively.
Billings to customers for shipping and handling are included in revenues. Costs incurred for
shipping and handling of products are charged to cost of revenues. Credit is extended to customers
based on an evaluation of each customers financial condition; generally, collateral is not
required. Revenues are presented in the consolidated financial statements net of sales allowances
and discounts. Accounts receivable are presented in the consolidated financial statements net of
the allowance for doubtful accounts. Taxes collected from customers and remitted to governmental
authorities are presented on a net basis; that is, they are excluded from revenues.
Accounts Receivable Allowances
The allowance for doubtful accounts is established to represent our best estimate of the net
realizable value of the outstanding accounts receivable balances. We estimate our allowance for
doubtful accounts based on past due amounts and historical write-off experience, as well as trends
and factors surrounding the credit risk of the markets we operate in and the financial viability of
specific customers. In an effort to identify adverse trends, we assess the financial health of the
markets we operate in and perform periodic credit evaluations of our customers and ongoing reviews
of account balances and aging of receivables. Amounts are considered past due when payment has not
been received within the time frame of the credit terms extended. Write-offs are charged directly
against the allowance for doubtful accounts and occur only after all collection efforts have been
exhausted.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit
risk consist primarily of cash and cash equivalents, marketable securities, accounts receivable,
and currency forward exchange contracts. We invest our cash and cash equivalents and marketable
securities in U.S. Government and municipal debt obligations, and time deposits. The Company had
amounts due from two customers that accounted for approximately 42 percent and 38 percent of
accounts receivable at December 31, 2010 and 2009, respectively.
Research and Development
Costs associated with the development of new products and improvements to existing products are
charged to expense as incurred.
Cash and Cash Equivalents and Marketable Securities
Highly liquid investments with maturities of three months or less, when acquired, are classified as
cash and cash equivalents. Investments in publicly traded securities with maturities greater than
three months, when acquired, are classified as marketable securities.
F-9
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All of the Companys marketable securities are classified as available-for-sale as of the balance
sheet date and are reported at fair value, with unrealized gains and losses included in
stockholders equity as a component of accumulated other comprehensive income, net of applicable
taxes. We regularly review the fair value of marketable security declines below amortized cost to
evaluate whether the decline is other-than-temporary. In making this determination, the Company
considers all available evidence including, among other things, considering the duration and extent
of the decline and the economic factors influencing the market to determine if the fair value will
recover to equal or exceed the amortized cost. If we determine that the fair value will not
recover, an other-than-temporary impairment is recognized, net of applicable taxes.
In April 2009, the guidance on the recognition and presentation of other-than-temporary impairments
was amended for debt securities, like our Massachusetts Educational Financing Authority (MEFA)
auction-rate security, requiring us to determine both the credit and non-credit components when we
conclude an investment has an other-than-temporary impairment. The change resulted in a second
quarter 2009 recognition of a cumulative-effect adjustment to retained earnings, with a
corresponding adjustment to accumulated other comprehensive income because we recognized a non-cash
other-than-temporary impairment of $2.4 million for our auction rate security in the first quarter
of 2009. As part of the transition of adoption we determined the amount of the impairment related
to credit loss and the amount related to all other factors. Since we concluded that we had no
current intent to sell this security and it was not more likely than not that we will be required
to sell the security before anticipated recovery of its remaining amortized cost, we adjusted
accumulated other comprehensive income (loss) for the component of the impairment loss due to all
other factors, net of tax. Of the total $2.4 million pre-tax loss recognized in the first quarter
of 2009, we determined the credit loss was $0.3 million and the loss due to other factors was $2.1
million. The credit loss of $0.3 million is being accreted to the cost basis of the security
ratably over the expected term of the security, currently estimated to be 15 years. The estimated
fair value of the auction-rate security was $2.9 million at December 31, 2010 and $2.6 million at
December 31, 2009. See Note 5 for further discussion regarding the auction-rate security.
Marketable securities that are in a temporarily impaired position, where management has the ability
and intent to hold until anticipated recovery or maturity, are classified as either current or
non-current based on the remaining contractual maturity of the security. Those securities in a
temporarily impaired position with contractual maturities greater than one year are classified as
non-current.
As part of our ongoing cash management optimization efforts during 2010, the Company purchased
South Korean time deposits which were classified as marketable securities. At December 31, 2010
and 2009, the Company had $5.4 million and no time deposits, respectively, in South Korea.
Non-marketable Equity and Debt Securities
We selectively invest in non-marketable equity securities of private companies, which range from
early-stage companies that are often still defining their strategic direction to more mature
companies whose products or technologies may directly support an ATMI product or initiative. Our
non-marketable equity investments are recorded using cost basis or the equity method of accounting,
depending on the facts and circumstances of each investment. At December 31, 2010, the carrying
value of our portfolio of strategic investments in non-marketable equity securities totaled $22.3
million ($22.1 million at December 31, 2009). In certain instances, we loan funds to early-stage
investees at market interest rates to enable them to focus on product and technology development.
Non-marketable equity and debt securities are included in the consolidated balance sheets under the
caption Other non-current assets. ATMIs share of the income or losses of all equity-method
investees, using the most current financial information available, which is typically one month
behind ATMIs normal closing date, is included in our results of operations from the investment
date forward.
Investments in non-marketable equity securities are inherently risky, and some of these companies
are likely to fail. Their success (or lack thereof) is dependent on product development, market
acceptance, operational efficiency, attracting and retaining talented professionals, and other key
business success factors. In addition, depending on their future prospects, they may not be able to
raise additional funds when needed or they may receive lower
valuations, with less favorable investment terms than in previous financings, and the investments
would likely become impaired.
F-10
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We review our investments quarterly for indicators of impairment; however, for non-marketable
equity securities, the impairment analysis may require significant judgment to identify events or
circumstances that would likely have a significant adverse effect on the fair value of the
investment. The indicators that we use to identify those events or circumstances include (a) the
investees revenue and earnings trends relative to predefined milestones and overall business
prospects, (b) the technological feasibility of the investees products and technologies, (c) the
general market conditions in the investees industry or geographic area, including adverse
regulatory or economic changes, (d) factors related to the investees ability to remain in
business, such as the investees liquidity, and the rate at which the investee is using its cash,
and (e) the investees receipt of additional funding at a lower valuation.
Investments identified as having an indicator of impairment are subject to further analysis to
determine if the investment is other-than-temporarily impaired, in which case we write the
investment down to its fair value, using the framework required by Accounting Standards
Codification (ASC) 820 Fair Value Measurements and Disclosures. When an investee is not
considered viable from a financial or technological point of view, we write down the entire
investment since we consider the estimated fair market value to be nominal. If an investee obtains
additional funding at a valuation lower than our carrying amount or requires a new round of equity
funding to stay in operation and the new funding does not appear imminent, we presume that the
investment is other-than-temporarily impaired, unless specific facts and circumstances indicate
otherwise. We recognized no impairments in our portfolio of non-marketable equity securities in
2010 (none in 2009 and $1.6 million in 2008).
In July 2005, ATMI purchased 30 percent of the outstanding common stock of Anji Microelectronics
Co., Ltd. (Anji), an entity in the development stage of researching and developing advanced
semiconductor materials, with primary operations in Shanghai, China. We have determined that Anji
is a variable interest entity. However, we have determined that we are not the primary beneficiary
of Anji because we do not have the power, through voting or similar rights, to direct the
activities of Anji that most significantly impact the entitys economic performance, and we are
also not expected to absorb significant losses or gains from Anji. In July 2010, we reduced our
equity ownership in Anji to 18 percent through the sale of a portion of our investment for $5.2
million. The transaction resulted in a gain of $2.5 million from the sale of these shares net of a
$0.4 million reserve for a put option granted to the buyer should certain contingencies occur over
the next three years. The put option is carried on our balance sheet in the caption, Other
non-current liabilities. ATMIs carrying value of the remaining shares is $3.9 million at
December 31, 2010. ATMI changed its accounting for this investment from the equity method of
accounting to the cost method as a result of the sale of these shares because ATMI is no longer
able to exercise significant influence over the operations of Anji. The carrying value of ATMIs
investment in Anji exceeds ATMIs share of Anjis net assets by approximately $2.6 million. The
carrying value of our investment in Anji represents the cash paid, less our share of the cumulative
losses during the period we used the equity-method of accounting. At December 31, 2010, the fair
value of a guarantee ATMI provided on behalf of Anji was $0.2 million (see Note 14) and our maximum
exposure to loss is $6.8 million, which consists of $3.9 million of our carrying value in this
investment, plus $2.5 million associated with Anjis bank line of credit, which is guaranteed by
ATMI, and a $0.4 million reserve for the put option.
Inventories
Inventories are stated at the lower of cost or market, using the first-in, first-out (FIFO)
method. Inventory valuation reserves are established in order to report inventories at the lower
of cost or market value on our consolidated balance sheets. The determination of inventory
valuation reserves requires management to make estimates and judgments on the future salability of
inventories. Valuation reserves for excess, obsolete, and slow-moving inventory are estimated by
comparing the inventory levels of individual parts to both future sales forecasts or production
requirements and historical usage rates in order to identify inventory where the resale value or
replacement value is less than inventory cost. Other factors that management considers in
determining these reserves include whether individual inventory parts or chemicals meet current
specifications and cannot be substituted for or reworked into a part currently being sold or used
as a service part, overall market conditions, and other inventory management initiatives.
F-11
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2010 and 2009, we had $2.4 million and $2.6 million, respectively, of inventory
valuation reserves recorded.
Property, Plant, and Equipment, net
Property, plant, and equipment are carried at cost, net of accumulated depreciation. Depreciation
is calculated on the straight-line method based on the estimated useful lives of the assets, which
range from 3 to 35 years (see Note 6). The estimated useful life represents the projected period of
time that the asset will be productively employed by the Company and is determined by management
based on many factors, including historical experience with similar assets and technological life
cycles. Circumstances and events relating to these assets are monitored to ensure that changes in
asset lives or impairments are identified and prospective depreciation expense or impairment
expense is adjusted accordingly. The depreciation periods used are: buildings, 15 to 35 years;
machinery and equipment, 3 to 10 years; software, 5 to 7 years; cylinders and canisters, 7 to 10
years; furniture and fixtures, 5 years; and leasehold improvements, over the lesser of the lease
term or estimated useful life. We use accelerated depreciation methods for tax purposes where
appropriate.
Asset-Retirement Obligations
An asset-retirement obligation (ARO) is recognized in the period in which sufficient information
exists to determine the fair value of the liability with a corresponding increase to the carrying
amount of the related property, plant, and equipment which is then depreciated over its useful
life. The liability is initially measured at fair value and then accretion expense is recorded in
each subsequent period. The Companys AROs are primarily associated with five leased facilities
where we have made substantial modifications to the leased property and we are obligated to restore
the facilities at the end of the contractual term of each lease. See Note 9 for further discussion
on leases.
Income Taxes
Current income taxes are determined based on estimated taxes payable or refundable on tax returns
for the current year. Deferred income taxes are determined using enacted tax rates for the effect
of temporary differences between the book and tax bases of recorded assets and liabilities. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. The Company recognizes the benefit of an income tax
position only if it is more likely than not (greater than 50 percent) that the tax position will be
sustained upon tax examination, based solely on the technical merits of the tax position.
Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the
largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement. We adjust these unrecognized tax benefits, including any impact on the related
interest and penalties, in light of changing facts and circumstances. A number of years may elapse
before a particular matter for which we have established an unrecognized tax benefit is audited and
fully resolved. Additionally, the Company accrues interest and related penalties, if applicable,
on all tax exposures for which reserves have been established consistent with jurisdictional tax
laws, which is included in income tax expense. See Note 10 for more information and disclosures on
income taxes.
Fair Value of Financial Instruments
The Company measures and reports financial assets and financial liabilities on a fair value basis,
consistent with ASC 820 Fair Value Measurements and Disclosures, using the following three
categories for classification and disclosure purposes:
Level 1 Quoted prices in active markets for identical assets and liabilities. Level 1 assets and
liabilities consist of cash, time deposits, money market fund deposits, certain of our marketable
equity instruments, and forward foreign currency exchange contracts that are traded in an active
market with sufficient volume and frequency of transactions.
F-12
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which all significant inputs are observable or can
be derived principally from or corroborated by observable market data for substantially the full
term of the assets or liabilities. Level 2 assets include certain of our marketable debt
instruments with quoted market prices that are traded in less active markets or priced using a
quoted market price for similar instruments.
Level 3 Unobservable inputs to the valuation methodology that are significant to the measurement
of fair value of assets or liabilities. At December 31, 2010, our auction-rate-security and the
Artelis acquisition contingent consideration payment liability are the only items reflected in this
category.
See Note 5 for more information on the methods and assumptions used to estimate the fair value of
our other financial instruments.
Foreign Currency Exchange Contracts
We use forward foreign currency exchange contracts to hedge specific or anticipated exposures
relating to intercompany payments (primarily U.S. export sales to subsidiaries at pre-established
U.S. dollar prices), intercompany loans and other specific and identified exposures. The terms of
the forward foreign currency exchange contracts are matched to the underlying transaction being
hedged, and are typically under one year. Because such contracts are directly associated with
identified transactions, they are an effective hedge against fluctuations in the value of the
foreign currency underlying the transaction.
Changes in the fair value of economic hedges are recognized in earnings as an offset to the change
in the fair value of the underlying exposures being hedged. The changes in fair value of
derivatives that are designated as cash-flow hedges are deferred in Accumulated other comprehensive
income and are recognized in earnings as the underlying hedged transaction occurs. Any hedge
ineffectiveness is recognized in earnings immediately. We do not enter into derivative instruments
for trading or speculative purposes and all of our derivatives were highly effective throughout the
periods reported. At December 31, 2010, we did not have any cash flow hedges outstanding.
Counterparties to forward foreign currency exchange contracts are major banking institutions with
credit ratings of investment grade or better and no collateral is required. There are no
significant risk concentrations. We believe the risk of incurring losses on derivative contracts
related to credit risk is remote.
Goodwill and Other Indefinite-Lived Intangible Assets
The assets and liabilities of acquired businesses are recorded under the purchase method of
accounting at their estimated fair values at the dates of acquisition. Goodwill represents costs in
excess of fair values assigned to the underlying net assets of acquired businesses.
Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject
to annual impairment testing. The identification and measurement of goodwill impairment involves
the estimation of the fair value of reporting units. The estimates of fair value of reporting
units are based on the best information available as of October 31, 2010, which primarily
incorporate management assumptions about expected future cash flows and contemplate other valuation
techniques. No goodwill impairment has been recorded to date.
Other Long-Lived Assets
We evaluate the potential impairment of other long-lived assets when indicators of impairment are
present. If the carrying value of assets exceeds the sum of the undiscounted expected future cash
flows, the carrying value of the asset is written down to fair value. We amortize acquired patents
and other amortizable intangible assets over their estimated useful lives. All amortizable
intangible assets are amortized using the straight-line method over the estimated useful lives of
the assets, ranging from 3 to 14 years.
F-13
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intercompany Loans
In certain circumstances, the Company maintains intercompany agreements with and among our
wholly-owned subsidiaries under which funds are provided to subsidiaries to finance general
business activities. Since settlement of these agreements is not expected in the foreseeable
future, and there is no repayment schedule as part of the agreements, we treat these loans as
permanent advances. Therefore, any associated foreign exchange gains and losses are deferred in
Accumulated other comprehensive income in the period in which they arise.
Translation of Foreign Currencies
We conduct business in many different currencies and, accordingly, are subject to the inherent
risks associated with foreign exchange rate movements. The financial position and results of
operations of many of our foreign subsidiaries are measured using the local currency as the
functional currency. Foreign currency denominated assets and liabilities are translated into U.S.
dollars at the exchange rates existing at the respective balance sheet dates, and income and
expense items are translated at the average exchange rates during the respective periods. The
aggregate effects of translating the balance sheets of these subsidiaries are deferred as a
separate component of Stockholders equity.
Equity-based Compensation
The Company recognizes compensation expense in its consolidated financial statements for all
share-based payments granted based on the fair value on the date of grant. For share-based
payments granted with a service period vesting restriction, compensation expense is recognized on a
straight-line basis over the awards respective vesting period. For share-based payments granted
with a performance condition, we accrue compensation expense when we determine it is probable that
the awards will be earned.
Recently Issued Accounting Pronouncements
In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605). This Update
provides amendments to the criteria in Subtopic 605-24 for separating consideration in
multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to
determine the selling price of each specific deliverable which includes vendor-specific objective
evidence (if available), third-party evidence (if vendor-specific evidence is not available), or
estimated selling price if neither of the first two are available. This Update also eliminates the
residual method for allocating revenue between the elements of an arrangement and requires that
arrangement consideration be allocated at the inception of the arrangement. Finally, this Update
expands the disclosure requirements regarding a vendors multiple-deliverable revenue arrangements.
This Update is effective for fiscal years beginning on or after June 15, 2010. We do not anticipate
any material impact from this Update.
In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. ASU 2010-20 requires increased disclosures about
the credit quality of financing receivables and allowances for credit losses, including disclosure
about credit quality indicators, past due information and modifications of finance receivables.
The guidance is generally effective for reporting periods ending after December 15, 2010. There
was no material impact from this Update.
In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805). This Update
requires a public entity to disclose pro forma information for business combinations that occurred
in the current reporting period and specifically requires the same information for the comparative
prior period. This guidance is generally effective for annual reporting periods beginning on or
after December 15, 2010. We do not anticipate any material impact from this Update.
In January 2011, the FASB issued ASU 2011-01, Deferral of the Effective Date of Disclosures about
Troubled Debt Restructurings in Update No. 2010-20. ASU 2011-01 defers the portion of ASU 2010-20
related to troubled
debt disclosures. This guidance is anticipated to be effective for interim and annual periods
ending after June 15, 2011. We do not anticipate any material impact from this Update.
F-14
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Marketable Securities
Marketable securities include at December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Estimated |
|
|
|
|
|
|
Unrealized |
|
|
Estimated |
|
|
|
Cost |
|
|
Gain (Loss) |
|
|
Fair Value |
|
|
Cost |
|
|
Gain (Loss) |
|
|
Fair Value |
|
Securities in unrealized gain
position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
$ |
251 |
|
|
$ |
1,545 |
|
|
$ |
1,796 |
|
|
$ |
343 |
|
|
$ |
2,029 |
|
|
$ |
2,372 |
|
Government debt
obligations (1) |
|
|
16,661 |
|
|
|
87 |
|
|
|
16,748 |
|
|
|
7,321 |
|
|
|
51 |
|
|
|
7,372 |
|
GS (2) debt obligations |
|
|
23,049 |
|
|
|
13 |
|
|
|
23,062 |
|
|
|
16,974 |
|
|
|
20 |
|
|
|
16,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
39,961 |
|
|
|
1,645 |
|
|
|
41,606 |
|
|
|
24,638 |
|
|
|
2,100 |
|
|
|
26,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities in unrealized loss
position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government debt
obligations (1) |
|
|
26,138 |
|
|
|
(63 |
) |
|
|
26,075 |
|
|
|
909 |
|
|
|
(1 |
) |
|
|
908 |
|
GS (2) debt obligations |
|
|
8,000 |
|
|
|
(9 |
) |
|
|
7,991 |
|
|
|
13,022 |
|
|
|
(29 |
) |
|
|
12,993 |
|
Auction-rate security (3) |
|
|
4,695 |
|
|
|
(1,794 |
) |
|
|
2,901 |
|
|
|
4,672 |
|
|
|
(2,071 |
) |
|
|
2,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
38,833 |
|
|
|
(1,866 |
) |
|
|
36,967 |
|
|
|
18,603 |
|
|
|
(2,101 |
) |
|
|
16,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits |
|
|
5,351 |
|
|
|
|
|
|
|
5,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government debt
obligations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
5,351 |
|
|
|
|
|
|
|
5,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities |
|
$ |
84,145 |
|
|
$ |
(221 |
) |
|
$ |
83,924 |
|
|
$ |
43,241 |
|
|
$ |
(1 |
) |
|
$ |
43,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
State and municipal government debt obligations |
|
(2) |
|
Government sponsored |
|
(3) |
|
Massachusetts Educational Financing Authority (MEFA) auction rate security Par Value
$5,000,000 less non-cash credit loss of $305,000 |
The amortized cost and estimated fair value of available-for-sale securities, by contractual
maturity, as of December 31, 2010 are shown below (in thousands); expected maturities may differ
from contractual maturities because the issuers of the securities may exercise the right to prepay
obligations without prepayment penalties.
F-15
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
|
Cost |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Due in one year or less |
|
$ |
31,588 |
|
|
$ |
31,659 |
|
Due between one and three years |
|
$ |
47,611 |
|
|
$ |
47,568 |
|
Auction-rate security (due in 2038) |
|
$ |
4,695 |
|
|
$ |
2,901 |
|
|
|
|
|
|
|
|
|
|
|
83,894 |
|
|
|
82,128 |
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
251 |
|
|
|
1,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
84,145 |
|
|
$ |
83,924 |
|
|
|
|
|
|
|
|
As of December 31, 2010, 36 out of the 68 marketable securities currently held were in an
unrealized loss position. This table shows the Companys marketable securities that were in an
unrealized loss position at December 31, 2010, and also shows the duration of time the security had
been in an unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months |
|
|
12 Months or Greater |
|
|
Total |
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Unrealized |
|
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
Fair Value |
|
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government debt obligations |
|
$ |
26,075 |
|
|
$ |
(63 |
) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
26,075 |
|
|
$ |
(63 |
) |
GS debt obligations |
|
|
7,991 |
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
7,991 |
|
|
|
(9 |
) |
Auction-rate security |
|
|
|
|
|
|
|
|
|
|
2,901 |
|
|
|
(1,794 |
) |
|
|
2,901 |
|
|
|
(1,794 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
34,066 |
|
|
$ |
(72 |
) |
|
$ |
2,901 |
|
|
$ |
(1,794 |
) |
|
$ |
36,967 |
|
|
$ |
(1,866 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 5 for further discussion.
3. Inventories
Inventories include at December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Raw materials |
|
$ |
16,499 |
|
|
$ |
14,985 |
|
Work in process |
|
|
2,133 |
|
|
|
2,446 |
|
Finished goods (1) |
|
|
46,575 |
|
|
|
38,924 |
|
|
|
|
|
|
|
|
|
|
|
65,207 |
|
|
|
56,355 |
|
Excess and obsolescence reserve |
|
|
(2,375 |
) |
|
|
(2,594 |
) |
|
|
|
|
|
|
|
Inventories, net |
|
$ |
62,832 |
|
|
$ |
53,761 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
$3.8 million and $3.3 million of finished goods inventory resides at non-ATMI consignment
locations at December 31, 2010 and 2009, respectively. |
As of December 31, 2010, the Company had commitments for inventory purchases of $8.5 million.
F-16
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Foreign Currency Exchange Contracts
At December 31, 2010, we held foreign currency exchange contracts that are economic hedges with
notional amounts totaling $32.7 million, of which $12.6 million will be settled in Euros, $1.8
million will be settled in Taiwan Dollars, $1.9 million will be settled in Japanese Yen and $16.4
million will be settled in Korean Won. Changes in the fair market value (gain or loss) on these
contracts were not significant as of December 31, 2010.
At December 31, 2009, we held foreign currency exchange contracts that were economic hedges with
notional amounts totaling $2.9 million, of which $1.6 million were settled in Taiwan Dollars and
$1.3 million were settled in Japanese Yen. Changes in the fair market value (gain or loss) on
these contracts were not significant as of December 31, 2009.
5. Fair Value Measurements
At December 31, 2010 and 2009, we have included the fair value of our auction-rate security under
the caption Marketable securities, non-current in the consolidated balance sheets.
Assets / Liabilities Measured at Fair Value on a Recurring Basis
This table summarizes the Companys assets (liabilities) measured at fair value on a recurring
basis at December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measured Using |
|
|
|
|
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
Total |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Cash & cash equivalents |
|
$ |
68,648 |
|
|
|
68,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
$ |
1,796 |
|
|
|
1,796 |
|
|
|
|
|
|
|
|
|
Time deposits |
|
$ |
5,351 |
|
|
|
5,351 |
|
|
|
|
|
|
|
|
|
Government debt
obligations (1) |
|
$ |
42,823 |
|
|
|
|
|
|
|
42,823 |
|
|
|
|
|
GS (2) debt obligations |
|
$ |
31,053 |
|
|
|
|
|
|
|
31,053 |
|
|
|
|
|
Auction-rate security |
|
$ |
2,901 |
|
|
|
|
|
|
|
|
|
|
|
2,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract asset |
|
$ |
81 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
Foreign currency exchange contract liability |
|
$ |
(750 |
) |
|
|
(750 |
) |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
State and municipal government debt obligations |
|
(2) |
|
Government sponsored |
F-17
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recorded a loss of $0.8 million for the year ended December 31, 2010, and gains of $0.2
million and $0.1 million for the years ended 2009, and 2008, respectively, under the caption Other
income (expense), net in the consolidated statements of operations, related to changes in the fair
value of its financial instruments for forward foreign currency exchange contracts accounted for as
fair value hedges.
During 2010, our valuation methodologies were consistent with previous years and there were no
transfers into or out of Level 3 based on changes in observable inputs.
There were no transfers between Level 1 and Level 2 during 2010.
This table presents a reconciliation for all assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) for the year ended December 31,
2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant |
|
|
|
Unobservable Inputs (Level 3) |
|
|
|
Available-For- |
|
|
|
|
|
|
Sale Marketable |
|
|
|
|
|
|
Securities |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
2,601 |
|
|
$ |
2,601 |
|
Total gains (losses), realized and unrealized: |
|
|
|
|
|
|
|
|
Included in net income |
|
|
|
|
|
|
|
|
Included in accumulated other comprehensive income |
|
|
300 |
|
|
|
300 |
|
Purchases, issuances, and settlements, net |
|
|
|
|
|
|
|
|
Transfers into (out of) Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
2,901 |
|
|
$ |
2,901 |
|
|
|
|
|
|
|
|
See Note 2 for further discussion.
Assets / Liabilities Measured at Fair Value on a Nonrecurring Basis
All assets and liabilities measured at fair value on a nonrecurring basis are categorized as Level
3, requiring significant management judgment due to the absence of quoted market prices or
observable inputs for assets of a similar nature.
On November 2, 2010, ATMIs Belgian subsidiary acquired the remaining 60 percent of the outstanding
shares of Artelis S.A. The total accounting purchase consideration of $21.8 million included the
cash payment of $4.0 million, the fair value of contingent payments tied to future revenue
performance of $8.4 million, the carrying value of $5.9 million related to our original 40 percent
non-controlling ownership interest, and assumed debt of $3.5 million. The contingent payments tied
to future revenue performance have a range of possible outcomes from zero to $23.3 million. Our
determination of the fair value of the 40 percent interest was based on the value we paid for the
remaining outstanding shares. The gain has been recorded in our Statement of Operations under the
caption Other income (expense), net. The acquisition was recorded under the purchase method of
accounting and, accordingly, Artelis results of operations are included in the Companys financial
statements from the date of acquisition.
The liability for the fair value of contingent payments tied to future revenue performance for the
fiscal years 2012 through 2014 of $8.4 million was calculated using unobservable inputs (primarily
using discounted cash flow
analyses, a discount rate of 17 percent, and reliance on the market and product knowledge of
internal experts), classified as Level 3, requiring significant management judgment due to the
absence of quoted market prices or observable inputs for assets of a similar nature.
F-18
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2009, long-lived assets held and used with a carrying amount of $8.4 million were written
down to their estimated fair values of $1.1 million, resulting in an impairment charge of $7.3
million. The fair value measurements were calculated using unobservable inputs (primarily using
discounted cash flow analyses and reliance on market knowledge of internal experts), classified as
Level 3, requiring significant management judgment due to the absence of quoted market prices or
observable inputs for assets of a similar nature. $3.1 million of the impairment charge is included
in cost of revenues and is primarily related to the planned idling of manufacturing capacity of our
gas products. $1.6 million of the impairment charge is included in research and development expense
and is related primarily to idled equipment used in our research and development efforts. $2.6
million of the impairment charge is included in selling, general and administrative expense and is
primarily related to redundant enterprise management software.
In 2008, Ceradyne, Inc. (Ceradyne) completed its acquisition of SemEquip, Inc., an entity in
which ATMI had previously invested. Ceradyne paid $25 million in cash at the closing and is
committed to contingent consideration up to $100 million over the next 15 years, based on SemEquip
revenues achieved during that period. Prior to the acquisition, ATMIs cost-basis investment in
SemEquip was $2.2 million. ATMI received $0.6 million representing its share of the closing
proceeds and wrote off the remaining balance from our investment in SemEquip of $1.6 million due to
the uncertainty of collecting any amounts in the future related to the earnout. The write off is
included in the caption, Impairment of investments in the consolidated statements of operations.
Also in 2008, due to changes in events and circumstances related to a convertible note due from an
early-stage semiconductor materials venture, the fair value of this investment was significantly
impacted, resulting in a $1.8 million impairment charge, representing the full value of the note.
ATMIs interest in this note, in the event of default, is secured by certain technology owned by
the venture, but recoverability of amounts due became unlikely. The fair value measurement was
calculated using unobservable inputs, classified as Level 3, requiring significant management
judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term
nature of this investment. The impairment charge is included in the caption, Impairment of
investments in the consolidated statements of operations. During 2009, we collected $0.5 million
of amounts due under the note, which we recognized as a gain under the caption, Other income
(expense), net in the consolidated statement of operations. If further amounts due, including
interest, are collected in the future, we will recognize a gain for those amounts.
Due to their nature, the carrying value of cash, receivables, and payables approximates fair value.
F-19
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Property, Plant and Equipment, Net
Property, plant, and equipment, net, consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Land |
|
$ |
1,123 |
|
|
$ |
1,104 |
|
Buildings |
|
|
25,739 |
|
|
|
25,453 |
|
Machinery and equipment |
|
|
138,664 |
|
|
|
133,328 |
|
Software |
|
|
28,252 |
|
|
|
27,222 |
|
Cylinders and canisters |
|
|
43,535 |
|
|
|
37,230 |
|
Furniture and fixtures |
|
|
2,751 |
|
|
|
2,640 |
|
Leasehold improvements |
|
|
26,488 |
|
|
|
21,499 |
|
Construction in progress |
|
|
2,105 |
|
|
|
6,260 |
|
|
|
|
|
|
|
|
|
|
|
268,657 |
|
|
|
254,736 |
|
Accumulated depreciation and amortization |
|
|
(149,604 |
) |
|
|
(130,127 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
119,053 |
|
|
$ |
124,609 |
|
|
|
|
|
|
|
|
In 2010 and 2009, in the table above, computer equipment has been categorized in Machinery and
equipment. In our 2009 Annual Report it was categorized as Computer equipment and software.
Depreciation and amortization expense for property, plant, and equipment for the years ended
December 31, 2010, 2009 and 2008 was $22.8 million, $22.3 million, and $20.1 million, respectively.
Fully depreciated assets, which were no longer in use, of approximately $2.3 million and $1.0
million were written off in the years ended December 31, 2010 and 2009, respectively.
We recognized impairment losses from property, plant, and equipment of $0.5 million, $7.3 million,
and $0.2 million in the years ended December 31, 2010, 2009 and 2008, respectively. Refer to Note
5 for additional information.
As of December 31, 2010, the Company had commitments for capital expenditures of $1.0 million.
This table shows amounts recorded in the consolidated statements of operations related to
depreciation expense for property, plant, and equipment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
10,531 |
|
|
$ |
10,633 |
|
|
$ |
9,207 |
|
Research and development |
|
|
5,219 |
|
|
|
4,381 |
|
|
|
3,681 |
|
Selling, general, and administrative |
|
|
7,006 |
|
|
|
7,314 |
|
|
|
7,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
$ |
22,756 |
|
|
$ |
22,328 |
|
|
$ |
20,066 |
|
|
|
|
|
|
|
|
|
|
|
F-20
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Goodwill and Other Intangibles
The Artelis acquisition was recorded under the purchase method of accounting and, accordingly,
Artelis results of operations are included in the Companys financial statements from the date of
acquisition.
The purchase consideration was allocated on a preliminary basis as summarized below (in thousands).
|
|
|
|
|
Identified intangible assets |
|
$ |
10,028 |
|
Net liabilities acquired |
|
|
(1,770 |
) |
Goodwill |
|
|
13,566 |
|
|
|
|
|
Purchase price, net of cash acquired |
|
$ |
21,824 |
|
|
|
|
|
The excess of the purchase price over the estimated fair value of identifiable net assets acquired
has been recorded as goodwill. The identified intangible assets identified were patents of $9.3
million and a trademark of $0.7 million. Patents are being amortized over 15 years while the
trademark has been assigned an indefinite life. Goodwill acquired is not deductible for income tax
purposes.
In 2008, ATMI, through its wholly-owned subsidiary in Belgium, entered into an asset purchase
agreement with Artelis, to purchase certain disposable bioreactor and mixing assets for use in the
biotechnology and pharmaceutical industries for approximately $5.4 million, including direct
acquisition costs. ATMI recognized $5.1 million of identified intangible assets in the acquisition,
which are being amortized over periods between 3 and 10 years. As a result of these asset
purchases, we recognized a $1.1 million gain representing our after-tax proportionate share of
Arteliss gains on the sale of assets. This gain is included in our consolidated statements of
operations under the caption, Other income (expense), net.
Changes in carrying amounts of goodwill and other intangibles for the years ended December 31, 2010
and 2009, respectively, were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents & |
|
|
|
|
|
|
Total Other |
|
|
|
Goodwill |
|
|
Trademarks |
|
|
Other |
|
|
Intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
33,355 |
|
|
$ |
25,226 |
|
|
$ |
1,976 |
|
|
$ |
27,202 |
|
Amortization expense |
|
|
|
|
|
|
(3,604 |
) |
|
|
(867 |
) |
|
|
(4,471 |
) |
Other, including foreign currency
translation (1) |
|
|
39 |
|
|
|
138 |
|
|
|
333 |
|
|
|
471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
33,394 |
|
|
$ |
21,760 |
|
|
$ |
1,442 |
|
|
$ |
23,202 |
|
Acquisitions |
|
|
13,566 |
|
|
|
10,028 |
|
|
|
|
|
|
|
10,028 |
|
Amortization expense |
|
|
|
|
|
|
(3,502 |
) |
|
|
(460 |
) |
|
|
(3,962 |
) |
Other, including foreign currency translation |
|
|
21 |
|
|
|
(360 |
) |
|
|
40 |
|
|
|
(320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
46,981 |
|
|
$ |
27,926 |
|
|
$ |
1,022 |
|
|
$ |
28,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $0.4 million of costs incurred in 2009 related to the asset purchase agreement with Artelis. |
F-21
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Goodwill and other intangibles balances at December 31, 2010 and 2009 were (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents & |
|
|
|
|
|
|
Total Other |
|
|
|
Goodwill |
|
|
Trademarks |
|
|
Other |
|
|
Intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount as of December 31, 2009 |
|
$ |
33,394 |
|
|
$ |
40,490 |
|
|
$ |
7,003 |
|
|
$ |
47,493 |
|
Accumulated amortization |
|
|
|
|
|
|
(18,730 |
) |
|
|
(5,561 |
) |
|
|
(24,291 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
33,394 |
|
|
$ |
21,760 |
|
|
$ |
1,442 |
|
|
$ |
23,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross amount as of December 31, 2010 |
|
$ |
46,981 |
|
|
$ |
49,869 |
|
|
$ |
1,396 |
|
|
$ |
51,265 |
|
Accumulated amortization |
|
|
|
|
|
|
(21,943 |
) |
|
|
(374 |
) |
|
|
(22,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
46,981 |
|
|
$ |
27,926 |
|
|
$ |
1,022 |
|
|
$ |
28,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully amortized intangibles, which are no longer in use, of approximately $5.9 million were written
off in the year ended December 31, 2010. Of these amounts, $5.6 million related to other
intangibles and $0.3 million related to patents and trademarks.
This table shows amounts recorded in the consolidated statements of operations related to
amortization expense for intangibles (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Cost of revenues |
|
$ |
313 |
|
|
$ |
296 |
|
|
$ |
133 |
|
Selling, general, and administrative |
|
|
3,649 |
|
|
|
4,175 |
|
|
|
3,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization |
|
$ |
3,962 |
|
|
$ |
4,471 |
|
|
$ |
4,075 |
|
|
|
|
|
|
|
|
|
|
|
The approximate amortization expense expected to be recognized related to intangible assets is
(in thousands):
|
|
|
|
|
Year |
|
Amount |
|
2011 |
|
$ |
3,591 |
|
2012 |
|
|
3,570 |
|
2013 |
|
|
3,570 |
|
2014 |
|
|
3,570 |
|
2015 |
|
|
3,056 |
|
Thereafter |
|
|
11,591 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
28,948 |
|
|
|
|
|
8. Other Non-Current Assets
In 2007, we entered into a purchase agreement with Intermolecular, Inc. (Intermolecular), an
entity in which, as of December 31, 2010, we own a $13.2 million minority equity stake (accounted
for at cost). As part of the initial agreement, we purchased HPD capabilities from Intermolecular,
which expanded upon an existing alliance agreement. We have since purchased additional HPD
capabilities (including tool sets), as well as services related to the use of these tools,
including the use of dedicated research personnel. In December 2007, we made a $10.0 million
royalty prepayment to Intermolecular, which is being applied to guaranteed royalties associated
with products developed using the HPD capabilities.
In 2010, we expensed $2.0 million of prepaid royalties and we expect to expense $5.0 million in
2011. The 2011 amount is included in the consolidated balance sheets under the caption, Other
current assets. The remaining
portion of the prepaid royalties, $1.9 million and the value of a warrant we currently possess of
$0.6 million, are both included in the consolidated balance sheets under the caption Other
non-current assets.
F-22
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the third quarter of 2010, we extended the contract term of our existing commitment with
Intermolecular to purchase R&D services. The extension maintains our current R&D infrastructure
and expense structures over the next two years. The extension resulted in an incremental
commitment to cash payments of $5.2 million, $10.2 million and $5.0 million in fiscal years 2010,
2011 and 2012, respectively.
9. Leases
The Company leases office and manufacturing facilities, and certain manufacturing equipment under
several operating leases expiring between 2011 and 2034. Rental expense was $3.4 million, $4.3
million, and $3.6 million for the years ended December 31, 2010, 2009 and 2008, respectively.
Below is a schedule of future minimum lease payments for operating leases as of December 31, 2010
(in thousands):
|
|
|
|
|
|
|
Operating |
|
|
|
Leases |
|
2011 |
|
$ |
3,939 |
|
2012 |
|
|
2,185 |
|
2013 |
|
|
1,466 |
|
2014 |
|
|
984 |
|
2015 |
|
|
925 |
|
Thereafter |
|
|
3,655 |
|
|
|
|
|
Total minimum lease payments |
|
$ |
13,154 |
|
|
|
|
|
We lease two facilities in Danbury, CT. One facility houses our research and development
activities and certain of our microelectronics manufacturing capabilities, and contains
approximately 73,000 square feet of space. In December 2010 we exercised a renewal option for the
period January 1, 2012 to December 31, 2016. For the period January 1, 2011 to December 31, 2011,
the monthly base rent is $42,094. For the period January 1, 2012 to December 31, 2016, the monthly
base rent is $47,500. There is one additional five-year renewal period available to ATMI under this
lease. We have agreed to certain restoration obligations associated with this facility, which we
are accounting for as an asset retirement obligation (ARO), associated with the leasehold
improvements made to this facility. The lease required that we repair the roof at the termination
of the lease. However, due to the maintenance costs associated with the aging roof, we decided to
replace the roof in 2010. As such, we reduced the ARO by approximately $0.4 million of costs
incurred to date and the revised discounted fair value of the ARO is $2.7 million.
The other facility in Danbury, CT is our headquarters, and contains approximately 31,000 square
feet of space. In October 2010, we exercised a renewal option for the period January 1, 2012 to
December 31, 2016. For the period January 1, 2011 to December 31, 2016, the monthly base rent is
$17,606. There is one additional five-year renewal period available to ATMI under this lease.
We lease a facility in Bloomington, MN where we manufacture high-purity materials packaging and
dispensing systems, within our microelectronics and life sciences product lines. This facility
contains approximately 68,000 square feet of space. We entered into an amendment of this lease on
September 23, 2008, which extended the lease term to August 31, 2013. For the period January 1,
2011 to August 31, 2013, the monthly base rent is $26,706. There are two successive three-year
renewal periods available to ATMI under this lease. We have agreed to certain restoration
obligations associated with this facility, which we are accounting for as an ARO, associated with
the leasehold improvements made to this facility. The discounted fair value of the ARO is $0.3
million.
F-23
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in the carrying amounts of the Companys AROs at December 31, 2010 are shown below (in
thousands):
|
|
|
|
|
Balance as of December 31, 2009 |
|
$ |
3,751 |
|
|
|
|
|
|
Liabilities incurred |
|
|
87 |
|
Liabilities settled |
|
|
(408 |
) |
Accretion expense |
|
|
76 |
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010 |
|
$ |
3,506 |
|
|
|
|
|
The ARO liability is included in the consolidated balance sheets under the caption, Other
non-current liabilities.
10. Income Taxes
Pre-tax income (loss) from continuing operations was taxed in these jurisdictions (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
32,644 |
|
|
$ |
(20,784 |
) |
|
$ |
28,830 |
|
Foreign |
|
|
17,983 |
|
|
|
7,128 |
|
|
|
11,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax income (loss) |
|
$ |
50,627 |
|
|
$ |
(13,656 |
) |
|
$ |
40,146 |
|
|
|
|
|
|
|
|
|
|
|
Significant components of the provision (benefit) for income taxes for the year ended are (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
4,144 |
|
|
$ |
(7,317 |
) |
|
$ |
1,919 |
|
State |
|
|
74 |
|
|
|
79 |
|
|
|
809 |
|
Foreign |
|
|
2,316 |
|
|
|
2,154 |
|
|
|
1,602 |
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
6,534 |
|
|
|
(5,084 |
) |
|
|
4,330 |
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
4,174 |
|
|
|
(117 |
) |
|
|
3,314 |
|
State |
|
|
739 |
|
|
|
(392 |
) |
|
|
(134 |
) |
Foreign |
|
|
(326 |
) |
|
|
(1,403 |
) |
|
|
(691 |
) |
|
|
|
|
|
|
|
|
|
|
Total deferred |
|
|
4,587 |
|
|
|
(1,912 |
) |
|
|
2,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,121 |
|
|
$ |
(6,996 |
) |
|
$ |
6,819 |
|
|
|
|
|
|
|
|
|
|
|
F-24
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of the Companys deferred tax assets and liabilities are (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Accrued liabilities |
|
$ |
3,647 |
|
|
$ |
5,619 |
|
Inventory reserves |
|
|
1,699 |
|
|
|
1,866 |
|
Net operating loss and tax credit carryforwards |
|
|
10,758 |
|
|
|
7,383 |
|
Equity-based compensation |
|
|
7,890 |
|
|
|
6,850 |
|
Other, net |
|
|
560 |
|
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
24,554 |
|
|
|
22,147 |
|
Valuation allowance |
|
|
(3,178 |
) |
|
|
(579 |
) |
|
|
|
|
|
|
|
|
|
|
21,376 |
|
|
|
21,568 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(21,835 |
) |
|
|
(17,475 |
) |
Unrealized gain on marketable securities |
|
|
(651 |
) |
|
|
(858 |
) |
Other, net |
|
|
(237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,723 |
) |
|
|
(18,333 |
) |
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
(1,347 |
) |
|
$ |
3,235 |
|
|
|
|
|
|
|
|
As of December 31, 2009, the Company changed the categorization of $0.6 million of
unrecognized tax benefits from Other non-current liabilities to Deferred income taxes,
non-current on the consolidated balance sheet.
The valuation allowance relates to the realizability of certain U.S. state and foreign net
operating losses, certain U.S. state and foreign tax credits, and U.S. capital losses.
As of December 31, 2010, the Company had the following deferred tax assets related to net operating
loss (NOLs) and tax credit carryforwards (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration |
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
|
-Capital Loss |
|
$ |
1,262 |
|
|
2015 |
|
|
|
|
|
|
|
|
$ |
1,262 |
|
|
|
|
|
|
|
|
|
State |
|
|
|
|
|
|
-NOLs |
|
|
513 |
|
|
2014-2031 |
-Credits |
|
|
857 |
|
|
2011-2025 |
-Credits |
|
|
589 |
|
|
None |
|
|
|
|
|
|
|
|
$ |
1,959 |
|
|
|
|
|
|
|
|
|
Foreign |
|
|
|
|
|
|
- NOLs |
|
|
6,112 |
|
|
None |
- Credits |
|
|
1,425 |
|
|
2012-2013 |
|
|
|
|
|
|
|
|
$ |
7,537 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,758 |
|
|
|
|
|
|
|
|
|
F-25
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The reconciliation of income tax expense (benefit) from operations computed at the U.S.
federal statutory tax rate to the Companys tax expense (benefit) is (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
U.S. statutory rate |
|
$ |
17,719 |
|
|
$ |
(4,779 |
) |
|
$ |
14,052 |
|
State income taxes |
|
|
529 |
|
|
|
(196 |
) |
|
|
439 |
|
Foreign income taxes |
|
|
(8,322 |
) |
|
|
(2,375 |
) |
|
|
(2,039 |
) |
Tax exempt income |
|
|
(112 |
) |
|
|
(213 |
) |
|
|
(705 |
) |
Change in valuation allowance
of deferred tax assets |
|
|
1,854 |
|
|
|
133 |
|
|
|
(24 |
) |
Adjustment to tax liabilities |
|
|
(213 |
) |
|
|
457 |
|
|
|
(2,371 |
) |
Research & development credits |
|
|
(846 |
) |
|
|
(284 |
) |
|
|
(2,442 |
) |
Other, net |
|
|
512 |
|
|
|
261 |
|
|
|
(91 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,121 |
|
|
$ |
(6,996 |
) |
|
$ |
6,819 |
|
|
|
|
|
|
|
|
|
|
|
ATMI has not provided for U.S. federal income and foreign withholding taxes on approximately
$71.2 million of undistributed earnings from non-U.S. operations as of December 31, 2010, because
such earnings are intended to be reinvested indefinitely outside of the United States. These
earnings could become subject to additional tax if they are remitted as dividends, loaned to ATMI,
or upon sale of subsidiary stock. It is not practicable to estimate the amount or timing of the
additional tax, if any, that eventually might be paid on the foreign earnings.
South Korea has granted the Company an income tax exemption that expires in 2014, including the
last two years at 50 percent of the exemption. The exemption applies only to income related to one
of the Companys product lines. The effect of the tax exemption was to reduce income tax expense
by $2.1 million, $1.3 million, and $1.2 million for the years ended December 31, 2010, 2009, and
2008.
At December 31, 2010, ATMI had $5.6 million of unrecognized tax benefits, which, if recognized,
would favorably affect the effective income tax rate in future periods. $0.7 million of this amount
is included in deferred taxes, and the balance of $4.9 million is included in the caption Other
non-current liabilities on the consolidated balance sheets, together with $0.7 million of accrued
interest (net) on tax reserves and $0 accrued for penalties. In 2009, we had $6.2 million of
unrecognized tax benefits, which, if recognized, would have favorably affected the effective income
tax rate in future periods.
The reconciliation of the unrecognized tax benefits (exclusive of interest) at the beginning and
end of 2010 is (in thousands):
|
|
|
|
|
Beginning Balance January 1, 2010 |
|
$ |
6,182 |
|
Increases from prior period positions |
|
|
241 |
|
Decreases from prior period positions |
|
|
(586 |
) |
Increases from current period positions |
|
|
1,293 |
|
Decreases from current period positions |
|
|
|
|
Decreases related to settlements with taxing authorities |
|
|
(1,130 |
) |
Decreases from lapse of statute of limitations |
|
|
(409 |
) |
|
|
|
|
Ending Balance December 31, 2010 |
|
$ |
5,591 |
|
|
|
|
|
It is reasonably possible that in the next 12 months, because of changes in facts and
circumstances, the unrecognized tax benefits for tax positions taken related to previously filed
tax returns may decrease. The range of possible decrease is $0.1 million to $0.7 million. In
2010, the Company finalized tax audits of our Taiwanese subsidiary for tax year 2006, and of our
German subsidiary for tax years 2004 through 2007; the settled adjustments were not significant to
ATMIs results of operations. Also in 2010, the Internal Revenue Service initiated a U.S. tax
audit of tax years 2008 and 2009.
F-26
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Defined Contribution Plan
The Company maintains a defined contribution plan (401(k) Plan) covering substantially all of its
U.S. employees that is subject to the provisions of the Employee Retirement Income Security Act of
1974. The Companys matching contributions are discretionary by plan year and were approximately
$1.5 million, $1.1 million, and $1.8 million for the years ended December 31, 2010, 2009 and 2008,
respectively. On June 5, 2009, the Company discontinued the matching of contributions, but the
Company match was reinstated on October 9, 2009. The Plan provides for discretionary matching
contributions of 100 percent of the first 3 percent of each participants eligible compensation
plus 50 percent on the next 2 percent of each participants eligible compensation, up to statutory
limitations. There is no matching contribution above 5 percent of each participants eligible
compensation.
12. Stockholders Equity
This table shows the effect of pre-tax compensation cost arising from equity-based payment
arrangements recognized in the consolidated statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
357 |
|
|
$ |
315 |
|
|
$ |
339 |
|
Research and development |
|
|
866 |
|
|
|
523 |
|
|
|
530 |
|
Selling, general, and administrative |
|
|
6,470 |
|
|
|
4,902 |
|
|
|
5,831 |
|
|
|
|
|
|
|
|
|
|
|
Total equity-based compensation expense |
|
|
7,693 |
|
|
|
5,740 |
|
|
|
6,700 |
|
|
|
|
|
|
|
|
|
|
|
No equity-based compensation cost was capitalized.
Summary of Plans
We currently have three equity-based compensation plans which provide for the granting of up to
7,000,000 shares of common stock pursuant to nonqualified stock options, incentive stock options
(ISOs), stock appreciation rights and restricted stock awards to employees, directors and
consultants of the Company. Stock options typically vest over periods ranging from one to four
years with a maximum term of ten years. Restricted stock awards typically vest over periods
ranging from three to five years. Shares issued as a result of stock option exercises are
primarily settled by the issuance of new shares.
F-27
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
This table shows the number of shares approved by shareholders for each plan and the number of
shares that remain available for equity awards at December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of |
|
|
|
# of Shares |
|
|
Shares |
|
Stock Plan |
|
Approved |
|
|
Available |
|
|
|
|
|
|
|
|
|
|
2003 Stock Plan (1) |
|
|
3,000 |
|
|
|
412 |
|
2010 Stock Plan (1) |
|
|
3,000 |
|
|
|
3,000 |
|
Employee Stock Purchase Plan (2) |
|
|
1,000 |
|
|
|
257 |
|
|
|
|
|
|
|
|
Totals |
|
|
7,000 |
|
|
|
3,669 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Exercise prices for ISOs and non-qualified stock options granted under this plan may
not be less than 100 percent of the fair market value for the Companys common stock on the
date of grant. |
|
(2) |
|
Employees may purchase shares at 95 percent of the closing price on the day previous
to the last day of each six-month offering period. This plan is not considered to be
compensatory. |
Fair Value
The Company uses the Black-Scholes-Merton options-pricing model to determine the fair value of
stock options under ASC 718 Compensation Stock Compensation. Management is required to make
certain assumptions with respect to selected model inputs, including anticipated changes in the
underlying stock price (i.e., expected volatility) and option exercise activity (i.e., expected
term). For awards granted subsequent to January 1, 2006, expected volatility is based on the
historical volatility of ATMI common stock for a period shorter than the expected term of the
options. We have excluded the historical volatility prior to the public announcement regarding the
sale of our non-core businesses in 2004, because those businesses that were sold represented a
significant portion of ATMIs consolidated business and were subject to considerable cyclicality
associated with the semiconductor equipment industry, which drove increased volatility in ATMIs
stock price. The expected term of options granted is derived using historical exercise patterns
which represent the period of time that options granted are expected to be outstanding. The
risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a
period commensurate with the estimated expected term. In accordance with ASC 718, in the
determination of equity-based compensation cost, the Company estimates the total number of
instruments that will be forfeited as a result of a failure to provide the requisite service to
earn the award.
The weighted-average fair value of options granted during the years ended December 31, 2010, 2009
and 2008 was $8.62, $6.44 and $13.48, respectively, based on the Black-Scholes-Merton
options-pricing model. These weighted-average assumptions were used for grants in the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Stock option grants: |
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
3.00 |
% |
|
|
2.15 |
% |
|
|
3.61 |
% |
Expected term, in years |
|
|
7.40 |
|
|
|
7.20 |
|
|
|
6.70 |
|
Expected volatility |
|
|
44.0 |
% |
|
|
41.4 |
% |
|
|
36.0 |
% |
Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
F-28
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company uses historical data to estimate forfeitures of awards from employee terminations
in order to estimate compensation cost for awards expected to vest. In addition, we separate
employees into groups that have similar characteristics for purposes of making forfeiture
estimates.
Stock Option and Restricted Stock Activity
This table shows the option activity under the plans as of December 31, 2010 and changes during the
year then ended (options are expressed in thousands; averages are calculated on a weighted basis;
life in years; intrinsic value expressed in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Average |
|
|
Average |
|
|
Aggregate |
|
|
|
of |
|
|
Exercise |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
Life |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
2,196 |
|
|
$ |
24.68 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
217 |
|
|
$ |
16.86 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(91 |
) |
|
$ |
17.76 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(391 |
) |
|
$ |
26.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010 |
|
|
1,931 |
|
|
$ |
21.87 |
|
|
|
4.6 |
|
|
$ |
2,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2010 |
|
|
1,489 |
|
|
$ |
22.96 |
|
|
|
3.5 |
|
|
$ |
1,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value represents the difference between the Companys closing stock
price of $19.94 as of December 31, 2010 and the exercise price of the dilutive options at that
date, multiplied by the number of dilutive options outstanding at that date. The total intrinsic
value of stock options exercised during the years ended December 31, 2010, 2009 and 2008 was $0.2,
$0 million, and $0.4 million, respectively. The total fair value of options which vested during
the years ended December 31, 2010, 2009 and 2008 was $1.7 million (189,000 shares), $2.1 million
(167,000 shares), and $4.4 million (338,000 shares) respectively.
An income tax deficiency was recognized in additional paid-in capital from equity-based
compensation totaling $0.1 million and $0.6 million for the years ended December 31, 2010 and
December 31, 2009, respectively, and the income tax benefit recognized in additional paid-in
capital from equity-based compensation totaled $0.3 million for the year ended December 31, 2008.
An income tax deficiency was recognized in income tax expense from equity-based compensation
totaling $0.4 million for the year ended December 31, 2010.
This table shows restricted stock activity as of December 31, 2010 and changes during the year then
ended (shares are expressed in thousands; averages are calculated on a weighted basis):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Number |
|
|
Grant |
|
|
|
of |
|
|
Date Fair |
|
|
|
Shares |
|
|
Value |
|
|
Nonvested at December 31, 2009 |
|
|
1,117 |
|
|
$ |
20.99 |
|
Granted |
|
|
424 |
|
|
$ |
17.15 |
|
Vested |
|
|
(177 |
) |
|
$ |
28.14 |
|
Forfeited |
|
|
(180 |
) |
|
$ |
16.10 |
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2010 |
|
|
1,184 |
|
|
$ |
19.28 |
|
|
|
|
|
|
|
|
|
F-29
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total fair value of restricted stock which vested during the years ended December 31,
2010, 2009 and 2008 was $5.0 million, $3.8 million and $3.3 million, respectively.
As of December 31, 2010, $2.2 million of unrecognized compensation cost related to non-vested stock
options is expected to be recognized over a weighted-average period of approximately 1.6 years. As
of December 31, 2010, $9.5 million of unrecognized compensation cost related to restricted stock is
expected to be recognized over a weighted-average period of approximately 2.0 years.
Earnings Per Share
This table shows the computation of basic and diluted earnings per share (in thousands, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
39,506 |
|
|
|
(6,660 |
) |
|
$ |
33,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings (loss) per share
weighted average shares |
|
|
31,413 |
|
|
|
31,398 |
|
|
|
31,447 |
|
Dilutive effect of employee stock options |
|
|
36 |
|
|
|
|
|
|
|
279 |
|
Dilutive effect of restricted stock |
|
|
446 |
|
|
|
|
|
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings (loss) per
common share weighted average shares |
|
|
31,895 |
|
|
|
31,398 |
|
|
|
32,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share-basic |
|
$ |
1.26 |
|
|
$ |
(0.21 |
) |
|
$ |
1.06 |
|
Earnings (loss) per share-diluted |
|
$ |
1.24 |
|
|
$ |
(0.21 |
) |
|
$ |
1.04 |
|
This table shows the potential common shares excluded from the calculation of weighted-average
shares outstanding because their effect was considered to be antidilutive (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive shares |
|
|
1,450 |
|
|
|
1,934 |
|
|
|
1,484 |
|
The Company has never declared or paid cash dividends on its capital stock.
In August 2010, the Companys Board of Directors approved a share repurchase program for up to
$50.0 million of ATMI common stock. The program, which has no expiration date, does not require
the Company to purchase any specific number or amount of shares and may be suspended or reinstated
at any time at the Companys discretion and without notice. In October 2005, the Companys Board
of Directors approved a share repurchase program for up to $75.0 million of ATMI common stock and
in August 2006, the Companys Board of Directors approved a second share repurchase program for an
additional $150.0 million (collectively, the Repurchase Programs). The 2005 and 2006 programs
were completed on March 7, 2008. Share repurchases were made from time to time in open market
transactions at prevailing market prices or in privately negotiated transactions. Management
determined the timing and amount of purchases under the Repurchase Programs based upon market
conditions or other factors.
Under the Repurchase Programs, the Company purchased a total of 8,001,000 shares of its common
stock at an average price of $28.37 per share.
F-30
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) |
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
on |
|
|
Gain (Loss) |
|
|
|
|
|
|
Currency |
|
|
Available- |
|
|
on |
|
|
|
|
|
|
Translation |
|
|
for-Sale |
|
|
Derivative |
|
|
|
|
|
|
Adjustments |
|
|
Securities |
|
|
Instruments |
|
|
Total |
|
Balance at December 31, 2007 |
|
$ |
6,790 |
|
|
$ |
2,573 |
|
|
$ |
78 |
|
|
$ |
9,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment related to marketable
securities in unrealized gain position at prior period
end, net of $925 tax benefit (1) |
|
|
|
|
|
|
(1,574 |
) |
|
|
|
|
|
|
(1,574 |
) |
Change in fair value of available-for-sale securities,
net of deferred income tax of $109 |
|
|
|
|
|
|
(1,598 |
) |
|
|
|
|
|
|
(1,598 |
) |
Change in fair value of derivative financial instruments,
net of deferred income tax of $938 |
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
(78 |
) |
Cumulative translation adjustment |
|
|
(5,925 |
) |
|
|
|
|
|
|
|
|
|
|
(5,925 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
865 |
|
|
$ |
(599 |
) |
|
$ |
0 |
|
|
$ |
266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of adoption of new accounting standard |
|
|
|
|
|
|
(1,287 |
) |
|
|
|
|
|
|
(1,287 |
) |
Reclassification adjustment related to marketable
securities in unrealized gain position at prior period
end, net of $32 tax provision (1) |
|
|
|
|
|
|
(55 |
) |
|
|
|
|
|
|
(55 |
) |
Change in fair value of available-for-sale securities,
net of deferred income tax of $1,139 |
|
|
|
|
|
|
1,940 |
|
|
|
|
|
|
|
1,940 |
|
Cumulative translation adjustment |
|
|
2,540 |
|
|
|
|
|
|
|
|
|
|
|
2,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
3,405 |
|
|
$ |
(1 |
) |
|
|
|
|
|
$ |
3,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment related to marketable
securities in net unrealized gain position at prior period
end, net of $282 tax provision (1) |
|
|
|
|
|
|
(481 |
) |
|
|
|
|
|
|
(481 |
) |
Change in fair value of available-for-sale securities,
net of deferred income tax of $201 |
|
|
|
|
|
|
343 |
|
|
|
|
|
|
|
343 |
|
Cumulative translation adjustment |
|
|
762 |
|
|
|
|
|
|
|
|
|
|
|
762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
4,167 |
|
|
$ |
(139 |
) |
|
|
|
|
|
$ |
4,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Determined based on the specific identification method |
F-31
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Commitments, Contingencies, and Other
ATMI is, from time to time involved in legal actions, governmental audits, and proceedings relating
to various matters incidental to its business including contract disputes, intellectual property
disputes, product liability claims, employment matters, export and trade matters, and environmental
claims. While the outcome of such matters cannot be predicted with certainty, in the opinion of
management, after reviewing such matters and consulting with ATMIs counsel and considering any
applicable insurance or indemnifications, any liability which may ultimately be incurred is not
expected to materially affect ATMIs consolidated financial position, cash flows or results of
operations.
ATMI has entered into a pledge agreement with Anji Microelectronics Co., Ltd. (Anji) for the
issuance of a financial guarantee up to $4.0 million in order to assist Anji in securing bank
financing. In January 2011, we reduced our guarantee to a maximum amount of $2.5 million, which is
to expire no later than December 31, 2011. ATMIs guarantee is secured by Anjis assets and
additional equity interests in Anjis operating subsidiaries. We believe that, based on
independent credit rating agency research, and our knowledge of their business, Anji continues to
be an acceptable credit risk. The fair value of the financial guarantee is $0.2 million at
December 31, 2010.
In the third quarter of 2010, we extended the contract term of an existing commitment with a
strategic alliance partner to purchase R&D services. The extension maintains our current R&D
infrastructure and expense structures over the next two years. The extension resulted in an
incremental commitment to cash payments of $5.2 million, $10.2 million and $5.0 million in fiscal
years 2010, 2011 and 2012, respectively.
As part of the Artelis acquisition, we recognized a liability for the fair value of contingent
payments tied to future revenue performance for the fiscal years 2012 through 2014 of $8.4 million.
The contingent payment tied to future revenue performance has a range of possible outcomes from
zero to $23.3 million.
ATMI currently has self-insurance limits for U.S. employee medical claims. The medical plan for
U.S. employees has a stop-loss of $0.1 million per individual occurrence and an annual aggregate
stop-loss of $4.8 million.
Other
Approximately 8 percent of the Companys employees are covered by collective bargaining agreements
that will expire in 2011. All of the employees covered by these agreements are based in Belgium.
The net assets of the Companys Belgian subsidiary represent approximately 7 percent of the
Companys consolidated net assets.
15. Segments
ATMI is organized along functional lines of responsibility, whereby each member of the Companys
executive team has global responsibility for each respective functional area, such as supply chain
operations, sales, marketing, finance, and research and development. The executive team is the
chief operating decision maker of ATMI. Discrete financial information is only prepared at the
product-line level for revenues and certain direct costs. Functional results are reviewed at the
consolidated level. ATMIs operations comprise one operating segment. Our organizational
structure has been consistent from 2009 to 2010.
ATMI derives virtually all its revenues from providing materials and packaging products and related
integrated process solutions to microelectronics and life sciences manufacturers. ATMIs products
are consumed or used in the front-end manufacturing process. They span many different technology
applications at various stages of maturity and in many cases are inter-related in their application
to a customers process.
F-32
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues from external customers, by product type, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
|
(In thousands) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Microelectronics |
|
$ |
336,519 |
|
|
$ |
230,707 |
|
|
$ |
310,141 |
|
Life sciences |
|
$ |
30,737 |
|
|
$ |
23,997 |
|
|
$ |
28,922 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
367,256 |
|
|
$ |
254,704 |
|
|
$ |
339,063 |
|
|
|
|
|
|
|
|
|
|
|
16. Geographic Data
The Companys geographic data for the years ended December 31, 2010, 2009 and 2008 are (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Europe and |
|
|
|
|
(In thousands) |
|
U.S. |
|
|
Taiwan |
|
|
Japan |
|
|
South Korea |
|
|
Pacific Rim |
|
|
Belgium |
|
|
Other |
|
|
Total |
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
64,824 |
|
|
$ |
89,415 |
|
|
$ |
49,539 |
|
|
$ |
67,743 |
|
|
$ |
56,377 |
|
|
$ |
2,050 |
|
|
$ |
37,308 |
|
|
$ |
367,256 |
|
Long-lived assets |
|
|
159,267 |
|
|
|
7,581 |
|
|
|
8,473 |
|
|
|
6,118 |
|
|
|
285 |
|
|
|
41,013 |
|
|
|
326 |
|
|
|
223,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
50,347 |
|
|
$ |
55,454 |
|
|
$ |
36,482 |
|
|
$ |
51,555 |
|
|
$ |
31,347 |
|
|
$ |
2,759 |
|
|
$ |
26,760 |
|
|
$ |
254,704 |
|
Long-lived assets |
|
|
168,678 |
|
|
|
8,513 |
|
|
|
7,354 |
|
|
|
3,274 |
|
|
|
265 |
|
|
|
24,216 |
|
|
|
392 |
|
|
|
212,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
76,949 |
|
|
$ |
79,547 |
|
|
$ |
43,068 |
|
|
$ |
46,909 |
|
|
$ |
48,388 |
|
|
$ |
2,900 |
|
|
$ |
41,302 |
|
|
$ |
339,063 |
|
Long-lived assets |
|
|
185,022 |
|
|
|
9,386 |
|
|
|
7,644 |
|
|
|
3,476 |
|
|
|
239 |
|
|
|
23,696 |
|
|
|
407 |
|
|
|
229,870 |
|
Revenues are attributed to countries based on the location of the customer. Long-lived assets
are located in the respective geographic regions, as shown above. Other than Taiwan, Japan,
Belgium, and South Korea, no one specific country within the Pacific Rim, Europe, South America,
and other regions accounted for greater than 10 percent of consolidated revenues and long-lived
assets in 2010, 2009 and 2008.
F-33
ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Quarterly Results of Operations
(Unaudited)
Summarized quarterly results of operations data is as follows (in thousands, except per share
amounts):
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Quarter |
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First |
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Second |
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Third |
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Fourth |
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2010 |
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Revenues |
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$ |
85,311 |
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$ |
90,996 |
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$ |
94,960 |
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$ |
95,989 |
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Gross profit |
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41,689 |
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|
43,555 |
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|
45,661 |
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|
45,103 |
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Operating income |
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11,994 |
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|
10,644 |
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|
10,688 |
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|
8,612 |
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Net income |
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$ |
8,666 |
(a) |
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$ |
7,598 |
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$ |
9,477 |
(b) |
|
$ |
13,765 |
(c) |
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Basic income per common share: |
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Earnings per common share |
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$ |
0.27 |
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$ |
0.24 |
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$ |
0.30 |
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|
$ |
0.44 |
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Diluted income per common share: |
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Earnings per common share |
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$ |
0.27 |
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$ |
0.24 |
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$ |
0.30 |
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$ |
0.43 |
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2009 |
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Revenues |
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$ |
37,362 |
|
|
$ |
60,095 |
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|
$ |
72,610 |
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|
$ |
84,637 |
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Gross profit |
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|
6,931 |
(d) |
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|
23,807 |
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|
33,038 |
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|
38,408 |
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Operating income (loss) |
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|
(26,960 |
)(e) |
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|
(3,191 |
) |
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|
8,038 |
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|
10,776 |
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Net income (loss) |
|
$ |
(18,424 |
)(f) |
|
$ |
(1,744 |
) |
|
$ |
6,539 |
(g) |
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$ |
6,969 |
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Basic income (loss) per common share: |
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Earnings (loss) per common share |
|
$ |
(0.59 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.21 |
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$ |
0.22 |
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Diluted income (loss) per common share: |
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Earnings (loss) per common share |
|
$ |
(0.59 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.21 |
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$ |
0.22 |
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(a) |
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Includes a $0.5 million gain from the sale of a marketable security and a $0.5 million tax
benefit (including interest) recognized to reverse previously established reserves for
uncertain tax positions. |
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(b) |
|
Includes a $2.5 million pre-tax gain on sale of shares of one of our equity-method investees. |
|
(c) |
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Includes a $5.9 million fair value remeasurement gain related to acquisition of Artelis, a
$1.2 million tax benefit (including interest) recognized to reverse previously established
reserves for uncertain tax positions, a $2.1 tax benefit related to a European dividend, and a
$1.9 million charge related to changes in valuation allowances. |
|
(d) |
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Includes $1.1 million charge for incremental excess and obsolescence related to product
discontinuances and a general reserve to cover expected product shelf-life issues; and $2.9
million impairment charge in cost of revenues for long-lived assets written down to their
estimated fair values primarily related to the planned idling of manufacturing capacity of our
gas products. |
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(e) |
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Includes $1.5 million impairment charge for long-lived assets written down to their estimated
fair values related primarily to idled equipment used in our research and development efforts;
$1.5 million charge to increase our reserves for bad debt to cover exposures related to
customer bankruptcy filings and uncertainties of collections; and $1.8 million impairment
charge in selling, general and administrative expense for long-lived assets written down to
their estimated fair values primarily related to redundant enterprise management software. |
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(f) |
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Includes a $2.5 million impairment charge, primarily related to a write-down associated with
an auction-rate security. |
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(g) |
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Includes a $0.7 million charge related to statutes of limitations expirations. |
F-34
ATMI, Inc.
Schedule II Valuation and Qualifying Accounts
Three Years Ended December 31, 2010
(In thousands)
|
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Allowances for Doubtful Accounts and Sales Returns: |
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|
|
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Balance December 31, 2007 |
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$ |
670 |
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Provision charged to income |
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|
300 |
|
Doubtful accounts written off (net) |
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|
(9 |
) |
Other adjustments |
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|
(3 |
) |
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Balance December 31, 2008 |
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|
958 |
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Provision charged to income |
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|
1,381 |
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Doubtful accounts written off (net) |
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|
(68 |
) |
Other adjustments |
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|
16 |
|
|
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Balance December 31, 2009 |
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|
2,287 |
|
Provision charged to income |
|
|
(798 |
) |
Doubtful accounts written off (net) |
|
|
(799 |
) |
Other adjustments |
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|
93 |
|
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|
Balance December 31, 2010 |
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$ |
783 |
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Allowance for Excess and Obsolete Inventories: |
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|
|
|
|
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Balance December 31, 2007 |
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$ |
2,317 |
|
Provision charged to income |
|
|
1,544 |
|
Disposals of inventory written off |
|
|
(1,131 |
) |
Other adjustments |
|
|
(361 |
) |
|
|
|
|
Balance December 31, 2008 |
|
|
2,369 |
|
Provision charged to income |
|
|
2,093 |
|
Disposals of inventory written off |
|
|
(1,798 |
) |
Other adjustments |
|
|
(70 |
) |
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|
|
|
Balance December 31, 2009 |
|
|
2,594 |
|
Provision charged to income |
|
|
625 |
|
Disposals of inventory written off |
|
|
(648 |
) |
Other adjustments |
|
|
(196 |
) |
|
|
|
|
Balance December 31, 2010 |
|
$ |
2,375 |
|
|
|
|
|
|
Future Income Tax Benefits Valuation Allowance: |
|
|
|
|
|
|
|
|
|
Balance December 31, 2007 |
|
$ |
278 |
|
Additions charged to income tax expense |
|
|
52 |
|
Reductions credited to income tax expense |
|
|
(76 |
) |
Other adjustments |
|
|
192 |
|
|
|
|
|
Balance December 31, 2008 |
|
|
446 |
|
Additions charged to income tax expense |
|
|
147 |
|
Reductions credited to income tax expense |
|
|
(14 |
) |
|
|
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|
Balance December 31, 2009 |
|
|
579 |
|
Additions charged to income tax expense |
|
|
1,904 |
|
Reductions credited to income tax expense |
|
|
(50 |
) |
Other adjustments |
|
|
745 |
|
|
|
|
|
Balance December 31, 2010 |
|
$ |
3,178 |
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F-35