ATMI Atmi Inc. (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 1-16239

ATMI, Inc.

Delaware		06-1481060
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
7 Commerce Drive, Danbury, CT		06810
(Address of principal executive offices)		(Zip Code)

203-794-1100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		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 number of shares outstanding of the registrant’s common stock as of March 31, 2010 was 31,489,909.

 

 

ATMI, INC.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2010

TABLE OF CONTENTS

		Page
Part I — Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)			3
Consolidated Statements of Operations (unaudited)			4
Consolidated Statement of Stockholders’ Equity (unaudited)			5
Consolidated Statements of Cash Flows (unaudited)			6
Notes to Consolidated Interim Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			31
Part II — Other Information
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 5. Other Information			32
Item 6. Exhibits			33
Signatures			34
Exhibits			35
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

ATMI, Inc.

Consolidated Balance Sheets

(in thousands, except per share data)

		March 31,				December 31,
		2010				2009
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	48,840			$	64,738
Marketable securities, current portion			57,846				32,650
Accounts receivable, net of allowances of $2,269 and $2,287, respectively			42,511				44,184
Inventories, net			56,102				53,761
Income taxes receivable			10,844				10,844
Deferred income taxes			7,880				8,027
Prepaid expenses and other current assets			22,154				19,383
Total current assets			246,177				233,587
Property, plant, and equipment, net			120,393				124,609
Goodwill			33,410				33,394
Other intangibles, net			21,814				23,202
Marketable securities, non-current			16,881				10,590
Deferred income taxes, non-current			2,593				2,707
Other non-current assets			30,179				31,487
Total assets		$	471,447			$	459,576
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	16,191			$	14,788
Accrued liabilities			4,209				4,804
Accrued salaries and related benefits			5,093				4,480
Income taxes payable			4,286				1,800
Loans and notes payable, current			—				483
Other current liabilities			3,937				3,328
Total current liabilities			33,716				29,683
Deferred income taxes, non-current			6,335				6,916
Other non-current liabilities			10,964				11,487
Commitments and contingencies (Note 8)
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; 39,491 and 39,354 issued and 31,490 and 31,388 outstanding in 2010 and 2009, respectively			394				393
Additional paid-in capital			428,962				426,436
Treasury stock at cost (8,001 and 7,966 shares in 2010 and 2009, respectively)			(228,312	)			(227,670	)
Retained earnings			217,593				208,927
Accumulated other comprehensive income			1,795				3,404
Total stockholders’ equity			420,432				411,490
Total liabilities and stockholders’ equity		$	471,447			$	459,576

See accompanying notes.

ATMI, Inc.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

		Three Months Ended
		March 31,
		2010				2009
Revenues		$	85,311			$	37,362
Cost of revenues			43,622				30,431
Gross profit			41,689				6,931
Operating expenses:
Research and development			9,723				11,651
Selling, general and administrative			19,972				22,240
Total operating expenses			29,695				33,891
Operating income (loss)			11,994				(26,960	)
Interest income			206				465
Impairment of investments			—				(2,486	)
Other income (expense), net			34				(125	)
Income (loss) before income taxes			12,234				(29,106	)
Provision (benefit) for income taxes			3,568				(10,682	)
Net income (loss)		$	8,666			$	(18,424	)
Earnings (loss) per common share — basic		$	0.27			$	(0.59	)
Weighted average shares outstanding — basic			31,513				31,376
Earnings (loss) per common share — diluted		$	0.27			$	(0.59	)
Weighted average shares outstanding — diluted			32,024				31,376

See accompanying notes.

ATMI, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

																		Accumulated
						Additional												Other
		Common				Paid-in				Treasury				Retained				Comprehensive
		Stock				Capital				Stock				Earnings				Income				Total
Balance at December 31, 2009		$	393			$	426,436			$	(227,670	)		$	208,927			$	3,404			$	411,490
Purchase of 35 treasury shares			—				—				(642	)			—				—				(642	)
Equity based compensation			—				2,422				—				—				—				2,422
Income tax benefit from equity-based compensation			—				105				—				—				—				105
Other			1				(1	)			—				—				—				—
Net income			—				—				—				8,666				—				8,666
Reclassification adjustment related to marketable securities sold in net unrealized gain position, net of $280 tax provision			—				—				—				—				(476	)			(476	)
Change in fair value on available-for-sale securities, net of deferred income tax of $14			—				—				—				—				23				23
Cumulative translation adjustment			—				—				—				—				(1,156	)			(1,156	)
Comprehensive income			—				—				—				—				—				7,057
Balance at March 31, 2010		$	394			$	428,962			$	(228,312	)		$	217,593			$	1,795			$	420,432

See accompanying notes.

ATMI, Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

		Three Months Ended
		March 31,
		2010				2009
Operating activities
Net income (loss)		$	8,666			$	(18,424	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization			6,756				6,849
Provision for bad debt			—				1,500
Provision for inventory obsolescence			25				1,060
Deferred income taxes			(328	)			(3,629	)
Income tax benefit (provision) from share-based payment arrangements			386				(428	)
Equity-based compensation expense			2,422				2,027
Long-lived asset impairments			296				6,227
Loss from equity-method investments			346				232
Impairment on investments			—				2,486
Other			—				7
Changes in operating assets and liabilities:
Accounts receivable			1,500				15,641
Inventories			(2,611	)			262
Other assets			(2,098	)			(1,023	)
Accounts payable			1,510				(729	)
Accrued expenses			95				(760	)
Income taxes			2,468				(4,263	)
Other liabilities			112				432
Net cash provided by operating activities			19,545				7,467
Investing activities
Capital expenditures			(2,169	)			(2,524	)
Proceeds from the sale of property, plant & equipment			—				28
Purchases of marketable securities			(39,283	)			(14,548	)
Proceeds from sales or maturities of marketable securities			7,083				18,598
Other			(5	)			—
Net cash (used for) provided by investing activities			(34,374	)			1,554
Financing activities
Purchases of treasury stock			(642	)			(511	)
Credit line borrowings			1,724				3,872
Credit line repayments			(2,207	)			(4,802	)
Other			(17	)			(16	)
Net cash used for financing activities			(1,142	)			(1,457	)
Effects of exchange rate changes on cash and cash equivalents			73				347
Net increase (decrease) in cash and cash equivalents			(15,898	)			7,911
Cash and cash equivalents, beginning of period			64,738				54,626
Cash and cash equivalents, end of period		$	48,840			$	62,537

See accompanying notes.

Notes To Consolidated Interim Financial Statements
(unaudited)

1. Description of 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, 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. ATMI’s 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. ATMI’s 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.

2. Significant Accounting Policies and Other Information

Basis of Presentation

The accompanying consolidated interim financial statements of ATMI, Inc. for the quarters ended March 31, 2010 and 2009 are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation of the results for the interim periods. These unaudited consolidated interim financial statements included herein should be read in conjunction with the December 31, 2009 audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company’s quarterly results are subject to fluctuation and, thus, the operating results for any quarter are not necessarily indicative of results to be expected for any future fiscal period.

The Consolidated Balance Sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the financial information and disclosures required by GAAP for complete financial statements.

Earnings (Loss) Per Share

This table shows the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):

		Three Months Ended
		March 31,
		2010				2009
Numerator:
Net income (loss)		$	8,666			$	(18,424	)
Denominator:
Denominator for basic earnings (loss) per share — weighted average shares			31,513				31,376
Dilutive effect of employee stock options			38				—
Dilutive effect of restricted stock			473				—
Denominator for diluted earnings (loss) per common share — weighted average shares			32,024				31,376
Earnings (loss) per share-basic		$	0.27			$	(0.59	)
Earnings (loss) per share-diluted		$	0.27			$	(0.59	)

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):

		Three Months Ended
		March 31,
		2010				2009
Antidilutive shares			1,724				2,003

Inventories

Inventories include (in thousands):

		March 31,				December 31,
		2010				2009
Raw materials		$	13,716			$	14,985
Work in process			3,070				2,446
Finished goods			41,846				38,924
			58,632				56,355
Excess and obsolescence reserve			(2,530	)			(2,594	)
Inventories, net		$	56,102			$	53,761

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. At March 31, 2010, the carrying value of our portfolio of strategic investments in non-marketable equity securities totaled $21.6 million ($22.1 million at December 31, 2009), of which $13.9 million are accounted for at cost ($14.0 million at December 31, 2009), and $7.7 million are accounted for using the equity method of accounting ($8.1 million at December 31, 2009). Non-marketable equity securities are included in the consolidated balance sheets under the caption “Other non-current assets.” ATMI’s share of the income or losses of all equity-method investees, using the most current financial information available, which is one month behind ATMI’s normal closing date, is included in our results of operations from the investment date forward.

Income Taxes

We have not provided for U.S. federal income and foreign withholding taxes on approximately $54.4 million of undistributed earnings from non-U.S. operations as of March 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.

We had an effective income tax rate of 29.2% for the three months ended March 31, 2010. In the first quarter of 2010, we reduced the income tax provision by a net $0.3 million (including interest) resulting from the reversal of previously established reserves (including interest) related to a favorable settlement of a foreign subsidiary’s income tax audit partially offset by a charge due to equity-based compensation. Without these items our effective income tax rate would have been 31.2%. In addition to the impact from these adjustments, the effective income tax rate for the first quarter of 2010 differs from the U.S. federal statutory income tax rate of 35.0 percent primarily due to the mix of income attributable to the various countries in which we conduct business. Our effective income tax rate is calculated based on full-year assumptions, and does not include the benefit of the U.S. research and development (“R&D”) credit, due to its expiration at December 31, 2009. If the U.S. R&D credit is reinstated retroactively to January 1, 2010, we anticipate a reduction to our effective income tax rate of at least one hundred basis points.

At March 31, 2010, the Company had recorded $5.9 million of unrecognized tax benefits. If any portion of this $5.9 million is subsequently recognized, the Company will then include that portion in the computation of its effective tax rate. On the Consolidated Balance Sheet, $5.7 million of this amount is included in the caption “Other non-current liabilities,” together with $0.8 million of accrued interest (net) on tax reserves and $0 accrued for penalties, while the balance of $0.2 million is included in the caption “Other current liabilities,” together with $0.1 million of accrued interest (net) of tax reserves and $0 accrued for penalties.

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 $0.2 million to $1.5 million (excluding interest). The Company has been audited in the United States by the Internal Revenue Service through tax year 2007.

Goodwill and Other Intangible Assets

Goodwill and Other intangibles balances at March 31, 2010 and December 31, 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 March 31, 2010		$	33,410			$	40,182			$	6,997			$	47,179
Accumulated Amortization			—				(19,653	)			(5,712	)			(25,365	)
Balance at March 31, 2010		$	33,410			$	20,529			$	1,285			$	21,814

Changes in carrying amounts of Goodwill and Other Intangibles for the three months ended March 31, 2010 were (in thousands):

						Patents &								Total Other
		Goodwill				Trademarks				Other				Intangibles
Balance at December 31, 2009		$	33,394			$	21,760			$	1,442			$	23,202
Amortization expense			—				(882	)			(240	)			(1,122	)
Other, including foreign currency translation			16				(349	)			83				(266	)
Balance at March 31, 2010		$	33,410			$	20,529			$	1,285			$	21,814

Variable Interest Entity

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 entity’s economic performance, and we are also not expected to absorb significant losses or gains from Anji. ATMI accounts for this investment using the equity method of accounting. The carrying value of ATMI’s investment in Anji exceeds ATMI’s share of Anji’s net assets by approximately $5.2 million. The carrying value of our investment in Anji represents the cash paid, less our share of the cumulative losses, and pursuant to an independent valuation obtained, the excess purchase price over the underlying net assets is deemed to be goodwill. At March 31, 2010, the fair value of a guarantee ATMI provided on behalf of Anji was $0.2 million (see Note 8) and our maximum exposure to loss is $9.7 million, which consists of $6.0 million of our carrying value in this investment, plus $3.7 million associated with Anji’s bank line of credit, which is guaranteed by ATMI.

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 vendor’s 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 February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855).” This Update provides amendments to Subtopic 855-10-50-4 and related guidance within U.S. GAAP to clarify that an SEC Registrant is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements and is effective for interim or annual periods ending after June 15, 2010. We do not anticipate any material impact from this Update.

Recently Adopted Accounting Standards

In June 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-17, “Improvement to Financial Reporting by Enterprises Involved with Variable Interest Entities.” This Statement amends previous guidance to require us to perform an analysis of our existing investments to determine whether our variable interest or interests give us a controlling financial interest in a variable interest entity. We adopted this new standard effective January 1, 2010 and it had no impact.

In January 2010, the FASB issued ASU 2010-02, “Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification.” This Update provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions applies to (1) a subsidiary or group of assets that is a business or nonprofit activity, (2) a subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture, and (3) an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture). We adopted this new standard effective January 1, 2010 and it had no impact.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820).” This Update provides amendments to Subtopic 820-10 and related guidance within U.S. GAAP to require disclosure of the transfers in and out of Levels 1 and 2 and a schedule for Level 3 that separately identifies purchases, sales, issuances and settlements and requires more detailed disclosures regarding valuation techniques and inputs. We adopted this new standard effective January 1, 2010—see Note 6 for disclosures associated with the adoption of this standard.

3. Equity-Based Compensation

Summary of Plans

This table shows the number of shares approved by stockholders for each plan and the number of shares that remain available for equity awards at March 31, 2010 (in thousands):

						# of
		# of Shares				Shares
Stock Plan		Approved				Available
2000 Stock Plan (1)			2,000				—
2003 Stock Plan (1)			3,000				387
Employee Stock Purchase Plan (2)			1,000				270
Totals			6,000				657

The Company did not issue any shares of common stock as a result of exercises by employees under its employee stock option plans during the first quarter of 2010. Such amount was 550 shares of common stock during the fiscal year ended December 31, 2009. The Company issued 287,392 shares of restricted stock that include solely a time-based vesting requirement in the first quarter of 2010, and such amount was 516,096 during the fiscal year ended December 31, 2009. The Company issued 102,514 shares of restricted stock to its executive officers that include both performance-based and time-based vesting requirements in the first quarter of 2010, and such amount was 120,839 during the fiscal year ended December 31, 2009. In the first quarter of 2010, 120,839 of the 2009 performance-based restricted stock awards were forfeited as a result of the failure to achieve the operating income growth targets established by the Board of Directors.

Our 2010 Definitive Proxy statement, filed April 9, 2010, includes a proposal, subject to shareholder approval, for a new 3 million share 2010 Stock Plan to assure that sufficient shares are available to provide long-term, equity-based incentives to those employees, directors, officers and consultants of the Company and any subsidiaries who will be responsible for the Company’s future growth and continued success.

4. Marketable Securities

Marketable securities include at March 31, 2010 and December 31, 2009 (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			$	1,358			$	1,609			$	343			$	2,029			$	2,372
Government debt obligations (1)			6,606				36				6,642				7,321				51				7,372
GS (2) debt obligations			27,080				22				27,102				16,974				20				16,994
Subtotal			33,937				1,416				35,353				24,638				2,100				26,738
Securities in unrealized loss position:
Government debt obligations (1)			14,707				(44	)			14,663				909				(1	)			908
GS (2) debt obligations			19,127				(17	)			19,110				13,022				(29	)			12,993
Auction-rate security (3)			4,676				(2,075	)			2,601				4,672				(2,071	)			2,601
Subtotal			38,510				(2,136	)			36,374				18,603				(2,101	)			16,502
Securities at amortized cost:
GS (2) debt obligations			3,000				—				3,000				—				—				—
Subtotal			3,000				—				3,000				—				—				—
Total marketable securities		$	75,447			$	(720	)		$	74,727			$	43,241			$	(1	)		$	43,240

The amortized cost and estimated fair value of available-for-sale securities, by contractual maturity, as of March 31, 2010 are shown below; expected maturities may differ from contractual maturities because the issuers of the securities may exercise the right to prepay obligations without prepayment penalties.

						Estimated
		Cost				Fair Value
Due in one year or less		$	45,075			$	45,080
Due between one and three years			25,445				25,437
Auction-rate security (due in 2038)			4,676				2,601
			75,196				73,118
Common stock			251				1,609
		$	75,447			$	74,727

This table shows the Company’s marketable securities that were in an unrealized loss position at March 31, 2010, and also shows the duration of time the security has been in an unrealized loss position:

		Less Than 12 Months								12 Months or Greater								Total
						Unrealized								Unrealized								Unrealized
		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
Government debt obligations			14,663				(44	)			—				—				14,663				(44	)
GS (1) debt obligations			19,110				(17	)			—				—				19,110				(17	)
Auction-rate security			—				—				2,601				(2,075	)			2,601				(2,075	)
Total		$	33,773			$	(61	)		$	2,601			$	(2,075	)		$	36,374			$	(2,136	)

See Note 6 for further discussion.

5. Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income are (in thousands):

						Unrealized
						Gain (Loss)
		Currency				on Available-
		Translation				for-Sale
		Adjustments				Securities				Total
Balance at December 31, 2008		$	865			$	(599	)		$	266
Cumulative effect of adoption of new accounting standard			—				(1,287	)			(1,287	)
Reclassification adjustment related to marketable securities in net 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 $280 tax provision (1)			—				(476	)			(476	)
Change in fair value of available-for-sale securities, net of deferred income tax of $14			—				23				23
Cumulative translation adjustment			(1,156	)			—				(1,156	)
Balance at March 31, 2010		$	2,249			$	(454	)		$	1,795

6. Fair Value Measurements

The Company measures financial assets and financial liabilities on a fair value basis 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, 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.

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 March 31, 2010, our auction-rate security is the only item included in this category.

In March 2010, the annual auction for the auction-rate security failed for the third time in three years, as was expected, and the tax-exempt coupon rate of interest was reset to 0.68 percent from its previous rate of 1.15 percent. We will not have access to these funds prior to maturity until a future auction for this auction rate security is successful, the security has been called by the issuer, or until we sell the security in a secondary market. Since we have no current intent to sell this security and it is not more likely than not that we will be required to sell this security before anticipated recovery of its remaining amortized cost, in 2009 we recorded a temporary impairment charge of $2.1 million within the caption “Accumulated other comprehensive income” on the Consolidated Balance Sheets based upon an independent third-party valuation we received for this auction-rate security. The valuation of this security incorporated assumptions about the anticipated term and the yield that a market participant would require to purchase such a security in the current market environment.

At March 31, 2010 and December 31, 2009, we have included the fair value of this 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 Company’s assets and liabilities measured at fair value on a recurring basis at March 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		$	48,840			$	48,840				—				—
Available-for-sale marketable securities
Common stock		$	1,609			$	1,609				—				—
Government debt obligations		$	21,305				—			$	21,305				—
GS (1) debt obligations		$	49,212				—			$	49,212				—
Auction Rate Security		$	2,601				—				—			$	2,601
Foreign currency exchange contract asset		$	110			$	110				—				—

There were no transfers of assets or liabilities between level 1 and level 2 during the first quarter of 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 three months ended March 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			—				—
Purchases, issuances, and settlements, net			—				—
Transfers into (out of) Level 3			—				—
Balance at March 31, 2010		$	2,601			$	2,601
See Note 4 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.

In the first quarter of 2009, long-lived assets held and used with a carrying amount of $6.9 million were written down to their estimated fair values of $0.7 million, resulting in an impairment charge of $6.2 million of which $2.9 million was included in cost of revenues, $1.5 million was included in research and development expense, and $1.8 million was included in selling, general and administrative expense.

Due to their nature, the carrying value of cash, receivables, and payables approximates fair value.

7. 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 (loss) 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 March 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.

At March 31, 2010, we held foreign currency exchange contracts that are economic hedges with notional amounts totaling $9.1 million, of which $5.6 million will be settled in Euros, $1.8 million will be settled in Taiwan Dollars and $1.7 million will be settled in Japanese Yen. The fair market value (gain or loss) on these contracts was not significant as of March 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, or will be settled in Taiwan Dollars and $1.3 million were settled or will be settled in Japanese Yen. The fair market value (gain or loss) on these contracts was not significant as of December 31, 2009.

The Company recorded gains of $0.1 million and $0.4 million for the three months ended March 31, 2010 and 2009, respectively under the caption “Other income (loss), net” in the consolidated statements of operations related to changes in the fair value of its financial instruments for forward foreign currency exchange contracts.

8. Commitments and Contingencies

ATMI is, from time to time, subject to 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 ATMI’s counsel and considering any applicable insurance or indemnifications, any liability which may ultimately be incurred is not expected to materially affect ATMI’s 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 in order to assist Anji in retaining its bank financing, which currently expires on June 30, 2010. ATMI’s guarantee continues to be secured by Anji’s assets and additional equity interests in Anji’s 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 March 31, 2010.

9. Segments

ATMI is organized along functional lines of responsibility, whereby each member of the Company’s executive team has global responsibility for each respective functional area, such as supply chain operations, sales, marketing, 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. ATMI’s operations comprise one operating segment.

ATMI derives virtually all its revenues from providing materials and packaging products and related integrated process solutions to microelectronics and life sciences manufacturers. ATMI’s 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 customer’s process.

Revenues from external customers, by product type, were as follows (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Microelectronics		$	76,713			$	31,685
Life sciences			8,598				5,677
Total		$	85,311			$	37,362

10. Subsequent Events

The Company has evaluated all subsequent events through April 21, 2010, which represents the filing date of this Form 10-Q with the Securities and Exchange Commission, to ensure that this Form 10-Q includes appropriate disclosure of events both recognized in the financial statements as of March 31, 2010, and events which occurred subsequent to March 31, 2010 but were not recognized in the financial statements.

During April 2010, ATMI entered into a loan arrangement with an equity-method investee to provide approximately $2.7 million in funds to the investee for working capital needs.

As of April 21, 2010, except for the above described loan arrangement, there were no other subsequent events which required recognition or disclosure.

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

Three Months Ended March 31, 2010 as Compared to 2009

Cautionary Statements Under the Private Securities Litigation Reform Act of 1995

Disclosures included in this Form 10-Q contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words such as “anticipate,” “plan,” “believe,” “seek,” “estimate,” “expect,” “could,” and words of similar meanings and include, without limitation, statements about the expected future business and financial performance of ATMI such as financial projections, expectations for demand and sales of new and existing products, customer and supplier relationships, research and development programs, market and technology opportunities, international trends, business strategies, business opportunities, objectives of management for future operations, microelectronics industry (including wafer start) growth, and trends in the markets in which the Company participates. Forward-looking statements are based on management’s current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions because of changes in political, economic, business, competitive, market, regulatory, and other factors. Certain factors that could cause such differences include:

•

disruptions in global credit and financial markets, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflationary or deflationary pressures, and uncertainty about economic stability;

•

cyclicality in the markets in which we operate;

•

aggressive management of inventory levels by our customers and their customers;

•

variation in profit margin performance caused by decreases in shipment volume, reductions in, or obsolescence of, inventory, inefficiencies in production facilities and shifts in product mix;

•

availability of supply from a single or limited number of suppliers or from suppliers in a single country;

•

highly competitive markets for our products;

•

changes in export controls, environmental and other laws or policies, as well as the general political and economic conditions, exchange rate fluctuations, security risks, health conditions and possible disruptions in transportation networks, of the various countries in which we operate;

•

potential natural disasters in locations where we, our customers, or our suppliers operate;

•

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

•

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

•

inability to meet customer demand from quarter to quarter, causing us to incur expedited shipping costs or hold excess or obsolete inventory;

•

taxation and audit by taxing authorities in the various countries in which we operate;

•

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

•

inability to continue 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;

•

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

•

risk of product claims beyond existing insurance coverage levels resulting from the manufacture and sale of our products, which include thin film and other toxic materials;

•

inability to realize the anticipated benefits of acquisitions due to difficulties integrating acquired businesses with our current operations;

•

fluctuations in currency exchange rates;

•

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

•

uncertainty regarding compliance matters and higher costs resulting from changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, and new regulations from the SEC.

These risks and uncertainties are described in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and our other subsequent filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings. These cautionary statements are not meant to be an exhaustive discussion of risks that apply to companies like ATMI with broad international operations. The most recent downturn in the semiconductor industry began during the second half of 2008, driven by broader macroeconomic deterioration, in particular in the credit, housing and financial markets. The disruptions in these 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 results 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 or distributors 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. 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.

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. ATMI’s 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. ATMI’s 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.

Results of Operations

Executive Summary

In the first quarter of 2010, our revenues grew by 128.3 percent compared to the first quarter of 2009, primarily due to improved consumer electronics demand which drove higher wafer starts and increased fab utilization during the first quarter of 2010. The growth in revenues which was seen in all product lines was the most pronounced for our SDS products. In the first quarter of 2010, our gross profit margin improved to 48.9 percent compared to 18.6 percent in the prior year quarter, driven by stronger unit volumes, favorable product mix and lower asset impairment charges. Primarily as a result of the revenue increases on improved demand, our net income increased to $8.7 million ($0.27 per diluted share) in the first quarter of 2010 compared to a loss of $18.4 million ($0.59 per diluted share) in the first quarter of 2009. In 2010, we are planning for an $8 million to $10 million increase in research and development spending, inclusive of the $3.0 million we deferred previously from 2009 to 2010.

Going forward, business and market uncertainties may continue to affect results. See “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995” above and Management’s Discussion and Analysis in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 for a full discussion of the key factors which affect our business and operating results.

Revenues

		2010				2009				% Change
Quarter ended March 31,		$	85,311			$	37,362				128.3	%

Revenues grew in the first quarter of 2010 compared to the first quarter of 2009 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 in life sciences. This was a contrast from the March 2009 decline in revenues which occurred in both our microelectronics and life sciences product lines, but was more pronounced in the microelectronics product lines, and was primarily the result of the global economic downturn, and which was magnified by excess inventory in the SDS distribution channel in the prior year. Revenues in our microelectronics product lines grew 142.1 percent to $76.7 million in the first quarter of 2010 from $31.7 million in the first quarter of 2009. Revenue growth in microelectronics was seen in all product lines and was consistent with overall market growth associated with continued increased wafer starts and fab utilization. First quarter 2010 revenues also benefited from $3 million of customer inventory stocking of SDS products in anticipation of planned import restrictions due to the upcoming World Expo in China. The increase in consumer electronics spending, the primary driver of wafer start growth and fab utilization, which began in the second half of 2009, continued into the first quarter of 2010. Revenues in our life sciences product lines increased 51.4 percent in the first quarter of 2010 to $8.6 million compared to $5.7 million in the first quarter of 2009. The growth in life sciences revenues is primarily attributable to improved macroeconomic conditions. We continue to experience typical pricing pressure in the marketplace; however, the pricing pressure on certain of our more mature product lines has increased.

Gross Profit

		2010								2009
						% of								% of
		Amount				Revenues				Amount				Revenues
Quarter ended March 31,		$	41,689				48.9	%		$	6,931				18.6	%

Gross profit increased 501.5 percent to $41.7 million in the first quarter of 2010 from $6.9 million in the first quarter of 2009. Gross profit in our microelectronics product lines increased 640 percent to $37.6 million in the first quarter of 2010 from $5.1 million in the first quarter of 2009. Gross profit margins in our microelectronics product lines were approximately 49 percent in the first quarter of 2010 compared to approximately 16 percent in the first quarter of 2009. The increase in gross profit was driven by sales volume increases as a result of improved economic conditions, favorable product mix and due to the effect of the charges recognized in the first quarter of 2009 for asset impairments ($2.9 million) and an increase in our reserves for excess and obsolete inventories in the microelectronics product lines ($1.1 million). Gross profit in our life sciences product lines increased 122 percent to $4.1 million in the first quarter of 2010 compared to $1.9 million in the first quarter of 2009. Gross profit margins in our life sciences product lines were approximately 48 percent in the first quarter of 2010 up from approximately 33 percent in the first quarter of 2009, driven primarily by improved sales volume.

Research and Development Expenses

		2010								2009
						% of								% of
		Amount				Revenues				Amount				Revenues
Quarter ended March 31,		$	9,723				11.4	%		$	11,651				31.2	%

Research and development (“R&D”) expense decreased 16.5 percent to $9.7 million in the first quarter of 2010 from $11.7 million in the first quarter of 2009. The decrease in R&D spending was primarily related to the $1.5 million asset impairment charge recognized in the first quarter of 2009, and reduced High-Productivity Development (HPD) licensing and maintenance contract costs ($0.9 million), partially offset by higher employee incentives ($0.3 million) and increased employee travel ($0.2 million). In 2010, we are planning for an $8 million to $10 million increase in research and development spending related to our HPD platform and activities, or approximately $3 million per quarter beginning in the second quarter of this year.

Selling, General and Administrative Expenses

		2010								2009
						% of								% of
		Amount				Revenues				Amount				Revenues
Quarter ended March 31,		$	19,972				23.4	%		$	22,240				59.5	%

Selling, general and administrative expenses decreased 10.2 percent to $20.0 million in the first quarter of 2010 from $22.2 million in the first quarter of 2009. The decrease in the first quarter of 2010 is the result of significantly lower asset impairment charges ($1.6 million), reduced bad debt expense ($1.5 million) due to improving economic conditions, partially offset by an increase of $1.1 million in employee-related costs which is primarily due to an increase in current year employee incentives based on improved financial performance.

Operating Income (Loss)

		2010								2009
						% of								% of
		Amount				Revenues				Amount				Revenues
Quarter ended March 31,		$	11,994				14.1	%		$	(26,960	)			-72.2	%

We generated operating income of $12.0 million in the first quarter of 2010 compared to an operating loss of $27.0 million in the first quarter of 2009. This change is from a variety of factors, such as the significant improvement in revenues due to improved economic conditions, lower asset impairment and other charges, and other items as noted above.

Interest Income

Interest income decreased to $0.2 million in the first quarter of 2010 from $0.5 million in the first quarter of 2009 primarily caused by lower average yields.

Impairment of Investments

The first quarter of 2009 results included a $2.5 million impairment charge primarily related to a write-down associated with our auction-rate security.

Other Income (Expense), Net

In the first quarter of 2010, we recognized losses of $0.3 million due to investments accounted for by the equity method, partially offset by a $0.5 million gain from the sale of a marketable equity security.

Provision (Benefit) for Income Taxes

		Effective Rate
		2010				2009
Quarter ended March 31,			29.2	%			(36.7	%)

We had an effective income tax rate of 29.2% for the three months ended March 31, 2010. In the first quarter of 2010, we reduced the income tax provision by a net $0.3 million (including interest) resulting from the reversal of previously established reserves (including interest) related to a favorable settlement of a foreign subsidiary’s income tax audit partially offset by a charge due to equity-based compensation. Without these items our effective income tax rate would have been 31.2%. In addition to the impact from these adjustments, the effective income tax rate for the first quarter of 2010 differs from the U.S. federal statutory income tax rate of 35.0 percent primarily due to the mix of income attributable to the various countries in which we conduct business. Our effective income tax rate is calculated based on full-year assumptions, and does not include the benefit of the U.S. research and development (“R&D”) credit, due to its expiration at December 31, 2009. If the U.S. R&D credit is reinstated retroactively to January 1, 2010, we anticipate a reduction to our effective income tax rate of at least one percentage point.

At March 31, 2010, the Company had recorded $5.9 million of unrecognized tax benefits. If any portion of this $5.9 million is subsequently recognized, the Company will then include that portion in the computation of its effective tax rate. On the Consolidated Balance Sheet, $5.7 million of this amount is included in the caption “Other non-current liabilities,” together with $0.8 million of accrued interest (net) on tax reserves and $0 accrued for penalties, while the balance of $0.2 million is included in the caption “Other current liabilities,” together with $0.1 million of accrued interest (net) of tax reserves and $0 accrued for penalties.

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 $0.2 million to $1.5 million (excluding interest). The Company has been audited in the United States by the Internal Revenue Service through tax year 2007.

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.

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 and capital expenditures through cash flows from our operations, and existing cash. We expect to continue to finance current and planned operating requirements principally through cash from operations, as well as existing cash resources. We believe that these funds will be sufficient to meet our operating requirements for the foreseeable future. However, we may, from time to time, seek additional funding through a combination of equity and debt financings or from other sources.

Under existing tax laws, we plan to carry back the 2009 U.S. tax loss which is expected to result in a $10.9 million cash refund in 2010.

During April 2010, ATMI entered into a loan arrangement with an equity-method investee to provide approximately $2.7 million in funds to the investee for working capital needs.

We continue to invest in R&D to provide future sources of revenue through the development of new products, as well as through additional uses for existing products. We consider R&D and the development of new products and technologies an integral part of our growth strategy and a core competency of the Company. Likewise, we continue to make capital expenditures in order to expand and modernize manufacturing facilities around the globe and to drive efficiencies throughout the organization. Additionally, management considers, on a continuing basis, potential acquisitions of strategic technologies and businesses complementary to the Company’s current business.

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

		Three Months Ended
		March 31,
		2010				2009
Cash provided by (used for):
Operating activities		$	19,545			$	7,467
Investing activities			(34,374	)			1,554
Financing activities			(1,142	)			(1,457	)
Effects of exchange rate changes on cash and cash equivalents			73				347

Net cash provided by operating activities increased by $12.1 million primarily from:

•

Increase in net income of $27.0 million (to net income of $8.7 million)

•

Reduction in cash used related to changes in deferred income taxes of $3.3 million

•

Increase in cash provided by change in accounts payable of $2.2 million due primarily to timing of payments

•

Decrease in cash provided by changes in accounts receivable of $14.1 million due to significantly higher sales in 1Q 2010 compared to 1Q 2009

•

Increase in cash used related to changes in inventories of $2.9 million driven by stronger year-over-year demand and resulting build of safety stock

•

Decrease in cash used related to changes in income taxes payable of $6.7 million driven by prior year operating loss

Net cash used for investing activities increased by $35.9 million primarily from:

•

Increase in cash used for purchases of marketable securities of $24.7 million

•

Decrease in cash proceeds from sales and maturities of marketable securities of $11.5 million

Net cash used for financing activities decreased by $0.3 million primarily from:

•

Net repayments on the credit line of $0.4 million

Critical Accounting Estimates

There have been no material changes from the methodologies applied by management for critical accounting estimates previously disclosed in ATMI’s most recent Annual Report on Form 10-K.

Off-Balance Sheet Arrangements and Contractual Obligations

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, which is to expire no later than June 30, 2010. ATMI’s guarantee is secured by Anji’s assets and additional equity interests in Anji’s 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 March 31, 2010.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk . As of March 31, 2010, the Company’s cash and cash equivalents and marketable securities included bank deposits, certificates of deposit, money market securities, government and government-sponsored bond obligations. As of March 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 Company’s marketable securities portfolio by approximately $0.7 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 Company’s marketable securities portfolio by approximately $0.8 million.

Foreign Currency Exchange Risk . Most of the Company’s sales are denominated in U.S. dollars and as a result, the Company does not have any significant exposure to foreign currency exchange risk with respect to sales made. Approximately 30 percent, of the Company’s revenues for the three-month period ended March 31, 2010 were denominated in Japanese Yen (“JPY”), Korean Won, and Euros, but a majority of the product is sourced in U.S. dollars. Management periodically reviews the Company’s exposure to currency fluctuations. This exposure may change over time as business practices evolve and could have a material effect on the Company’s 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 hedges that are highly effective and recognize in accumulated other comprehensive income (loss) any changes in the fair value of all derivatives designated as cash flow hedges 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 March 31, 2010, we held forward foreign currency exchange contracts as fair value hedges with notional amounts totaling $9.1 million, which are being used to hedge recorded foreign denominated liabilities and which will be settled in either JPY, EUR or New Taiwan Dollars (NTD). The functional currency of our Taiwanese subsidiary is U.S. dollars. We have opened a foreign currency position to hedge a significant local currency prepayment made by our Taiwanese subsidiary related to income tax exposures. Holding other variables constant, if there were a 10 percent decline in foreign exchange rates for the JPY, NTD and EUR, the fair market value of the foreign exchange contracts outstanding at March 31, 2010 would decrease by approximately $1.8 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 Company’s 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, has caused extreme disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, increases in unemployment rates, and uncertainty about economic stability. There can be no assurance that there will not be further deterioration in credit and financial markets and 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. The current constriction of credit in financial markets may continue to lead consumers and businesses to postpone spending, which may cause our customers to continue to aggressively manage their inventories and delay their future orders with us. In addition, financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable defaults and inventory challenges.

Item 4.		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-Q. 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-Q, 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.

We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. There have been no changes to our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the first quarter of fiscal 2010 that we believe materially affected, or will be reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.		Legal Proceedings

ATMI is, from time to time, subject to 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 ATMI’s counsel and considering any applicable insurance or indemnifications, any liability which may ultimately be incurred is not expected to materially affect ATMI’s consolidated financial position, cash flows or results of operations.

Item 1A.		Risk Factors

There have been no material changes to the Risk Factors, which are described in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and our other subsequent filings with the Securities and Exchange Commission and in materials incorporated by reference in these filings. See also “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995” within this Form 10-Q.

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities — There were no share repurchases during the three months ended March 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. We withheld 34,935 shares (at an average price of $18.35 per share) through net share settlements during the three months ended March 31, 2010, upon the vesting of restricted stock awards to cover minimum tax withholding obligations.

Item 5.		Other Information

None.

Item 6.		Exhibits

	31.1			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Atmi Inc. (MM) (NASDAQ:ATMI)
Historical Stock Chart
From Jun 2024 to Jul 2024

Atmi Inc. (MM) (NASDAQ:ATMI)
Historical Stock Chart
From Jul 2023 to Jul 2024