Notes To Consolidated Interim Financial Statements
(unaudited)
1. Description of Business
ATMI, Inc. (together with its subsidiaries, collectively referred to as the Company, ATMI, our or
we), a global technology company, is a leading supplier of high performance materials, materials packaging and materials delivery systems used worldwide in various industries including microelectronics and life sciences. Our
Microelectronics segment products consist of front-end semiconductor performance materials, sub-atmospheric pressure gas delivery systems for safe handling and delivery of toxic and hazardous gases to semiconductor process equipment, and
high-purity materials packaging and dispensing systems that allow for the reliable introduction of low volatility liquids to microelectronics processes. ATMI targets semiconductor and flat-panel display manufacturers, whose products form the
foundation of microelectronics technology rapidly proliferating through the consumer products, information technology, automotive, and communications industries. The market for microelectronics devices is continually changing, which drives demand
for new products and technologies that have improved performance at lower cost. Our customers include the leading semiconductor manufacturers in the world who target leading-edge technologies. In our LifeSciences segment, we address an increasing
number of single-use development and manufacturing needs for the life sciences markets. Our proprietary containment, mixing, and bioreactor technologies are sold to biotechnology, cell therapy and pharmaceutical companies involved in the manufacture
of vaccine, monoclonal antibodies and cell therapy applications, which we believe offer significant long-term growth potential. ATMIs objective is to meet the demands of our microelectronics and life sciences customers with solutions that
maximize the efficiency and safety of their manufacturing processes, reduce capital or operating costs, and minimize the time to develop new products and integrate them into their processes.
2. Basis of Presentation and Other Information
Basis of Presentation
The accompanying consolidated interim financial statements of ATMI, Inc. at June 30, 2013 and for the three and six months ended June 30, 2013
and 2012, respectively, are unaudited, but in the opinion of management include all adjustments necessary for a fair presentation of the results for the interim periods. The unaudited consolidated interim financial statements included herein should
be read in conjunction with the December 31, 2012 audited consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012. The Companys 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, 2012 has been derived from the audited financial statements at that date, but does not include all of the financial information and disclosures required
by United States Generally Accepted Accounting Principles (GAAP) for complete financial statements.
8
Earnings Per Share
This table shows the computation of basic and diluted earnings per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,447
|
|
|
$
|
11,423
|
|
|
|
17,873
|
|
|
|
15,285
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per shareweighted average shares
|
|
|
31,946
|
|
|
|
31,938
|
|
|
|
31,977
|
|
|
|
31,873
|
|
Dilutive effect of employee stock options
|
|
|
158
|
|
|
|
168
|
|
|
|
153
|
|
|
|
195
|
|
Dilutive effect of restricted stock awards and restricted stock units
|
|
|
635
|
|
|
|
563
|
|
|
|
607
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per common share weighted average shares
|
|
|
32,739
|
|
|
|
32,669
|
|
|
|
32,737
|
|
|
|
32,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-basic
|
|
$
|
0.30
|
|
|
$
|
0.36
|
|
|
$
|
0.56
|
|
|
$
|
0.48
|
|
Earnings per share-diluted
|
|
$
|
0.29
|
|
|
$
|
0.35
|
|
|
$
|
0.55
|
|
|
$
|
0.47
|
|
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
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Antidilutive shares
|
|
|
885
|
|
|
|
1,154
|
|
|
|
906
|
|
|
|
951
|
|
Inventories
Inventories include (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
Raw materials
|
|
$
|
31,420
|
|
|
$
|
26,874
|
|
Work in process
|
|
|
2,568
|
|
|
|
2,064
|
|
Finished goods
|
|
|
64,867
|
|
|
|
62,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,855
|
|
|
|
90,941
|
|
Excess and obsolescence reserve
|
|
|
(3,948
|
)
|
|
|
(3,386
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
94,907
|
|
|
$
|
87,555
|
|
|
|
|
|
|
|
|
|
|
Non-marketable Equity Securities
We selectively invest in non-marketable equity securities of private companies, which range from early-stage companies to more mature companies whose products or technologies may directly support an ATMI
product or initiative. At June 30, 2013, the carrying value of our portfolio of strategic investments in non-marketable equity securities totaled $11.9 million ($8.1 million at December 31, 2012), of which $9.3 million are accounted for at
cost ($5.4 million at December 31, 2012), and $2.6 million are accounted for using the equity method of accounting ($2.7 million at December 31, 2012). Non-marketable equity 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 one month behind ATMIs 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 $96.1 million of undistributed earnings from non-U.S.
operations as of June 30, 2013, 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.
9
We had an effective income tax rate of 33.8 percent and 29.4 percent for the three and
six month periods ended June 30, 2013. The effective income tax rate differs from the U.S. federal statutory income tax rate of 35.0 percent primarily due to the mix of income attributable to the various countries in which we conduct business,
the increase in the valuation allowance on certain foreign losses, and the impact of our reserves. The year-to-date effective income tax rate includes a $1.3 million settlement with the South Korea taxing authority, $1.1 million of benefits for
certain 2012 retroactive provisions of The American Taxpayer Relief Act of 2012 (signed into law on January 2, 2013) including the US R&D credit, $1.8 million net benefit for reversals of previously established reserves, and a $0.2 million
provision related to equity-based compensation. The effective income tax rate is calculated based on full-year assumptions and is affected by the mix of income attributable to the various countries in which we conduct business. We continue to incur
losses at Artelis, our iCellis
®
and Xpansion bioreactor business, and as a result, we have not recorded a
tax benefit on these losses. If a tax benefit had been reflected on the foreign losses, our effective income tax rate would have been approximately 29.2 percent and 25.0 percent for the three and six month periods ended June 30, 2013,
respectively.
At June 30, 2013, the Company had $4.1 million of unrecognized tax benefits, which if recognized, would favorably affect
the effective income tax rate in future periods. $0.2 million of this amount is included in deferred taxes, $1.7 million is included in the caption Other current liabilities, and the balance of $2.2 million is included in the caption
Other non-current liabilities on the consolidated balance sheets, which includes $0.3 million of total accrued interest (net) on tax reserves. In addition, at December 31, 2012, the Company had $27 million of unrecognized tax
benefits related to the timing of deduction of certain acquired assets. This uncertainty was resolved in the period ended June 30, 2013 as the Internal Revenue Service completed the audit of tax years 2010 and 2011, for which the Company
expects to pay approximately $8.0 million (excluding interest).
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 million to $1.4 million (excluding interest). While the Company believes it was
in complete compliance with existing tax law, it has reached a settlement with the South Korea tax authority to settle income tax issues related to tax years 2008-2012 for a payment of approximately $1.3 million (including interest and penalties).
Variable Interest Entity
We
hold a variable interest in the equity of Anji Microelectronics Co., Ltd. (Anji), an entity that produces advanced semiconductor materials, with primary operations in Shanghai, China. 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. ATMIs carrying value of this cost basis investment is $3.9 million at June 30, 2013. The carrying value of our investment in Anji represents the cash paid, less our share of the cumulative losses during the period that
we used the equity-method of accounting. At June 30, 2013, our maximum exposure to loss is our carrying value in this investment of $3.9 million.
Severance Expense
During the first quarter of 2013, we initiated an action in our
Microelectronics business to better streamline business activities with our customers and partners. As a result, we recognized $1.8 million of severance expense under the caption, Selling, general & administrative in the consolidated
statements of comprehensive income. During the first half of 2013, we paid $1.6 million associated with this action. At this time, we do not anticipate any material additional charges associated with this action. Because the actions were driven by
ATMIs executive team and were not driven by the Microelectronics segment manager, the severance charge is reflected in the All Other segment.
Recently Adopted Accounting Pronouncements
In December 2011, the FASB issued ASU
2011-11-Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities and in January 2013, the FASB issued ASU 2013-01- Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities. In ASU 2011-11, entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions
subject to an agreement similar to a master netting arrangement. ASU 2013-01 limits the scope of disclosures to derivatives, repurchase agreements and securities lending arrangements. We were required to apply the amendments retrospectively for
annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. There was no material impact from the adoption of these Updates.
In February 2013, the FASB issued ASU 2013-02-Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income. Substantially all of the
information that this Update requires was already disclosed in our financial statements under U.S. GAAP, however, this Update requires additional disclosure about amounts reclassified out of accumulated other comprehensive income and their
corresponding effect on net income in one place. We were required to apply the amendments prospectively for annual reporting periods beginning after December 15, 2012. See Note 5 for the disclosures as a result of adoption of this Update.
10
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 June 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
# of Shares
Approved
|
|
|
# of Shares
Available
|
|
Stock Plan
|
|
|
|
|
|
|
|
|
2010 Stock Plan
(1)
|
|
|
3,000
|
|
|
|
2,189
|
|
Employee Stock Purchase Plan
(2)
|
|
|
1,000
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
4,000
|
|
|
|
2,419
|
|
|
|
|
|
|
|
|
|
|
(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.
|
The Company issued 166,788 shares of common stock as a result of exercises by employees
under its employee stock option plans during the first six months of 2013. Such amount was 258,446 shares of common stock during the fiscal year ended December 31, 2012. The Company issued 317,815 shares of restricted stock awards that include
solely a time-based vesting requirement in the first six months of 2013 and such amount was 321,965 during the fiscal year ended December 31, 2012.
4. Fair Value Measurements and Marketable Securities
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, money market fund deposits, time 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 June 30, 2013, the Artelis acquisition contingent consideration payment liability, which is categorized as a non-recurring fair value measurement, is the only item valued in this category.
11
Assets / Liabilities Measured at Fair Value on a Recurring Basis
This table summarizes the Companys assets and liabilities measured at fair value on a recurring basis at June 30, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measured Using
|
|
|
Total
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Cash & cash equivalents
|
|
$
|
35,349
|
|
|
|
35,349
|
|
|
|
|
|
|
|
Available-for-sale marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
25,322
|
|
|
$
|
25,322
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
21,009
|
|
|
$
|
21,009
|
|
|
|
|
|
|
|
Corporate debt obligations
|
|
$
|
7,267
|
|
|
|
|
|
|
$
|
7,267
|
|
|
|
Government debt obligations
|
|
$
|
30,406
|
|
|
|
|
|
|
$
|
30,406
|
|
|
|
Government sponsored debt obligations
|
|
$
|
5,231
|
|
|
|
|
|
|
$
|
5,231
|
|
|
|
Foreign currency exchange contract asset
|
|
$
|
3,408
|
|
|
$
|
3,408
|
|
|
|
|
|
|
|
Foreign currency exchange contract liability
|
|
$
|
(61
|
)
|
|
$
|
(61
|
)
|
|
|
|
|
|
|
During the first six months of 2013, our valuation methodologies were consistent with previous years, and there were no
transfers made among the three levels of the valuation hierarchy.
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.
Consistent with prior quarters, the
liability for the Artelis contingent consideration payments, which is classified as Level 3, and is tied to future revenue performance for the fiscal years 2013 through 2014, was calculated using unobservable inputs (primarily using discounted cash
flow analysis, a current average discount rate of 5.5 percent, and reliance on the market and product knowledge of internal experts). The contingent payments have a range of possible outcomes from $0 to $23.3 million, subject to movements in
currency.
Our estimate of the fair value of the Artelis contingent payments was $4.7 million at June 30, 2013, representing an increase
in our estimated payments of $0.1 million from December 31, 2012. This increase was driven by an increase in our assessment of our future payment obligation due to an increase in our assessment of anticipated future revenues.
Due to their nature, the carrying value of cash, receivables, and payables approximates fair value.
12
Marketable securities include at June 30, 2013 and December 31, 2012 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gain (Loss) (3)
|
|
|
Estimated
Fair
Value
|
|
|
Cost
|
|
|
Gross
Unrealized
Gain (Loss) (3)
|
|
|
Estimated
Fair Value
|
|
Securities in unrealized gain position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
18,969
|
|
|
$
|
6,353
|
|
|
$
|
25,322
|
|
|
$
|
22,376
|
|
|
$
|
13,049
|
|
|
$
|
35,425
|
|
Corporate debt obligations
|
|
|
1,941
|
|
|
|
2
|
|
|
|
1,943
|
|
|
|
4,211
|
|
|
|
4
|
|
|
|
4,215
|
|
Government debt obligations
(1)
|
|
|
20,352
|
|
|
|
10
|
|
|
|
20,362
|
|
|
|
4,495
|
|
|
|
14
|
|
|
|
4,509
|
|
GSE
(2)
debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,501
|
|
|
|
|
|
|
|
3,501
|
|
U.S. Treasury obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,023
|
|
|
|
|
|
|
|
4,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
41,262
|
|
|
|
6,365
|
|
|
|
47,627
|
|
|
|
38,606
|
|
|
|
13,067
|
|
|
|
51,673
|
|
Securities in unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt obligations
|
|
|
5,329
|
|
|
|
(5
|
)
|
|
|
5,324
|
|
|
|
4,844
|
|
|
|
(7
|
)
|
|
|
4,837
|
|
Government debt obligations
|
|
|
10,057
|
|
|
|
(13
|
)
|
|
|
10,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE debt obligations
|
|
|
5,234
|
|
|
|
(3
|
)
|
|
|
5,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,251
|
|
|
|
(1
|
)
|
|
|
8,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
20,620
|
|
|
|
(21
|
)
|
|
|
20,599
|
|
|
|
13,095
|
|
|
|
(8
|
)
|
|
|
13,087
|
|
Securities at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
21,009
|
|
|
|
|
|
|
|
21,009
|
|
|
|
16,920
|
|
|
|
|
|
|
|
16,920
|
|
Corporate debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
|
|
|
|
|
|
790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
21,009
|
|
|
|
|
|
|
|
21,009
|
|
|
|
17,710
|
|
|
|
|
|
|
|
17,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
82,891
|
|
|
$
|
6,344
|
|
|
$
|
89,235
|
|
|
$
|
69,411
|
|
|
$
|
13,059
|
|
|
$
|
82,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
State and municipal government debt obligations.
|
(2)
|
Government sponsored enterprise.
|
(3)
|
Unrealized gains or losses of less than $500 for each category are reflected as a dash. The decrease in the unrealized gain in Common stock was due
primarily to the reduction in the market value of our Intermolecular, Inc. shareholdings.
|
The amortized cost and estimated
fair value of available-for-sale securities, by contractual maturity, as of June 30, 2013 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.
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Estimated
Fair Value
|
|
Due in one year or less
|
|
$
|
46,971
|
|
|
$
|
46,972
|
|
Due between one and three years
|
|
|
16,951
|
|
|
|
16,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,922
|
|
|
|
63,913
|
|
Common stock
|
|
|
18,969
|
|
|
|
25,322
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
82,891
|
|
|
$
|
89,235
|
|
|
|
|
|
|
|
|
|
|
This table shows the Companys marketable securities that were in an unrealized loss position at June 30, 2013,
and also shows the period of time the security had been in an unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
Corporate debt obligations
|
|
$
|
5,324
|
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,324
|
|
|
$
|
(5
|
)
|
Government debt obligations
|
|
|
5,274
|
|
|
|
(1
|
)
|
|
|
4,770
|
|
|
|
(12
|
)
|
|
|
10,044
|
|
|
|
(13
|
)
|
GSE
(1)
debt obligations
|
|
|
|
|
|
|
|
|
|
|
5,231
|
|
|
|
(3
|
)
|
|
|
5,231
|
|
|
|
(3
|
)
|
Total
(2)
|
|
$
|
10,598
|
|
|
$
|
(6
|
)
|
|
$
|
10,001
|
|
|
$
|
(15
|
)
|
|
$
|
20,599
|
|
|
$
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Government sponsored enterprise.
|
(2)
|
As of June 30, 2013, we had 17 securities in an unrealized loss position.
|
13
5. Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
Translation
Adjustments
|
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
|
Unrealized
Gain (Loss)
on Derivative
Instruments
|
|
|
Total
|
|
Balance at December 31, 2012
|
|
$
|
6,300
|
|
|
$
|
8,230
|
|
|
$
|
1,098
|
|
|
$
|
15,628
|
|
Reclassification adjustment related to marketable securities in net unrealized gain at prior period end, net of $685 tax
provision
(1)
|
|
|
|
|
|
|
(1,201
|
)
|
|
|
|
|
|
|
(1,201
|
)
|
Change in fair value of available-for-sale securities, net of deferred income tax of $1,801
|
|
|
|
|
|
|
(2,970
|
)
|
|
|
|
|
|
|
(2,970
|
)
|
Reclassification adjustment related to cash flow hedges at prior period end in a net unrealized loss at prior period end, net of
deferred income tax of $214
|
|
|
|
|
|
|
|
|
|
|
(375
|
)
|
|
|
(375
|
)
|
Change in fair value of cash flow hedges, net of deferred income tax of $727
|
|
|
|
|
|
|
|
|
|
|
1,276
|
|
|
|
1,276
|
|
Cumulative translation adjustment
|
|
|
(6,848
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2013
|
|
$
|
(548
|
)
|
|
$
|
4,059
|
|
|
$
|
1,999
|
|
|
$
|
5,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Determined based on the average cost method
|
The reclassifications out of accumulated other comprehensive income are (in thousands):
|
|
|
|
|
|
|
Details about Accumulated Other Comprehensive
Income Components
|
|
Amount Reclassified from
Accumulated Other
Comprehensive Income
|
|
|
Affected Line Item in the
Consolidated
Statements of Comprehensive Income
|
Realized gains and losses on cash flow hedges
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
678
|
|
|
Revenues
|
|
|
|
(89
|
)
|
|
Cost of revenues
|
|
|
|
|
|
|
|
|
|
|
589
|
|
|
Total before tax
|
|
|
|
(214
|
)
|
|
Estimated tax expense
|
|
|
|
|
|
|
|
|
|
$
|
375
|
|
|
Net of estimated tax
|
|
|
|
|
|
|
|
Realized gains and losses on available-for-sale securities
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
1,886
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
1,886
|
|
|
Total before tax
|
|
|
|
(685
|
)
|
|
Estimated tax expense
|
|
|
|
|
|
|
|
|
|
$
|
1,201
|
|
|
Net of estimated tax
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
1,576
|
|
|
Net of estimated tax
|
|
|
|
|
|
|
|
6. 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, future cash flows and other specific and identified exposures. The terms of the forward foreign currency exchange contracts are matched to the
underlying transaction being hedged. 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 when the underlying hedged transaction occurs. Any ineffectiveness
is recognized in earnings immediately. Gains and losses on hedges are reported as a net change in cash provided or used by operating activities. We do not enter into derivative instruments for trading or speculative purposes and all of our
derivatives were effective throughout the periods reported.
14
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 June 30, 2013, we held foreign currency exchange contracts, not designated as cash flow hedges, with notional amounts totaling $23.0 million of
which $9.1 million will be settled in Euros, $1.4 million will be settled in Taiwan Dollars, $2.4 million will be settled in Korean Won, $2.0 million will be settled in Chinese Yuan Renminbi, and $8.1 million will be settled in Japanese Yen. At
June 30, 2013, we held forward foreign currency exchange contracts designated as cash flow hedges with notional amounts totaling $19.2 million, which will be settled in Japanese Yen. The cash flow hedges held at June 30, 2013 mature
between the third quarter of 2013 and the fourth quarter 2014. At June 30, 2013, the accumulated net unrecognized gains that are expected to be reclassified into earnings during the next twelve months are $1.8 million.
The Company recorded net gains of $0.4 million and $0.7 million for the six months ended June 30, 2013 and 2012, respectively, under the caption
Other income (expense), net in the consolidated statements of comprehensive income related to changes in the fair value of the foreign currency exchange contract economic hedges. The net losses for the three months ended June 30,
2013 and 2012, respectively, were not material. The Company recorded net gains of $0.2 million and $0.9 million for the three and six months ended June 30, 2013 in other comprehensive income related to the change in the fair value of cash flow
hedges. The change in fair value of cash flow hedges was not material for the three and six months ended June 30, 2012.
7. Commitments and Contingencies
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.
As part of the Artelis acquisition, we recognized a liability for the
fair value of contingent payments tied to anticipated future revenue performance, which is currently valued at $4.7 million. The range of possible outcomes related to the contingent payment obligation is $0 to $23.3 million, subject to movements in
currency. See Note 4 for further discussion.
In the first quarter of 2013, we executed a $16.0 million commitment to purchase raw material
from a strategic gas supplier over the next two years.
8. Segments
ATMI has two reportable operating segments, Microelectronics and LifeSciences. Our Chief Executive Officer regularly reviews financial
information which separately identifies each segments results.
The Microelectronics business unit sells
high-purity materials and materials delivery systems for integrated circuit and flat-panel display manufacturing. Microelectronics products consist of ATMIs patented Safe Delivery Source
®
(SDS) solutions to deliver ion implant gases, copper materials for plating, post-etch cleans, post-CMP cleans and deposition, and high-purity liquid
materials packaging solutions. Microelectronics products represent the largest portion of ATMIs business and development activities. The principal drivers for this market are technical performance, yield improvement, time to market, cost,
utilization of capital, and risk reduction. The success of an electronic component or device is determined by the increased functionality it can deliver at an acceptable cost.
The life sciences industry has been using disposable components like filters, connectors, and disposable storage bags for several
years; however, as customers migrate toward processes which integrate disposable components into disposable systems, we see growing opportunities. The LifeSciences business unit sells products that address an increasing number of critical process
steps for biopharmaceutical manufacturing of vaccines, monoclonal antibodies, and cell therapy applications, including disposable mixers and bioreactors, both considered growth opportunities for ATMI. This unit includes our Newform products
and Integrity
®
suite of single-use technology mixers, bioreactors and bioprocess vessels.
The All Other category includes revenues from early stage resource efficiency businesses such as the eVOLV and BrightBlack product lines.
15
The Company evaluates performance and allocates resources based on profit or loss from operations. The
accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
(1)
|
|
|
|
Three Months Ended
June
30,
|
|
|
Six Months Ended
June
30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Microelectronics
|
|
$
|
89,414
|
|
|
$
|
94,518
|
|
|
$
|
177,525
|
|
|
$
|
177,983
|
|
LifeSciences
|
|
|
11,944
|
|
|
|
11,154
|
|
|
|
23,225
|
|
|
|
20,263
|
|
All Other
|
|
|
650
|
|
|
|
227
|
|
|
|
665
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
102,008
|
|
|
$
|
105,899
|
|
|
$
|
201,415
|
|
|
$
|
198,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Intersegment sales for the three and six month periods ended June 30, 2013 and 2012 were not material.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Microelectronics
|
|
$
|
26,926
|
|
|
$
|
30,397
|
|
|
$
|
52,168
|
|
|
$
|
51,429
|
|
LifeSciences
|
|
|
(1,682
|
)
|
|
|
(1,104
|
)
|
|
|
(2,940
|
)
|
|
|
(3,230
|
)
|
All Other
|
|
|
(12,529
|
)
|
|
|
(12,357
|
)
|
|
|
(26,176
|
)
|
|
|
(25,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated
|
|
$
|
12,715
|
|
|
$
|
16,936
|
|
|
$
|
23,052
|
|
|
$
|
23,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16