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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004 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
incorporation or organization)
    
    (I.R.S. Employer Identification No.)7 Commerce Drive, Danbury, CT
    
    06810(Address of principal executive offices)
    
    (Zip Code)
 203-794-1100   Securities registered pursuant to Section 12(b) of the Act: Title
of each class
    
    Name of each exchange
on which registeredNone
    
    Not Applicable
 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value     þ o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K o Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of
the Act). Yes þ No o The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30,
2004, was approximately $850,241,411 based on the closing price of $27.31 per share. The number of shares outstanding of the registrants common stock as of March 9, 2005 was
32,278,580 DOCUMENTS INCORPORATED BY REFERENCE: Proxy statement for the annual meeting of stockholders to be held on May 24, 2005 (Part III).




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ATMI, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2004  
 TABLE OF CONTENTS PagePart IItem 1.Business
    
    
    3Item 2.Properties
    
    
    13Item 3.Legal Proceedings
    
    
    14Item 4.Submission of Matters to a Vote of Security Holders
    
    
    14Part IIItem 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    14Item 6.Selected Financial Data
    
    
    15Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 7A.Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 8.Financial Statements and Supplementary Data
    
    
    26Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    26Item 9A.Controls and Procedures
    
    
    27Part III
    
    
    28Part IVItem 15.Exhibits and Financial Statement Schedule
    
    
    28Signatures
    
    
    32Index to Consolidated Financial Statements and Financial Statement Schedule
    
    
    F-1EX-10.23: AGREEMENT OF LEASEEX-10.24: FORM OF EMPLOYEE RESTRICTED STOCK GRANT AGREEMENTEX-10.25: FORM OF NON-EMPLOYEE DIRECTOR RESTRICTED STOCK GRANT AGREEMENTEX-21: SUBSIDIARIESEX-23: CONSENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATIONS




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PART I References in this annual report to the Company, ATMI, we, us and our refer to ATMI,
Inc. and our wholly-owned subsidiaries on a consolidated basis, unless otherwise stated. 
 Item 1. Business ATMI is a leading supplier of materials, materials delivery systems and high-purity materials
packaging products used worldwide in the manufacture of semiconductor devices. ATMI specifically
targets the front-end semiconductor materials market. This market includes the processes used to
convert a bare silicon wafer into a fully functional wafer that contains many copies of a
semiconductor device or chip. To complete the manufacturing process, this functional wafer is
taken through a back-end manufacturing process that includes wafer dicing into chips, packaging
and testing. ATMIs customers include many of the leading semiconductor manufacturers in the
world. ATMI has further refined its market focus to target specialty materials used in front-end
semiconductor manufacturing. These specialty materials are applied in eight key process steps that
are used repetitively to add functionality to a silicon wafer. The semiconductor industry has grown worldwide over time and front-end manufacturing processes
have become increasingly complex, resulting in rapidly changing requirements for semiconductor
materials. ATMI has capitalized on the growth of the semiconductor industry in general, and
front-end processing in particular, through:  
    a comprehensive research and development program that has provided a stream of
proprietary and patented products for this market;
    customer focused applications development to provide material solutions at future
technology nodes;
    a strategy of providing a comprehensive array of semiconductor materials products (ATMI
now offers materials consumed in five of the eight front-end processes used in
semiconductor manufacturing); and
    a targeted acquisition effort that has allowed us to move toward a complete product
portfolio more rapidly. During 2004, ATMI significantly reduced its exposure to the capital equipment cycles of the
semiconductor industry by selling non-core product lines (which represented nearly all of our
former Technologies segment). The non-core product lines that we exited by sale included the
following: environmental abatement equipment, materials sensing and monitoring equipment,
specialty thin-film deposition services, outsourced parts cleaning and tool maintenance services, a
smartcard device venture and gallium nitride materials. ATMIs continuing operations comprise one reportable business segment. ATMI provides:  
    a broad range of ultrahigh-purity semiconductor materials and materials delivery
systems; and
    ultra-high purity materials packaging with applications in the semiconductor and
pharmaceutical industries. ATMIs business consists of consumables that generally track wafer starts, or the approximate
square inches of silicon wafers processed into fully functional semiconductor devices. Additional
financial information about the Company and related geographic information can be found in the
Managements Discussion and Analysis of Financial Condition and Results of Operations section of
this Form 10-K. 3




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ATMI has achieved a leadership position in high-purity materials, materials delivery systems
and high-purity semiconductor packaging products by providing a more complete line of products than
its competitors through innovation and acquisitions. ATMIs focus has been on providing material
solutions to our customers that will allow them to make faster, better and more reliable chips. We
also focus on working with customers to bring new materials processes into ramped production as
quickly and efficiently as possible. ATMI plans to continue its growth through product line
expansion and to leverage its core technology to create new high growth product lines, including
growing its leadership position in copper advanced interconnect markets. Semiconductor Industry Background The demand for semiconductor devices has grown significantly over time as the use of
semiconductor devices has proliferated in a wide variety of consumer and industrial products,
especially in computing, networking and communications equipment. This increase in demand for
semiconductor devices has been fueled by the ability of semiconductor manufacturers to deliver
products with:  
    consistently enhanced performance characteristics and functionality;
    improved reliability;
    increased memory capacity;
    reduced size, weight, power consumption and cost. These advances have been made possible by innovations in the fabrication processes and in the
materials and delivery systems used in manufacturing advanced semiconductor devices. At the same
time, as the construction and management of fabrication facilities has become more complex,
semiconductor manufacturers continually seek to streamline their supplier relationships and reduce
the number of suppliers upon which they rely. Because of this trend, consolidation among the
providers of semiconductor materials and materials delivery systems is expected to continue. Semiconductor Manufacturing Process Semiconductor devices are manufactured by repeating a complex series of process steps on a
wafer substrate usually made of silicon. The primary process steps include various kinds of
materials deposition (physical vapor deposition, chemical vapor deposition, electrochemical
deposition and ion implantation), etch, wafer preparation (chemical mechanical planarization),
patterning (photolithography) and cleaning (photoresist stripping), each of which is described in
more detail below. The industry is currently being revolutionalized by a transformation from aluminum wiring to
copper wiring in advanced semiconductor chips. Copper wiring requires many new materials to be
developed, such as barriers and insulators, pre- and post- deposition cleaners, pre- and
post-chemical mechanical planarization (CMP) cleaners, and post-etch photoresist and post-strip
residue removers. Each new layer of copper generates a need for several additional materials. During deposition processes, several layers of conducting, semi-conducting or insulating thin
films are formed on a wafer. Precise and reliable control of the deposition of these films is
vital to the ultimate performance of an individual device. The most mature processes for thin film deposition and modification are physical vapor
deposition, also known as PVD or sputtering, and ion implantation. In PVD, which is used primarily
for the deposition of conducting metal layers, a high energy beam is directed at a high purity
metal target which in turn causes the displacement of metal atoms that are showered over the wafer,
coating it with a thin metallic film. Ion
implantation is a gas-based process 4




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used principally to modify (or dope) semi-conducting layers
with a high-energy beam of material that is implanted into an existing thin film. Chemical vapor deposition, or CVD, is a process used in the deposition of semi-conducting and
insulating thin films. In the CVD process, wafers are placed in a sophisticated reaction chamber
and a specially designed gas or vaporized liquid material is introduced. Simultaneously, a form of
energy, such as heat or plasma, is added to the reactor to cause the decomposition of the material
being introduced. As a result of this decomposition, a thin film of material is deposited on the
surface of the wafer. CVD based processes have certain advantages over PVD based processes,
including:  
    the relative thinness of the films applied to the wafer;
    conformality (ability to coat evenly, especially in holes and trenches designed into the device);
    purity; and
    the ability to coat large areas. These advantages have led to rapid growth in sales of reactors and related CVD process consumables
and equipment. Consumables and related equipment include the raw materials used in the CVD process
and the delivery systems required to transport the materials around a semiconductor plant and to a
reactor. Electrochemical deposition, or ECD, is growing rapidly as a result of the industrys desire to
use copper as the conducting layer in certain devices. The use of copper allows for smaller
circuits, because copper greatly reduces power consumption while increasing integrated circuit (IC)
speed. Nature favors copper over aluminum wiring because of its higher conductivity and greater
resistance to thermally and electrically induced short circuits. In ECD, the wafer is submerged in
a bath of copper electroplating solution which, when appropriately charged, deposits a thin film of
copper on the wafer. Etch is a process that selectively erodes away certain thin film materials. It is carried out
either dry with corrosive gases or wet with energized liquids. As semiconductor manufacturing
facilities (or fabs) migrate to copper wiring as the main component inside advanced integrated
circuits, new advanced interconnect materials are required. CMP is used to prepare a wafer for patterning photolithography. As wafers are processed, thin
film thicknesses inevitably vary across the surface of the wafer. Due to the fine line widths used
in photolithography, present-day wafers need to be perfectly flat. CMP flattens the processed
wafer by polishing the wafer using a mechanical polishing pad and a slurry, which is an abrasive
solution containing solid materials and chemicals which selectively erodes away the appropriate
excess materials. Given the migration to copper, precision surface preparation and cleaning
materials become more critical in the fabrication of advanced interconnect devices. Photolithography is the process whereby patterns are developed on the wafer surface. The
process is begun by spinning a photosensitive material called photoresist or resist onto the
wafer surface and shining light through a patterned photomask to selectively harden the resist.
Photoresist strip is the process of stripping or otherwise removing excess resist material and
allowing for the fabrication of the wafers circuitry. Because thin film materials are consumables, the market for these materials and delivery
systems generally tracks wafer starts. The thin film materials market is also segmented into a
wide variety of material types and forms. For example, many thin film precursors are now sold as
pressurized gases, which allows for easy transport around a typical semiconductor manufacturing
plant. However, many of these gases are toxic and/or hazardous, leading to the development of
safer alternatives including the use of liquid or solid materials and the adoption of gas handling
technologies and delivery systems that minimize the danger of a catastrophic release of toxic gas. 5




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In addition, semiconductor materials have exceptional purity requirements due to the extremely
low tolerances for impurities and particulates in semiconductor processing. Liquids and solids used
in making devices require special packaging to minimize exposure to air, airborne contamination and
particulates. The market for semiconductor thin film materials has expanded and contracted with the growth
and contractions of the market for semiconductor devices. The design of new thin film materials
and delivery systems to transport these materials around a semiconductor plant has experienced
ongoing innovation. This innovation has been driven by the demand for expanding semiconductor
device capabilities and corresponding decreases in circuit dimensions. ATMIs Strategy ATMIs objective is to establish and enhance leadership positions in each market it serves.
ATMIs strategy consists of the following key elements:  
    Focus product development and application engineering initiatives with leading
semiconductor manufacturers to provide advanced interconnect and next generation material
solutions.
    Target high-growth, high-margin specialty markets that use ATMIs core materials
technologies and require products that are consumed in the production process.
    Add value through advanced high-purity packaging and dispensing systems designed to meet
the demands of users for greater levels of purity, productivity, safety and environmental
responsiveness.
    Leverage ATMIs technology leadership by investing extensively in developing proprietary
and patented materials and materials handling technology that the Company uses to
commercialize new products and new solutions that will be required for future technology
nodes.
    Form strategic alliances, including joint development programs and collaborative
marketing efforts, to accelerate the introduction of ATMIs products into markets that ATMI
does not currently serve. In summary, ATMIs strategy does not envision a traditional materials supplier-to-customer
relationship. In those relationships, suppliers tend to provide materials to customers based
solely on the cost, quantity and quality of the materials being supplied. Instead, ATMI has worked
to develop partnerships with its customers based on ATMIs ability to improve the efficiency of
customers manufacturing and supply chain processes, thereby lowering the integrated costs of
materials to our customers. Businesses and Products ATMI believes it is one of the fastest growing, and among the most innovative, suppliers of
ultra-high purity semiconductor materials, materials delivery systems and ultra-high purity
materials packaging to the semiconductor industry. ATMI has sought to take advantage of the
changes in the market for materials, delivery systems and packaging by:  
    developing and commercializing a broad range of front-end semiconductor materials;
    developing and commercializing low-pressure gas delivery systems for safe handling and
delivery of toxic and hazardous gases to semiconductor process equipment;
    developing and commercializing innovative high-purity packaging systems that allow for
the introduction of low volatility liquids and solids to semiconductor processes; and
    developing manufacturing processes to meet the critical purity and integrity
requirements of the semiconductor industry. 6




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In meeting the needs of its customers, which include semiconductor device manufacturers,
chemical suppliers and semiconductor original equipment manufacturers, or OEMs, located throughout
the world, and anticipating their future requirements, ATMI seeks to:  
    offer the most complete line of consumable and delivery and packaging system products;
    offer the highest purity materials available;
    provide a high level of customer service and applications support;
    meet customer needs for statistical quality and process control and dock-to-stock programs; and
    meet the industrys needs for advanced materials required for future generation devices. Products and Services.ATMI has three primary product lines: gas delivery systems, liquid
materials and delivery systems and advanced high-purity packaging and delivery systems. ATMI also
provides applications and analytical support services relating to each of these product lines. Gas Delivery Systems Gas Delivery SystemsATMIs patented SDS® (the SDS® product line or
Safe Delivery Source) product line uses a standard gas cylinder containing an adsorbent material.
The cylinder is filled with gas under conditions such that the gas is adsorbed onto the adsorbent
material at sub-atmospheric pressure. Sub-atmospheric storage of hazardous gases minimizes
potential leaks of gas during transportation and use, thus providing significant safety and
environmental improvements over the traditional high-pressure cylinders. In addition,
SDS® products allow more gas to be stored in the cylinder, providing significantly
higher rates of productivity than traditional methods of gas delivery used in ion implantation
manufacturing processes. Since ion implantation processes operate at reduced pressures, the gas
can be desorbed or released from the SDS® gas sources using the ion implanters vacuum
pumps. SDS® gas sources can be installed and operated like conventional high-pressure
gas cylinders with minimal maintenance. These advantages have led major chip manufacturers to
adopt this technology as the industrial standard for dopant gas delivery. ATMI is a market leader in materials used in ion implantation applications with its
SDS® brand of implant gases. SDS® materials include primarily arsine,
phosphine and boron trifluoride. These products are manufactured by ATMI and ATMIs exclusive
distributor, Matheson Tri-Gas, Inc. In its continuous effort to improve SDS®technology, ATMI recently introduced the third generation of SDS® products, called
the SDS3 product line The new product, while still maintaining all the inherent safety
features of previous generation SDS® products, dramatically increases the gas storage
capacity by using newly invented adsorbent. The 2 to 3 times capacity improvement over existing
products allows implanter users to further reduce tool down time, resulting in significant cost
savings. ATMI has also successfully adopted the carbon adsorption technology and introduced new
products for semiconductor deposition processes marketed under the SAGE® brand. These
applications include: low-k plasma-enhanced deposition, or PE-CVD, processes using low-k
materials, pre-metal dielectric high-density plasma, or HDP-CVD, films utilizing phosphine gases
and thermal deposition processes using germane gases. ATMI has also introduced a silane product
used in processes such as HDP-CVD packaged in a novel vacuum-actuated cylinder (VAC®)
for improved safety. Liquid Materials and Delivery Systems Surface Preparation.ATMIs AP and ST brand wafer photoresist strip cleaning materials are
proprietary chemistries used for applications such as semiconductor post-etch residue removal,
wafer etching, organics removal, negative resist removal, edge bead removal and corrosion
prevention. The ST-250 material is recognized as a leading material for the high-growth copper
device post-etch residue removal application. This proprietary material is used for copper
interconnects in advanced wafer fabs. Copper wiring in semiconductor devices is a rapid-growth 7




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segment with most major logic segment semiconductor companies in production at 130 nanometers. Our
surface preparation products, acquired in connection with the acquisition of ESC, Inc., are being
used in the most advanced copper fabs around the world for various surface preparation applications
such as post-CMP cleaning and pre-nitride deposition surface treatment. ATMI expects that
applications for these products will expand rapidly as the advanced IC device designs drop below 90
nanometers. The surface preparation technology has applications in IC as well as other niches such
as LCD (liquid crystal display), disk drive and other areas. Copper Plating.ATMI is a market leader in materials used in copper electrochemical deposition
applications with its Viaform® brand of copper materials. ATMI purchased an exclusive,
worldwide license to market and distribute Viaform® materials in 2003 from Enthone,
Inc., a subsidiary of Cookson Electronics. Viaform® materials include inorganic and
proprietary organic molecules that enable process efficiency in dual damascene copper processing
applications. Dual damascene copper processing in semiconductor devices is a rapidly growing
market with most major logic segment semiconductor companies in production at 130 and 90 nanometers
with ongoing research and development in 65 and 45 nanometer technology nodes. Deposition.ATMI is also a leader in CVD products used for thin films in semiconductor
manufacturing. ATMI markets these materials under the UltraPur brand for pre-metal dielectric,
dielectric and barrier applications. ATMI believes it is well positioned as the industry prepares

to move to low-k dielectric films with the introduction of several new products in this area
including UltraPur OMCTS (octamethylcyclotetrasiloxane), UltraPur 4MS (tetramethylsilane),
Super Dry TMCTS (tetramethylcyclotetrasiloxane) and other materials. The low-k dielectric
application is one of the fastest growing applications for dielectric deposition and is expected to
become a mainstream technology at 90 and 65 nanometer device generations. ATMI is also well
positioned for the incorporation of atomic layer deposition (ALD) processes by the semiconductor
industry with its ProE-VapTM ampoule. This proprietary container allows for reliable
delivery of low volatility solid precursors required for ALD. ATMI manufactures and markets chemical delivery systems under the Bulkfill, Unichem, 3Chem
and RPM brands. ATMIs patented canister technology and proprietary piping manifold purge
technology make these systems a preferred solution, which reliably and safely manage materials in
semiconductor fabs. These systems are designed to enable process tool efficiency through
continuous refill of deposition tools, alleviating the need for costly tool shutdowns for container
changes. The Bulkfill system is used for fab-wide distribution of TEOS (tetraethylorthosilicate),
greatly reducing the frequency of container changes with its large 200-liter reservoirs. The
3Chem system is designed for BPSG (boron phosphorous silica glass) applications, combining the
delivery of the boron, phosphorous and silicon precursors. The reduced pressure manifold or RPM
gas delivery cabinet is designed to deliver ATMIs proprietary sub-atmospheric SAGE®and
VAC®gases. Chemical Mechanical Planarization.ATMIs CMP products include the PlanarChem brand of
materials. ATMI supplies materials for silicon oxide based film polishing for many different
applications. ATMI is also developing copper and barrier polishing materials for the application
of polishing copper-based dual damascene structures. These products are sold under the
CERULEAN® brand name and provide advantages to customers for simplicity and cost of
ownership that provide lower defect rates while achieving high removal rates, thus providing
overall process efficiency that is consistent with our core strategy. Advanced High-Purity Packaging and Delivery Systems ATMI manufactures three different types of NOWPak® container assemblies for
packaging and delivery of ultra-high purity liquids: Bag-in-a-Bottle container system ;
Bag-in-a-Can container system and Bag-in-a-Drum container system, each with its own companion
dispense connection system. Each features a pre-cleaned collapsible inner liner, or bag, inside
a rugged, high-density polyethylene or stainless steel overpack. The
standard liner films are made of polytetrafluoroethylene, or proprietary multi-ply films of
polyolefin and other polymers, which allow chemicals to be delivered to the manufacturing process
without compromising their inherent purity. The empty inner liner is easily removed for waste
consolidation, and the outer shell is recyclable or returnable for insertion of a new replacement
liner. The dispense system promotes full utilization of the chemical, chemical isolation from
environmental contamination and improved safety during dispense by sealing and isolating the 8




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chemical from the environment to protect further the chemical and the operator. It also ensures
that the correct chemical is installed on the process through a key coding or RFID system. The largest current market for NOWPak® packaging is photoresist and related
chemicals used to pattern integrated circuits and flat panel displays. For integrated circuit
patterning, these materials are typically packaged in Bag-in-a-Bottle containers that range in
size from 1 to 10 liters. For flat panel display applications, larger 18-20 liter Bag-in-a-Bottle
or Bag-in-a-Can containers are used. Recently, applications have expanded beyond photolithography
chemicals in the semiconductor market to include ancillary chemicals, CMP slurries and process
chemicals using the recently developed 200 liter Bag-in-a-Drum container system. ATMI also produces packages for high-purity solids under the Newform brand name. The Company
makes high-purity flexible Ultra Clean packaging for the semiconductor and pharmaceutical
industries. With its Newform products, ATMI packages critical materials and components for the
semiconductor industry such as sputtering targets, wafer and disc shippers and cleanroom
components. With the NOWPak® liquid packaging system and Newform solids packaging,
ATMI is addressing an increasing number of critical packaging needs for the microelectronics and
pharmaceutical markets. Other markets for the Companys proprietary high-purity packaging and
delivery systems include the biotech and laboratory markets. Customers, Sales and Marketing ATMI sells and distributes its products worldwide primarily through a direct global sales and
service organization. For a breakdown of revenue by geography, see Note 17 to our consolidated
financial statements. ATMI markets and sells its materials products to end-use customers, chemical
suppliers and equipment suppliers through its direct sales force in North America, Europe, Taiwan,
Korea, Japan, China and Singapore, with limited use of regional manufacturing representatives in
certain parts of Asia. Additionally, ATMIs materials delivery systems product lines are marketed
and sold to semiconductor equipment OEMs, who in turn resell to end-users. NOWPak®
containers are generally sold to chemical suppliers, who sell their high purity chemicals in
NOWPak® containers at the request of end-users. Newform packaging products are sold
directly to semiconductor and pharmaceutical companies, predominately in Europe and to an
increasing extent in the United States. ATMI sells its SDS® products for ion implant
applications directly to certain end-users and through an exclusive distribution agreement with
Matheson Tri-Gas. The majority of ATMIs sales are to customers in the worldwide semiconductor industry.
Results of operations, therefore, are materially dependent upon economic and business conditions in
the semiconductor industry. The semiconductor industry is highly cyclical and while it has
historically experienced significant growth, periods of reduced semiconductor unit demand and
manufacturing overcapacity have resulted and could result again in significantly reduced demand for
semiconductor materials, including the materials, materials delivery systems and ultra-high purity
packaging products sold by ATMI. 9




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Manufacturing The following table summarizes the locations, products manufactured and size of ATMIs various
manufacturing facilities as of December 31, 2004. Location
    
    
    Products
    
    
    Square FootageAllentown, PA
    
    
    
    
    liquid materials
    
    
    
    7,000Anseong, South Korea
    
    
    
    
    liquid materials
    
    
    
    9,000Burnet, TX
    
    
    
    
    liquid materials and
delivery systems
    
    
    
    75,000Bloomington, MN (1)
    
    
    
    
    high-purity
packaging and delivery systems
    
    
    
    164,000Danbury, CT
    
    
    
    
    gas delivery systems
    
    
    
    75,000
    
    liquid materialsHoegaarden, Belgium
    
    
    
    
    high-purity packaging
and mixing systems
    
    
    
    71,000
   (1) Includes a new 68,000 square foot facility, which ATMI leased in the fourth quarter of
2004. During 2005, the Company will outfit this new facility and will move the operations of the
high-purity packaging and delivery systems business from the old facility, also located in
Bloomington, MN, to the new facility. The lease on the old facility (96,000 square feet) will
expire in August 2005 and is not expected to be renewed. Competition ATMIs primary competitors in the semiconductor materials product lines are the Schumacher and
Ashland divisions of Air Products and Chemicals, Inc., the EKC Division of DuPont and the Shipley
division of Rohm and Haas. There are several additional companies outside the United States that
compete with ATMI. ATMIs SDS® brand product currently has no widely established direct competition.
Several companies compete with high-pressure gas cylinders and solid sources. There are numerous

domestic and foreign companies that offer products that compete with ATMIs high-purity materials,
materials delivery systems and ultra-high purity packaging and chemical dispensing system products.
ATMI believes that its ability to compete in the markets for containers and dispensing systems is
dependent largely upon its patented NOWPak® technology and its proven ability to enhance
and improve its products and technologies. Increased competition has and may continue to impact
the prices we are able to charge for our products. In addition, our competitors could have or
obtain intellectual property rights which could restrict our ability to market our existing
products and / or to innovate and develop new products. Research and Development The Companys research and development expenses consist of personnel and other direct and
indirect costs for internally funded project development. ATMI also participates in joint
development efforts with certain semiconductor manufacturers and semiconductor equipment OEMs.
Total expenses for research and development for the years ended December 31, 2004, 2003 and 2002
were $19.6 million, $19.2 million and $13.8 million, respectively, including amounts reimbursed by
external parties through contract funding and cost share agreements of $0.7 million, $0.8 million
and $1.6 million in 2004, 2003 and 2002, respectively. Total research and development expenditures
represented 7.9%, 11.2% and 10.1% of revenues in 2004, 2003 and 2002, respectively. Strategic Alliances ATMI forms strategic alliances, including joint development programs and collaborative
marketing efforts, to accelerate the introduction of its products into markets that have
manufacturing or distribution barriers. These 10




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programs have led to significant technological
advances, including the development of proprietary advanced materials and semiconductor
manufacturing processes. ATMI has entered into an exclusive license, manufacture and distribution
agreement with Matheson Gas Products, Inc. (Matheson), whereby ATMI has granted licensing rights
for the manufacturing and worldwide distribution of certain SDSâproducts to
Matheson. Both ATMI and Matheson manufacture SDSâproducts for worldwide
distribution under this exclusive agreement. ATMI has also entered into a strategic alliance with
Enthone, Inc., a Cookson Electronics Company (Enthone), whereby ATMI purchased the exclusive
worldwide selling and distribution rights to Enthones copper electrochemical deposition (ECD)
products, including its ViaFormâ products, for a period of ten years, subject to
automatic renewal upon satisfaction of certain conditions. Under the terms of the agreement,
Enthone continues to manufacture the ViaFormâproducts for ATMI. Most of ATMIs
other strategic alliances are with leading semiconductor manufacturers or OEMs, each of which has
participated with the Company in advanced materials and process development programs. These
programs enhance ATMIs core technology base and promote the introduction of targeted products. Backlog ATMI does not track backlog, since substantial portions of the business are conducted with
open-ended, supply contracts that do not specify quantities. Also, the SDSâ gas
delivery source product, marketed principally through Matheson as an exclusive distributor
for the ion implant market, carries no backlog. Therefore, the Company does not believe that
backlog as of any particular date is indicative of future results. Patents and Proprietary Rights ATMI has made a significant investment in securing intellectual property protection for its
technology and products. ATMI seeks to protect its technology by, among other things, filing
patent applications where appropriate. The Company also relies upon trade secrets, unpatented
know-how, continuing technological innovation and licensing opportunities to help develop and
maintain its competitive position. As of February 15, 2005, ATMI owns or controls approximately 284 United States patents and had
approximately 116 current United States patent applications pending. Foreign counterparts of
certain of these applications have been filed, or may be filed at an appropriate time. ATMI
decides on a case-by-case basis whether, and in what countries, it will file counterparts of a
United States patent application outside the United States. ATMIs United States patents expire
between approximately 2005 and 2024. ATMI also holds approximately 23 United States registered
trademarks. ATMIs ability to compete effectively with other companies will depend, in part, on its
ability to maintain the proprietary nature of its technology. Although the Company has been
awarded, has filed applications for, or has been licensed under numerous patents in the United
States and other countries, there can be no assurance concerning the degree of protection afforded
by these patents or the likelihood that pending patents will be issued. ATMI requires all employees and most consultants, outside scientific collaborators, sponsored
researchers and other advisors to execute confidentiality agreements upon the commencement of
employment or consulting relationships with the Company. These agreements provide that all
confidential information developed or made known to the entity or individual during the course of
the entitys or individuals relationship with ATMI is to be kept confidential and not disclosed to
third parties except in specific circumstances. All of ATMIs employees have entered into
agreements providing for the assignment of rights to inventions made by them while employed by the
Company. Environmental Regulation ATMI uses hazardous materials and generates regulated waste streams as part of its
manufacturing, processing and R&D activities. As a result, the Company is subject to a variety of
governmental regulations related to the storage, use and disposal of these materials. ATMIs
failure to comply with present or future laws could result in fines or other liabilities being
imposed on the Company, suspension of production or a cessation of operations. 11




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##### Table of Contents



The various premises that ATMI occupies may have been contaminated prior to occupancy. ATMI
is not aware of any material environmental investigation or action by government agencies involving
these premises. However, under federal and state statutes and regulations, a government agency may
seek to recover its response costs or require future remedial measures from both operators and
owners of property where releases of hazardous substances have occurred or are ongoing. The
Company has secured indemnifications for remediation costs in connection with certain potential
pre-existing, on-site contamination or environmental conditions. However, these indemnifications
may not prove adequate to cover any liability imposed on the Company related to the environmental
condition of the premises or the cost of defending an environmental action, either of which could
be substantial. ATMIs activities may also result in the Company being subject to additional regulation. Such
regulations could require ATMI to acquire significant additional equipment or to incur other
substantial expenses to comply with environmental laws. ATMIs failure to control properly the use
of hazardous substances could subject the Company to substantial liabilities. Employees As of December 31, 2004, ATMI employed 671 individuals, including 302 in sales, marketing and
administration, 262 in operations and 107 in research and development. Of these employees, 37 hold
Ph.D. degrees and 67 hold other advanced degrees in electrical engineering, materials science,
chemistry, physics or other technical fields. Only 5% of the Companys employees are covered by a
collective bargaining agreement, which expired in December 2004. ATMI is currently in the process
of negotiating a new collective bargaining agreement with agents of this employee group and expects
to have this accomplished by the second quarter of 2005. All of the employees covered by this
agreement are based in Europe. ATMI has never experienced any work stoppages and considers its
relations with its employees to be good. Company Information ATMI was incorporated under the laws of Delaware in 1997, and its predecessor company was
incorporated under the laws of Delaware in 1987. ATMIs headquarters is located at 7 Commerce
Drive, Danbury, Connecticut 06810, and the telephone number is (203) 794-1100. ATMIs website can be found on the Internet at www.atmi.com. The website contains
information about the Company and its operations. Copies of each of the Companys filings with the
SEC, including filings on Form 10-K, Form 10-Q, Form 8-K and Form S-8, and all amendments to those
reports can be viewed and downloaded free of charge as soon as reasonably practicable after the
reports and amendments are electronically filed with or furnished to the SEC by accessing
www.atmi.com and clicking on Investorand then clicking on SEC Filing. 12




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##### Table of Contents



Any of our reports filed or furnished with the SEC can also be obtained in print by any
stockholder who requests them from our Investor Relations Department: Investor RelationsATMI, Inc.7 Commerce DriveDanbury, CT 06810
 
 Item 2. Properties The following table summarizes the location and size of ATMIs various properties as of
December 31, 2004: Location
    
    
    Square Footage
    
    
    Lease / OwnAllentown, PA
    
    
    
    7,000
    
    
    
    LeaseAnseong, South Korea
    
    
    
    9,000
    
    
    
    OwnBloomington, MN(1)
    
    
    
    96,000
    
    
    
    LeaseBloomington, MN (1)
    
    
    
    68,000
    
    
    
    LeaseBundang, South Korea
    
    
    
    3,000
    
    
    
    OwnBurnet, TX (2)
    
    
    
    35,000
    
    
    
    OwnBurnet, TX
    
    
    
    75,000
    
    
    
    OwnDanbury, CT (3)
    
    
    
    31,000
    
    
    
    LeaseDanbury, CT
    
    
    
    75,000
    
    
    
    LeaseHillsboro, OR (4)
    
    
    
    24,000
    
    
    
    LeaseHoegaarden, Belgium
    
    
    
    71,000
    
    
    
    OwnHsin-chu, Taiwan
    
    
    
    40,000
    
    
    
    LeaseSan Jose, CA (5)
    
    
    
    45,000
    
    
    
    Lease
   (1)     Includes a new 68,000 square foot facility, which ATMI leased in the fourth quarter of
2004. During 2005, the Company will outfit this new facility and will move the operations of
the high-purity packaging and delivery systems business from the old facility, also located in
Bloomington, MN, to the new facility. The lease on the old facility will expire in August 2005
and is not expected to be renewed. (2)     The operations of this facility have been moved to the Companys new state-of-the-art
materials manufacturing facility also in Burnet, Texas. Management expects to dispose of this
site during 2005. (3)     ATMIs corporate headquarters. The lease expires in 2008. (4)     This facility is primarily used by the buyer of the Companys former outsourced parts
cleaning and tool maintenance services business and the buyer of that business is paying a
monthly occupancy fee to the Company for its continued use. (5)     This facility is primarily used by the Companys former environmental abatement equipment
business and the buyer of that business is paying a monthly occupancy fee to the Company for its
continued use. ATMI also leases various sales offices throughout the world, each one of which occupies
less than 5,000 square feet. 13




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##### Table of Contents



Item 3. Legal Proceedings On July 11, 2003, ATMIs subsidiary, Advanced Technology Materials, Inc., filed suit against
Praxair, Inc., the parent company of Praxair Electronics, in the United States District Court for
the Southern District of New York, charging it with infringing two patents ATMI holds for certain
gas storage and delivery systems. ATMI is seeking damages and an injunction against Praxair
marketing its UpTime system. On December 22, 2003, Praxair, Inc. and Praxair Technology, Inc.
filed suit against ATMI, Inc. and Advanced Technology Materials, Inc. in the United States District
Court for the District of Delaware alleging infringement of three patents owned by Praxair
Technology, Inc. related to certain gas storage and delivery systems. Praxair is seeking damages
and an injunction against ATMI marketing its VAC system. In addition, in the normal course of business, ATMI is involved in various proceedings and
claims. Although the Company cannot determine the ultimate outcome of any of these legal
proceedings at this time, management, including internal counsel, does not believe that the outcome
of these proceedings, individually or in the aggregate, will have a material adverse effect on
ATMIs financial position or results of operations. 
 Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders, through the solicitation of proxies or
otherwise, during the fourth quarter of the fiscal year ended December 31, 2004. 
 PART II. 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities The common stock of ATMI has traded on the Nasdaq National Market under the symbol ATMI since
October 13, 1997, and the common stock of our predecessor company traded under that symbol from
1993 until October 12, 1997. The following table sets forth for the periods indicated the high and
low sales price for the common stock as reported on the Nasdaq National Market: High
    
    
    LowFiscal year ended December 31, 20031st  Quarter
    
    $
    23.61
    
    
    $
    16.802nd Quarter
    
    
    27.90
    
    
    
    19.273rd  Quarter
    
    
    30.50
    
    
    
    23.254th  Quarter
    
    
    27.83
    
    
    
    20.10Fiscal year ended December 31, 20041st  Quarter
    
    $
    30.00
    
    
    $
    23.222nd Quarter
    
    
    27.50
    
    
    
    21.803rd  Quarter
    
    
    27.13
    
    
    
    17.184th  Quarter
    
    
    25.65
    
    
    
    19.16
 As of March 9, 2005, there were approximately 221 holders of record of the common stock. The Company has never declared or paid any cash dividends on its capital stock. The Company
currently intends to retain all available earnings for use in its business and does not anticipate
paying any cash dividends in the foreseeable future. The Transfer Agent and Registrar for ATMI is Equiserve Trust Company, N.A. 14




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##### Table of Contents



Item 6. Selected Financial Data The following selected consolidated statements of operations for the years ended December 31,
2004, 2003, 2002, 2001 and 2000 and the consolidated balance sheet data as of December 31, 2004,
2003, 2002, 2001 and 2000 are derived from ATMIs audited consolidated financial statements. The
data set forth below should be read in conjunction with the consolidated financial statements and
notes thereto and other financial information included elsewhere in this Form 10-K. 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Consolidated Statements of Operations:Revenues
    
    $
    246,291
    
    
    $
    171,634
    
    
    $
    136,975
    
    
    $
    111,563
    
    
    $
    132,747Cost of revenues
    
    
    122,415
    
    
    
    89,902
    (2)
    
    
    68,424
    
    
    
    54,545
    (10)
    
    
    59,783Gross profit
    
    
    123,876
    
    
    
    81,732
    
    
    
    68,551
    
    
    
    57,018
    
    
    
    72,964Operating expenses:Research and development
    
    
    19,577
    
    
    
    19,170
    (3)
    
    
    13,843
    
    
    
    9,896
    
    
    
    7,495Selling, general and
administrative
    
    
    66,920
    
    
    
    54,145
    
    
    
    50,572
    
    
    
    51,843
    (11)
    
    
    49,394Restructuring and other charges
    
    
    
    
    
    
    1,731
    (4)
    
    
    
    
    
    
    6,011
    (12)
    
    
    Total operating
expenses
    
    
    86,497
    
    
    
    75,046
    
    
    
    64,415
    
    
    
    67,750
    
    
    
    56,889Operating income (loss)
    
    
    37,379
    
    
    
    6,686
    
    
    
    4,136
    
    
    
    (10,732
    )
    
    
    16,075Interest income (expense), net
    
    
    (3,442
    )
    
    
    (3,862
    )
    
    
    (1,803
    )
    
    
    3,582
    
    
    
    7,156Other income (expense), net
    
    
    (3,473
    )(1)
    
    
    (5,453
    )(5)
    
    
    390
    (8)
    
    
    7,003
    (13)
    
    
    7,939
    (15)Income (loss) before income
taxes and minority interest
    
    
    30,464
    
    
    
    (2,629
    )
    
    
    2,723
    
    
    
    (147
    )
    
    
    31,170Provision (benefit) for income
Taxes
    
    
    10,358
    
    
    
    (4,617
    )(6)
    
    
    951

    
    
    
    (804
    )
    
    
    11,691Income before minority interest
    
    
    20,106
    
    
    
    1,988
    
    
    
    1,772
    
    
    
    657
    
    
    
    19,479Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351
    )Income from continuing
Operations
    
    
    20,106
    
    
    
    1,988
    
    
    
    1,772
    
    
    
    657
    
    
    
    19,128Income (loss) from operations of
discontinued operations, net
of taxes
    
    
    3,313
    
    
    
    (11,907
    )(7)
    
    
    (32,493
    )(9)
    
    
    (10,353
    )(14)
    
    
    24,557
    (16)Gain on disposal
of discontinued
operations, net of taxes
    
    
    8,083
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    31,502
    
    
    $
    (9,919
    )
    
    $
    (30,721
    )
    
    $
    (9,696
    )
    
    $
    43,685Diluted earnings (loss) per
share:Earnings per share from
continuing operations
    
    $
    0.64
    
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    0.63Earnings (loss) per share from
operations of discontinued
operations
    
    $
    0.10
    
    
    $
    (0.38
    )
    
    $
    (1.05
    )
    
    $
    (0.34
    )
    
    $
    0.81Earnings per share from gain on
disposal of discontinued
operations
    
    $
    0.26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings (loss) per common share
    
    $
    1.00
    
    
    $
    (0.32
    )
    
    $
    (0.99
    )
    
    $
    (0.32
    )
    
    $
    1.44Weighted average shares
Outstanding assuming dilution
    
    
    31,650
    
    
    
    31,208
    
    
    
    30,997
    
    
    
    30,657
    
    
    
    30,290
 15




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##### Table of Contents



2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Consolidated Balance Sheet Data:Cash, cash equivalents and
marketable securities
    
    $
    238,960
    
    
    $
    128,700
    
    
    $

    166,178
    
    
    $
    210,494
    
    
    $
    131,505Working capital
    
    
    296,629
    
    
    
    244,934
    
    
    
    282,734
    
    
    
    339,448
    
    
    
    248,711Total assets
    
    
    470,100
    
    
    
    414,442
    
    
    
    416,482
    
    
    
    459,056
    
    
    
    350,805Long-term obligations
    
    
    118,255
    
    
    
    115,406
    
    
    
    115,346
    
    
    
    118,118
    
    
    
    3,455Total stockholders equity
    
    
    297,576
    
    
    
    254,251
    
    
    
    256,390
    
    
    
    280,014
    
    
    
    286,567
   (1)
    
    Includes a $4.5 million asset impairment charge related to the Companys strategic investment
portfolio.(2)
    
    Includes charges of $2.7 million to write down inventory balances in the liquid chemistries
and delivery equipment product lines.(3)
    
    Includes $0.7 million of in-process research and development expensed in connection with the
ESC, Inc. acquisition.(4)
    
    Represents a $2.4 million asset impairment charge related to the Companys former liquid
chemistries manufacturing facility, partially offset by a $0.7 million gain related to
sublease income from a former tenant in the Companys Danbury, Connecticut facility.(5)
    
    Includes $5.7 million of asset impairment charges related to the Companys strategic
investment portfolio.(6)
    
    Includes $3.0 million of tax benefit recognized as a result of a favorable U.S. Tax Court
judgment.(7)
    
    Includes a $2.6 million (net of $1.5 million tax benefit) charge for excess and obsolete
inventory.(8)
    
    Includes $1.0 million gain from the sale of available-for-sale securities, offset by a $0.4
million write-down of other available-for-sale securities.(9)
    
    Includes an asset impairment charge of $21.8 million (net of tax benefit of $12.8 million) to
recognize the impairment of assets in the Companys former gallium arsenide epitaxial services
business.(10)
    
    Includes a $0.6 million inventory write-down.(11)
    
    Includes a special charge for accounts receivables write down of $2.5 million as a reserve
against the possible effects that the weakened economic environment and semiconductor industry
downturn had on ATMIs customers.(12)
    
    Represents severance and other costs incurred in connection with ATMIs restructuring
efforts.(13)
    
    Includes a gain on settlement of patent litigation, net of related expenses, and a $2.6
million gain on the sale of available-for-sale securities, offset by an asset impairment
charge of approximately $0.4 million on available-for-sale securities.(14)
    
    Includes a $0.7 million (net of tax benefit of $0.4 million) inventory write-down and a $5.4
million (net of tax benefit of $2.6 million) of costs incurred in connection with ATMIs
restructuring efforts announced in the first and third quarters of 2001.(15)
    
    Includes a $9.5 million gain on the sale of marketable securities offset by a loss of $1.3
million on other investments.(16)
    
    Includes $1.5 million of costs incurred in connection with completing an acquisition. 16




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations
should be read together with the consolidated financial statements and the related notes thereto
appearing in Item 8 of this annual report. Overview ATMI is a leading supplier of materials, materials delivery systems, and high-purity materials
packaging products used worldwide in the manufacture of semiconductor devices. ATMI specifically
targets the front-end semiconductor materials market. This market includes the processes used to
convert a bare silicon wafer into a fully functional wafer that contains many copies of a
semiconductor device or chip. To complete the manufacturing process, this functional wafer is
taken through a back-end manufacturing process that includes wafer dicing into chips, packaging
and testing. ATMIs customers include many of the leading semiconductor manufacturers in the
world. During 2004, ATMI significantly reduced its exposure to the capital equipment cycles of the
semiconductor industry by selling non-core product lines. The non-core product lines that we
exited by sale included the following: environmental abatement equipment, materials sensing and
monitoring equipment, specialty thin-film deposition services, outsourced parts cleaning and tool
maintenance services, our smartcard device venture and gallium nitride materials. See Note 2 to our consolidated financial statements in Item 8 for additional details about the
discontinued operations. Critical Accounting Policies and Estimates General Managements discussion and analysis of ATMIs financial condition and results of operations
are based upon the Companys consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States (U.S. GAAP). The
preparation of these financial statements requires ATMI to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to bad debts, inventories, marketable securities and investments,
intangible assets, property, plant and equipment, income taxes, restructuring charges,
contingencies and litigation. The Company bases its estimates on experience and on various other
assumptions that the Company believes to be reasonable under the circumstances, which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. The policies discussed below are considered by management to be critical to understanding the
Companys financial statements and accompanying notes prepared in accordance with U.S. GAAP. Revenue Recognition The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements(SAB 101), as amended by SAB 101A, 101B, and SAB 104.
SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3)
the fee is fixed or determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on managements judgments regarding the fixed nature of the fee
charged for products delivered and services rendered and collectibility of those fees. Revenues
from product sales are recognized upon title transfer, which generally occurs upon shipment. In
instances where final acceptance of equipment is specified by the purchase agreement, revenue is
deferred until all
acceptance criteria have been satisfied. Service revenue is generally recognized ratably over the
period of the related 17




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##### Table of Contents



contract, or if not under contract, when service is provided. Should changes
in conditions cause management to determine these criteria are not met for certain future
transactions, revenue recognized for any reporting period could be adversely affected. The Company
accrues for sales returns, warranty costs and other allowances based on a current evaluation of its
experience based on stated terms of the transactions. Should actual product failure rates or
customer return experience differ from the Companys estimates, revisions to the estimated accruals
would be required. Bad Debts The Company maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. Past due status of accounts receivable is
determined primarily based upon contractual terms. ATMI grants extended payment terms, which vary
based on the geographic location of the customer and generally range from 30 to 90 days. There are
no known material collectibility issues with these extended-term receivables. If the financial
condition of the Companys customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required. Inventories The Company provides inventory allowances for estimated excess, obsolete and unmarketable
inventory equal to the difference between the cost of inventory and estimated market value based
upon future demand forecasts and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be required. Marketable Securities and Investments The Company holds minority interests in companies having operations or technology in areas
within or related to its strategic focus, some of which are in publicly traded companies whose
share prices are highly volatile and some of which are in private companies whose value is
difficult to determine. Investments in private companies are included in the consolidated balance
sheets under the caption other long-term assets, net. ATMI regularly reviews investment
securities for impairment based on criteria that include the extent to which cost exceeds market
value, the duration of that market decline, our intent and ability to hold to recovery and the
financial health and specific prospects for the issuer. Future adverse changes in market conditions
or poor operating results of underlying investments could result in losses or an inability to
recover the carrying value of the investments that may not be reflected in an investments current
carrying value, thereby possibly requiring an impairment charge in the future. Depreciable Lives of Property, Plant and Equipment Property, plant and equipment is recorded at cost and depreciated over the assets estimated
useful lives on a straight-line basis for financial reporting purposes. The estimated useful life
represents the projected period of time that the asset will be productively employed by the Company
and is determined by management based on many factors, including experience with similar assets,
technological life cycles, and geographic locations. Circumstances and events relating to these
assets are monitored to ensure that changes in asset lives or impairments are identified and
prospective depreciation expense or impairment expense is adjusted accordingly. Managements
judgment is required in the determination of the estimated depreciable lives that are used to
calculate the annual depreciation expense and accumulated depreciation. Goodwill The Company accounts for goodwill in accordance with Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. In accordance with SFAS 142,
management reviews goodwill for impairment annually or when events or circumstances indicate that
its value may have declined. In order to evaluate impairment of goodwill, assumptions about the
future condition and operations of the business
unit to which the goodwill asset relates are made. These assumptions are applied to complex
models in which we estimate the fair value of the business unit utilizing projected future cash
flows, multiples of earnings and sales and other factors. 18




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##### Table of Contents



Using these models, management
determines whether an impairment charge is required to reduce goodwill to its estimated fair value. This estimation process is complex and involves subjective assumptions about future events and
discount factors to be applied to projected cash flows. Estimated values can be affected by many
factors beyond the Companys control such as business and economic trends, government regulation
and technological changes. Management believes the assumptions made to evaluate goodwill
impairment are appropriate and reasonable. However, changes in circumstances or conditions
affecting these assumptions could result in impairment charges in future periods that may be
material. Other Identifiable Intangible Assets Other identifiable intangible assets, such as acquired patents and trademarks, customer lists
and non-compete covenants are currently amortized using the straight-line method over their
estimated useful lives ranging from 3 to 14 years. These assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. Stock-Based Compensation At December 31, 2004, the Company has seven stock-based employee compensation plans, which are
described more fully in Note 13 to the consolidated financial statements. The Company accounts for
these plans under the recognition and measurement principles of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. All
options granted under those plans had an exercise price equal to market value of the underlying
common stock on the date of grant. Additionally, unvested (restricted) stock was issued as
stock-based compensation during 2004. See Note 1 to the consolidated financial statements for the
effect on earnings if the Company had applied the fair value recognition provisions of SFAS No.
123, Accounting For Stock-Based Compensation, to stock-based employee compensation. Restructuring During the fiscal year ended December 31, 2003, the Company recorded significant charges in
connection with restructuring and other initiatives. These charges included costs related to
employee separation costs, plant closing costs, early lease termination expenses and various other
asset and working capital write-offs or write-downs. Income Taxes The carrying value of the Companys net deferred tax assets assumes that the Company will be
able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates
and assumptions. If these estimates and related assumptions change in the future, the Company may
be required to record additional valuation allowances against its deferred tax assets resulting in
additional income tax expense in the Companys consolidated statement of operations. Management
evaluates the realizability of the deferred tax assets and assesses the adequacy of the valuation
allowance quarterly. Likewise, in the event that the Company was to determine that it would be
able to realize its deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the deferred tax assets would increase income in the period such determination was
made. 19




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##### Table of Contents



Recent Accounting Pronouncements See Notes 1 and 11 to the consolidated financial statements for information concerning recent
accounting pronouncements. Results of Operations The following table sets forth selected financial data as a percentage of total revenues for
the periods indicated: 2004
    
    
    2003
    
    
    2002Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    49.7
    
    
    
    52.4
    
    
    
    50.0Gross profit
    
    
    50.3
    
    
    
    47.6
    
    
    
    50.0Operating expenses:Research and development
    
    
    7.9
    
    
    
    11.2
    
    
    
    10.1Selling, general and administrative
    
    
    27.2
    
    
    
    31.5
    
    
    
    36.9Restructuring and other charges
    
    
    0.0
    
    
    
    1.0
    
    
    
    0.0Total operating expenses
    
    
    35.1
    
    
    

    43.7
    
    
    
    47.0Operating income
    
    
    15.2
    
    
    
    3.9
    
    
    
    3.0Interest income (expense), net
    
    
    (1.4
    )
    
    
    (2.2
    )
    
    
    (1.3
    )Other income (expense), net
    
    
    (1.4
    )
    
    
    (3.2
    )
    
    
    0.3Income (loss) before income taxes
    
    
    12.4
    
    
    
    (1.5
    )
    
    
    2.0Provision (benefit) for income taxes
    
    
    4.2
    
    
    
    (2.7
    )
    
    
    0.7Income from continuing operations
    
    
    8.2
    
    
    
    1.2
    
    
    
    1.3Income (loss) from operations of
discontinued operations, net of tax
    
    
    1.3
    
    
    
    (6.9
    )
    
    
    (23.7
    )Gain on sale of discontinued
operations, net of tax
    
    
    3.3
    
    
    
    0.0
    
    
    
    0.0Net income (loss)
    
    
    12.8
    %
    
    
    (5.7
    )%
    
    
    (22.4
    )%
 Comparison of Years Ended December 31, 2004, 2003 and 2002 Revenues. Revenues increased by 43.5% to $246.3 million in 2004 from $171.6 million in 2003.
This increase is primarily due to increased wafer starts driving increased revenues in almost all
product lines. Wafer starts in copper advanced interconnect applications increased at a faster
pace than industry-wide wafer starts, which drove higher growth rates for our advanced materials
and high-purity packaging products. Revenues also increased as a full year of sales were realized
in 2004 from the acquisitions and alliances that were completed in 2003. Excluding the impact of
the acquisitions and alliances, revenues grew 33.9%. Revenues increased 25.3% to $171.6 million in
2003 from $137.0 million in 2002. Revenues increased in 2003 compared to 2002 primarily due to
increased wafer starts which led to increased demand for liquid chemistries, SDS®and
high purity packaging products, and also due to the ViaFormâ licensing agreement
and the acquisition of the ESC product lines. Excluding the impact of the acquisition and
alliances, revenues grew 14.1%. Gross Profit. Gross profit increased 51.6% to $123.9 million in 2004. Gross margin increased
to 50.3% in 2004 from 47.6% in 2003. The increase in gross profit was a result of increased
revenues and improved manufacturing efficiencies partially offset by costs incurred to ramp
production and expedite shipments of our ST-250 photoresist strip product to Asia as a result of
greater than expected demand. Gross profit in 2004 included positive cost adjustments of $1.5
million related to a third party manufacturing agreement; however, this was offset by approximately
$1.6 million of excess and obsolete inventory charges incurred during the year. Gross profit
increased 19.2% to $81.7 million in 2003 from $68.6 million in 2002. The increase in gross profit
in 2003, as compared to 2002, was primarily attributable to volume increases in the higher margin
SDS®and high purity packaging product lines, as well as the positive effect of the
ViaFormâlicensing agreement and the acquisition of
the ESC product lines in 2003, offset by a $2.7 million charge for excess and obsolete inventory
primarily related to the 20




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outsourcing and standardization of the Companys materials delivery
equipment product lines. Research and Development Expenses. Research and development expenses increased 2.1% to $19.6
million in 2004 from $19.2 million in 2003. The 2003 research and development expenses included a
$0.7 million charge to write off acquired in-process research and development from the ESC
acquisition. The increase in spending, excluding the $0.7 million charge, is mainly attributable to
research and development efforts to support new product development in advanced interconnect and
the SDS® product lines. As a percentage of revenues, research and development expenses
decreased to 7.9% in 2004, compared to 11.2% in 2003, primarily due to the increase in sales.
Research and development expenses increased 38.5% to $19.2 million in 2003 from $13.8 million in
2002 and as a percentage of revenues, increased to 11.2% in 2003, compared to 10.1% in 2002. The
increase was mainly attributable to increased research and development efforts in chemical
mechanical planarization (CMP), photoresist and advanced interconnect materials applications, as
well as spending in the ViaFormâ and ESC product lines which were licensed and
acquired in 2003. Approximately $0.7 million of the 2003 increase in research and development
expense is attributable to the in-process research and development charge described above. Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased 23.6% to $66.9 million in 2004, compared to $54.1 million in 2003. Increased patent
litigation costs, incentive compensation costs, a full year of infrastructure costs associated with
the Enthone licensing activities and ESC acquired product line in 2004 versus six months of these
costs in 2003, and Sarbanes Oxley compliance costs drove the increased expenditures in 2004 as
compared to 2003. As a percentage of revenues, selling, general, and administrative expenses
decreased to 27.2% in 2004 as compared to 31.5% in 2003, primarily due to increased sales volumes
in 2004 over 2003. Selling, general and administrative expenses increased 7.1% to $54.1 million in
2003, compared to $50.6 million in 2002. The increase in selling, general and administrative
expenses in 2003 compared to 2002 reflects six months of expenses related to the
ViaFormâ licensing agreement and the ESC acquisition, including amortization
expense from intangibles relating to the acquisition and the licensing agreement. Direct selling
expenses also increased in 2003 due to several new product launches. As a percentage of revenues,
selling, general and administrative expenses decreased to 31.5% in 2003, compared to 36.9% in 2002
primarily due to increased sales volumes in 2003 versus 2002. Restructuring and Other Charges. The 2003 results include the recognition of $1.7 million of
restructuring and other charges. The $1.7 million charge includes $2.4 million for abandoned
assets in the Companys former materials and liquid delivery systems manufacturing facility in
Burnet, Texas, including $1.1 million of liquid chemistry canisters that were not returned to the
Company by various customers. Partially offsetting the charge was a $0.7 million gain related to
sub-lease income from a former tenant in the Companys Danbury, Connecticut research and
development facility. Operating Income (Loss).Operating income increased $30.7 million to $37.4 million in 2004,
from $6.7 million in 2003. Increased wafer starts and penetration into our key accounts drove
increased sales and higher gross margins, along with a reduction of operating expenses as a
percentage of sales, leading to increased operating income. In 2003, the Company reported
operating income of $6.7 million, an increase of 61.7% over the $4.1 million of operating income
reported in 2002. The increase in 2003 operating income compared to 2002 was a result of the
positive effect of acquisitions made by the Company during the year and incremental wafer start
growth driving increased demand for specialty materials packaging products and SDS®
offset by the $2.7 million excess and obsolescence charge and the $1.7 million restructuring and
other charge taken in 2003, both previously discussed above. Interest Income. Interest income increased to $3.5 million in 2004, from $3.0 million in
2003, primarily due to higher invested balances from cash generated by the sale of discontinued
operations and higher short-term investment returns due to recent Federal Reserve interest rate
movements. Interest income declined $1.9 million to $3.0 million in 2003 from $4.9 million in
2002, primarily due to overall lower yields on the Companys cash and marketable securities
portfolio and a reduction of cash balances due to acquisitions in 2003. Interest Expense. Interest expense was $6.9 million for both 2004 and 2003. Interest expense
increased 3.3% in 2003 to $6.9 million from $6.7 million in 2002, primarily as a result of lower
interest capitalization on construction projects. 21




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Impairment of Investments. The 2004 results include a $4.5 million charge to recognize the
impairment of one of the Companys strategic cost-basis investment. The 2003 results include a
$5.7 million charge to recognize impairments on two of the Companys strategic cost-basis
investments. The 2002 results include a $0.4 million write-down on other available-for-sale
securities. Other Income, net. Other income, net was $1.0 million in 2004 compared to $03 million in
2003. Other income, net includes gains from the sale of available-for-sale securities of $0.3
million and $0.4 million in 2004 and 2003, respectively. Additionally, the increase in 2004
compared to 2003 is the result of favorable changes in foreign currency exchange rates in Europe
and Asia. Other income, net decreased 34.9% to $0.8 million in 2003 compared to $0.4 million in
2002. Other income, net in 2002 included a $1.0 million gain from the sale of available-for-sale
securities. Income Taxes. The income tax provision for 2004 was $10.4 million compared to an income tax
benefit of $4.6 million in 2003. The increase in pre-tax operating income is the primary driver
behind the increased income tax provision in 2004 compared to 2003. The 2003 income tax benefit
included a $3.0 million benefit from a favorable judgment received from the U.S. Tax Court during
2003. Excluding this one-time benefit, the income tax benefit for 2003 was $1.6 million. The
Companys effective tax rate for 2004 was 34.0%. The 2004 effective tax rate of 34.0% differs from
the Federal statutory rate of 35.0%, primarily because of state and foreign income taxes,
extra-territorial income (ETI) exclusion benefits and the change in valuation allowance of
deferred tax assets. In 2003, the income tax benefit was $4.6 million, compared to an income tax
provision of $1.0 million in 2002. The increase in the tax benefit was the result of the pre-tax
operating losses in 2003, compared to pre-tax operating income in 2002. The effective tax rate for
2003 was 61.5%, excluding the one-time $3.0 million tax benefit described above, compared to an
effective tax rate of 35.0% for 2002. The effective tax rate of 61.5% differs from the Federal
statutory rate of 35.0%, primarily because of state and foreign income taxes, ETI exclusion
benefits, in-process research and development expenses, and the change in valuation allowance of
deferred tax assets. As of December 31, 2004, the Company has a net deferred tax asset on its
balance sheet of $10.0 million, primarily due to temporary differences, state net operating losses,
and federal and state tax credit carryforwards, which are anticipated to be used to offset future
taxable income. The minimum amount of future taxable income that needs to be generated to realize
the net deferred tax assets is approximately $29.5 million. Income (Loss) from Operations of Discontinued Operations. Income from operations of
discontinued operations in 2004, net of income taxes, was $3.3 million, compared to a loss, net of
income taxes, of $11.9 million in 2003. The 2003 loss included a $4.1 million charge for excess
and obsolete inventory. The overall improvement in the semiconductor capital equipment market in
2004 drove increased sales volumes leading to the increased income in 2004 compared to 2003. The
loss from operations of discontinued operations in 2003, net of income taxes, was $11.9 million
compared to a loss of $32.5 million in 2002, net of income taxes. Excluding a $4.1 million charge
for excess and obsolete inventory, the loss in 2003 was driven by three quarters of reduced demand
for semiconductor equipment as capital spending in the industry continued to decline offset by some
positive volume momentum as wafer starts increased in the fourth quarter of 2003 leading to higher
industry capital spending, which translated to higher sales volumes. The results for the fourth
quarter of 2003 exclude $2.2 million of depreciation and amortization expense as a result of assets
being classified as held for sale. Depreciation and amortization expense was recognized on these
assets in all previous quarters. The 2002 results from operations of discontinued operations
included the recognition of a $34.6 million asset impairment charge associated with the Companys
former gallium arsenide epitaxial services business in Phoenix, Arizona. The loss from operations
of discontinued operations in 2002 was also driven by the downturn in the semiconductor industry,
particularly the equipment sector, which had a significant impact on operations. Gain on sale of discontinued operations. A gain of $8.1 million, net of income taxes, was
recognized on the sale of discontinued operations in 2004. Each of the six businesses comprising
discontinued operations was
sold in 2004 at a price above existing net book value of each individual business. Diluted Earnings (Loss) per Share. Diluted earnings per share was $1.00 for 2004, compared to
a diluted loss per share of $0.32 in 2003. Diluted earnings per share in 2004 of $1.00 is
comprised of $0.64 from continuing operations, $0.10 per share from operations of discontinued
operations and a gain of $0.26 per share related to the 22




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sale of those discontinued operations. The
diluted loss per share of $0.32 in 2003 is comprised of diluted earnings per share of $0.06 from
continuing operations, offset by a loss of $0.38 per share from operations of discontinued
operations. Diluted loss per share of $0.32 for 2003, compared to diluted loss per share of $0.99
for 2002. The diluted loss per share of $0.99 in 2002 is comprised of diluted earnings per share
of $0.06 from continuing operations, offset by a loss of $1.05 per share from operations of
discontinued operations. Diluted weighted average shares outstanding was 31.7 million in 2004,
compared to 31.2 million in 2003. The 0.5 million share increase from 2003 to 2004 was primarily
due to the exercise of employee stock options and the issuance of employee stock purchase plan
shares. Diluted weighted average shares outstanding was 31.2 million for 2003 compared to 31.0
million for 2002. The difference in weighted average shares outstanding, assuming dilution,
between 2003 and 2002 is primarily the result of the exercise of employee stock options and the
issuance of employee stock purchase plan shares. Liquidity and Capital Resources Years ended December 31, 2004, 2003 and 2002 The Company finances its activities principally through cash from operations and the issuance
of equity. Additionally, the Company received proceeds from the sale of discontinued operations in
2004. The Companys working capital increased to $296.6 million at December 31, 2004 from $244.9
million at December 31, 2003. The increase was mostly due to the proceeds from sales of
discontinued operations and from cash generated from operating activities. The Companys working
capital decreased to $244.9 million at December 31, 2003 from $282.7 million at December 31, 2002
primarily as a result of in the use of cash to fund acquisition and licensing activity in 2003. Net cash provided by operating activities of continuing operations was $33.6 million in 2004,
compared to $20.0 million in 2003, primarily as a result of increased operating earnings of the
business. Furthermore, the increase in cash from operations resulted from increases in inventories
for the Companys copper-based materials products in Asia and liquid packaging products in Japan,
increases in accounts receivable, largely offset by non-cash expenses during the period. Net cash
provided by operating activities of continuing operations was $20.0 million in 2003, compared to
$4.6 million in 2002. The increase was mainly attributable to collection of federal income tax
receivables and increased operating income before non-cash expenses, offset by increased
inventories to support the strategic alliance with Enthone and increased sales volumes in various
other product lines, and increased accounts receivable as a result of higher sales volumes. Cash
used by operating activities of discontinued operations was $8.2 million in 2004, compared to $12.2
million in 2003, primarily due to improved operating performance of discontinued operations. Cash
used by operating activities of discontinued operations was $12.2 million in 2003, compared to cash
provided by operating activities of discontinued operations of $10.5 million in 2002. Net cash used by investing activities of continuing operations was $119.6 million, $12.0
million and $102.2 million in 2004, 2003 and 2002, respectively. For the years ended December 31,
2004, 2003 and 2002, the Company purchased $210.7 million, $103.4 million and $248.6 million of
marketable securities, respectively, consisting primarily of short-term corporate and municipal
debt obligations. For the years ended December 31, 2004, 2003 and 2002, the Company received $109.9
million, $143.2 million and $182.5 million, respectively, from the sale of marketable securities.
Capital expenditures were $16.8 million, $15.3 million and $31.2 million in 2004, 2003 and 2002,
respectively. The significant 2002 capital spending related primarily to the construction of the
Companys new liquid materials manufacturing facility in Burnet, Texas, and continued strategic
investments in facilities and equipment for materials research and development capabilities. The
Company invested $2.1 million during 2004 to purchase equity in an entity that is developing
advanced materials for implant applications. Acquisitions and other equity investments in 2003
included entering into a strategic alliance with Enthone, Inc.,
which included purchasing the exclusive worldwide selling and distribution rights to Enthones
copper electrochemical deposition products for $20.0 million and the acquisition of all the
outstanding capital stock of ESC, Inc., a developer of novel surface preparation and cleaning
materials for copper and advanced interconnect microelectronic fabrication processes for $16.4
million. Acquisitions and other equity investments in 2002 include a strategic investment to
acquire copper delivery and abatement product lines and rights to a copper electrochemical
deposition management system. Net cash provided by investing activities of discontinued operations
was $94.8 million for 2004 as a result of the proceeds received from the sales of the discontinued
operations. Net cash used by investing activities of 23




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discontinued operations was $0.4 million and
$9.7 million in 2003 and 2002, respectively. The cash used by investing activities of discontinued
operations in 2002 was primarily related to capital expenditures. Net cash provided by financing activities of continuing operations was $7.3 million, $4.0
million and $2.8 million in 2004, 2003 and 2002, respectively. During 2004, 2003 and 2002, the
Company received net proceeds from the exercise of employee stock options and employee stock
purchase plan shares of $8.4 million, $4.7 million and $4.4 million, respectively. Net cash used
by financing activities of discontinued operations was $0.1 million and $19.0 million in 2003 and
2002, respectively. The cash used by financing activities of discontinued operations in 2002 was
primarily related to the retirement of a $20.0 million outstanding balance of the Companys
commercial bank financing agreement. At December 31, 2004, $115.2 million of debt remained
outstanding, principally related to our convertible notes. Following is a summary of consolidated debt, lease, interest, purchase and other long-term
liability obligations at December 31, 2004 (see Notes 7, 9 and 10 of the consolidated financial
statements), in thousands: Payments Due by PeriodLess thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    ThereafterContractual obligations:Debt:Convertible Notes
    
    $
    115,000
    
    
    $
    
    
    
    $
    115,000
    
    
    $
    
    
    
    $
    Other
    
    
    168
    
    
    
    84
    
    
    
    84
    
    
    
    
    
    
    
    Total debt
    
    
    115,168
    
    
    
    84
    
    
    
    115,084
    
    
    
    
    
    
    
    Leases:Operating leases
    
    
    8,847
    
    
    
    3,158
    
    
    
    4,310
    
    
    
    1,163
    
    
    
    216Capital leases
    
    
    137
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    Total lease obligations
    
    
    8,984
    
    
    
    3,295
    
    
    
    4,310
    
    
    
    1,163
    
    
    
    216Interest on Indebtedness
    
    
    12,076
    
    
    
    6,038
    
    
    
    6,038
    
    
    
    
    
    
    
    Purchase obligations:Inventory purchases
    
    
    10,007
    
    
    
    10,007
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditures
    
    
    2,521
    
    
    
    2,521
    
    
    
    
    
    
    
    
    
    
    
    Total purchase obligations
    
    
    12,528
    
    
    
    12,528
    
    
    
    
    
    
    
    
    
    
    
    Standby Letters of Credit
    
    
    1,450
    
    
    
    1,450
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
    
    
    157
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    Total debt, lease,
interest, purchase and
other long-term liability
obligations
    
    $
    150,363
    
    
    $
    23,395
    
    
    $
    125,589
    
    
    $
    1,163
    
    
    $
    216
 ATMI has agreed not to allow any of its significant subsidiaries, or the subsidiaries of
those significant subsidiaries, to incur subordinated debt while the convertible subordinated notes
are outstanding without such subsidiary first entering into an unconditional guarantee of the
convertible notes on a subordinated basis. This restriction may limit those subsidiaries ability
to obtain subordinated debt on favorable terms and conditions or at
all. The outstanding convertible notes are due on November 15, 2006. If these notes are not
converted pursuant to their terms prior to the due date, the Company will repay them in full, or
refinance them, if management deems it more desirable to use the Companys cash balances for other
strategic purposes. Management believes that the Company could obtain refinancing for the
convertible notes, though there can be no assurance that the Company would be successful in its
efforts to obtain such refinancing on acceptable terms or at all. Failure to obtain refinancing
could have an adverse effect on the financial condition of the Company. However, management
expects 24




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to maintain sufficient liquidity to allow for repayment of the notes in the event no such
refinancing could be completed successfully. On March 9, 2005, the Company announced that it will exercise its right to redeem its 5.25%
convertible subordinated notes (the Notes) due November 15, 2006 in their entirety pursuant to
the provisions of the Indenture dated November 15, 2001. The Notes are to be redeemed on April 8,
2005 at a price of 102.1% of the principal amount, plus accrued but unpaid interest to April 8,
2005, unless earlier converted. Note holders who choose to convert their notes into common shares
will have until 5 p.m. on Thursday, April 7, 2005 to make their election. No interest on the notes
will accrue after April 8, 2005. The conversion rate for the notes is 45.0707 shares per $1,000
principal amount, equivalent to approximately $22.19 per share. Were all note holders to elect to
convert their notes into shares, ATMI would need to issue approximately 5.2 million additional
shares, creating diluted shares outstanding of approximately 36.8 million. If all of the note
holders elect not to convert their notes into shares, the Company would incur $2.4 million of
premium costs. The Company believes that its existing cash and cash equivalents and marketable securities
balances and its existing operations and existing sources of liquidity will satisfy the Companys
projected working capital and other cash requirements through at least the end of 2005.
Additionally, the Company believes that cash from operations generated through the period ending
when our outstanding convertible notes become due on November 15, 2006, when combined with existing
balances, should be sufficient to repay the notes when due, if they are not converted to equity
prior to that time. However, management also believes the level of financing resources available to
the Company is an important competitive factor in its industry and may seek additional capital
prior to the end of that period. Additionally, management considers, on a continuing basis,
potential acquisitions of strategic technologies and businesses complementary to the Companys
current business. There are presently no definitive agreements with respect to any such potential
acquisitions. However, any such transaction could affect the Companys future capital needs. Operations Outside the United States For the years ended December 31, 2004, 2003 and 2002, sales outside the United States,
including Asia and Europe, accounted for 64.9%, 58.4% and 50.0%, respectively, of the Companys
revenues. Management anticipates that the Companys sales outside the United States will continue
to account for a significant percentage of total revenues. The Company has wholly-owned
subsidiaries in Taiwan, Singapore, China and Japan where the Company sells and services several
product lines. The Company also has a wholly-owned subsidiary in South Korea that manufactures,
sells and distributes materials delivery equipment and thin-film materials to the semiconductor
industry in South Korea. In addition, the Company has a wholly-owned subsidiary in Belgium where it
manufactures and sells high-purity solids packaging applications. Cautionary Statements Under the Private Securities Litigation Reform Act of 1995 Forward-Looking Statements Disclosures included in this Form 10-K, contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). 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, research and
development programs, market and technology opportunities, international trends, business
strategies, business opportunities, objectives of management for future operations, semiconductor
industry 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 due to changes
in global political, economic, business, competitive, market regulatory and other factors. ATMI
undertakes no obligation to update publicly or review any forward-looking statements, whether as a
result of new information, future developments or otherwise. 25




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk As of December 31, 2004, the Companys cash and cash equivalents and marketable securities
included money market securities, corporate and municipal bond obligations and commercial paper. As
of December 31, 2004, an increase of 100 basis points in interest rates would reduce the fair value
of our marketable securities portfolio by approximately $1.3 million. Conversely, a reduction in
interest rates of 100 basis points would increase the fair value of our marketable securities
portfolio by approximately $0.8 million. As of December 31, 2004, the Company had $115.0 million of fixed rate long-term convertible
notes outstanding. Interest rate changes and changes in the value of the Companys common stock
would likely result in changes in the market value of these notes. The fair value of these notes
was approximately $133.7 million at December 31, 2004. The Company performs a sensitivity analysis
on its fixed rate long-term convertible debt to assess the risk of changes in fair value. The
model to determine interest rate sensitivity assumes a hypothetical 100 basis point shift in
interest rates, while keeping the price of the Companys common stock constant. At December 31,
2004, assuming a 100 basis point increase in interest rates, the fair value of the notes would
decrease by $0.9 million. Conversely, a 100 basis point decrease in interest rates at December 31,
2004 would increase the fair value of the notes by $0.9 million. The model to determine equity
price sensitivity assumes a hypothetical 10% change in the price of the Companys common stock,
while keeping the interest rate constant. At December 31, 2004, assuming a 10% increase in the
price of our common stock, the fair value of the notes would increase by $5.6 million. Conversely,
a 10% decrease in the price of the Companys common stock would result in the fair value of the
notes decreasing by $5.1 million. Foreign Currency Exchange Risk A substantial portion of the Companys sales are denominated in U.S. dollars and as a result,
the Company has relatively minimal exposure to foreign currency exchange risk with respect to sales
made. Approximately, 13% of the Companys sales are denominated in Japanese Yen but 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 impact on the Companys financial results in the future. The Company periodically
utilizes forward exchange contracts to hedge certain foreign currency exposures, but does not use
any other derivative financial instruments for trading or speculative purposes. At December 31,
2004, ATMI did not have any open foreign exchange contracts. Changes in Market Risk There have been no material quantitative changes in market risk exposure between the fiscal
years ended December 31, 2003 and December 31, 2004. 
 Item 8. Financial Statements and Supplementary Data The Reports of Independent Registered Public Accounting Firm, the consolidated financial
statements and the financial statement schedule that are listed in the Index to Consolidated
Financial Statements and Financial Statement Schedule are included herein on pages F-1 through
F-32. 
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants required to be reported
herein. 26




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Item 9A. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures An evaluation was performed under the supervision and with the participation of our
management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of
the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on that
evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and
procedures were effective as of December 31, 2004 to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act was recorded, processed,
summarized and reported as specified in the SECs rules and forms. 27




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Managements Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under
the supervision and with the participation of our management, including our CEO and CFO, we
conducted an assessment of the effectiveness of the design and operation of our internal controls
over financial reporting based on the framework in Internal ControlIntegrated Frameworkissued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment,
management concluded that our internal control over financial reporting was effective as of
December 31, 2004. Our managements assessment of the effectiveness of our internal control over financial
reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered
public accounting firm, as stated in their attestation report on managements assessment of
internal control over financial reporting, which is included elsewhere herein. 
 PART III. The information required to be filed by Part III (Items 10, 11, 12, 13 and 14) is hereby
incorporated by reference from the Companys definitive proxy statement (to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A), which proxy statement will be filed
no later than 120 days after December 31, 2004. 
 PART IV 
 Item 15. Exhibits, Financial Statement Schedule  (a)
    The following documents are filed as part of this annual report on Form 10-K:(1)
    Financial Statements: Reports of Independent Registered Public Accountants
Consolidated Balance Sheets  December 31, 2004 and 2003
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002
Consolidated Statements of Stockholders Equity for the years ended December 31, 2002, 2003 and 2004
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
Notes to Consolidated Financial Statements  (2)
    Financial Statement Schedule:  Schedule II Valuation and Qualifying AccountsThe Reports of Independent Registered Public Accountants, consolidated financial statements
and financial statement schedule listed in the Index to Consolidated Financial Statements
and Financial Statement Schedule on page F-1 hereof are filed as part of this report,
commencing on page F-2 hereof.All other financial statement schedules are omitted as the required information is not
applicable or the information is shown in the consolidated financial statements or related
notes. 28




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##### Table of Contents



(3)
    Exhibits The documents set forth below are filed herewith or incorporated herein by reference to the
location indicated. Exhibit No.
    
    
    Description2.01
    
    
    Asset Purchase Agreement dated as of June 28, 2004 by and between
International Rectifier Corporation, IR Epi Service, Inc. and Advanced
Technology Materials, Inc. (Exhibit 2.1 to ATMIs Current Report on Form 8-K,
filed on July 20, 2004). (1) (4)3.01(a)
    
    
    Certificate of Incorporation dated as of April 7, 1997 (Exhibit 3.01 to
ATMIs Registration Statement on Form S-4, filed on September 10, 1997,
Registration No. 333-35323 (the 1997 Form S-4 Registration Statement)).
(1)3.01(b)
    
    
    Certificate of Amendment to Certificate of Incorporation dated as of
September 23, 1997 (Exhibit 4.1(b) to the ATMIs Post-Effective Amendment No.
1 to Registration Statement on Form S-8, filed on October 10, 1997,
Registration No. 33-93048). (1)3.01(c)
    
    
    Certificate of Amendment to Certificate of Incorporation dated as of June 16,
1998 (Exhibit 3.01(c) to the ATMIs Registration Statement on Form S-4/A,
filed on July 1, 1998, File No. 333-51333). (1)3.01(d)
    
    
    Certificate of Designation for Series A Junior Participating Preferred Stock
dated as of October 13, 2000 (Exhibit 4.01 to ATMIs Current Report on Form
8-K filed on October 17, 2000). (1)3.01(e)
    
    
    Certificate of Amendment to Certificate of Designation for Series A Junior
Participating Preferred Stock dated December 20, 2001 (Exhibit 3.01(e) to
ATMIs Annual Report on Form 10-K, filed on March 27, 2002) (the 2001 Form
10-K). (1)3.01(f)
    
    
    Certificate of Amendment to Certificate of Incorporation dated as of May,
23,.2003 (Exhibit 3.1 to ATMIs Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, filed on July 30, 2003). (1)3.02
    
    
    Bylaws of ATMI dated April 7, 1007 (Exhibit 3.02 to the 1997 Form S-4
Registration Statement). (1)4.01
    
    
    Specimen of ATMIs Common Stock Certificate (Exhibit 4.01 to the 1997 Form
S-4 Registration Statement). (1)4.02
    
    
    Rights Agreement, dated as of October 13, 2000, between ATMI, Inc. and Fleet
National Bank, as Rights Agent (Exhibit 4.01 to ATMIs Current Report on Form
8-K, filed on October 17, 2000). (1)4.03
    
    
    Registration Rights Agreement, dated November 13, 2001, among ATMI, Inc.,
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
relating to ATMIs 5.25% Convertible Subordinated Notes due 2006 (Exhibit 4.1
to ATMIs Registration Statement on Form S-3, filed on January 7, 2002,
Registration No. 333-76378 (the 2002 Form S-3 Registration Statement)). (1)4.04
    
    
    Indenture, dated November 13, 2001, between ATMI, Inc. and State Street Bank
and Trust Company, relating to the ATMIs 5.25% Convertible Subordinated
Notes due 2006 (Exhibit 4.2 to the 2002 Form S-3 Registration Statement). (1)
 29




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##### Table of Contents



Exhibit No.
    
    
    Description4.05
    
    
    Specimen Note for ATMIs 5.25% Convertible Subordinated Notes due 2006
(included in pages 26 to 40 of the Indenture filed as Exhibit 4.2 to the 2002
Form S-3 Registration Statement). (1)10.01*
    
    
    Employment Agreement between Eugene G. Banucci, Ph.D. and Advanced Technology
Materials, Inc. dated October 10, 1997 (Exhibit 10.01 to ATMIs Registration
Statement on Form S-1, filed on February 20, 1998, File No. 333-46609 (the
Form S-1 Registration Statement)). (1)10.02*
    
    
    Employment Agreement between Daniel P. Sharkey and ATMI, Inc. dated December
31, 2004 (Exhibit 10.1 to ATMIs Current Report on Form 8-K, filed on January
5, 2005). (1)10.03*
    
    
    Employment Agreement between Douglas A. Neugold and ATMI, Inc. dated December
31, 2004 (Exhibit 10.1 to ATMIs Current Report on Form 8-K/A, filed on
January 5, 2005). (1)10.04
    
    
    Agreement of Lease between Melvyn J. Powers and Mary P. Powers d/b/a/ M&M
Realty and Advanced Technology Materials, Inc., dated December 23, 1994
(Exhibit 10.09 to Advanced Technology Materials, Inc. Annual Report on Form
10-K/A for the year ended December 31, 1994, File No. 0-22756). (1)10.05
    
    
    First Amendment to Agreement of Lease dated as of November 22, 2000 by and
between Commerce Park Realty, LLC and Advanced Technology Materials, Inc. (1)10.06
    
    
    Second Amendment to Agreement of Lease dated as of March 24, 2003 by and
between Commerce Park Realty, LLC and Advanced Technology Materials, Inc. (1)10.07*
    
    
    ATMIs 1995 Stock Plan (Exhibit to ATMIs Registration Statement on Form S-8,
File No. 33-93048). (1)10.08*
    
    
    ATMIs 1997 Stock Plan, dated October 10, 1997, (Exhibit 99.1 to ATMIs
Registration Statement on Form S-8, filed on April 6, 1998, File No.
333-49561). (1)10.09*
    
    
    ATMIs 1998 Stock Plan, dated May 20, 1998 (Exhibit 99.1 to ATMIs
Registration Statement on Form S-8, filed on June 9, 1998, File No.
333-56349). (1)10.10
    
    
    Agreement of Lease between Seymour R. Powers, Leon Griss and Ruth Griss and
Advanced Technology Materials, Inc., dated November 24, 2000 (Exhibit 10.08
to ATMIs Annual Report on Form 10-K for the year ended December 31, 2000,
File No. 001-16239). (1)10.11*
    
    
    ATMIs 2000 Stock Plan, dated May 24, 2000 (Exhibit 99.01 to ATMIs
Registration Statement on Form S-8, dated September 20, 2000, File No.
333-46222). (1)10.13*
    
    
    ATMIs 2003 Stock Plan (as amended May 21, 2003) (Exhibit 4.6 to ATMIs
Registration Statement on Form S-8, filed on August 1, 2003, File No.
333-107591). (1)10.14*
    
    
    ATMIs 1998 Employee Stock Purchase Plan, (as amended February 28,
2003)(Exhibit 4.7 to ATMIs Registration Statement on Form S-8, filed on
August 1, 2003, File No. 333-107591). (1)10.15
    
    
    Alliance Agreement dated as of May 16, 2003 by and between Advanced
Technology Materials, Inc. on its own behalf and on behalf of its Affiliates
and Enthone, Inc. (Exhibit 10.15 to ATMIs Annual Report on Form 10-K, filed
on March 12, 2004) (the 2003 Form 10-K). (1)(4)
 30




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##### Table of Contents



Exhibit No.
    
    
    Description10.16
    
    
    Stock Purchase Agreement dated as of July 14, 2003 by and among Advanced
Technology Materials, Inc., Lente, LLC and the Persons listed on the
signature page thereto. (Exhibit 10.16 to the 2003 Form 10-K). (1)(4)10.17
    
    
    Lease Agreement between Jennifer Development Company and Now Technologies,
Inc. dated as of January 18, 1995. (Exhibit 10.17 to the 2003 Form 10-K). (1)10.18*
    
    
    Employment Agreement between Cynthia L. Shereda and ATMI, Inc. dated April
29, 2004 (Exhibit 10.01 to ATMIs Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004, filed on August 5, 2004). (1)10.19*
    
    
    Amendment to Employment Agreement between Cynthia L. Shereda and ATMI, Inc.
dated December 31, 2004 (Exhibit 10.2 to ATMIs Current Report on Form 8-K,
filed on January 5, 2005). (1)10.20*
    
    
    Non-Employee Directors Deferred Compensation Program of ATMI, Inc. 1998 Stock
Plan (Exhibit 10.19 to ATMIs Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004, filed on November 4, 2004). (1)10.21*
    
    
    Form of ATMI, Inc. Restricted Stock Grant Agreement (Exhibit 10.1 to ATMIs
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, filed on
May 3, 2004). (1)10.22*
    
    
    Form of ATMI, Inc. Non-Qualified Stock Option Agreement (Exhibit 10.2 to
ATMIs Quarterly Report on Form 10-Q for the quarter ended March 31, 2004,
filed on May 3, 2004). (1)10.23*
    
    
    Agreement of Lease between West Real Estate and Management, Inc. and Advanced
Technology Materials, Inc., dated October 21, 2004. (2)10.24
    
    
    Form of ATMI, Inc. Employee Restricted Stock Grant Agreement. (2)10.25
    
    
    Form of ATMI, Inc. Non-Employee Director Restricted Stock Grant Agreement. (2)21
    
    
    Subsidiaries of ATMI (2)23
    
    
    Consent of Independent Registered Public Accounting Firm (2)31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended. (2)31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
15d-14(a) of the Securities Exchange Act, as amended. (2)32

    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (3)
   *
    
    Management contract or compensatory plan arrangement.(1)
    
    Incorporated by reference.(2)
    
    Filed herewith.(3)
    
    Furnished herewith.(4)
    
    Portions omitted pursuant to a request for confidential treatment. 31




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or15(d)of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. ATMI, Inc.March 14, 2005By:
    
    /S/ Douglas A. NeugoldDouglas A. NeugoldPresident, Chief Executive Officer, and
Director
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated. Signature
    
    Title
    
    Date/S/ Douglas A. Neugold
    
    President, Chief Executive Officer
    
    March 14, 2005and Director (principal executive officer)Douglas A. Neugold/S/ Daniel P. Sharkey
    
    Vice President, Chief Financial
    
    March 14, 2005Officer and Treasurer (principal financial andDaniel P. Sharkey
    
    accounting officer)/S/ Eugene G. Banucci
    
    
    
    March 14, 2005Eugene G. Banucci, Ph.D.
    
    Chairman of the Board and Director/S/ Mark A. Adley
    
    
    
    March 14, 2005Mark A. Adley
    
    Director/S/ Robert S. Hillas
    
    
    
    March 14, 2005Robert S. Hillas
    
    Director/S/ Stephen H. Mahle
    
    
    
    March 14, 2005Stephen H. Mahle
    
    Director/S/ C. Douglas Marsh
    
    
    
    March 14, 2005C. Douglas Marsh
    
    Director/S/ Michael J. Yomazzo
    
    
    
    March 14, 2005Michael J. Yomazzo
    
    Director
 32




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##### Table of Contents



ATMI, INC. 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE PageReports of Independent Registered Public Accounting Firm
    
    
    F-2Audited Financial StatementsConsolidated Balance Sheets  December 31, 2004 and 2003
    
    
    F-4Consolidated Statements of Operations for the years ended December 31, 2004,
2003, and 2002
    
    
    F-5Consolidated Statements of Stockholders Equity for the years ended
December 31, 2002, 2003, and 2004
    
    
    F-6Consolidated Statements of Cash Flows for the years ended December 31, 2004,
2003, and 2002
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts
    
    
    F-32
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of ATMI, Inc. We have audited the accompanying consolidated balance sheets of ATMI, Inc. as of December 31,
2004 and 2003, and the related consolidated statements of operations, stockholders equity, and
cash flows for each of the three years in the period ended December 31, 2004. Our audits also
included the financial statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of ATMI, Inc.s management. Our responsibility is
to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ATMI, Inc. at December 31, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the three years in the
period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material respects the
information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of ATMI, Inc.s internal control over financial
reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 9, 2005 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Stamford, Connecticut
March 9, 2005 F-2




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of ATMI, Inc. We have audited managements assessment, included in Item 9A, Managements Report on Internal
Control Over Financial Reporting, that ATMI, Inc. maintained effective internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). ATMI, Inc.s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the companys internal control over financial
reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that ATMI, Inc. maintained effective internal control
over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based
on the COSO criteria. Also, in our opinion, ATMI, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004, based on the COSO
criteria. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ATMI, Inc. as of December 31,
2004 and 2003, and the related consolidated statements of operations, stockholders equity, and
cash flows for each of the three years in the period ended December 31, 2004 of ATMI, Inc. and our
report dated March 9, 2005 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Stamford, Connecticut
March 9, 2005 F-3




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##### Table of Contents



ATMI, INC. 
 CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31,2004
    

    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    36,395
    
    
    $
    25,471Marketable securities
    
    
    202,565
    
    
    
    103,229Accounts receivable, net of allowances of $701 in 2004 and $694 in 2003
    
    
    43,680
    
    
    
    38,439Inventories, net
    
    
    36,918
    
    
    
    21,564Deferred income taxes
    
    
    13,046
    
    
    
    7,488Assets held for sale
    
    
    
    
    
    
    84,736Prepaid expenses and other current assets
    
    
    18,294
    
    
    
    8,792Total current assets
    
    
    350,898
    
    
    
    289,719Property, plant and equipment, net
    
    
    69,758
    
    
    
    64,673Goodwill, net
    
    
    12,097
    
    
    
    11,959Other intangibles, net
    
    
    29,179
    
    
    
    33,550Deferred income taxes
    
    
    
    
    
    
    10,342Other long-term assets, net
    
    
    8,168
    
    
    
    4,199Total assets
    
    $
    470,100
    
    
    $
    414,442LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    16,174
    
    
    $
    11,743Accrued liabilities
    
    
    20,849
    
    
    
    12,365Accrued salaries and related benefits
    
    
    11,050
    
    
    
    6,961Loans, notes and bonds payable, current portion
    
    
    84
    
    
    
    777Capital lease obligations, current portion
    
    
    136
    
    
    
    270Income taxes payable
    
    
    216
    
    
    
    1,783Liabilities held for sale
    
    
    
    
    
    
    7,196Other current liabilities
    
    
    5,760
    
    
    
    3,690Total current liabilities
    
    
    54,269
    
    
    
    44,785Loans, notes and bonds payable, less current portion
    
    
    115,084
    
    
    
    115,154Capital lease obligations, less current portion
    
    
    
    
    
    
    136Deferred income taxes, non-current
    
    
    3,014
    
    
    
    Other long-term liabilities
    
    
    157
    
    
    
    116Commitments and contingencies (Notes 7, 10 and 16)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, par value $.01: 2,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, par value $.01: 100,000 shares authorized; 31,478 and 30,973
issued and outstanding in 2004 and 2003, respectively
    
    
    315
    
    
    
    310Additional paid-in capital
    
    
    222,651
    
    
    
    212,792Retained earnings
    
    
    69,751
    
    
    
    38,249Accumulated other comprehensive income
    
    
    4,859
    
    
    
    2,900Total stockholders equity
    
    
    297,576
    
    
    
    254,251Total liabilities and stockholders equity
    
    $
    470,100
    
    
    $
    414,442
 See accompanying notes. F-4




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##### Table of Contents



ATMI, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31,2004
    
    
    2003
    
    
    2002Revenues
    
    $
    246,291
    
    
    $
    171,634
    
    
    $
    136,975Cost of revenues
    
    
    122,415
    
    
    
    89,902
    
    
    
    68,424Gross profit
    
    
    123,876
    
    
    
    81,732
    
    
    
    68,551Operating expenses:Research and development
    
    
    19,577
    
    
    
    19,170
    
    
    
    13,843Selling, general and administrative
    
    
    66,920
    
    
    
    54,145
    
    
    
    50,572Restructuring and other charges (Note 15)
    
    
    
    
    
    
    1,731
    
    
    
    Total operating expenses
    
    
    86,497
    
    
    
    75,046
    
    
    
    64,415Operating income
    
    
    37,379
    
    
    
    6,686
    
    
    
    4,136Interest income
    
    
    3,485
    
    
    
    3,026
    
    
    
    4,867Interest expense
    
    
    (6,927
    )
    
    
    (6,887
    )
    
    
    (6,670
    )Impairment of investments
    
    
    (4,471
    )
    
    
    (5,708
    )
    
    
    (400
    )Other income, net
    
    
    998
    
    
    
    254
    
    
    
    790Income (loss) before income taxes
    
    
    30,464
    
    
    
    (2,629
    )
    
    
    2,723Provision (benefit) for income taxes
    
    
    10,358
    
    
    
    (4,617
    )
    
    
    951Income from continuing operations
    
    
    20,106
    
    
    
    1,988
    
    
    
    1,772Income (loss) from operations of discontinued operations,
net of income tax provision (benefit) of $1,784, $(5,649)
and $(18,993)
    
    
    3,313
    
    
    
    (11,907
    )
    
    
    (32,493
    )Gain on sale of discontinued operations, net of income
tax provision of $4,352
    
    
    8,083
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    31,502
    
    
    $
    (9,919
    )
    
    $
    (30,721
    )Basic earnings (loss) per shareEarnings per share from continuing operations
    
    $
    0.64
    
    
    $
    0.07
    
    
    $
    0.06Income (loss) per share from operations of discontinued
operations
    
    
    0.11
    
    
    
    (0.40
    )
    
    
    (1.09
    )Gain on sale of discontinued operations
    
    
    0.26
    
    
    
    
    
    
    
    Income (loss) per common share
    
    $
    1.01
    
    
    $
    (0.33
    )
    
    $
    (1.03
    )Weighted average shares outstanding
    
    
    31,247
    
    
    
    30,149
    
    
    
    29,896Diluted earnings (loss) per shareEarnings per share from operations of continuing operations
    
    $
    0.64
    
    
    $
    0.06
    
    
    $
    0.06Income (loss) per share from operations of discontinued
operations
    
    
    0.10
    
    
    
    (0.38
    )
    
    
    (1.05
    )Gain on sale of discontinued operations
    
    
    0.26
    
    
    
    
    
    
    
    Income (loss) per common share
    
    $
    1.00
    
    
    
    (0.32
    )
    
    
    (0.99
    )Weighted average shares outstanding
    
    
    31,650
    
    
    
    31,208
    
    
    
    30,997
 See accompanying notes. F-5




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##### Table of Contents



ATMI, INC. 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (in thousands) AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2001
    
    $
    304
    
    
    $
    202,164
    
    
    $
    78,889
    
    
    $
    (1,343
    )
    
    $
    280,014Issuance of 179 shares of common stock pursuant to the
exercise of employee stock options
    
    
    2
    
    
    
    2,769
    
    
    
    
    
    
    
    
    
    
    
    2,771Issuance of 82 shares of common stock pursuant to the
employee stock purchase plan
    
    
    1
    
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    1,601Equity based compensation
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Tax benefit related to nonqualified stock options
    
    
    
    
    
    
    868
    
    
    
    
    
    
    
    
    
    
    
    868Net loss
    
    
    
    
    
    
    
    
    
    
    (30,721
    )
    
    
    
    
    
    
    (30,721
    )Reclassification adjustment for realized gain on
available-for-sale securities sold (net of tax provision
of $366)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (598
    )
    
    
    (598
    )Unrealized gain on available-for-sale securities (net of
tax provision of $560)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,108
    
    
    
    1,108Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,336
    
    
    
    1,336Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,875
    )Balance at December 31, 2002
    
    
    307
    
    
    
    207,412
    
    
    
    48,168
    
    
    
    503
    
    
    
    256,390Issuance of 197 shares of common stock pursuant to the
exercise of employee stock options
    
    
    2
    
    
    
    3,034
    
    
    
    
    
    
    
    
    
    
    
    3,036Issuance of 102 shares of common stock pursuant to the
employee stock purchase plan
    
    
    1
    
    
    
    1,620
    
    
    
    
    
    
    
    
    
    
    
    1,621Equity based compensation
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    42Tax benefit related to nonqualified stock options
    
    
    
    
    
    
    684
    
    
    
    
    
    
    
    
    
    
    
    684Net loss
    
    
    
    
    
    
    
    
    
    
    (9,919
    )
    
    
    
    
    
    
    (9,919
    )Reclassification adjustment for realized gain on available-
for-sale securities sold (net of tax provision of $129)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228
    )
    
    
    (228
    )Unrealized gain on available-for-sale securities (net of
tax provision of $122)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    217Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,408
    
    
    
    2,408Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,522
    )Balance at December 31, 2003
    
    
    310
    
    
    
    212,792
    
    
    
    38,249
    
    
    
    2,900
    
    
    
    254,251Issuance of
330 shares of common stock pursuant to the
exercise of employee stock options
    
    
    3
    
    
    
    6,092
    
    
    
    
    
    
    
    
    
    
    
    6,095Issuance of 115 shares of common stock pursuant to the
employee stock purchase plan
    
    
    1
    
    
    
    2,253
    
    
    
    
    
    
    
    
    
    
    
    2,254Equity based compensation
    
    
    
    
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    215Issuance of 60 shares of restricted stock
    
    
    1
    
    
    
    373
    
    
    
    
    
    
    
    
    
    
    
    374Tax benefit related to nonqualified stock options
    
    
    
    
    
    
    926
    
    
    
    
    
    
    
    
    
    
    
    926Net income
    
    
    
    
    
    
    
    
    
    
    31,502
    
    
    
    
    
    
    
    31,502Reclassification adjustment for realized gain on
available-for-sale securities sold (net of tax provision
of $79)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129
    )
    
    
    (129
    )Unrealized loss on available-for-sale securities (net of
tax benefit of $606)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (989
    )
    
    
    (989
    )Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,077
    
    
    
    3,077Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,461Balance at December 31, 2004
    
    $
    315
    
    
    $
    222,651
    
    
    $
    69,751
    
    
    $
    4,859
    
    
    $
    297,576
 See accompanying notes. F-6




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##### Table of Contents



ATMI, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Year Ended December 31,2004
    
    
    2003
    
    
    2002Operating activitiesNet income (loss)
    
    $
    31,502
    
    
    $
    (9,919
    )
    
    $
    (30,721
    )Less: income (loss) from discontinued operations
    
    
    11,396
    
    
    
    (11,907
    )
    
    
    (32,493
    )Income from continuing operations
    
    
    20,106
    
    
    
    1,988
    
    
    
    1,772Adjustments to reconcile income from continuing operations to cash provided
(used) by operating activities from continuing operations:Depreciation and amortization
    
    
    17,250
    
    
    
    15,039
    
    
    
    11,045Restructuring and other charges
    
    
    
    
    
    
    1,731
    
    
    
    Provision for bad debt
    
    
    25
    
    
    
    124
    
    
    
    327Provision for inventory obsolescence
    
    
    1,606
    
    
    
    3,054
    
    
    
    384Deferred income taxes
    
    
    4,130
    
    
    
    (4,727
    )
    
    
    (1,915
    )Tax benefit from nonqualified stock options
    
    
    926
    
    
    
    684
    
    
    
    868Stock compensation expense
    
    
    374
    
    
    
    42
    
    
    
    11Realized gain on sale of marketable securities
    
    
    (271
    )
    
    
    (357
    )
    
    
    (958
    )Impairment of investments
    
    
    4,471
    
    
    
    5,708
    
    
    
    400Other
    
    
    76
    
    
    
    317
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,266
    )
    
    
    (5,164
    )
    
    
    (3,300
    )Inventories
    
    
    (16,960
    )
    
    
    (8,597
    )
    
    
    (509
    )Other assets
    
    
    (9,908
    )
    
    
    1,722
    
    
    
    2,329Accounts payable
    
    
    4,431
    
    
    
    570
    
    
    
    1,608Accrued expenses
    
    

    11,891
    
    
    
    87
    
    
    
    820Income taxes
    
    
    (1,379
    )
    
    
    7,940
    
    
    
    (9,765
    )Other liabilities
    
    
    2,110
    
    
    
    (165
    )
    
    
    1,455Cash provided by operating activities of continuing operations
    
    
    33,612
    
    
    
    19,996
    
    
    
    4,572Cash provided (used) by operating activities of discontinued operations
    
    
    (8,220
    )
    
    
    (12,228
    )
    
    
    10,467Net cash provided by operating activities
    
    
    25,392
    
    
    
    7,768
    
    
    
    15,039Investing activitiesCapital expenditures
    
    
    (16,785
    )
    
    
    (15,306
    )
    
    
    (31,150
    )Acquisitions and other equity investments
    
    
    (2,136
    )
    
    
    (36,463
    )
    
    
    (5,000
    )Purchases of marketable securities
    
    
    (210,746
    )
    
    
    (103,388
    )
    
    
    (248,582
    )Sales or maturities of marketable securities
    
    
    109,880
    
    
    
    143,181
    
    
    
    182,512Other
    
    
    150
    
    
    
    
    
    
    
    Cash used by investing activities of continuing operations
    
    
    (119,637
    )
    
    
    (11,976
    )
    
    
    (102,220
    )Cash provided (used) by investing activities of discontinued operations
    
    
    94,776
    
    
    
    (399
    )
    
    
    (9,727
    )Net cash used by investing activities
    
    
    (24,861
    )
    
    
    (12,375
    )
    
    
    (111,947
    )Financing activitiesPayments on loans, notes, and bonds payable
    
    
    (763
    )
    
    
    (523
    )
    
    
    (1,581
    )Payments on capital lease obligations
    
    
    (270
    )
    
    
    (142
    )
    
    
    (5
    )Proceeds from exercise of stock options and employee stock purchase plan shares
    
    
    8,349
    
    
    
    4,657
    
    
    
    4,372Cash provided by financing activities of continuing operations
    
    
    7,316
    
    
    
    3,992
    
    
    
    2,786Cash provided (used) by financing activities of discontinued operations
    
    
    
    
    
    
    (106
    )
    
    
    (18,956
    )Net cash provided (used) by financing activities
    
    
    7,316
    
    
    
    3,886
    
    
    
    (16,170
    )Effects of exchange rate changes on cash
    
    
    3,077
    
    
    
    2,408
    
    
    
    1,337Increase (decrease) in cash and cash equivalents from continuing operations
    
    
    (75,632
    )
    
    
    14,420
    
    
    
    (93,525
    )Increase (decrease) in cash and cash equivalents from discontinued operations
    
    
    86,556
    
    
    
    (12,733
    )
    
    
    (18,216
    )Net increase (decrease) in cash and cash equivalents
    
    
    10,924
    
    
    
    1,687
    
    
    
    (111,741
    )Cash and cash equivalents, beginning of year
    
    
    25,471
    
    
    
    23,784
    
    
    
    135,525Cash and cash equivalents, end of year
    
    $
    36,395
    
    
    $
    25,471
    
    
    $
    23,784SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash interest paid
    
    $
    6,131
    
    
    $
    6,057
    
    
    $
    6,100Cash income taxes paid
    
    $
    7,230
    
    
    $
    2,157
    
    
    $
    2,994
 See accompanying notes. F-7




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##### Table of Contents



ATMI, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ATMI is a leading supplier of materials, materials delivery systems, and high-purity materials
packaging products used worldwide in the manufacture of semiconductor devices. ATMI specifically
targets the front-end semiconductor materials market. This market includes the processes used to
convert a bare silicon wafer into a fully functional wafer that contains many copies of a
semiconductor device or chip. To complete the manufacturing process, this functional wafer is
taken through a back-end manufacturing process that includes wafer dicing into chips, packaging
and testing. ATMIs customers include many of the leading semiconductor manufacturers in the
world. 1. Summary of Significant Accounting Policies General The preparation of the consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates,
including those related to bad debts, inventories, marketable securities, property, plant and
equipment, investments, intangible assets, income taxes, accrued expenses, accrued salaries and
related benefits, restructuring charges, and contingencies and litigation. The Company bases its
estimates on experience and on various other assumptions that the Company believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions and such
differences could be material to the financial statements. Basis of Presentation The consolidated financial statements include the accounts of ATMI, Inc. and its wholly-owned
subsidiaries (ATMI, or the Company), after elimination of intercompany accounts and
transactions. During 2004, ATMI significantly reduced its exposure to the capital equipment cycles of the
semiconductor industry by selling non-core product lines (which represented nearly all of our
former Technologies segment). The non-core product lines that we exited by sale include the
following: environmental abatement equipment, materials sensing and monitoring equipment,
specialty thin-film deposition services, outsourced parts cleaning and tool maintenance services,
our smartcard device venture, and gallium nitride materials. The Company completed these sales by
the end of 2004. Certain prior year amounts have been reclassified to conform to the current year presentation. F-8




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) Revenue Recognition The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements(SAB 101), as amended by SAB 101A, 101B, and SAB 104. SAB
101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is
fixed or determinable; and (4) collectibility is reasonably assured. Determination of criteria (3)
and (4) are based on managements judgments regarding the fixed nature of the fee charged for
products delivered and services rendered and collectibility of those fees. The Companys revenues
from product sales are recognized upon title transfer, which generally occurs upon shipment. In
instances where final acceptance of equipment is specified by the purchase agreement, revenue is
deferred until all acceptance criteria have been satisfied. Service revenue is generally recognized
ratably over the period of the related contract, or if not under contract, when service is
provided. The Company accrues for warranty costs, sales returns, and other allowances based on a
current evaluation of its experience based on stated terms of the transactions. Should actual
product failure rates or customer return experience differ from the Companys estimates, revisions
to the estimated accruals would be required. Shipping and Handling Fees and Costs The Company includes all shipping and handling billings within revenues, and freight costs incurred
for product shipments within cost of revenues. Bad
Debts Credit is extended to commercial customers based on an evaluation of their financial condition and
collateral is not generally required. The evaluation of the financial condition of commercial
customers is performed to reduce the risk of loss. The Company grants extended payment terms, which
vary based on the geographic location of the customer, and generally range from 30 to 90 days.
There are no material collectibility issues with these extended-term receivables. The Company
maintains allowances for doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. Amounts are written off when they are determined to be
uncollectible. Past due status of accounts receivable is determined primarily based upon
contractual terms. Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit
risk consist primarily of cash and cash equivalents, marketable securities, accounts receivable and
currency forward exchange contracts. The Company invests its cash and cash equivalents and
marketable securities primarily in auction rate securities, other corporate obligations and
municipal debt obligations. The Company performs ongoing credit evaluations of its customers
financial condition and generally requires no collateral from its customers. The Company utilized
one vendor to manufacture and distribute product that accounted for approximately 26%, 27% and 29%
of consolidated revenues in 2004, 2003 and 2002, respectively. The Company had amounts due from
two customers that accounted for approximately 40% and 31% of accounts receivable at December 31,
2004 and 2003, respectively. F-9




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) Research and Development Research and development costs primarily relate to self-funded projects and include materials,
labor and overhead, that are expensed as incurred. The Company also incurs research and
development costs that are funded by external sources. Contract funding amounts and cost share
agreement reimbursements are included as on offset to research and development expense. Cash and Cash Equivalents, Marketable Securities and Investments Highly liquid investments with maturities of three months or less, when purchased, are classified
as cash and cash equivalents. Investments in publicly traded securities with maturities greater
than three months are classified as marketable securities. The Company accounts for marketable securities in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. All
of the Companys marketable securities are classified as available-for-sale as of the balance sheet
date and are reported at fair value, based on quoted market prices, with unrealized gains and
losses included in stockholders equity, net of applicable taxes. The cost of securities sold is
based on the specific identification method. Interest on these securities is accrued and included
in interest income. The 2004 and 2003 results include gains of $0.3 million and $0.4 million,
respectively, on sales of available-for-sale securities. The 2002 results include a gain of
approximately $1.0 million from the sale of available-for-sale securities. These amounts are
included in other income, net for the years ended December 31, 2004, 2003 and 2002. The Company holds minority interests in companies having operations or technology in areas within
or related to its strategic focus, some of which are in publicly traded companies whose share
prices are highly volatile and some of which are in private companies whose value is difficult to
determine. Investments in private companies are accounted for at aggregate cost and are included in
the consolidated balance sheets under the caption other long-term assets, net and were $5.8
million and $4.2 million at December 31, 2004 and 2003, respectively. The 2004, 2003 and 2002 results include impairment charges of $4.5 million, $5.7 million and $0.4
million respectively, related to investments and marketable securities, which are presented
separately in the Statements of Operations as impairment of investments. The Company reviews investment securities on a regular basis for impairment based on criteria that
include the extent to which cost exceeds market value, the duration of that market decline, our
intent and ability to hold to recovery and the financial health and specific prospects for the
issuer. Inventories Inventories are stated at the lower of cost or market using the first-in, first-out method. The
Company provides inventory allowances for estimated excess, obsolete and unmarketable inventory
equal to the difference between the cost of inventory and estimated market value based upon future
demand forecasts and market conditions. F-10




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) Property, Plant and Equipment Property, plant and equipment are carried at cost, net of accumulated depreciation. Depreciation is
calculated on the straight-line method based on the estimated useful lives of the assets, as
follows: buildings, 15 to 35 years; machinery and equipment, 3 to 15 years; furniture and
fixtures, 5 years; and leasehold improvements are amortized over the lesser of the lease term or
estimated useful life. ATMI uses accelerated depreciation methods for tax purposes where
appropriate. Foreign Currency Translation The Companys foreign subsidiaries operate primarily using local currencies. Accordingly, all
assets and liabilities of these subsidiaries are translated using exchange rates in effect at the
end of the period, and revenues and expenses are translated using average exchange rates in effect
during the period. Gains and losses from translation adjustments are included in accumulated other
comprehensive income on the consolidated balance sheet. Gains or losses resulting from foreign
currency transactions are included in other income (expense), net and have not been significant to
our operating results for any period. Income Taxes The Company accounts for income taxes in accordance with the liability method. Under this method,
deferred tax assets and liabilities are determined based upon differences between the financial
reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates
expected to apply to taxable income in the periods in which the deferred tax assets or liabilities
are expected to be realized or settled. The Company evaluates the realizability of the deferred
tax assets on a quarterly basis. If a portion or all of the valuation allowance is unnecessary,
then the related tax benefits will reduce the future income tax provision anticipated at that time. Fair Values of Financial Instruments Other than Derivatives The Companys financial instruments consist primarily of cash and cash equivalents, marketable
securities, accounts receivable, accounts payable, accrued liabilities and debt. Marketable
securities are accounted for at fair value using quoted market prices for those securities. The
Companys 5.25% convertible notes are accounted for at historical cost. The fair value of the
convertible notes is approximately $133.7 million at December 31, 2004, based on a quoted market
price at that date. All other financial instruments are accounted for on a historical cost basis,
which due to the nature of these instruments approximates fair value at the balance sheet dates. Derivative Instruments ATMI enters into derivative financial instruments solely to manage its exposure to fluctuating
currency rates. These financial instruments are in the form of forward contracts, and are not
entered into for trading purposes. ATMI uses only commonly traded instruments. At December 31,
2004 there were no open forward contracts. F-11




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) ATMI accounts for derivatives in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS Nos. 137, 138 and 149. SFAS No. 133
requires all derivatives to be recorded on the balance sheet at fair value. ATMI has entered into
only forward exchange contracts to hedge fair value exposures. Derivatives that are entered into for risk management purposes, and are not designated as hedges,
are recorded at their fair market values, with changes in fair market value being recognized in
current earnings. The fair values of currency forward contracts are estimated based on market
prices obtained from independent dealer or market quotes. Such quotes represent the estimated
amount the Company would receive or pay to terminate the agreements taking into consideration
current rates. Long-Lived Assets ATMI records impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets may be impaired and the undiscounted future cash flows
estimated to be generated by these assets are less than the assets net book value. If impairment
occurs, the loss is measured by comparing the fair value of the asset to its carrying amount. Goodwill and Other Intangibles The Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible
Assets. In accordance with SFAS 142, management reviews goodwill for impairment annually or when
events or circumstances indicate that its value may have declined. In order to evaluate impairment
of goodwill, assumptions about the future condition and operations of the business unit to which
the goodwill asset relates are made. These assumptions are applied to financial models in which we
estimate the fair value of the business unit utilizing projected future cash flows, multiples of
earnings and sales and other factors. Using these models, management determines whether an
impairment charge is required to reduce goodwill to its estimated fair value. F-12




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) Other intangible assets, such as acquired patents and trademarks, customer base, purchased systems
and manufacturing documentation, and covenants not to compete, are currently amortized on the
straight-line method over their estimated useful lives ranging from 3 to 14 years. These assets
are currently reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Stock-Based Compensation At December 31, 2004, the Company had seven stock-based employee compensation plans, which are
described more fully in Note 13. The Company accounts for these plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. All options granted under those plans had an
exercise price equal to the fair market value of the underlying common stock on the date of grant.
All stock-based compensation expense included in the statements of operations is calculated using
the intrinsic-value method prescribed by APB No. 25. The following table sets forth the effect on
net income and earnings per share if the Company had applied the fair value recognition provisions
of SFAS No. 123, Accounting For Stock-Based Compensation, to stock-based employee compensation
(in thousands, except per share data): Year Ended December 31,2004
    
    
    2003
    
    
    2002Net income (loss), as reported
    
    $
    31,502
    
    
    $
    (9,919
    )
    
    $
    (30,721
    )Add: Total stock-based
employee compensation expense
included in reported net
income (loss), net of tax
effect
    
    
    385
    
    
    
    16
    
    
    
    7Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of tax effect
    
    
    (8,404
    )
    
    
    (9,279
    )
    
    
    (11,704
    )Pro forma net income (loss)
    
    $
    23,483
    
    
    $
    (19,182
    )
    
    $
    (42,418
    )Income (loss) per share:Basic-as reported
    
    $
    1.01
    
    
    $
    (0.33
    )
    
    $
    (1.03
    )Basic-pro forma
    
    $
    0.75
    
    
    $
    (0.64
    )
    
    $
    (1.42
    )Diluted-as reported
    
    $
    1.00
    
    
    $
    (0.32
    )
    
    $
    (0.99
    )Diluted-pro forma
    
    $
    0.74
    
    
    $
    (0.64
    )
    
    $
    (1.42
    )
 Warranty Accrual ATMIs equipment products are generally sold with a 12 to 24 month warranty period. Parts and labor
are covered under the terms of the warranty agreement. The warranty provision is based on
historical experience by product type. Changes in the warranty accrual for continuing operations
were as follows (in thousands): Accrual for ProductWarranty CostsBalance December 31, 2002
    
    $
    287Charged to expense
    
    
    296Warranty service costs deducted from accrual
    
    
    (150
    )Balance December 31, 2003
    
    $

    433Charged to expense
    
    
    809Warranty service costs deducted from accrual
    
    
    (913
    )Balance December 31, 2004
    
    $
    329
 F-13




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 1. Summary of Significant Accounting Policies (continued) Recently Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (revised
2004), Share-Based Payment. SFAS No. 123(R) requires that the compensation cost relating to
share-based payment transactions be recognized in financial statements. The cost will be measured
based on the fair value of the instruments issued. SFAS No. 123(R) covers a wide range of
share-based compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights and employee share purchase plans. SFAS No.
123(R) replaces SFAS No. 123 and supersedes APB Opinion No. 25. As originally issued in 1995, SFAS
No. 123 established as preferable the fair-value-based method of accounting for share-based payment
transactions with employees. However, that Statement permitted entities the option of continuing to
apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what
net income (loss) would have been had the preferable fair-value-based method been used. ATMI will
be required to apply SFAS No. 123(R) as of the first interim reporting period that begins after
June 15, 2005, and we plan to adopt it using the modified-prospective method, effective July 1,
2005. We are currently evaluating the impact SFAS No. 123(R) will have on us and, based on our
preliminarily analysis, expect to incur approximately $5.2 million in additional compensation
expense during the period July 1, 2005 to December 31, 2005 as a result of this new accounting
standard. Other Only 5% of the Companys employees are covered by a collective bargaining agreement, which expired
in December 2004. ATMI is currently in the process of negotiating a new collective bargaining
agreement with agents of this employee group and expects to have this accomplished by the end of
the second quarter of 2005. All of the employees covered by this agreement are based in Europe. 2. Discontinued Operations Throughout 2004, the Company significantly reduced its exposure to the capital equipment cycles of
the semiconductor industry by selling non-core product lines. The non-core product lines that we
exited by sale include the following: environmental abatement equipment, materials sensing and
monitoring equipment, epitaxial services, outsourced parts cleaning and tool maintenance services,
our smartcard device venture and gallium nitride materials. In accordance with SFAS No. 144, the
Company has accounted for these product lines as discontinued operations for all periods presented.
The operating results and gains on sale of these product lines are shown as a discontinued
operation in the consolidated statements of operations. The assets and liabilities of the
discontinued operations have been classified separately on the consolidated balance sheets in the
current assets and current liabilities, respectively, for 2003. In December 2004, the Company completed the sale of its environmental abatement equipment business
for $14.4 million in cash with an additional $1.6 million in escrow, pending the outcome of certain
acquisition contingencies. A gain of $2.7 million, net of tax, was recognized on the sale of this
business. In September 2004, the Company completed the sale of its Emosyn smartcard business for $15.1
million in cash and a 16.4% investment in the entity that acquired the Emosyn smartcard business.
The investment of $2.6 million has been accounted for on the cost basis. A gain of $3.4 million,
net of taxes, was recognized on the sale of the Emosyn smartcard business. F-14




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 2. Discontinued Operations (continued) In July 2004, the Company completed the sale of its epitaxial services business for proceeds of
$38.0 million. In December 2004, the Company received an additional $1.2 million as full
settlement of the amounts held in escrow pending satisfaction of certain contingencies. A gain of
$0.5 million, net of taxes, was recognized on the sale of the epitaxial services business. In June 2004, the Company completed the sale of its semiconductor parts cleaning services business,
Fab Services, for total proceeds of $6.7 million, including $4.9 million of cash, and a note for
the balance. Additional contingent consideration of up to $0.3 million, which has not yet been
recognized, may be recognized based on the achievement of certain operating targets. A gain of $0.2
million, net of taxes, was recognized on the sale of the Fab Services business. In May 2004, the Company completed the sale of its life safety sensors business for total cash
proceeds of $11.0 million. A gain of $0.1 million, net of taxes, was recognized on the sale of the
life safety sensors business. In March 2004, the Company completed the sale of its gallium nitride materials business for total
cash proceeds of $10.3 million. A gain of $1.2 million, net of taxes, was recognized on the sale
of the gallium nitride materials business. The aggregate gains from the sales of the business units noted above are included in the
accompanying statement of operations as a gain on disposal of discontinued operations, net of
income taxes. Revenues and income (losses) from discontinued operations were as follows (in thousands): Year Ended December 31,2004
    
    
    2003
    
    
    2002Revenues
    
    $
    83,868
    
    
    $
    71,744
    
    
    $
    75,660Pre-tax income (loss) from
discontinued operations (1)
    
    $
    17,532
    
    
    
    ($17,556
    )
    
    
    ($51,486
    )Income (loss) from operations of
discontinued operations,
net of income taxes
    
    $
    3,313
    
    
    
    ($11,907
    )
    
    
    ($32,493
    )Gain on sale of discontinued
operations
net of income taxes
    
    $
    8,083
    
    
    
    
    
    
    
    
   (1)
    
    2004 includes $12.4 million of gain on sale of discontinued operations. F-15




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 2. Discontinued Operations (continued) The assets and liabilities of the discontinued operations at December 31, 2003 were as follows (in
thousands): Assets:Accounts receivable, net
    
    $
    6,691Inventories, net
    
    
    19,642Other current assets
    
    
    4,707Property, plant and equipment, net
    
    
    48,383Goodwill, net
    
    
    2,888Other intangible assets, net
    
    
    2,297Other non-current assets
    
    
    128Total assets
    
    $
    84,736Liabilities:Accrued liabilities
    
    $
    6,130Other liabilities
    
    
    1,066Total liabilities
    
    $
    7,196
 3. Mergers and Acquisitions On July 14, 2003, ATMI acquired all of the outstanding capital stock of ESC, Inc. (ESC) of
Bethlehem, PA for $16.4 million, net of cash acquired, plus a possible future payment of up to
$27.0 million which is contingent on future product revenues through the end of 2005. Of the
initial purchase price, $3.6 million remains in escrow in accordance with the purchase agreement in
order to secure certain indemnity obligations of the sellers. ESC developed, marketed and sold
novel wafer preparation and cleaning materials for copper and advanced interconnect microelectronic
fabrication processes. The acquisition was recorded under the purchase method of accounting and,
accordingly, ESCs results of operations are included in the Companys financial statements
prospectively from the date of acquisition (July 14, 2003). The purchase price was allocated to
assets acquired and liabilities assumed based on an independent valuation of their respective fair
market values at the date of acquisition as summarized below (in thousands). The excess of the
purchase price over the assessment of fair market value of identifiable assets acquired has been
recorded as goodwill. Identified intangible assets
    
    $
    10,450In-process research and development
    
    
    650Net liabilities assumed
    
    
    (1,838
    )Goodwill
    
    
    7,174Purchase price, net of cash acquired
    
    $
    16,436
 Net liabilities assumed were presented net of cash acquired of $1.7 million. The $0.7 million of
in-process research and development was charged to expense in 2003, since it had no alternative
future use. The $10.5 million of identified intangible assets is included in other intangibles and
is being amortized using the straight-line method over 7 years. During May 2003, ATMI entered into a strategic alliance with Enthone, Inc., a Cookson Electronics
Company (Enthone), whereby ATMI purchased for a cash payment of $20.0 million the exclusive
worldwide selling and distribution rights to Enthones copper electrochemical deposition (ECD)
products, including its ViaFormâ products, for a period of ten years, subject to
automatic renewal upon satisfaction of certain conditions. Under the terms of the agreement,
Enthone continues to manufacture the ViaFormâproducts for ATMI. The asset
related to these purchased rights is included in other intangibles and is being amortized using the
straight-line method over a period of 14 years. F-16




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 4. Marketable Securities Marketable securities are comprised of the following at December 31, (in thousands): 2004
    
    
    
    
    
    
    
    
    2003Gross
    
    
    
    
    
    
    
    
    
    
    GrossUnrealized
    
    
    Estimated
    
    
    
    
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gain (Loss)
    
    
    Fair Value
    
    
    Cost
    
    
    Gain
    
    
    Fair ValueCommon stock
    
    
    629
    
    
    $
    1,525
    
    
    $
    2,154
    
    
    $
    679
    
    
    $
    2,216
    
    
    $
    2,895Corporate debt obligations
    
    
    123,264
    
    
    
    (342
    )
    
    
    122,922
    
    
    
    42,569
    
    
    
    21
    
    
    
    42,590Government obligations
    
    
    78,184
    
    
    
    (695
    )
    
    
    77,489
    
    
    
    57,706
    
    
    
    38
    
    
    
    57,744Total marketable securities
    
    $
    202,077
    
    
    $
    488
    
    
    $
    202,565
    
    
    $
    100,954
    
    
    $
    2,275
    
    
    $
    103,229
 The amortized cost and estimated fair value of available-for-sale securities, by contractual
maturity, as of December 31, 2004 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. EstimatedCost
    
    
    Fair ValueDue in one year or less
    
    $
    94,840
    
    
    $
    94,656Due after one year through three years
    
    
    106,608
    
    
    
    105,755201,448
    
    
    
    200,411Common stock
    
    
    629
    
    
    
    2,154$
    202,077
    
    
    $
    202,565
 5. Inventories Inventories are comprised of the following at December 31, (in thousands): 2004
    
    
    2003Raw materials
    
    $
    8,874
    
    
    $
    11,272Work in process
    
    
    1,731
    
    
    
    725Finished goods
    
    
    29,109
    
    
    
    13,44439,714
    
    
    
    25,441Excess and obsolescence reserve
    
    
    (2,796
    )
    
    
    (3,877
    )Net Inventory
    
    $
    36,918
    
    
    $
    21,564
 As of December 31, 2004, the Company had commitments for inventory purchases of $10.0 million. F-17




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 6. Derivative Instruments ATMI does not have any foreign exchange contracts outstanding as of December 31, 2004. The Company
enters into forward contracts from time to time to hedge against foreign currency denominated
receivables and payables. 7. Property, Plant and Equipment Property, plant and equipment is comprised of the following (in thousands): December 31,2004
    
    
    2003Land
    
    $
    1,297
    
    
    $
    1,216Buildings
    
    
    23,052
    
    
    
    21,782Machinery and equipment
    
    
    86,738
    
    
    
    76,008Furniture and fixtures
    
    
    4,193
    
    
    
    3,289Leasehold improvements
    
    
    14,887
    
    
    
    11,640Construction in progress
    
    
    6,388
    
    
    
    4,515136,555
    
    
    
    118,450Accumulated depreciation and amortization
    
    
    (66,797
    )
    
    
    (53,777
    )$
    69,758
    
    
    $
    64,673
 Depreciation and amortization expense for property, plant and equipment for the years ended
December 31, 2004, 2003, and 2002 was $12.9 million, $12.5 million and $10.0 million, respectively.
The Company capitalizes interest as part of the cost of constructing major facilities. Interest
cost capitalized in 2004, 2003 and 2002 was $0, $0.1 million and $0.9 million, respectively. As of December 31, 2004, the Company had commitments for capital expenditures of $2.5 million. F-18




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 8. Goodwill and Other Intangibles Changes in carrying amounts of goodwill and other intangibles for the year ended December 31, 2004
were as follows: Debt Issuance
    
    
    Patents &
    
    
    Other
    
    
    Total OtherGoodwill
    
    
    
    Costs
    
    
    Trademarks
    
    
    Intangibles
    
    
    IntangiblesBalance at January 1, 2003
    
    $
    5,296
    
    
    
    $
    3,245
    
    
    $
    260
    
    
    $
    2,268
    
    
    $
    5,773Acquisitions
    
    
    7,174
    (1)
    
    
    
    
    
    
    
    27,187
    (2)
    
    
    3,378
    (3)
    
    
    30,565Amortization
    
    
    
    
    
    
    
    (841
    )
    
    
    (1,270
    )
    
    
    (416
    )
    
    
    (2,527
    )Other, including foreign currency translation
    
    
    (511
    )
    
    
    
    
    
    
    
    43
    
    
    
    (304
    )
    
    
    (261
    )Balance at December 31, 2003
    
    $
    11,959
    
    
    
    $
    2,404
    
    
    $
    26,220
    
    
    $
    4,926
    
    
    $
    33,550Acquisitions
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Amortization
    
    
    
    
    
    
    
    (847
    )
    
    
    (2,535
    )
    
    
    (978
    )
    
    
    (4,360
    )Other, including foreign currency translation
    
    
    138
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (21
    )
    
    
    (27
    )Balance at December 31, 2004
    
    $
    12,097
    
    
    
    $
    1,557
    
    
    $
    23,695
    
    
    $
    3,927
    
    
    $
    29,179
   (1)
    
    Represents goodwill from acquisition of ESC, Inc.(2)
    
    Includes $20.0 million for selling and distribution rights purchased from Enthone and
$7.1 million from the acquisition of ESC, Inc.(3)
    
    Represents the value attributed to the customer base from the acquisition of ESC, Inc. Goodwill and other intangibles balances consisted of the following at December 31, 2004 and
2003 (in thousands): Debt Issuance
    
    
    Patents &
    
    
    Other
    
    
    Total OtherGoodwill
    
    
    
    Costs
    
    
    Trademarks
    
    
    Intangibles
    
    
    IntangiblesGross amount as of December 31, 2003
    
    $
    12.238
    
    
    
    $
    4,257
    
    
    $
    27,490
    
    
    $
    5,969
    
    
    $
    37,716Accumulated Amortization
    
    
    (279
    )
    
    
    
    (1,853
    )
    
    
    (1,270
    )
    
    
    (1,043
    )
    
    
    (4,166
    )Balance as of December 31, 2003
    
    $
    11,959
    
    
    
    $
    2,404
    
    
    $
    26,220
    
    
    $
    4,926
    
    
    $
    33,550Gross Amount as of December 31, 2004
    
    $
    12,376
    
    
    
    $
    4,257
    
    
    $
    27,500
    
    
    $
    5,948
    
    
    $
    37,705Accumulated Amortization
    
    
    (279
    )
    
    
    
    (2,700
    )
    
    
    (3,805
    )
    
    
    (2,021
    )
    
    
    (8,526
    )Balance as of December 31, 2004
    
    $
    12,097
    
    
    
    $
    1,557
    
    
    $
    23,695
    
    
    $
    3,927
    
    
    $
    29,179
 F-19




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 8. Goodwill and Other Intangibles (continued) The approximate amortization expenses to be recognized related to intangible assets for the
following years ended are as follows (in thousands): Year
    
    Amount2005
    
    $
    4,3792006
    
    
    4,1712007
    
    
    3,2162008
    
    
    2,9242009
    
    
    2,924Thereafter
    
    
    11,565Total
    
    $
    29,179
 9. Loans, Notes and Bonds Payable Loans, notes and bonds payable consist of the following (in thousands): December 31,2004
    
    
    2003City of Bloomington, Minnesota Industrial Revenue Bonds,
interest rate was variable (1.6% at December 31, 2003)
    
    
    
    
    
    $
    7005.25% Convertible Subordinated Notes due November 15, 2006
    
    $
    115,000
    
    
    
    115,000Commercial credit lines and other
    
    
    168
    
    
    
    231115,168
    
    
    
    115,931Less current portion
    
    
    (84
    )
    
    
    (777
    )$
    115,084
    
    
    $
    115,154
 F-20




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 9. Loans, Notes and Bonds Payable (continued) The approximate aggregate debt maturities are as follows as of December 31, 2004 (in thousands): 2005
    
    $
    842006
    
    
    115,0842007
    
    

    2008
    
    
    2009
    
    
    Thereafter
    
    
    $
    115,168
 The City of Bloomington, Minnesota bonds were fully redeemed in December 2004. On November 13, 2001, the Company sold $115.0 million of convertible subordinated notes due in 2006
in a private offering. The notes bear interest at 5.25% per annum and are convertible by the
holders into approximately 5.2 million shares of the Companys common stock, at a conversion price
of approximately $22.19 per share. The notes and related shares, issuable upon conversion of the
notes, were registered with the Securities and Exchange Commission on February 19, 2002. The notes
become redeemable at the Companys option beginning on November 15, 2004, in whole or in part, if
ATMIs common stock exceeds 120% of the conversion price for at least 20 trading days within a
period of 30 consecutive trading days. The redemption premium beginning on November 15, 2004 and
ending on November 14, 2005 is 102.10%. The redemption premium beginning on November 15, 2005 and
ending on November 14, 2006 is 101.05%. Upon notification of redemption by the Company, the note
holder may choose to convert their notes to common stock prior to the
redemption date (see Note 19). Interest is
payable to note holders on a semi-annual basis. At December 31, 2004, the Company had $1.5 million of outstanding standby letters of credit, which
are related to three leased facilities. These standby letters of credit will expire before the end
of 2005, and will remain unused unless the Company is found to be in default of certain terms of
the related leases. 10. Leases The following is a schedule of future minimum lease payments for capital leases as of December 31,
2004 (in thousands): 2005
    
    $
    137Less amount representing interest
    
    
    (1
    )Present value of future minimum lease payments
    
    
    136Less current portion
    
    
    136Long-term portion
    
    $
    
 F-21




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##### Table of Contents



ATMI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 10. Leases (continued) The Company leases office and manufacturing facilities, and certain manufacturing equipment under
several operating leases expiring between 2005 and 2011. Rental expense was $3.2 million, $2.7
million and $3.3 million for the years ended December 31, 2004, 2003 and 2002, respectively. The following is a schedule of future minimum lease payments for operating leases as of December
31, 2004 (in thousands): OperatingLeases2005
    
    $
    3,1582006
    
    
    2,3322007
    
    
    1,9782008
    
    
    8402009
    
    
    323Thereafter
    
    
    216Total minimum lease payments
    
    $
    8,847
 11. Income Taxes Pre-tax income (loss) from continuing operations was taxed in the following jurisdictions (in
thousands): Year Ended December 31,2004
    
    
    2003
    
    
    2002Domestic
    
    $
    27,497
    
    
    $
    (11,532
    )
    
    $
    995Foreign
    
    
    2,967
    
    
    
    8,903
    
    
    
    1,728Total pre-tax income (loss)
    
    $
    30,464
    
    
    $
    (2,629
    )
    
    $
    2,723
 Significant components of the provision (benefit) for income taxes for the periods presented
are as follows (in thousands): December 31,2004
    
    
    2003
    
    
    2002Current:Federal
    

    $
    4,864
    
    
    $
    (2,501
    )
    
    $
    1,495State
    
    
    173
    
    
    
    209
    
    
    
    506Foreign
    
    
    1,231
    
    
    
    2,402
    
    
    
    865Total current
    
    
    6,268
    
    
    
    110
    
    
    
    2,866Deferred:Federal
    
    
    3,485
    
    
    
    (4,488
    )
    
    
    (1,291
    )State
    
    
    541
    
    
    
    (280
    )
    
    
    (586
    )Foreign
    
    
    64
    
    
    
    41
    
    
    
    (38
    )Total deferred
    
    
    4,090
    
    
    
    (4,727
    )
    
    
    (1,915
    )$
    10,358
    
    
    $
    (4,617
    )
    
    $
    951
 F-22




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 11. Income Taxes (continued) Significant components of the Companys deferred tax assets and liabilities are as follows (in
thousands): December 31,2004
    
    
    2003Deferred tax assets:Accrued liabilities
    
    $
    7,665
    
    
    $
    6,222Inventory adjustments
    
    
    5,877
    
    
    
    5,098Net operating loss and tax credit carryforwards
    
    
    5,238
    
    
    
    19,901Other, net
    
    
    633
    
    
    
    2819,413
    
    
    
    31,249Valuation allowance
    
    
    (647
    )
    
    
    (956
    )18,766
    
    
    
    30,293Deferred tax liabilities:Depreciation and amortization
    
    
    (8,501
    )
    
    
    (11,493
    )Unrealized gain on marketable securities
    
    
    (183
    )
    
    
    (844
    )Other, net
    
    
    (50
    )
    
    
    (126
    )(8,734
    )
    
    
    (12,463
    )Net deferred tax assets
    
    $
    10,032
    
    
    $
    17,830
 The valuation allowance relates to realizability of certain U.S. state and foreign net
operating losses and certain U.S. state tax credits. As of December 31, 2004, the Company has a deferred tax asset related to state net operating loss
carryforwards of $0.7 million. Additionally, the Company has federal and state tax credit
carryforwards of $3.3 million and $1.1 million, respectively. The net operating loss and tax
credit carryforwards will expire at various dates in 2006 through 2024, if not used. Income taxes paid in the years ended December 31, 2004, 2003, and 2002 were $7.2 million, $2.2
million, and $3.0 million, respectively. The Company received refunds of $0.2 million, $14.7
million and $9.3 million in 2004, 2003 and 2002, respectively. The reconciliation of income tax expense (benefit) from continuing operations computed at the U.S.
federal statutory tax rate to the Companys tax expense (benefit) is as follows (in thousands): For the Year Ended December 31,2004
    
    
    2003
    
    
    2002U.S. statutory rate
    
    $
    10,662
    
    
    $
    (920
    )
    
    $
    953State income taxes
    
    
    658
    
    
    
    (46
    )
    
    
    (52
    )Foreign income taxes
    
    
    343
    
    
    
    (66
    )
    
    
    231In-process R&D expenses
    
    
    
    
    
    
    228
    
    
    
    ETI benefit
    
    
    (904
    )
    
    
    (660
    )
    
    
    (582
    )Change in valuation allowance of deferred tax assets
    
    
    (384
    )
    
    
    (650
    )
    
    
    119Adjustment to prior years tax liabilities
    
    
    
    
    
    
    (3,000
    )
    
    
    Other, net
    
    
    (17
    )
    
    
    497
    
    
    
    282$
    10,358
    
    
    $
    (4,617
    )
    
    $
    951
 F-23




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 11. Income Taxes (continued) ATMI has not provided for U.S. federal income and foreign withholding taxes on $17.4 million of
undistributed earnings from non-U.S. operations as of December 31, 2004, 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 the
subsidiarys 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. ATMI has not yet reevaluated its
position with respect to the indefinite reinvestment of foreign earnings to take into account the
possible election of the repatriation provisions contained in the American Jobs Creation Act of
2004. The status of ATMIs evaluation of these provisions is detailed below. American Jobs Creation Act of 2004Repatriation of Foreign Earnings The American Jobs Creation Act of 2004 (the Jobs Act), enacted on October 22, 2004, provides for
a temporary 85% dividends received deduction on certain foreign earnings repatriated during a
one-year period. The deduction would result in an approximate 5.25% federal tax rate on the
repatriated earnings. To qualify for the deduction, the earnings must be reinvested in the United
States pursuant to a domestic reinvestment plan established by a companys chief executive officer
and approved by the companys board of directors. Certain other criteria in the Jobs Act must be
satisfied as well. The maximum amount of the Companys foreign earnings that qualify for the
temporary deduction is $17.4 million. For ATMI, the one-year period during which the qualifying
distributions can be made ends on December 31, 2005. The Company is in the process of evaluating whether it will repatriate foreign earnings under the
repatriation provisions of the Jobs Act, and if so, the amount that will be repatriated. The range
of reasonably possible amounts that ATMI is considering for repatriation, which would be eligible
for the temporary deduction, is zero to $17.4 million. The Company is awaiting the issuance of
further regulatory guidance and passage of statutory technical corrections with respect to certain
provisions in the Jobs Act prior to determining the amounts it will repatriate. ATMI is not yet in
a position to determine the tax impact of a qualifying repatriation, should it choose to make one,
on its income tax expense for 2005. The Company expects to determine the amounts and sources of
foreign earnings to be repatriated, if any, by the third quarter of 2005. During the second quarter of 1999, the Company was notified by the Internal Revenue Service of an
assessment of $2.1 million, plus interest, for certain tax matters. The issues were litigated in
U.S. Tax Court in 2002, and in 2003, the Company received a favorable court decision. As a result
of the favorable decision, the Company recognized a $3.0 million income tax benefit in 2003. F-24




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 12. Profit Sharing Plan The Company maintains a 401(k) profit sharing plan covering substantially all of its domestic
employees that is subject to the provisions of the Employee Retirement Income Security Act of 1974.
The Companys matching contributions are discretionary by plan year and were approximately $0.5
million for 2004, and $0.7 million for each of the two years ended December 31, 2003 and 2002,
respectively. 13. Stockholders Equity Stock Plans The Company has certain stock plans, which provide for the granting of up to 9,515,833 nonqualified
stock options, incentive stock options (ISOs), stock appreciation rights and restricted stock
awards to employees, directors and consultants of the Company. Under the terms of these stock plans, nonqualified options granted may not be at a price of less
than 50% of the fair market value of the common stock on the date of grant, and ISOs granted may
not be at a price of less than 100% of fair market value of the common stock on the date of grant.
All grants of stock options have been made at fair market value under the plans. Options are
generally exercisable commencing one year after the date of grant at the rate of either 20% or 25%
per annum on a cumulative basis. Nonqualified options expire up to ten years from the date of
grant, and ISOs expire five to ten years from the date of grant. Additionally, the Company awarded
59,994 shares of restricted common stock to key executives and non-employee directors during 2004.
The weighted-average grant date fair value of the restricted common
stock issued in 2004 was $23.58
per share. The restrictions on sale of these shares lapse as follows: 50% on the third anniversary
date of grant and 25% on each of the fourth and fifth anniversary dates of grant. The following table provides a summary of the status of the Companys stock option plans as of
December 31, 2004, 2003 and 2002, and changes during the years ending on those dates (in thousands,
except per share data): 2004
    
    
    2003
    
    
    2002Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    4,483
    
    
    $
    23.47
    
    
    
    4,133
    
    
    $
    23.85
    
    
    
    3,925
    
    
    $
    23.72Granted
    
    
    802
    
    
    $
    22.83
    
    
    
    911
    
    
    $
    20.41
    
    
    
    953
    
    
    $
    24.02Exercised
    
    
    (330
    )
    
    $
    18.19
    
    
    
    (197
    )
    
    $
    15.45
    
    
    
    (179
    )
    
    $
    14.64Terminated or cancelled
    
    
    (692
    )
    
    $
    24.02
    
    
    
    (364
    )
    
    $
    24.39
    
    
    
    (566
    )
    
    $
    25.41Outstanding at end of year
    
    
    4,263
    
    
    $
    23.68
    
    
    
    4,483
    
    
    $
    23.47
    
    
    
    4,133
    
    
    $
    23.85Options exercisable at end of
year
    
    
    2,433
    
    
    $
    24.48
    
    
    
    2,129
    
    
    $
    23.94
    
    
    
    1,754
    
    
    $
    22.72Weightedaverage fair value of
options granted
    
    $
    12.76
    
    
    
    
    
    
    $
    12.63
    
    
    
    
    
    
    $
    15.35
 F-25




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 13. Stockholders Equity (continued) The following table summarizes information about the Companys stock options outstanding at
December 31, 2004 (in thousands, except contractual life and per share data): Options Outstanding
    
    
    Options ExercisableNumber ofOptions
    
    
    Weighted-
    
    
    Weighted-Outstanding at
    
    
    Average
    
    
    Average
    
    
    Number of Options
    
    
    Weighted-December 31,
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable at
    
    
    AverageRange of Exercise Prices
    
    2004
    
    
    Contractual Life
    
    
    Price
    
    
    December 31, 2004
    
    
    Exercise Price$1.11 to $12.00
    
    
    142
    
    
    
    1.1
    
    
    $
    9.71
    
    
    
    141
    
    
    $
    9.71$12.01 to $18.00
    
    
    288
    
    
    
    4.5
    
    
    $
    16.67
    
    
    
    210
    
    
    $
    16.69$18.01 to $24.00
    
    
    2,240
    
    
    
    7.0
    
    
    $
    20.99
    
    
    
    833
    
    
    $
    20.60$24.01 to $36.00
    
    
    1,322
    
    
    
    4.3
    
    
    $
    27.42
    
    
    
    1,025
    
    
    $
    27.36$36.01 to $48.00
    
    
    263
    
    
    
    4.9
    
    
    $
    42.11
    
    
    
    217
    
    
    $
    42.04$48.01 to $60.00
    
    
    8
    
    
    
    4.4
    
    
    $
    51.66
    
    
    
    7
    
    
    $
    51.584,263
    
    
    
    5.7
    
    
    $
    23.68
    
    
    
    2,433
    
    
    $
    24.48
 The fair value of each option grant, for pro forma disclosure purposes (see Note 1), was
estimated on the date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions: 2004
    
    
    2003
    
    
    2002Expected dividend yield
    
    None
    
    None
    
    NoneRisk free interest rate
    
    
    3.5
    %
    
    
    3.75
    %
    
    
    3.5
    %Expected volatility
    
    
    .671
    
    
    
    .693
    
    
    
    .713Expected life of options
    4.5 years
    5.4 years
    5.6 Years
 Option valuation models require the input of highly subjective assumptions, including the
expected stock price volatility. Because changes in the subjective assumptions can materially
affect the fair value estimate, in the opinion of management, the existing models do not
necessarily provide a reliable single measure of the fair value of the Companys employee stock
options. Employee Stock Purchase Plan The Employee Stock Purchase Plan (ESPP) was amended in May 2003 to authorize a total of 1,000,000
shares for subscription. The ESPP enables all employees to subscribe at six-month intervals to
purchase shares of common stock at the lower of 85% of the closing price of the shares on the day
previous to the first day or last day of each six-month period. At December 31, 2004, 484,673
shares remain available for issuance under the ESPP. F-26




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 13. Stockholders Equity (continued) Earnings Per Share The following table presents the computation of basic and diluted earnings per share from
continuing operations (in thousands, except per share data): 2004
    
    
    2003
    
    
    2002Numerator:Income from continuing operations
    
    
    20,106
    
    
    $
    1,988
    
    
    $
    1,772Denominator:Denominator for basic earnings per share-
Weighted-average shares
    
    
    31,247
    
    
    
    30,149
    
    
    
    29,896Dilutive effect of contingent shares related to
acquisitions subject to escrow
arrangements
    
    
    
    
    
    
    700
    
    
    
    700Dilutive effect of warrants
    
    
    10
    
    
    
    20
    
    
    
    20Dilutive effect of employee stock options
    
    
    393
    
    
    
    339
    
    
    
    381Denominator for diluted earnings per share
    
    
    31,650
    
    
    
    31,208
    
    
    
    30,997Earnings per share from continuing
operations  basic
    
    $
    0.64
    
    
    $
    0.07
    
    
    $
    0.06Earnings per share from continuing
operations  assuming dilution
    
    $
    0.64
    
    
    $
    0.06
    
    
    $
    0.06
 For
the years ended December 31, 2004, 2003 and 2002, respectively,
5,183,099 shares issuable upon
conversion of the 5.25% Convertible Subordinated Notes Due 2006 were not included in the
computation of diluted income (loss) per share, because their inclusion would be antidilutive. As
of December 31, 2004, 2003 and 2002, there were 20,000 warrants outstanding at an exercise price of
$11.75 that are fully exercisable and expire on September 1, 2005. At
December 31, 2004, there were 8,705,582 shares of common stock reserved for the conversion of
subordinated notes and further grants under the Companys various stock plans. The Company has never declared or paid cash dividends on its capital stock. F-27




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 14. Other Comprehensive Income (Loss) The components of other comprehensive income (loss) are as follows (in thousands): UnrealizedCurrency
    
    
    Gain (Loss) onTranslation
    
    
    Available-for-Adjustments
    
    
    Sale Securities
    
    
    TotalBalance at January 1, 2002
    
    $
    (2,276
    )
    
    $
    933
    
    
    $
    (1,343
    )Reclassification adjustment for realized gain on available-for-sale
securities sold (net of tax provision of $366) (1)
    
    
    
    
    
    
    (598
    )
    
    
    (598
    )Unrealized gain on available-for-sale securities (net of tax provision of
$560)
    
    
    
    
    
    
    1,108
    
    
    
    1,108Cumulative translation adjustment
    
    
    1,336
    
    
    
    
    
    
    
    1,336Balance at December 31, 2002
    
    
    (940
    )
    
    
    1,443
    
    
    
    503Reclassification adjustment for realized gain on available-for-sale
securities sold (net of tax provision of $129) (1)
    
    
    
    
    
    
    (228
    )
    
    
    (228
    )Unrealized gain on available-for-sale securities (net of tax provision of
$122)
    
    
    
    
    
    
    217
    
    
    
    217Cumulative translation adjustment
    
    
    2,408
    
    
    
    
    
    
    
    2,408Balance at December 31, 2003
    
    
    1,468
    
    
    
    1,432
    
    
    
    2,900Reclassification adjustment for realized gain on available-for-sale
securities sold (net of tax provision of $79) (1)
    
    
    
    
    
    
    (129
    )
    
    
    (129
    )Unrealized loss on available-for-sale securities (net of tax benefit of $606)
    
    
    
    
    
    
    (989
    )
    
    
    (989
    )Cumulative translation adjustment
    
    
    3,077
    
    
    
    
    
    
    
    3,077Balance at December 31, 2004
    
    $
    4,545
    
    
    $
    314
    
    
    $
    4,859
   (1)
    
    Determined based on the specific identification method. 15. Restructuring and Other Charges During 2003, Dow Corning purchased the operations of Sterling Semiconductor (a sub-lease tenant and
former joint development partner of the Company) from Uniroyal Technology Corporation. Prior to
its sale, the financial condition of Sterling required that the impact of all commercial
transactions with Sterling be fully reserved. As part of the sale, all of Sterlings debts to ATMI
were paid, which resulted in the recognition of a pre-tax gain of $0.7 million consisting of
expense reimbursements included in restructuring and other charges. Effective January 1, 2003, the Company adopted the provisions of SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities, which requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is incurred, rather
than on the date of commitment to an exit plan. The loss from discontinued operations for the year
ended December 31, 2003 includes a $1.2 million pre-tax charge for costs associated with a
restructuring initiative to close a service facility in Colorado Springs, Colorado due to
significantly reduced demand subsequent to the shutdown of a large customer facility in the area.
The charge relates primarily to asset write offs and lease exit costs. Also during 2003, the Company recognized a $2.4 million pre-tax impairment charge related to
abandoned assets in the Companys former materials and liquid delivery systems manufacturing
facility in Burnet, Texas. This charge is included on the statement of operations in restructuring
and other charges. F-28




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 15. Restructuring and Other Charges (continued) The loss from the operations of discontinued operations in 2002 includes a pre-tax asset impairment
charge of $34.6 million to recognize the impairment of inventory and long-lived assets in the
Companys gallium arsenide epitaxial services business in Phoenix, Arizona, due to deteriorating
market conditions in this product line. Assets in this line of business were written down to their
fair value, less estimated costs of disposal, using estimated prices for similar assets as the
basis for determining fair value. During the first quarter of 2003, the assets associated with the
gallium arsenide epitaxial services business were sold pursuant to an asset purchase agreement and
the facility lease associated with this business has been assumed by the buyer pursuant to a lease
assignment agreement. As a result of the sale of these assets and the buyers assumption of the
related facility lease, the Company recognized a $1.5 million pre-tax gain in 2003, which is
included in the 2003 loss from operations of discontinued operations. 16. Commitments and Contingencies On July 11, 2003, ATMIs subsidiary, Advanced Technology Materials, Inc., filed suit against
Praxair, Inc., the parent company of Praxair Electronics, in the United States District Court for
the Southern District of New York, charging it with infringing two patents ATMI holds for certain
gas storage and delivery systems. ATMI is seeking damages and an injunction against Praxair
marketing its UpTime system. On December 22, 2003, Praxair, Inc. and Praxair Technology, Inc.
filed suit against ATMI, Inc. and Advanced Technology Materials, Inc. in the United States District
Court for the District of Delaware alleging infringement of three patents owned by Praxair
Technology, Inc. related to certain gas storage and delivery systems. Praxair is seeking damages
and an injunction against ATMI marketing its VAC system. In the normal course of business, ATMI is involved in various proceedings and claims. Although the
Company cannot determine the ultimate outcome of any of these legal proceedings at this time,
management, including internal counsel, does not believe that the outcome of these proceedings,
individually or in the aggregate, will have a material adverse effect on ATMIs financial position
or results of operations. 17. Geographic Data The Companys geographic data for the years ended December 31, 2004, 2003 and 2002 are as follows: Other
    
    
    Europe and(In thousands)
    
    United States
    
    
    Taiwan
    
    
    Japan
    
    
    Pacific Rim
    
    
    Other
    
    
    TotalDecember 31, 2004Revenues
    
    $
    86,365
    
    
    $
    54,781
    
    
    $
    40,122
    
    
    $
    39,643
    
    
    $
    25,380
    
    
    $
    246,291Long-lived assets
    
    
    111,349
    
    
    
    467
    
    
    
    917
    
    
    
    2,641
    
    
    
    3,828
    
    
    
    119,202December 31, 2003Revenues
    
    $
    71,475
    
    
    $
    26,238
    
    
    $
    27,132
    
    
    $
    24,805
    
    
    $
    21,984
    
    
    $
    171,634Long-lived assets
    
    
    107,223
    
    
    
    586
    
    
    
    491
    
    
    
    2,514
    
    
    
    3,567
    
    
    
    114,381December 31, 2002Revenues
    
    $
    68,797
    
    
    $
    19,224
    
    
    $
    18,255
    
    
    $
    15,798
    
    
    $
    14,901
    
    
    $
    136,975Long-lived assets
    
    
    77,737
    
    
    
    899
    
    
    
    90
    
    
    
    2,406
    
    
    
    3,017
    
    
    
    84,149
 Revenues are attributed to countries based on the location of the customer. Long-lived assets
are located in the respective geographic regions, as shown above. Other than Taiwan and Japan, no
one specific country within the Pacific Rim or within Europe accounted for greater than 10% of
consolidated revenues and long-lived assets in 2004, 2003 and 2002. F-29




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##### Table of Contents



ATMI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) 18. Quarterly Results of Operations (Unaudited) Summarized quarterly results of operations data is as follows (in thousands, except per share
amounts): Quarter2004
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    56,019
    
    
    $
    60,978
    
    
    $
    64,423
    
    
    $
    64,871Gross profit
    
    
    27,227
    
    
    
    30,679
    
    
    
    32,580
    
    
    
    33,390Operating income
    
    
    6,802
    
    
    
    9,697
    
    
    
    10,669
    
    
    
    10,211Income from continuing operations, net
of taxes
    
    
    3,968
    
    
    
    5,815
    
    
    
    6,395
    
    
    
    3,928
    (a)Income (loss) from operations of
discontinued operations, net of taxes
    
    
    1,120
    
    
    
    1,714
    
    
    
    755
    
    
    
    (276
    )Gain on sale of discontinued
operations, net of taxes
    
    
    1,024
    
    
    
    333
    
    
    
    3,468
    
    
    
    3,258Net income
    
    $
    6,112
    
    
    $
    7,862
    
    
    $
    10,618
    
    
    $
    6,910Basic income (loss) per common share:Continuing operations
    
    $
    0.13
    
    
    $
    0.19
    
    
    $
    0.20
    
    
    $
    0.13Operations of discontinued operations
    
    
    0.04
    
    
    
    0.05
    
    
    
    0.03
    
    
    
    (0.01
    )Gain on sale of discontinued operations
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.11
    
    
    
    0.10Net income per common share
    
    $
    0.20
    
    
    $
    0.25
    
    
    $
    0.34
    
    
    $
    0.22Diluted income per common share:Continuing operations
    
    $
    0.12
    
    
    $
    0.18
    
    
    $
    0.20
    
    
    $
    0.13Operations of discontinued operations
    
    
    0.04
    
    
    
    0.06
    
    
    
    0.02
    
    
    
    ($0.01
    )Gain on sale of discontinued operations
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.10
    
    
    
    0.10Net income per common share
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.32
    
    
    $
    0.22
 Quarter2003
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    37,039
    
    
    $
    39,983
    
    
    $
    42,260
    
    
    $
    52,352Gross profit
    
    
    18,145
    
    
    
    20,263
    
    
    
    16,569
    (d)
    
    
    26,755Operating income (loss)
    
    
    1,315
    (b)
    
    
    3,417
    (c)
    
    
    (4,379
    )(e)
    
    
    6,333
    (h)Income (loss) from continuing
operations, net of taxes
    
    
    924
    
    
    
    108
    
    
    
    (4,656
    )(f)
    
    
    5,612
    (i)Loss from operations of discontinued
operations, net of taxes
    
    
    (2,542
    )
    
    
    (2,882
    )
    
    
    (6,117
    )(g)
    
    
    (366
    )Net income (loss)
    
    ($
    1,618
    )
    
    ($
    2,774
    )
    
    ($
    10,773
    )
    
    $
    5,246Basic income (loss) per common share:Continuing operations
    
    $
    0.03
    
    
    $
    0.00
    
    
    ($
    0.16
    )
    
    $
    0.18Operations of discontinued operations
    
    (
    0.08
    )
    
    (
    0.09
    )
    
    (
    0.20
    )
    
    (
    0.01
    )Net income (loss) per common share
    
    ($
    0.05
    )
    
    ($
    0.09
    )
    
    ($
    0.36
    )
    
    $
    0.17Diluted income (loss) per common share:Continuing operations
    
    $
    0.03
    
    
    $
    0.00
    
    
    ($
    0.16
    )
    
    $
    0.18Operations of discontinued operations
    
    (
    0.08
    )
    
    (
    0.09
    )
    
    (
    0.20
    )
    
    (
    0.01
    )Net income (loss) per common share
    
    ($
    0.05
    )
    
    ($
    0.09
    )
    
    ($
    0.36
    )
    
    $
    0.17
   (a)
    
    Includes a $4.5 million asset impairment charge related to the Companys strategic
investment portfolio. F-30




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##### Table of Contents



(b)
    
    Includes a $0.7 million gain related to sublease income from a former tenant in the
Companys Danbury, Connecticut facility.(c)
    
    Includes a $2.2 million asset impairment charge related to the Companys strategic
investment portfolio.(d)
    
    Includes a $2.7 million charge for excess and obsolete inventories.(e)
    
    Includes $0.7 million of in-process research and development expense in connection
with the ESC, Inc. acquisition and a $2.4 million asset impairment charge related to the
Companys former liquid chemistries manufacturing facility.(f)
    
    Includes a $2.2 million asset impairment charge related to the Companys strategic
investment portfolio.(g)
    
    Includes a $2.6 million charge (net of $1.5 million tax benefit) for excess and
obsolete inventories.(h)
    
    Includes a $1.3 million asset impairment charge related to the Companys strategic
investment portfolio.(i)
    
    Includes a $3.0 million tax benefit related to a favorable U.S. Tax Court decision. 19. Subsequent Event On March 9, 2005, the Company announced that it will exercise its right to redeem its 5.25%
convertible subordinated notes (the Notes) due November 15, 2006 in their entirety pursuant to
the provisions of the Indenture dated November 15, 2001. The Notes are to be redeemed on April 8, 2005 at a price of 102.1% of the principal amount,
plus accrued but unpaid interest to April 8, 2005, unless earlier converted. Note holders who
choose to convert their notes into common shares will have until 5 p.m. on Thursday, April 7, 2005
to make their election. No interest on the notes will accrue after April 8, 2005. The conversion
rate for the notes is 45.0707 shares per $1,000 principal amount, equivalent to approximately
$22.19 per share. Were all note holders to elect to convert their notes into shares, ATMI would need to issue
approximately 5.2 million additional shares, creating diluted shares outstanding of approximately
36.8 million. If all of the note holders elect not to convert their notes into shares, the Company
would incur $2.4 million of premium costs, in addition to the
cash required for such redemption. F-31




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##### Table of Contents



Schedule II ATMI, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands) Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Charged to
    
    
    
    
    
    
    EndYear Ended
    
    of Period
    
    
    Cost/Expense
    
    
    Deductions
    
    
    of PeriodDecember 31, 2004Allowance for bad debts and returns
    
    $
    694
    
    
    
    $          25
    
    
    $
    (18
    )(a)
    
    $
    701Reserve for excess and obsolete
inventories and lower of cost or
market adjustments
    
    
    3,877
    
    
    
    1,606
    
    
    
    (2,687
    )(b)
    
    
    2,796December 31, 2003Allowance for bad debts and returns
    
    $
    1,355
    
    
    
    $        124
    
    
    $
    (785
    )(a)
    
    $
    694Reserve for excess and obsolete
inventories and lower of cost or
market adjustments
    
    
    946
    
    
    
    3,054
    
    
    
    (123
    )(b)
    
    
    3,877December 31, 2002Allowance for bad debts and returns
    
    $
    2,365
    
    
    
    $        327
    
    
    $
    (1,337
    )(a)
    
    $
    1,355Reserve for excess and obsolete
inventories and lower of cost or
market adjustments
    
    
    898
    
    
    
    384
    
    
    
    (336
    )(b)
    
    
    946
   Notes:
    
    (a) Reflects uncollectible accounts written off, net of recoveries, and other
reductions to the reserve.(b) Reflects disposals of obsolete inventory in 2004, 2003 and 2002 and reductions to
lower-of-cost or market reserve in 2002.
 F-32