ATMI Sees Softer Business Conditions in the Third Quarter, but Remains on Track for Long-Term Growth
1:24 PM ET 10/19/11 | Morningstar
ATMI ( ATMI) reported third-quarter results that indicated slowing business conditions. However, ATMI continues to see momentum with its new products, which should provide some cushion for the firm in the latest downturn. For the quarter, revenue was $95 million, down 9% sequentially, and flat when compared to sales from a year ago. Manufacturing activity in the semiconductor industry declined after being elevated in the last several quarters, as global economic uncertainty has caused chipmakers to lower their production levels. This, in turn, resulted in lower demand for ATMI's materials and consumables products. Despite the weaker business conditions, ATMI saw growth from new products developed with its high-productivity development (HPD) platform and continued to see adoption of its life sciences products targeted at pharmaceutical manufacturing, which should provide some secular tailwinds for the firm in the upcoming quarters and in the longer term.
On the profitability front, gross margin came in at 46.4%, down from 47.5% in the second quarter, because of product mix. Operating income was $11.8 million, down from $15.4 million last quarter. In the third quarter, ATMI also entered into its first structured development program, where the firm will use its technical expertise to develop materials for next-generation semiconductor fabrication processes for a leading chipmaker. For the time being, the financial effect of the deal will be a reduction in research-and-development expenses, which provided a benefit of $500,000 during the quarter and resulted in net R&D expenses of $12.8 million for ATMI. Over time, the firm potentially could see significant revenue from the collaboration if it creates any materials that are used in volume manufacturing.
ATMI anticipates more opportunities for such partnerships with other customers down the road. Management forecasts that semiconductor manufacturing levels will fall slightly in the fourth quarter, and that activity likely will be soft for several quarters. Nonetheless, ATMI expects to see continued revenue growth from its new products developed with the HPD platform, which are targeted at cutting-edge chip fabrication processes as chipmakers ramp up their latest manufacturing technologies. In particular, management believes the upcoming 28-nanometer (circuit size) manufacturing ramp-up at foundries will have the most direct positive impact in the near term.
Although the firm likely will see some revenue declines in the next several quarters, growth opportunities from HPD and from the life sciences segment should somewhat offset the effects of the latest business downturn on ATMI. |
