ATMI 2nd Qtr letter to shareholders.
"Dear Shareholder:
It was the best of times; it was the worst of times: during the first half of 1998 --
for ATMI and the entire semiconductor industry -- we hit new highs ... and lows.
The first quarter this year was record-setting for ATMI -- our revenues were
$27.4 million, up 22%, and earnings per share increased 85% to $0.24. The second
quarter was traumatizing -- revenues declined 8% year-over-year to $21.6 million.
Earnings dropped 50% to $0.07 per share. Overall, revenues and earnings increased
6% and 17% in the first half.
What happened?
In the first quarter, semiconductor production continued near record levels. The
entire industry expected to see strong growth this year. We were so encouraged
we had a stock offering at the end of March, which raised over $60 million for ATMI.
The offering also provided partial liquidity to the principals of ADCS and
Lawrence Semiconductor, the companies we acquired last fall.
Near the end of April, with no warning, demand disappeared. Not just to us, but
to almost every semiconductor supplier. Asian economic problems hit the industry
hard -- overcapacity there led to plummeting chip prices, while their consumer
electronics demand plummeted. Personal computers use about 40% of all the
semiconductors produced. To compete with Dell Computer, all the PC producers
slashed their inventory levels -- which means they stopped ordering new parts.
Meanwhile, PCs selling for less than $1000 were limiting both revenues and
profitability throughout the semiconductor production chain.
ATMI lives and breathes by growth in chip unit demand. in the 40-year history
of the semiconductor industry, there have only been one or two blips of decreasing
demand. 1998 looks to be a record year for the semiconductor industry ... but it's
not the kind of record any of us wants to set: 1998 may be the worst decline ever
experienced in our industry.
We are confident we are gaining market share in each of our businesses. Even so,
especially for EcoSys, the capital equipment side of the industry remains in a
deep slump -- a slump expected to last for at least another year. We are matching
resources expended to expected revenues and have reassigned staff, especially to
NovaSource and its SDS (tm) Gas Source product line -- our fastest growing business.
Why didn't we -- or any semiconductor company -- see this coming? 'Visibility' is
the key word you'll hear. It describes how far in advance a company can see its
order flow. ATMI's visibility is generally only several days. Almost all our
sales are 'book-and-ship' -- when we receive the order, our customers want delivery
ASAP. There are limited ways for us to accurately project major shifts in demand
-- as we saw during the second quarter.
Where do we stand?
We are confident the ATMI portfolio of businesses will withstand the current
downturn. April and May were unpleasant; June had a small uptick, giving us
cautious optimism that we may resume sequential growth in the second half.
We continue to fully fund our research and development efforts. We continue
to seek advantageous acquisitions -- and believe me, there are more opportunities
than ever. We have $90 million of cash. The NOW Technologies acquisition was
approved by their shareholders on August 5. We expect NOW to be an excellent
addition to the ATMI family -- they are a great group of people, backed up by
some excellent technology, and a solid business plan. We hope you feel the same
about ATMI as a whole.
Sincerely, Gene Banucci, President" |
