| ATMI INC Item 1A Risk Factors Cautionary Statements Regarding Future Results of Operations You should read the following cautionary statements in conjunction with the factors discussed elsewhere in this and other of our filings with the Securities and Exchange Commission (SEC) and in materials incorporated by reference in these filings |
| These cautionary statements are intended to highlight certain factors that may affect our financial condition and results of operations and are not meant to be an exhaustive discussion of risks that apply to companies like ATMI with broad international operations |
| Like other companies, we are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and our performance and the performance of our customers |
| Similarly, the price of our common stock is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control |
| Cyclicality in the semiconductor market may adversely affect our performance |
| The semiconductor market has historically been cyclical and subject to significant and often rapid increases and decreases in demand |
| These changes could adversely affect our results of operations and have an adverse effect on the market price of our common stock |
| The results of our operations may be adversely affected in the future if demand for semiconductors or devices that use semiconductors decreases or grows at a significantly slower pace than management expects |
| Our margins may vary over time |
| Our profit margins may be adversely affected in the future by a number of factors, including decreases in our shipment volume, reductions in, or obsolescence of, our inventory and shifts in our product mix |
| Many of our expenses, particularly those relating to capital equipment and manufacturing overhead, are fixed in the short term |
| Accordingly, reduced demand for our products and services could cause our fixed production costs to be allocated across reduced production volumes, which could adversely affect our gross margin and profitability |
| Our ability to reduce expenses is further constrained because we must continue to invest in research and development to maintain our competitive position and to maintain service and support for our existing global customer base |
| We may have difficulty obtaining the resources or products we need for manufacturing or assembling our products or operating other aspects of our business, which could adversely affect our ability to meet demand for our products and may increase our costs |
| We have hundreds of suppliers providing various materials that we use in the production of our products and other aspects of our business, and we seek, where possible, to have several sources of supply for all of these materials |
| However, we may rely on a single or a limited number of suppliers, or upon suppliers in a single country, for these materials |
| The inability of such suppliers to deliver adequate supplies of production materials or other supplies could disrupt our production process |
| In addition, production could be disrupted by the unavailability of the resources used in production such as electricity, chemicals, and gases |
| The unavailability or reduced availability of the materials or resources we use in our business may require us to reduce production of products or may require us to incur additional costs in order to obtain an adequate supply of these materials or resources |
| The occurrence of any of these events could adversely impact our business and results of operations |
| 13 _________________________________________________________________ We face intense competition from a variety of sources, including larger companies |
| The markets for advanced semiconductor materials and high-purity materials and dispensing solutions are intensely competitive |
| A number of domestic and international companies engage in commercial activities in the markets we serve |
| Many of these companies have substantially greater financial, research and development, manufacturing and marketing resources than we do |
| In addition, as this industry evolves, other competitors may emerge |
| To remain competitive, we must continue to invest in and focus upon research and development and product and process innovation |
| We may not be successful if we cannot compete on: • price; • technical capabilities; • quality; or • customer service |
| Our global manufacturing and sales activities subject us to risks associated with legal, political, economic or other changes |
| We have facilities in eight countries worldwide, and in 2005, more than 67 percent of our revenue came from sales to locations outside the United States |
| Operating internationally exposes us to changes in export controls and other laws or policies, as well as the general political and economic conditions, security risks, health conditions and possible disruptions in transportation networks, of the various countries in which we operate, which could result in an adverse effect on our business operations in such countries and our results of operations |
| Also, we employ limited use of Japanese Yen (JPY) forward currency exchange contracts to minimize the adverse earnings impact from the effect of exchange rate fluctuations on our JPY net balance sheet exposures |
| Nevertheless, in periods when the US dollar significantly fluctuates in relation to the non-US currencies in which we transact business, such as the Euro, Taiwan Dollar, and the Korea Won, remeasurement can have an adverse effect on our non-US business |
| Our results of operations could be adversely affected by natural events in the locations in which we, our customers or suppliers operate |
| We have manufacturing and other operations in locations subject to natural events such as severe weather and earthquakes that could disrupt operations |
| In addition, our suppliers and customers also have operations in such locations |
| A natural disaster that results in a prolonged disruption to our operations, or our customers’ or suppliers’ operations, may adversely affect our results of operations and financial condition |
| The loss of or significant curtailment of purchases by any of our largest customers could adversely affect our results of operations |
| While we generate revenue from hundreds of customers worldwide, the loss of or significant curtailment of purchases by one or more of our top customers including curtailments due to a change in the design or manufacturing sourcing policies or practices of these customers or the timing of customer inventory adjustments may adversely affect our results of operations |
| Incorrect forecasts of customer demand could adversely affect our results of operations |
| Our ability to match inventory and production mix with the product mix needed to fill current orders and orders to be delivered in the given quarter may affect our ability to meet that quarter’s revenue forecast |
| In addition, when responding to customers’ requests for shorter shipment lead times, we manufacture product based on forecasts of customers’ demands |
| These forecasts are based on multiple assumptions |
| If we inaccurately forecast customer demand, we may incur expedited shipping costs to deliver products to meet customer demand or hold excess or obsolete inventory that would reduce our profit margins and could adversely affect our results of operation |
| 14 _________________________________________________________________ Our results of operations could be adversely affected by changes in taxation |
| We have facilities in eight countries and, as a result, are subject to taxation and audit by a number of taxing authorities |
| Tax rates vary among the jurisdictions in which we operate |
| Our results of operations could be affected by market opportunities or decisions we make that cause us to increase or decrease operations in one or more countries, or by changes in applicable tax rates or audits by the taxing authorities in countries in which we operate |
| In addition, we are subject to laws and regulations in various locations that govern the determination of which is the appropriate jurisdiction to decide when and how much profit has been earned and is subject to taxation in that jurisdiction |
| Changes in these laws and regulations could affect the locations where we are deemed to earn income, which could in turn affect our results of operations |
| We have deferred tax assets on our balance sheet |
| Changes in applicable tax laws and regulations could affect our ability to realize those deferred tax assets, which could also affect our results of operations |
| Each quarter we forecast our tax liability based on our forecast of our performance for the year |
| If that performance forecast changes, our forecasted tax liability may change |
| We may have difficulty managing our growth and attracting and retaining highly skilled scientific, technical, managerial and marketing personnel, which could adversely affect our revenues and increase our operating expenses |
| The management of our growth requires qualified personnel, systems and other resources |
| Our future success will depend in part on our ability to attract and retain highly skilled scientific, technical, managerial and marketing personnel |
| Competition for such personnel in the semiconductor industry is intense, and our competitors are often larger and more established than we are |
| We may not be successful in attracting and retaining qualified personnel |
| In addition, our expansion may also significantly strain operational, management, financial, sales and marketing and other resources |
| To manage growth effectively, we must continue to enhance and integrate our information technology infrastructure, systems and controls and successfully expand, train and manage our employee base |
| We may not be able to manage this expansion effectively, including by providing satisfactory levels of customer service and technical support |
| Inability to manage our growth and to attract and retain skilled personnel could have a material adverse effect on our business, operating results and financial condition |
| Our revenues and earnings could be negatively affected if we cannot anticipate market trends, enhance our existing products and processes, develop and commercialize new products and processes, and identify and consummate strategic acquisitions |
| We believe that our future success will depend, in part, upon our ability to anticipate rapidly changing technologies and market trends, to enhance our existing products and processes, to develop and commercialize new products and processes, and to expand through selected acquisitions of technologies or businesses or other strategic alliances |
| The semiconductor industry markets we serve undergo frequent technological changes, which in turn create demand for new and improved products and process technologies |
| We may not be able to improve our existing products and process technologies or to develop and market new products and technologies that will be cost-effective or introduced in a timely manner or accepted in the marketplace |
| Our failure to develop or introduce enhanced and new products and processes in a timely manner may negatively affect our revenues and earnings |
| Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of expansion through acquisitions |
| Management considers, on a continuing basis, potential acquisitions of technologies and businesses and other strategic alliances, some of which may be material to us |
| However, we cannot be assured that we will identify or succeed in consummating transactions with suitable acquisition candidates or alliance partners in the future |
| Our business could be adversely affected if we cannot protect our proprietary technology or if we infringe on the proprietary technology of others |
| Our proprietary technology aids our ability to compete effectively with other companies |
| Although we have been awarded, have filed applications for or have been licensed under numerous patents in the United States and other countries, these patents may not fully protect our technology or competitive position |
| Further, our competitors may apply for and obtain patents that will restrict our ability to make and sell our products |
| 15 _________________________________________________________________ Our competitors may intentionally infringe our patents |
| Third parties may also assert infringement claims against us in the future |
| Litigation may be necessary to enforce patents issued to us, to protect our trade secrets or know-how, to defend ourselves against claimed infringement of the rights of others or to determine the scope and validity of the proprietary rights of others |
| The defense and prosecution of patent suits are both costly and time-consuming, even if the outcome is favorable to us |
| Outside the United States, such proceedings can be extremely expensive and their outcome very unpredictable |
| An adverse outcome in the defense of a patent suit could cause us to lose proprietary rights, subject us to significant liabilities to third parties or require us to license rights from third parties or to cease selling our products |
| We also rely on unpatented proprietary technology that others may independently develop or otherwise obtain access to |
| Our inability to maintain the proprietary nature of our technologies could negatively affect our revenues and earnings |
| We face the risk of product liability claims |
| The manufacture and sale of our products, which include thin film and other toxic materials, involve the risk of product liability claims |
| In addition, a failure of one of our products at a customer site could interrupt the business operations of the customer |
| Our existing insurance coverage limits may not be adequate to protect us from all liabilities that we might incur in connection with the manufacture and sale of our products if a successful product liability claim or series of product liability claims were brought against us |
| Our business is potentially subject to substantial liabilities for failure to comply with environmental regulations |
| We use, generate and discharge toxic or otherwise hazardous chemicals and wastes in our manufacturing, processing and research and development activities |
| As a result, we are subject to a variety of governmental regulations related to the storage, use and disposal of these materials |
| Our failure to comply with present or future laws could result in fines or other liabilities being imposed on us, suspension of production or a cessation of operations |
| Although we are not aware of any contamination issues, the various premises we occupy, particularly our research and development facility in Danbury, Connecticut, may have been contaminated prior to our occupancy |
| We are not aware of any 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 and/or require future remedial measures from both operators and owners of property where releases of hazardous substances have occurred or are ongoing |
| The prior occupant of the Danbury, Connecticut premises has agreed to indemnify us for remediation costs in connection with any pre-existing, on-site contamination or environmental condition |
| However, this indemnification may not prove adequate to cover any liability imposed on us related to the environmental condition of the premises or the cost of defending an environmental action, either of which could be substantial |
| Our activities may also result in our being subject to additional regulation |
| Such regulations could require us to acquire significant additional equipment or to incur other substantial expenses to comply with environmental laws |
| Our failure to control the use of hazardous substances could subject us to substantial financial liabilities |
| Compliance with changing regulation of corporate governance and public disclosure may result in additional risks and exposures |
| Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new regulations from the SEC, are creating uncertainty for public companies such as ours |
| These laws, regulations, and standards are subject to varying interpretations in many cases and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices |
| We are committed to maintaining high standards of corporate governance and public disclosure |
| As a result, our efforts to comply with evolving laws, regulations, and standards have resulted in, and are likely to continue to result in, increased sales, general and administrative expenses and a diversion of management time and attention |
| In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting and our independent registered public accounting 16 _________________________________________________________________ firm’s audit of that assessment for fiscal 2005 have required, and we expect such efforts to continue to require, the commitment of significant financial and managerial resources |