Aehr Test Systems — FY2012 Form 10-K
Reporting period: Fiscal year ended May 31, 2012. The filing also reports the fourth quarter ended May 31, 2012; “2012 Q4” is not the company’s fiscal-year reporting period.
Business context
Aehr Test designs, manufactures and sells semiconductor test and burn-in equipment, including full-wafer FOX systems, ABTS and MAX packaged-device systems, WaferPak contactors, DiePak carriers and related fixtures. Its markets are driven by semiconductor manufacturers’ capital spending and demand for device testing and reliability screening.
Financial results
Unless otherwise stated, dollar amounts are in millions. Fiscal-year comparisons are FY2012 versus FY2011.
| Metric | FY2012 | FY2011 |
|---|---|---|
| Net sales | $15.521 | $13.737 |
| Gross profit / margin | $6.207 / 40.0% | $5.512 / 40.1% |
| Operating loss | $(4.507) | $(4.187) |
| Net loss | $(3.389) | $(3.373) |
| Basic and diluted loss per share | $(0.38) | $(0.38) |
| Cash used in operating activities | $(4.875) | $(4.142) |
| Cash and cash equivalents at year-end | $2.073 | $4.020 |
| Working capital at year-end | $6.073 | $8.031 |
- FY2012 sales increased 13%. Test-during-burn-in sales rose $2.4 million to $6.7 million; wafer-level product sales fell approximately $0.9 million to $8.2 million.
- SG&A increased 9.4% to $6.526 million; R&D decreased 8.3% to $4.188 million.
- The FY2012 net loss included a $0.990 million gain on sale of the ESA Electronics investment. The company received $1.375 million in proceeds from that sale.
- Cash fell by $1.947 million. Operating cash use reflected the loss and increases in receivables and inventory, partly offset by higher accounts payable. Investing activities provided $1.330 million; financing activities provided $1.576 million, including $1.408 million of net credit-line borrowings.
Fourth-quarter results and changes
| Three months ended May 31 | FY2012 Q4 | FY2011 Q4 |
|---|---|---|
| Net sales | $4.676 million | $3.749 million |
| Gross profit | $2.169 million | $1.609 million |
| Net income (loss) | $(0.779) million | $(0.144) million |
| Basic and diluted loss per share | $(0.09) | $(0.02) |
Fourth-quarter sales and gross profit were higher year over year, while the net loss widened. The filing does not clearly attribute the Q4 loss increase to specific factors.
Liquidity, debt and obligations
- At May 31, 2012, the company had $2.073 million in cash, $6.073 million in working capital and a $1.408 million balance on its asset-secured working-capital credit facility. The facility limit was increased to $2.0 million in May 2012, leaving $0.592 million available; the company reported covenant compliance.
- The filing states that cash, expected operating cash flows and available facility capacity were expected to cover working-capital and capital-equipment needs through FY2013. Contractual obligations totaled $3.162 million, including $1.819 million in operating leases and $1.343 million in purchase obligations.
- Management expected the company to become profitable and return to positive cash flow by the end of calendar 2012. This was an expectation, not a guarantee; after FY2013, additional financing might be required.
Outlook, risks and unusual items
- Sales remain highly concentrated: the five largest customers represented 83% of FY2012 sales. Spansion and Texas Instruments accounted for approximately 40% and 22%, respectively. Three customers represented 45%, 22% and 18% of year-end gross receivables.
- Backlog was $7.3 million at May 31, 2012, versus $5.8 million a year earlier, but orders may be canceled or rescheduled and backlog may not predict future sales.
- Management identified risks from semiconductor-industry cyclicality, customer concentration, competition and pricing pressure, qualification and adoption of FOX and ABTS products, reliance on sole- or limited-source suppliers, and possible product reliability, warranty or delivery problems. Foreign-exchange exposure is not hedged.
- The company had reported operating losses in FY2009–FY2012 and warned that prolonged weak business could erode cash and require financing. Deferred tax assets of $21.110 million were fully offset by a valuation allowance.
- The company reported no pending legal proceeding believed likely to have a material adverse effect and no pending third-party intellectual-property infringement claim. It disclosed customary indemnification commitments whose maximum potential exposure could not be determined.
- The independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Whether the profitability and positive-cash-flow target for the end of calendar 2012 was achieved, and whether liquidity remained adequate beyond FY2013.
- Subsequent customer orders, backlog conversion and revenue concentration, particularly exposure to Spansion and Texas Instruments.
- Collection of receivables and inventory conversion, given FY2012 cash use and the sharp rise in both balances.
- Credit-facility availability, borrowing-base terms, covenants and any refinancing or additional financing needs.
- Progress in FOX and ABTS customer qualification, product enhancements and production adoption, along with supplier continuity and warranty trends.