Camtek Ltd. — FY2013 Form 20-F
Reporting period: Fiscal year ended December 31, 2013. This is an annual report, not a standalone fourth-quarter filing; Q4-specific financial results are not clearly provided in the filing text. Amounts below are U.S. dollars unless otherwise stated.
Business context
Camtek designs, manufactures and sells automated optical inspection (AOI) systems and related services to the semiconductor, printed circuit board (PCB) and integrated circuit substrate industries. Its 3D Inkjet System, intended for PCB solder-mask application, was in customer-site testing and final development. The company reported one business segment, with approximately 78% of FY2013 revenue from Asia Pacific.
Financial results and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $85.4 million | $84.5 million |
| Gross profit / margin | $34.4 million / 40.3% | $37.1 million / 43.8% |
| Operating income (loss) | $1.1 million | $(20,000) |
| Net income | $7,000 | $3,000 |
| Operating cash flow | $4.7 million | $4.0 million |
| Capital expenditures | $2.1 million | $3.7 million |
| Cash and cash equivalents | $16.5 million | $18.9 million |
| Short-term deposits | $6.0 million | $7.2 million |
| Total assets / liabilities | $91.9 million / $30.0 million | $99.0 million / $38.7 million |
| Bank loans at year-end | None | $6.3 million |
Working capital was $47.1 million, versus $43.1 million a year earlier. The company repaid its outstanding short- and long-term bank loans during 2013. Total liabilities nevertheless include non-bank obligations, including liabilities to the Israeli Office of the Chief Scientist (OCS) and contingent acquisition consideration. Basic and diluted earnings per share were both reported as $0.00.
Changes versus the prior comparable period
- Revenue rose 1%; PCB and substrate revenue increased 18% to $19.4 million, while semiconductor revenue declined 4% to $48.4 million. Service revenue was nearly unchanged at $17.5 million.
- Gross profit fell 7% and gross margin declined 3.5 percentage points, primarily due to product mix and higher inventory write-offs: approximately $3.7 million in 2013 versus $2.0 million in 2012.
- R&D expense increased to $14.4 million from $12.9 million; selling, general and administrative expense rose to $22.4 million from $21.1 million.
- Operating performance improved modestly, but net income remained close to break-even. Net financial expense was $1.7 million, compared with net financial income of $0.2 million in 2012.
- Cash declined by $2.4 million during 2013. Operating cash generation was offset principally by debt repayments and other financing outflows.
Outlook, commentary and risks
- Management described 2012 and 2013 as volatile, relatively slow years, with moderate improvement in the second half of 2013. It expected improved customer spending, particularly in semiconductor markets, to continue into the first or second quarter of 2014.
- Management expected existing resources and operating cash flow to meet liquidity needs through 2014. If liquidity proved insufficient, it could seek financing or reduce expenditures.
- The 3D Inkjet System remained a material execution risk: customer testing, commercialization, market adoption and return on development investment were uncertain. The filing also reports substantial investment in its final development.
- Camtek discontinued further development of the Sela Xact product line in late 2013, while continuing to sell existing products and support customers. Related inventory write-offs, impairment charges and acquisition-liability revaluations materially affected reported results.
- Patent litigation with Rudolph Technologies remained unresolved. The company disclosed a potential loss range of $0–$8.2 million, excluding interest, in the principal patent case, with no accrual recorded; a separate residual sanctions exposure was estimated at up to $650,000, excluding interest and amounts already accrued. A second patent case remained stayed, and its potential loss could not be estimated.
- Other risks include cyclical end markets, intense competition, customer and supplier concentration, foreign-exchange exposure, and dependence on operations and manufacturing in Israel and China. Approximately 56% of shares were held by controlling shareholder Priortech.
- The filing notes a sharp rise in share price and trading volume beginning in late 2013, which management said might reflect market speculation about the 3D Inkjet System; it could not confirm the cause.
Important facts for investors to verify
- Review the audited statements and subsequent disclosures for the timing and outcome of 3D Inkjet customer testing, commercialization plans and related spending.
- Track gross margin, inventory levels and further write-offs, particularly following the Xact discontinuation and the $2.2 million of inventory classified as long-term at year-end.
- Monitor the Rudolph cases, potential damages and legal costs, and the separate OCS dispute of approximately $755,000 including accrued interest, for which no provision was recorded.
- Assess cash generation and liquidity against purchase commitments of $6.1 million, total disclosed contractual obligations of $16.0 million, and management’s 2014 liquidity outlook.
- Reconcile the filing’s share-count disclosures: the cover page reports 29,896,933 shares as of period-end, while the audited balance sheet reports 30,405,526 outstanding at December 31, 2013.