Amtech Systems, Inc. — Q1 FY2013 Form 10-Q
Business context and period: The filing covers the three months ended December 31, 2012, compared with the three months ended December 31, 2011. Amtech supplies thermal processing and related equipment to solar, semiconductor, wafer and MEMS markets, and polishing equipment and supplies. The company noted that these markets are cyclical and that solar-industry overcapacity was weighing on demand.
Financial performance
| Metric | Q1 FY2013 | Q1 FY2012 |
|---|---|---|
| Revenue | $9.4 million | $24.7 million |
| Gross profit / margin | $1.4 million / 15% | $7.2 million / 29% |
| Operating loss | $4.8 million | $1.8 million |
| Net loss attributable to Amtech | $4.2 million; $0.44 per share | $0.9 million; $0.09 per share |
| Operating cash flow | $(4.6) million | $(6.1) million |
Revenue fell 62%, primarily due to lower equipment shipments and less recognition of previously deferred revenue. Solar-market revenue was $4.3 million versus $15.6 million. Lower volume and capacity utilization reduced gross margin. SG&A declined to $4.3 million from $6.3 million, while the quarter included $0.7 million of restructuring charges. Net R&D expense fell to $1.2 million from $2.8 million, aided by $1.3 million of government grants, principally for ion-implanter development.
Cash and cash equivalents were $42.6 million at December 31, 2012, down from $46.7 million at September 30, 2012; restricted cash was $9.7 million, up from $4.6 million, including grant funds and customer-related collateral. Working capital was $57.8 million and the current ratio was 2.4:1. Total liabilities were $43.3 million, including $2.4 million of long-term income taxes payable; the balance sheet reports no borrowings. Cash used in investing was $0.1 million, and there were no financing cash flows. Total assets were $124.9 million and total equity was $81.6 million at quarter-end.
Outlook, risks and notable items
- Management expected the solar supply-demand imbalance and resulting downturn to continue into 2013, while stating that the timing of market improvement was difficult to predict. It gave no specific revenue or earnings guidance.
- Backlog was $14.7 million, versus $69.2 million a year earlier; new orders were $5.0 million, versus $11.1 million. Solar-related backlog was approximately $10.1 million, versus $55.8 million. Management cautioned that orders may be delayed or canceled and backlog does not assure sales or profit.
- Management said cash and other liquidity sources were adequate for at least the next 12 months. Purchase obligations were $9.6 million. The company reported no off-balance-sheet arrangements and said ordinary-course litigation was not expected to materially affect results or financial condition.
- Risks include cyclical and weak end markets, customer concentration, revenue timing tied to installation and acceptance, foreign-exchange exposure, and uncertainty around tax assets and uncertain tax positions. One customer represented 14% of quarterly revenue; three customers represented 14%, 12% and 11% of accounts receivable.
- The company recorded a $0.5 million income tax benefit and maintained approximately $1.8 million of unrecognized tax benefits and $0.7 million of accrued interest and penalties. A valuation allowance was increased for China deferred tax assets associated with the current-period loss.
Key facts for investors to verify
- Whether solar and semiconductor demand, orders and backlog stabilized or continued to decline after quarter-end.
- How much deferred revenue is ultimately recognized following customer installation and acceptance, and whether backlog converts to profitable sales.
- How restricted grant cash may be used and whether grant funding for ion-implanter development continues.
- Whether operating cash use, the $6.7 million current tax liability and purchase commitments remain manageable against available liquidity.
- Whether customer concentration, foreign-currency movements and tax-position developments materially affect future results.