Amtech Systems, Inc. — Q2 FY2012 Form 10-Q
Reporting period: Three and six months ended March 31, 2012. Amtech designs and sells capital equipment and related consumables for solar-cell, semiconductor and wafer manufacturing, and is developing a solar ion implanter. Unless otherwise stated, amounts below are in U.S. dollars.
Financial performance
| Metric | Q2 FY2012 | Q2 FY2011 | Six months FY2012 | Six months FY2011 |
|---|---|---|---|---|
| Revenue | $21.6 million | $61.3 million | $46.3 million | $115.0 million |
| Gross profit / margin | $4.0 million / 19% | $24.7 million / 40% | $11.2 million / 24% | $44.3 million / 39% |
| Operating income (loss) | $(6.0) million | $12.5 million | $(7.8) million | $20.9 million |
| Net income (loss) attributable to Amtech | $(5.1) million | $7.5 million | $(6.0) million | $12.5 million |
| Basic loss / earnings per share | $(0.54) | $0.79 | $(0.63) | $1.33 |
| Operating cash flow | Not separately reported for the quarter | $(12.7) million | $11.2 million |
Q2 operating expenses included $6.0 million of SG&A, $3.3 million of R&D and $0.7 million of impairment charges. The company recorded a $1.3 million excess-and-obsolete inventory charge in the first half. R&D rose sharply, primarily reflecting solar ion-implanter and other solar-process development.
Balance sheet and liquidity
- At March 31, 2012, cash and cash equivalents were $48.8 million, restricted cash was $3.6 million, working capital was $86.5 million, and current assets/current liabilities were 2.6:1.
- Cash and cash equivalents declined from $67.4 million at September 30, 2011. Six-month cash flows included $12.7 million used in operations, $1.1 million used in investing and $4.1 million used in financing; foreign exchange reduced cash by $0.8 million.
- Operating cash use reflected the net loss and reductions in customer deposits, accounts payable, accrued compensation and deferred profit, partly offset by receivable collections.
- Total liabilities were $55.1 million, including $52.6 million of current liabilities. The balance sheet does not present significant conventional interest-bearing debt; it reports $2.4 million of long-term income taxes payable.
- Purchase obligations were $22.9 million, down from $47.2 million at September 30, 2011. Management expected approximately $13 million of income tax payments during calendar 2012.
Changes versus prior-year period
- Q2 revenue fell 65% year over year; first-half revenue fell 60%. Solar-market revenue declined 80% in Q2 and 74% for the first half, primarily amid solar-industry overcapacity and customers delaying or reducing expansion plans.
- Q2 gross margin fell to 19% from 40%, reflecting lower volume and capacity utilization, as well as the inventory charge; recognition of previously deferred profit partly offset the decline.
- Backlog was $67.4 million at March 31, 2012, versus $195.1 million a year earlier. First-half orders were $29.1 million versus $209.6 million. Q2 orders were $18.0 million, up sequentially from $11.1 million but below $72.5 million a year earlier.
- R&D expense for the first half increased to $6.1 million from $1.8 million. SG&A decreased in dollars, but increased as a percentage of revenue because sales contracted.
- The company repurchased $4.1 million of shares during the first half. Accumulated other comprehensive loss increased to $3.6 million from $2.1 million, including a $1.5 million foreign-currency translation loss.
Outlook, risks and unusual items
- Management described the solar-equipment downturn as difficult to time but maintained a long-term positive view of the solar market. It expected higher R&D spending over the next several quarters to continue supporting the ion implanter and other solar technologies; the filing gives no specific revenue or earnings guidance.
- Management believed available liquidity was adequate for at least the next 12 months, while noting that growth strategy success depends on access to additional capital on satisfactory terms.
- Backlog is not assurance of future sales or profits: orders are generally expected to ship within 12 months and may be canceled or delayed. One customer represented 26% of backlog. Two customers accounted for 17% and 11% of Q2 revenue; four customers represented 54% of receivables at quarter-end.
- Solar-industry overcapacity, fluctuating government subsidies, cyclical end markets, customer acceptance and installation timing, and foreign-exchange movements could affect results. A 10% currency change could affect reported translation equity by an estimated $8.1 million.
- A $0.7 million impairment was recorded for a technology-partner license and related assets after the partner’s financial difficulties and insufficient sales. The company also reported $1.8 million of unrecognized tax benefits and $0.5 million accrued for related interest and penalties.
- Management reported no material changes to previously disclosed risk factors, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2012. Routine litigation was not expected to have a material impact.
Key facts for investors to verify
- Whether order intake, backlog conversion and solar-market demand recover, and whether backlog cancellations or delays increase.
- Whether deferred revenue and customer acceptance timing support future reported revenue and margins.
- Cash burn, working-capital trends, expected tax payments, and the sufficiency of liquidity if the downturn persists.
- Progress, spending and commercial prospects for the ion implanter, including the effect of ongoing development costs on earnings and taxes.
- Customer concentration, inventory exposure, purchase obligations and foreign-currency sensitivity.