Amtech Systems, Inc. — FY 2012 Form 10-K
Reporting period: Fiscal year ended September 30, 2012. The filing was signed December 6, 2012. Amtech supplies thermal-processing, deposition and automation equipment, parts and services to solar, semiconductor, silicon-wafer and MEMS manufacturers, and polishing products to related industries.
Financial results and position
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Net revenue | $81.5 million | $246.7 million |
| Gross profit / margin | $9.2 million / 11% | $90.7 million / 37% |
| Operating income (loss) | ($33.0 million) | $38.3 million |
| Net income (loss) attributable to Amtech | ($23.0 million) | $22.9 million |
| Diluted earnings (loss) per share | ($2.43) | $2.34 |
| Cash from (used in) operating activities | ($12.4 million) | $15.4 million |
| Cash and cash equivalents at year-end | $46.7 million | $67.4 million |
| Working capital / current ratio | $60.2 million / 2.4:1 | $94.1 million / 2.2:1 |
| Order backlog at year-end | $18.7 million | $85.9 million |
Solar revenue fell to $44.2 million from $211.9 million; revenue from other markets increased to $37.3 million from $34.8 million. Fiscal 2012 included $10.4 million of inventory write-downs and $2.5 million of losses on inventory purchase commitments, as well as $5.4 million of impairment charges. Amtech reported $4.7 million of goodwill impairment in solar-related reporting units and $0.7 million of impairment on technology-partner licenses.
At September 30, 2012, total assets were $129.0 million, total liabilities $45.0 million and total equity $84.1 million. The balance sheet showed $2.4 million of long-term income taxes payable and no material conventional borrowings identified in the supplied filing text. Cash flow from investing activities was ($1.5 million); financing activities were ($4.1 million), principally reflecting a $4.1 million share repurchase related to the Kingstone acquisition. Restricted cash was $4.6 million. Contractual obligations included $12.1 million of purchase obligations and $3.2 million of operating leases.
Material changes and quarterly performance
- Revenue declined 67% year over year as solar customers cut or postponed capacity investments amid industry-wide production overcapacity and weaker demand.
- Solar orders were $13 million, versus $199 million in FY 2011; total new orders were $40.9 million versus $239.8 million. Backlog declined 78%, and included approximately $13.8 million of solar orders and deferred revenue.
- Gross margin contracted from 37% to 11%, reflecting lower volume and capacity utilization, inventory-related charges, and the mix and timing of revenue recognition. Amtech recognized $16.1 million of previously deferred profit in FY 2012, compared with a $16.6 million net deferral in FY 2011.
- Fourth-quarter FY 2012 revenue was $10.9 million versus $59.9 million in the prior-year quarter; gross profit was negative $6.9 million versus positive $20.2 million. Net loss attributable to Amtech was $14.1 million versus net income of $3.1 million; loss per share was $1.49 versus earnings per share of $0.32.
- Research and development expense, net of grants, rose to $13.7 million from $5.8 million, principally for solar ion-implant development and other solar-cell technologies.
- Geographic customer concentration shifted: Asia represented 66% of revenue, including China at 43%; Europe represented 21%. One customer accounted for 11% of FY 2012 revenue. Two customers represented 14% and 12% of year-end receivables.
Outlook, risks and unusual items
Management expected the solar supply-demand imbalance and downturn to continue into FY 2013 and said timing of a market recovery was difficult to predict. It cited overcapacity, fluctuating government subsidies, customer access to financing and global economic conditions as factors weighing on demand. Amtech stated that current cash and other liquidity sources were expected to support operations for at least the next 12 months.
- Orders and backlog may be canceled or delayed; backlog is not assurance of future revenue or profit. The company also excluded approximately $23 million of uncanceled orders not expected to ship within 12 months.
- Customer and receivables concentration, customer acceptance delays, and the international nature of sales expose Amtech to collection, currency, country and policy risks. Foreign-currency translation reduced comprehensive results, including a $4.7 million translation loss in FY 2012.
- Other risks include cyclical solar and semiconductor investment, stronger competitors and local Asian suppliers, inventory obsolescence and supplier constraints, execution and commercial acceptance of new technologies, acquisition integration, and potential further impairment charges.
- FY 2012’s tax benefit was $5.3 million; management cited valuation allowances, foreign tax matters and a $2.3 million expiration of foreign net operating losses among tax-reconciliation items. The company also reported a $7.1 million current tax liability.
- Amtech reported no legal proceedings in the business section and no off-balance-sheet arrangements. The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Key facts for investors to verify
- Whether solar orders, bookings and backlog recover, and how much of reported backlog ships, is accepted and converts to revenue and cash.
- Whether inventory write-downs, purchase-commitment losses and low factory utilization continue to pressure gross margins.
- Cash burn and liquidity, including restricted cash, the current tax liability, purchase commitments and customer deposit requirements.
- Progress, funding and commercial acceptance of the ion-implant and other next-generation solar products, given elevated R&D spending.
- Customer credit quality and collection of concentrated receivables, as well as the treatment and timing of deferred revenue and customer holdbacks.
- Assumptions underlying goodwill and intangible-asset valuations, tax benefits and uncertain tax positions.