Amtech Systems, Inc. — FY2014 Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2014. The filing also reports fourth-quarter results; this is an annual report, not a standalone quarterly filing.
Business context
Amtech manufactures thermal-processing, wafer-handling, automation, ion-implant and related equipment for solar-cell, semiconductor, silicon-wafer and MEMS manufacturers. Its second segment sells lapping and polishing equipment and supplies. The business is cyclical and depends on customers’ capital spending. Solar accounted for approximately $27.6 million, or 49% of FY2014 revenue.
Financial results and liquidity
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $56.5 million | $34.8 million |
| Gross profit / margin | $11.6 million / 20.6% | $4.3 million / 12.4% |
| Operating loss | $13.1 million | $20.0 million |
| Net loss attributable to Amtech | $13.0 million | $20.1 million |
| Basic and diluted loss per share | $1.34 | $2.11 |
| Operating cash flow | $(11.1) million | $(10.0) million |
| Cash and cash equivalents at year-end | $27.4 million | $37.2 million |
| Working capital | $32.3 million | $42.9 million |
| Order backlog | $28.5 million | $26.8 million |
Current assets were $65.4 million and current liabilities were $33.1 million, a 2.0:1 current ratio. Restricted cash was $2.4 million. Management stated the company had no debt and believed available liquidity sufficient for at least 12 months. Total liabilities were $36.3 million. The company expected to pay approximately $5 million in taxes in 2015.
FY2014 cash used in investing activities was $0.5 million; financing activities provided $1.5 million. Net R&D expense, after grants, was $6.3 million. The solar and semiconductor equipment segment generated $45.8 million in revenue and a $10.2 million operating loss; polishing supplies generated $10.7 million in revenue and $2.8 million in operating income.
In FY2014’s fourth quarter, revenue was $19.8 million, gross profit was $2.6 million, net loss attributable to Amtech was $3.2 million, and loss per share was $0.33.
Changes versus prior periods
- Revenue rose 62% year over year, reflecting increased shipments of N-type solar equipment and improved semiconductor equipment purchases; polishing-template sales also increased.
- Gross margin improved to 20.6% from 12.4%. The comparison was affected by FY2013 inventory write-downs of $3.7 million and a $4.0 million FY2014 benefit from using previously written-down inventory. New-product shipments and revenue deferrals also affected reported margins.
- Operating and net losses narrowed, but the company remained loss-making and continued to use cash in operations. Cash declined by $9.8 million during the year.
- Backlog increased 7%; new orders were $61.3 million versus $43.6 million in FY2013. Solar orders and deferred revenue in backlog were approximately $20.9 million. Backlog is subject to customer cancellation or delay.
- Accounts receivable allowance increased to $2.8 million from $0.6 million, including a $1.3 million doubtful-account provision and an additional adjustment. The filing cites financial difficulties at certain customers.
Outlook, risks and notable items
Management said ongoing solar supply-demand imbalance and global economic conditions had slowed or delayed customer capacity plans, and the timing of market improvement was difficult to predict. No specific financial guidance was provided. Key risks include industry cyclicality and solar overcapacity, reliance on a limited number of customers, international exposure, competition, technology shifts, customer acceptance and collection delays, and supplier and inventory risks.
On October 21, 2014, after fiscal year-end, Amtech agreed to acquire BTU International in an all-stock merger. BTU shareholders would receive 0.3291 Amtech shares per BTU share and were expected to own approximately 23.9% of the combined company. Closing was subject to shareholder and other conditions. The filing describes two putative BTU-stockholder lawsuits seeking, among other relief, to block the merger; Amtech said it considered the claims without merit and intended to defend them. Merger termination fees or expense reimbursements of up to approximately $1.3 million and $1.0 million, respectively, could apply in specified circumstances.
Other notable items include a $1.4 million Tempress contribution commitment to a four-year ion-implant development project and a $6.1 million Kingstone project funding commitment for which Amtech stated it had no obligation or plan to provide funding. The Dutch multiemployer pension plan’s reported coverage ratio was 102.8%, below its 104.3% threshold; further pension-right reductions were possible under the recovery plan. The company reported effective internal controls and received unqualified audit opinions on its financial statements and internal controls.
Important facts for investors to verify
- Whether the BTU merger closed, its final terms and dilution, and the outcome of the merger litigation.
- Whether customer acceptance, deferred revenue and backlog convert into revenue and cash; backlog may be canceled or delayed.
- Customer credit quality and concentration, including the increased receivables allowance and collection risks.
- Liquidity after continued operating cash outflows, the expected 2015 tax payment and scheduled purchase obligations.
- Progress and funding of ion-implant development, and the potential impact of grants, project commitments and R&D costs.
- Solar and semiconductor market conditions, margin sustainability and the effects of inventory write-downs and revenue-recognition timing.