To Our Shareholders:
We would like to share with you the financial results and some highlights
from our second fiscal quarter ended November 30, 2001.
Net sales for the second quarter of fiscal 2002 were $2.8 million, a decrease
of 68 percent from net sales of $9.0 million in the same quarter of the prior
year. Net loss for the quarter was $774,000, or $0.11 per share, compared
with a net income of $280,000, or $0.04 per share, in the same quarter a year
ago.
For the six months ended November 30, 2001, net sales were $5.6 million, a
decrease of 68 percent from net sales of $17.7 million for the same period in
the prior year. Net loss for the six months ended November 30, 2001 was $1.4
million, or $0.20 per share. Net loss for the same period of the prior year
was $1.2 million, or $0.17 per share, which included a charge of $1.6 million
for the cumulative effect of applying SAB 101 for revenue recognition. The
income for the six months ended November 30, 2000 before that charge was
$444,000, or $0.06 per share.
As of November 30, 2001, we had no outstanding debt, our cash and short-term
investments totaled $12.2 million, working capital was $27.5 million and book
value per share was $4.70.
Because of the continued downturn in the semiconductor equipment industry, we
experienced another quarter of low net sales. However, we are pleased to see
that the level of customer quote activities has started to pick up. We are
also encouraged by the strengthening of our business in Taiwan, which is
evidenced by recent repeat orders for several MTX parallel test systems
received from a major DRAM production facility. In order to control spending
and maintain our competitiveness, we have continued to drive our cost
reduction programs, while maintaining our research and development projects.
The FOX full wafer contact system continues to be a major part of our growth
strategy, as it is designed to provide cost effective test solutions for the
latest technology integrated circuits. In view of our recently received MTX
system orders, we anticipate that for our third fiscal quarter net sales will
increase and gross margin will decrease, compared with those of the quarter
just reported. Overall, we believe that we have passed beyond our low point
in net sales for this semiconductor downturn.
Your continued support during these difficult times has been greatly
appreciated by everyone at Aehr Test.
/S/ RHEA POSEDEL
Rhea Posedel
CEO and Chairman
/S/ C.J. MEURELL
C.J. Meurell
President and COO
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
Nov 30, Nov 30, Nov 30, Nov 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales...................................... $ 2,822 $ 8,958 $ 5,627 $17,664
Cost of sales.................................. 1,401 5,572 2,811 10,892
---------- ---------- ---------- ----------
Gross profit................................... 1,421 3,386 2,816 6,772
---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative.......... 1,500 1,884 3,131 3,902
Research and development..................... 999 1,348 1,965 2,600
Research and development cost
reimbursement--DARPA ...................... -- (300) -- (300)
---------- ---------- ---------- ----------
Total operating expenses................... 2,499 2,932 5,096 6,202
---------- ---------- ---------- ----------
Income (loss) from operations.................. (1,078) 454 (2,280) 570
Interest income................................ 145 230 313 463
Interest expense............................... -- (3) -- (6)
Other expense, net............................. (102) (74) (1) (74)
---------- ---------- ---------- ----------
Income (loss) before income taxes ............. (1,035) 607 (1,968) 953
Income tax expense (benefit)................... (261) 327 (560) 509
---------- ---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle............ (774) 280 (1,408) 444
Cumulative effect of change in accounting
principle - net of tax....................... -- -- -- (1,629)
---------- ---------- ---------- ----------
Net income (loss).............................. $ (774) $ 280 $(1,408) $(1,185)
========== ========== ========== ==========
Net income (loss) per share (basic)............ $ (0.11) $ 0.04 $ (0.20) $ (0.17)
Net income (loss) per share (diluted).......... $ (0.11) $ 0.04 $ (0.20) $ (0.17)
Shares used in per share calculation (basic)... 7,128 7,078 7,125 7,021
Shares used in per share calculation (diluted). 7,128 7,251 7,125 7,021
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Nov 30, May 31,
2001 2001
(unaudited)
---------- ----------
Assets
Current assets:
Cash and cash equivalents .......................... $ 5,994 $10,391
Short-term investments ............................. 6,186 3,764
Accounts receivable................................. 4,734 5,751
Inventories ........................................ 9,472 10,125
Prepaid expenses and other ......................... 3,426 3,321
---------- ----------
Total current assets ........................... 29,812 33,352
Property and equipment, net .......................... 1,874 2,103
Long-term investments ................................ 2,563 2,267
Other assets, net .................................... 1,966 1,870
---------- ----------
Total assets ................................... $36,215 $39,592
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable ................................... $ 371 $ 1,213
Accrued expenses ................................... 1,623 3,336
Deferred revenue ................................... 327 51
---------- ----------
Total current liabilities ...................... 2,321 4,600
Deferred revenue ..................................... 39 39
Deferred lease commitment ............................ 190 146
---------- ----------
Total liabilities .............................. 2,550 4,785
---------- ----------
Shareholders' equity:
Common stock........................................ 72 71
Additional paid-in capital ......................... 36,345 36,134
Notes receivable from shareholders ................. (84) (84)
Accumulated deficit ................................ (4,209) (2,801)
Net unrealized gain on investments.................. 45 19
Cumulative translation adjustment................... 1,496 1,468
---------- ----------
Total shareholders' equity ..................... 33,665 34,807
---------- ----------
Total liabilities and shareholders' equity ..... $36,215 $39,592
========== ==========
"Safe Harbor" Statement: This letter contains forward-looking statements
that involve risks and uncertainties relating to projections regarding
industry growth and customer demand for the Company's products. Actual
results may vary from projected results. These risks and uncertainties
include economic conditions in Asia, particularly in Taiwan, and elsewhere, a
continued slowdown in the semiconductor industry, world events, acceptance by
customers of the FOX, MTX, MAX and DiePak technologies, the Company's
development and manufacture of a commercially successful wafer-level burn-in
system, a downturn in customer quote activity levels, the ability of the
Company to turn customer quotes into sales, the Company's ability to control
spending and maintain research and development projects, the Company's
ability to increase net sales and the potential emergence of alternative
technologies, which could adversely affect demand for the Company's products
in calendar year 2002. See the Company's 10-K and most recent 10-Q filed
with the SEC for additional risks affecting the Company.