To Our Shareholders:
We would like to share with you the financial results and some highlights
from our third fiscal quarter ended February 28, 2002.
Net sales for the third quarter of fiscal 2002 were $3.4 million, a decrease
of 62 percent from net sales of $9.0 million in the same quarter of the prior
year. Net loss for the quarter was $737,000, or $0.10 per share, compared
with net income of $1.0 million, or $0.14 per share, in the same quarter a
year ago.
For the nine months ended February 28, 2002, net sales were $9.0 million, a
decrease of 66 percent from net sales of $26.7 million for the same period in
the prior year. Net loss for the nine months ended February 28, 2002 was
$2.1 million, or $0.30 per share. Net loss for the same period of the prior
year was $160,000, or $0.02 per share, which included a charge of $1.6
million for the cumulative effect of applying SAB 101 for revenue
recognition. Income for the nine months ended February 28, 2001 before that
charge was $1.5 million, or $0.20 per share.
As of February 28, 2002, we had no outstanding debt. Our cash, short-term
investments and long-term investments totaled $14.1 million; working capital
was $25.3 million and book value per share was $4.61. Our long-term
investments consist of interest bearing securities with maturities of less
than 18 months.
We are encouraged by the recent strengthening of the DRAM market, which we
believe could result in our receiving additional orders for our MTX massively
parallel memory tester over the next few quarters. We are continuing
development on our wafer level products and expect to start qualification
testing this quarter of our first FOX full wafer burn-in of VCSEL laser
diodes, which are used in the emerging optical communications market.
We are also aggressively developing new burn-in products during this
downturn. We are planning to ship our next generation MAX4 burn-in system
for higher power microprocessors in the latter part of the fourth fiscal
quarter. In addition to introducing new products, we believe we have
strengthened our market position for our MAX and MTX products in Taiwan by
bringing direct sales staff into our office in Hsinchu, Taiwan.
We also see an increased interest in our FOX wafer level burn-in and test
products, with applications ranging from memory devices to laser diodes. The
FOX full wafer contact product continues to be a major part of our growth
strategy. Even though we expect the semiconductor industry to recover long-
term, we are still cautious about our short-term outlook. We plan to begin
the customer acceptance process for both the new MAX4 system and VCSEL wafer
level contactor in our fourth fiscal quarter. However, given SAB 101 revenue
recognition requirements, our net sales for our fourth quarter may be less
than those of the quarter just ended.
On behalf of everyone at Aehr Test, we deeply appreciate your continued
support and patience during these difficult times.
/S/ RHEA J. POSEDEL
Rhea J. 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 Nine Months Ended
Feb 28, Feb 28, Feb 28, Feb 28,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales...................................... $ 3,419 $ 9,008 $ 9,046 $26,672
Cost of sales.................................. 1,801 4,938 4,612 15,830
---------- ---------- ---------- ----------
Gross profit................................... 1,618 4,070 4,434 10,842
---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative.......... 1,683 1,744 4,814 5,646
Research and development..................... 966 1,266 2,931 3,866
Research and development cost
reimbursement--DARPA ...................... -- (300) -- (600)
---------- ---------- ---------- ----------
Total operating expenses................... 2,649 2,710 7,745 8,912
---------- ---------- ---------- ----------
Income (loss) from operations.................. (1,031) 1,360 (3,311) 1,930
Interest income................................ 110 276 423 739
Interest expense............................... -- (1) -- (7)
Other expense, net............................. (91) (16) (92) (90)
---------- ---------- ---------- ----------
Income (loss) before income taxes ............. (1,012) 1,619 (2,980) 2,572
Income tax expense (benefit)................... (275) 594 (835) 1,103
---------- ---------- ---------- ----------
Income (loss) before cumulative effect
of change in accounting principle............ (737) 1,025 (2,145) 1,469
Cumulative effect of change in accounting
principle - net of tax....................... -- -- -- (1,629)
---------- ---------- ---------- ----------
Net income (loss).............................. $ (737) $ 1,025 $(2,145) $ (160)
========== ========== ========== ==========
Net income (loss) per share (basic)............ $ (0.10) $ 0.14 $ (0.30) $ (0.02)
Net income (loss) per share (diluted).......... $ (0.10) $ 0.14 $ (0.30) $ (0.02)
Shares used in per share calculation (basic)... 7,169 7,138 7,140 7,060
Shares used in per share calculation (diluted). 7,169 7,186 7,140 7,060
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Feb 28, May 31,
2002 2001
(unaudited)
---------- ----------
Assets
Current assets:
Cash and cash equivalents .......................... $ 7,001 $10,391
Short-term investments ............................. 3,551 3,764
Accounts receivable................................. 5,009 5,751
Inventories ........................................ 8,610 10,125
Prepaid expenses and other ......................... 3,593 3,321
---------- ----------
Total current assets ........................... 27,764 33,352
Property and equipment, net .......................... 2,457 2,103
Long-term investments ................................ 3,578 2,267
Other assets, net .................................... 1,896 1,870
---------- ----------
Total assets ................................... $35,695 $39,592
========== ==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable ................................... $ 549 $ 1,213
Accrued expenses ................................... 1,220 3,336
Deferred revenue ................................... 646 51
---------- ----------
Total current liabilities ...................... 2,415 4,600
Deferred revenue ..................................... 39 39
Deferred lease commitment ............................ 206 146
---------- ----------
Total liabilities .............................. 2,660 4,785
---------- ----------
Shareholders' equity:
Common stock........................................ 72 71
Additional paid-in capital ......................... 36,332 36,134
Notes receivable from shareholders ................. -- (84)
Accumulated deficit ................................ (4,946) (2,801)
Net unrealized gain on investments.................. 27 19
Cumulative translation adjustment................... 1,550 1,468
---------- ----------
Total shareholders' equity ..................... 33,035 34,807
---------- ----------
Total liabilities and shareholders' equity ..... $35,695 $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.