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James Hodges is a Value Investing practitioner who has been independently studying the art form since 1992. He specializes in NCAV small cap situations with a catalyst.
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  • Axcelis Technologies, Inc. (NASDAQ: ACLS) 0 comments
    May 12, 2009 4:18 PM | about stocks: ACLS



    Axcelis Technologies, Inc. is a new venture for us. We haven’t followed the company for very long but after reviewing their SEC filings, it didn’t take us long to see the integrity of the company. What caught our intital attention was this letter.

    Axcelis Technologies Inc. chief executive Mary Puma will have her base salary reduced 20 percent for the next two years, the company announced Monday.

    Puma offered to take the pay cut in a letter to Axcelis’ board and declined any bonuses for the year. She will earn a base salary of $400,000 for 2009 and 2010.

    That is the kind of integrity we are dealing with here. How many executives in the corporate world do you find that is willing to take on cost cutting measures first hand? I haven’t found many and when I do find one, it deserves a look. To put this into perspective, Axcelis mentions who their competition is in their last 10-K annual report. They are Varian Semiconductor, Mattson Technology, Novellus Systems, & two foreign companies in the Asian market. Here is a rundown of their direct competitors compensation:

    Gary E. Dickerson – CEO: Varian Semiconductor Equipment Associates, Inc. – Salary: $4,710,877

    David Dutton – CEO: Mattson Technology, Inc. – Salary: $1,285,161

    Richard S. Hill – CEO: Novellus Systems, Inc – Salary: $5,104,235

    Each of these companies have seen large declines of Revenue and profit margins. Axcelis is the only one that is doing something about it and acting efficiently and quickly.

    The company has expressed their belief in the future of the company by realeasing this information.

    “People are always going to buy their cell phones and TVs and other electronics,” she said. ‘It always gets better. It really does. Demand will return, and we want to be ready.”

    Last quarter while Axcelis was trading between $0.17 – $0.50 per share. During that period, Axcelis had a liquidation value we estimated at $0.73 per share.

    Today, as of May 12th, 2009, shares took a -11% hit in early morning trading after the company released their 10Q filing. Why? After investigating we found that their Revenue had decreased yet their Cost of Revenue dramatically decreased as well.

    Valuing the assets of a business is the most effective way to gain insight to a company as well as the rationale traders use on Wall Street. Looking at the recent 10Q and noticing the -11% drop in today’s price immediately leaves us with the impression that Mr. Market is acting extremely irrational concerning their 10Q report.

    Last quarter, Axcelis reported these numbers:

    Cash & Equivalents: $49.73 Million which $12.64 Million was restricted bringing the actual liquid Cash & Equivalents to $37.09 Million.

    This Quarter, although reporting a smaller Revenue, Axcelis reported a large increase in their Cash position of $71.24 Million of which only $8.32 Million is restricted bringing the actual liquid value to $62.92 Million in Cash & Equivalents. That’s a 69.65% increase in their Cash position alone!!! This was due to the sale of their Long Term Investments. The company wisely understands that having cash on the books is more important in this market than having marketable securities. They reduced their risk exposure by doing so. Why then did they take an -11% dive on the release of the 10Q filing? Let’s continue.

    Last quarter, Axcelis reported $36.57 Million in Recievables. This quarter they reported a little less, $20.97 Million. Having less recievables is a good thing. It means they are collecting money that is owed to them. The baffledness continues.

    Last quarter they reported $177.01 Million in Inventories. This quarter, $140.46 Million. Very insignificant change.

    Last quarter, PPE was valued at $64.00 Million; this quarter $43.69 Million which is understandable due to wear and tear on machinery that always depreciates in value and the current crisis which has devalued property to ridiculous prices that are unsustainable for any great length of time and WILL come back.

    Last quarter they reported their Current Liabilities were $134.20 Million. Their Long Term Liabilities were $5.80 Million more. This quarter, although they didn’t report their LTL, they did report their Current Liabilities which allows us to make assumptions of their Long Term Liabilites. This quarter, their Current Liabilities were $50.62 Million!!! A staggering reduction of 62.28%.

    So, why on earth did their share price take a nose dive of -11% in the opening bell? No justifiable reason except for investor fear and lack of investor rationale.

    Our last liquidation value of this company was $0.73 per share. It has now increased to $1.11 per share. A 51.62% increase in value that has now turned into a Net-Net opportunity. Where as before, some of their liquidation value was found in their Long Term Securities; they have exited their Long Term Securities and used the money to increase their cash position as well as decrease their Liabilities. SIGNIFICANTLY!!!

    One last bit of icing on the cake is this: Last quarter they reported on their cashflow statement a net income loss of -$196.66 Million. This quarter they’ve drastically reduced that to a loss of -$29.16 Million while producing nearly half the amount of Revenue they did in the previous quarter. Not only have they made their cost cutting intentions known publicly, they’ve backed it up with evidence. Management receives an A+ score competency rating.

    [Full Disclosure:  We have a holding in Axcelis Technologies, Inc. (NASDAQ:ACLS). This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]


    Stocks: ACLS
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