inTest Corp. Reports Operating Results (10-Q)

inTest Corp. (INTT, Financial) filed Quarterly Report for the period ended 2009-09-30.

InTEST Corporation is an independent designer, manufacturer and marketer of ATE interface solutions and temperature management products, which are used by semiconductor manufacturers to perform final testing of integrated circuits and wafers. The Company's high-performance products are designed to enable semiconductor manufacturers to improve the speed, reliability, efficiency and profitability of IC test processes. Specific products include positioner and docking hardware products, temperature management systems and customized interface solutions. The Company has established strong relationships with semiconductor manufacturers globally, which it supports through a network of local offices. Intest Corp. has a market cap of $8.2 million; its shares were traded at around $0.82 with and P/S ratio of 0.2.

Highlight of Business Operations:

Net cash used in financing activities for the nine months ended September 30, 2009 was $6,000, which represents payments made under capital lease obligations. We have a secured credit facility that provides for maximum borrowings of $250,000. This facility had been secured by the assets of inTEST Corporation, Temptronic Corporation and inTEST Silicon Valley Corporation, excluding all patents, trademarks and applications for same. During the quarter ended September 30, 2009, we agreed with the lender who provides this secured credit facility to release their aforementioned liens against the assets of our operations in exchange for pledged certificates of deposit totaling $250,000. The loan agreement for this facility contained certain negative covenants regarding, among other things, acquisitions and additional debt. We had notified the lender that our recent acquisitions may have violated these covenants and the lender has provided waivers of those covenant violations as well as eliminated those covenants. We have not used our secured credit facility to borrow any funds. Our usage consists of the issuance of letters of credit in the face amount of $250,000. We pay a quarterly fee of 1.5% per annum on the total amount of the outstanding letters of credit. As of September 30, 2009, we had cash and cash equivalents of $3.4 million. In light of deteriorating conditions in the semiconductor industry and the global economic recession, we initiated a series of restructuring and cost reduction programs during the fourth quarter of 2008, which have continued into the first nine months of 2009, as previously discussed, in order to conserve cash and reduce costs. In April 2009, we retained the services of a financial advisor to assist us in assessing our strategic alternatives to enhance operating performance and stockholder value. We determined that under the then current market conditions and with our then current resources, our goals were to continue conserving cash, reducing costs and generating sales of our products. Since that time, we have implemented strategies consistent with those goals and remain committed to those objectives. We also continue to consider other alternatives as we may deem appropriate. If we are not successful in generating sufficient additional sales and conserving cash, or if we cannot obtain adequate financing for our working capital needs if our business continues expanding, we may be forced to seek relief through a filing under the U.S. Bankruptcy Code. While we currently expect our cash and cash equivalents and projected future cash flow to be sufficient to support our near term working capital requirements, in light of the increased demand for our products and our current plans to restore salaries for our domestic employees in early 2010, we may need additional working capital in 2010. Consequently, in late October 2009, we retained the services of a third-party financial intermediary that specializes in debt placements for companies in distressed situations to assist us in soliciting proposals from lenders to provide us with a revolving line of credit of up to $2.0 million secured by the assets of our domestic operations. We expect to receive these proposals during the fourth quarter of 2009 and hope to put in place prior to the end of 2009 either a revolving line of credit or a commitment to lend. We cannot be certain that we will be successful in obtaining any lending proposals, or that the terms proposed in any of these lending proposals will be satisfactory to us or that we will be successful in achieving our goal of putting a revolving credit facility or a commitment to lend in place. As discussed in Note 2 to the consolidated financial statements in our 2008 Form 10-K, we received a report from our independent registered public accounting firm expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on many events, some of which may be outside of our direct control, including, among other things, the success and timeliness of our cost reduction initiatives and the availability of financing, if needed, to fund our working capital requirements. We have incurred significant losses in three of the last five years including losses in 2007 and 2008 and the first nine months of 2009. These losses were attributable to operations as well as to charges for impairments and restructurings. We have managed our liquidity during this time primarily through a series of cost reduction initiatives. However, the continuing weakness and turmoil of the macroeconomic environment that began in 2008, worsened in 2009 and resulted in a significant reduction in equipment utilization rates in the semiconductor industry which has had a significant negative impact on our bookings. While we presently see positive indicators in all of our segments, and although our bookings for the third quarter of 2009 increased to $7.9 million as compared to $4.6 million for the second quarter of the year, we continue to remain focused on methods to reduce our cash burn and manage our cash flow. We cannot be certain that the downturn is reversing or that we will have sufficient cash to continue to operate. Consequently, we continue to remain focused on methods to restructure our business and reduce our cash burn or to identify appropriate strategic alternatives. However, if we are not successful in accomplishing these goals or alternatives, we may be forced to seek relief through a filing under the U.S. Bankruptcy Code or liquidate and dissolve our business. We do not currently have any available credit facilities under which we can borrow to help fund our working capital requirements.

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