AMTECH SYSTEMS, INC.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our "Condensed Consolidated
Financial Statements" in Item 1 of this Quarterly Report on Form 10-Q
("Quarterly Report") and our consolidated financial statements and related notes
included in Item 8, "Financial Statements and Supplementary Data" in our Annual
Report on Form 10-K for the fiscal year ended September 30, 2020 .
Overview
We are a leading, global manufacturer of capital equipment, including thermal
processing and wafer polishing and related consumables used in fabricating
semiconductor devices, such as silicon carbide ("SiC") and silicon power
devices, analog and discrete devices, electronic assemblies and light-emitting
diodes ("LEDs"). We sell these products to semiconductor device and module
manufacturers worldwide, particularly in Asia , North America and Europe .
We operate in two reportable business segments, based primarily on the industry
they serve: (i) Semiconductor, and (ii) Material and Substrate. In our
Semiconductor segment, we supply thermal processing equipment, including solder
reflow ovens, horizontal diffusion furnaces, and custom high-temp belt furnaces
for use by semiconductor, electronics, and electro/mechanical assembly
manufacturers. In our Material and Substrate segment, we produce substrate
consumables, chemicals, and machinery for lapping (fine abrading) and polishing
of materials, such as silicon wafers for semiconductor products, sapphire wafers
for LED applications, and compound substrates, like silicon carbide wafers, for
power device applications.
Our semiconductor customers are primarily manufacturers of integrated circuits
and optoelectronics sensors and discrete ("O-S-D") components used in analog,
power and radio frequency ("RF"). The semiconductor industry is cyclical and
historically has experienced fluctuations. Our revenue is impacted by these
broad industry trends.
Strategy
We continue to focus on our plans to profitably grow our business and have
developed a strategic growth plan and a capital allocation plan that we believe
will support our growth objectives. Our Power Semiconductor strategic growth
plan leverages our experience, products and capabilities in pursuit of growth,
profitability and sustainability. Our core focus areas are:
• Emerging opportunities in the SiC industry - We believe we are
well-positioned to take part in this significant growth area,specifically as it relates to silicon carbide wafer capacity expansion.
We are working closely with our customers to understand their SiC growth
plans, needs and opportunities. We are investing in our capacity, next
generation product development, and in our people. We believe these
investments will help fuel our growth in the emerging growth SiC
industry.
• 300mm Horizontal Thermal Reactor - We have a highly successful and proven
300mm horizontal diffusion solution used for power semiconductor device
manufacturing applications. We have a strong foundation with the leading
300mm power chip manufacturer, and, in fiscal 2019, we announced an order
to another industry-leading manufacturer. In
another order from a top-tier global power semiconductor customer in
Asia , and in August 2020 , we announced a repeat order for our 300mm
solution. In
European semiconductor manufacturer in the power semiconductor sector. We
believe we have a strong opportunity to continue expanding our customer
base and grow revenue with our 300mm solution.
• As a major revenue contributor to our organization we expect our
subsidiary,
industry growth cycles for our advanced semi-packaging and SMT products,
in addition to specialized custom belt furnaces used in automotive and
other specialized industrial applications. We believe that our
investments in product innovation will provide BTU with opportunities to
grow further, especially in high growth applications of consumer and
industrial electronics, IOT, electric vehicles ("EV") and 5G
communications.
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-------------------------------------------------------------------------------- We anticipate that the required investments to achieve our revenue growth targets will be in the range of$6.0 -$8.0 million in research and development and capital expenditures. We may also need to make investments in other areas of our business, such as management information systems and capacity expansions at other existing manufacturing facilities. Additionally, we may decide to divest some or all of our real estate holdings to streamline our balance sheet and provide additional working capital for our investments and research and development needs. Our current capacity expansion plans include the relocation of ourShanghai, China manufacturing facility, which is expected to occur inAugust 2021 . This new facility will increase capacity in support of our Pyramax product line, serving our Advanced Packaging, other semiconductor packaging and SMT customers. We are and will continue to closely scrutinize these planned investments, in light of the COVID-19 challenges, and we may defer some of our projects. However, as a capital equipment manufacturer, we will continue to invest in our business to support working capital and fuel our future growth. In addition to investments in our organic growth, another key aspect of our capital allocation policy is our plan to grow through acquisitions. We have the expertise and track record to identify strong acquisition targets in the semi and SiC growth environment and to execute transactions and integrations to provide for value creating, profitable growth in both the short-term and long-term. OnMarch 3, 2021 , we acquiredIntersurface Dynamics, Inc. ("IDI"), aConnecticut -based manufacturer of substrate process chemicals used in various manufacturing processes, including semiconductors, silicon and compound semiconductor wafers, and optics. As of the date of the filing of this Quarterly Report on Form 10-Q, we do not have a definitive agreement to acquire any additional acquisition target. Cybersecurity Incident OnApril 12, 2021 , we detected a data incident in which attackers acquired data and disabled some of the technology systems used by one of our subsidiaries. Upon learning of the incident, we immediately engaged external counsel and retained a team of third-party forensic, incident response, and security professionals to investigate and determine the full scope of this incident. We also notified law enforcement officials and confirmed that the incident is covered by our insurance. We are wrapping up the investigation of the data incident with assistance from our outside professionals, and indications are that the unauthorized third-party gained access to certain personal information relating to employees and their beneficiaries for some of our operations. There is currently no indication of any misuse of this information. Despite this disruption, production continued in our facilities. Our previously disabled subsidiary network is now back up and running securely. Working alongside our security professionals, we were able to bring our subsidiary's systems online with enhanced security controls. We have deployed an advanced next generation anti-virus and endpoint detection and response tool, as well as Managed Detection & Response services. We remain committed to protecting the security of the personal information entrusted to us and providing high-quality products and service to our customers. We recorded approximately$1.1 million of expense related to this incident, which is included in selling, general and administrative expenses, during the third quarter of fiscal 2021. The expense is primarily related to third-party service providers, including security professionals as well as legal and response teams. We may make additional investments in the future to further strengthen our cyber security. We expect to file an insurance claim during the fourth quarter of fiscal 2021 related to the incident. Disputes over the extent of insurance coverage for claims are not uncommon, and there will be a time lag between the initial incurrence of costs and the receipt of any insurance proceeds. There is no guarantee that we will be fully reimbursed for all expenses incurred.
Solar and Automation Divestitures
OnApril 3, 2019 , we announced that our Board of Directors (the "Board") determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities the Company believes are presented in those areas. We completed the sale of our solar subsidiaries, SoLayTec and Tempress, onJune 7, 2019 andJanuary 22, 2020 , respectively. Additionally, onDecember 13, 2019 , we completed the sale of our automation division, R2D, to certain members of R2D's management team. 21
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Segment Reporting Changes
Upon the acquisition of IDI in the second quarter of 2021, we evaluated our organizational structure and concluded that we have two reportable business segments following the acquisition. Our Material and Substrate segment includes our former SiC/LED segment in addition to IDI from the date of acquisition.
In the second quarter of 2019, we began the process to divest our solar business, which we completed onJanuary 22, 2020 with the sale of our Tempress subsidiary. As such, we have reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations for 2020. Results of Operations
The following table sets forth certain operational data as a percentage of net revenue for the periods indicated:
Three Months Ended June 30, Nine Months Ended June 30,
2021 2020 2021 2020
Net revenue 100 % 100 % 100 % 100 %
Cost of sales 56 % 61 % 58 % 61 %
Gross margin 44 % 39 % 42 % 39 %
Selling, general and administrative 31 % 32 % 30 % 32 %
Research, development and engineering 7 % 6 % 8 % 5 %
Restructuring charges - % 1 % - % 1 %
Operating income 6 % - % 4 % 1 %
Loss on sale of subsidiary - % - % - % (5 )%
Interest (expense) income and other, net (1 )% - % (1 )% 1 %
Income (loss) from continuing operations
before
income taxes 5 % - % 3 % (3 )%
Income tax provision 3 % 1 % 2 % 1 %
Income (loss) from continuing operations,
net of tax 2 % (1 )% 1 % (4 )%
Loss from discontinued operations, net of
tax - % - % - % (23 )%
Net income (loss) 2 % (1 )% 1 % (27 )%
Net Revenue
Net revenue consists of revenue recognized upon shipment or installation of
equipment, with the exception of products using new technology, for which
revenue is recognized upon customer acceptance. Spare parts sales are recognized
upon shipment and service revenue is recognized upon completion of the service
activity, which is generally ratable over the term of the service contract.
Since the majority of our revenue is generated from large system sales, revenue
and operating income can be significantly impacted by the timing of system
shipments and system acceptances.
Our net revenue by operating segment was as follows (dollars in thousands):
Three Months Ended June 30, Nine Months Ended June 30,
Segment 2021 2020 Incr (Decr) % Change 2021 2020 Incr (Decr) % Change
Semiconductor $ 19,501 $ 12,357 $ 7,144 58 % $ 52,195 $ 41,581 $ 10,614 26 %
Material and Substrate 3,599 2,870 729 25 % 8,670 8,155 515 6 %
Non-segment related - - - - % - 643 (643 ) (100 )%
Total net revenue $ 23,100 $ 15,227 $ 7,873 52 % $ 60,865 $ 50,379 $ 10,486 21 %
Total net revenue for the quarters ended
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on our customers' expansions, and our 2020 results were negatively impacted by
the uncertainty in the global economy due primarily to the impact of the
COVID-19 virus, as well as lingering trade tensions between the U.S. and
China . Beginning in the third quarter of 2020, we experienced a return to
near-capacity in our China factory. This trend has continued into fiscal 2021,
as sales across all our semi platforms have increased over the prior year.
Material and Substrate revenue increased primarily due to the addition of IDI in
March 2021 , which accounted for approximately 73% of the revenue increase
between periods. The remaining increase is due to higher machine and machine
parts sales between periods. The recovery in our Material and Substrate segment
continues to be slower than expected, as most of our customers were negatively
affected by COVID-19 and delayed their expansion plans; however, we are
experiencing an increase in machine purchases and believe there remains
significant potential in the SiC industry and long-term growth in power
semiconductors.
Total net revenue for the nine months ended June 30, 2021 and 2020 was $60.9
million and $50.4 million , respectively, an increase of approximately $10.5
million or 21%. Revenue from the Semiconductor segment increased $10.6 million
compared to the prior year period. This change is primarily attributable to
higher shipments across all of our product lines in the 2021 period. Revenue
from our Material and Substrate segment increased $0.5 million due to the
addition of IDI in March 2021 . Excluding IDI's revenue, Material and Substrate
revenue decreased approximately $0.2 million , due to lower sales of consumable
products for Sapphire customers, as we faced increased competition from
lower-cost Chinese manufacturers. We are actively looking for cost reduction
opportunities and are making efforts to regain this market-share; however, we do
expect this trend to continue in the near term for consumables sales to Sapphire
customers. Non-segment related revenues relate to R2D, the automation division
that we divested in December 2019 .
Backlog and Orders
Our backlog as of June 30, 2021 and 2020 was as follows (dollars in thousands):
June 30,
Segment 2021 2020 Incr (Decr) % Change
Semiconductor $ 32,388 $ 13,798 $ 18,590 135 %
Material and Substrate 1,907 1,423 484 34 %
Total backlog $ 34,295 $ 15,221 $ 19,074 125 %
New orders booked in the three and nine months ended
Three Months Ended June 30, Nine Months Ended June 30,
Segment 2021 2020 Incr (Decr) % Change 2021 2020 Incr (Decr) % Change
Semiconductor $ 26,607 $ 8,356 $ 18,251 218 % $ 71,741 $ 40,469 $ 31,272 77 %
Material and Substrate 4,254 2,474 1,780 72 % 9,515 8,612 903 10 %
Total new orders $ 30,861 $ 10,830 $ 20,031 185 % $ 81,256 $ 49,081 $ 32,175 66 %
As of June 30, 2021 , one Semiconductor customer individually accounted for 31%
of our backlog. No other customer accounted for more than 10% of our backlog as
of June 30, 2021 . The orders included in our backlog are generally credit
approved customer purchase orders believed to be firm and are generally expected
to ship within the next twelve months. Because our orders are typically subject
to cancellation or delay by the customer, our backlog at any particular point in
time is not necessarily representative of actual sales for future periods, nor
is backlog any assurance that we will realize profit from completing these
orders.
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Gross Profit and Gross Margin
Gross profit is the difference between net revenue and cost of goods sold. Cost
of goods sold consists of purchased material, labor and overhead to manufacture
equipment and spare parts and the cost of service and support to customers for
installation, warranty and paid service calls. Gross margin is gross profit as a
percent of net revenue. Our gross profit and gross margin by operating segment
were as follows (dollars in thousands):
Three Months Ended June 30, Nine Months Ended June 30,
Gross Gross Gross Gross
Segment 2021 Margin 2020 Margin Incr (Decr) 2021 Margin 2020 Margin Incr (Decr)
Semiconductor $ 8,599 44 % $ 4,953 40 % $ 3,646 $ 22,604 43 % $ 16,552 40 % $ 6,052
Material and Substrate 1,480 41 % 998 35 % 482 2,715 31 % 2,922 36 % (207 )
Non-segment related - - % - - % - - - % 9 1 % (9 )
Total gross profit $ 10,079 44 % $ 5,951 39 % $ 4,128 $ 25,319 42 %$ 19,483 39 %$ 5,836 Gross profit for the three months endedJune 30, 2021 and 2020 was$10.1 million (44% of net revenue) and$6.0 million (39% of net revenue), respectively, an increase of$4.1 million . Our gross margins can be affected by capacity utilization and the type and volume of machines and consumables sold each quarter. Gross margin on products from our Semiconductor segment increased compared to the three months endedJune 30, 2020 , due primarily to increased capacity utilization and favorable product mix, partially offset by an increase in labor costs, as we made targeted investments in our labor force to meet existing demand. We expect rising labor costs to continue, as the labor markets in which we operate remain competitive. Gross margin on products from our Material and Substrate segment increased compared to the three months endedJune 30, 2020 , due primarily to the addition of IDI as well as higher machine sales leading to improved utilization, partially offset by higher depreciation. We are experiencing increased material costs across all of our segments and expect this trend to continue through at least the end of fiscal 2021. In response to such increased costs, we are reviewing our pricing plans and supplier agreements and expect to pass these increased costs to our customers where possible; however, we continue to experience pricing pressure from our customers. Gross profit for the nine months endedJune 30, 2021 and 2020 was$25.3 million (42% of net revenue) and$19.5 million (39% of net revenue), respectively, an increase of$5.8 million . Gross margin on products from our Semiconductor segment increased compared to the nine months endedJune 30, 2020 , due primarily to favorable product mix, lower labor costs as a portion of our engineers finished customer-specific design projects and began work on strategic-development projects, and a benefit from the usage of previously reserved inventory. Gross margin on products from our Material and Substrate segment decreased compared to the nine months endedJune 30, 2020 , due primarily to increased material, labor and fixed costs as a result of our facility relocation, which occurred in the prior year period, as well as higher inventory obsolescence charges.
Selling, General and Administrative
Selling, general and administrative expenses ("SG&A") consists of the cost of
employees, consultants and contractors, facility costs, sales commissions,
shipping costs, promotional marketing expenses, legal and accounting expenses
and bad debt expense.
SG&A for the three months ended June 30, 2021 and 2020 were $7.3 million and
$4.8 million , respectively. SG&A increased compared to the prior year quarter
due primarily to costs associated with the data incident in April 2021 of
approximately $1.1 million . Additionally, the fiscal 2021 period includes
increases in labor, travel and commissions expenses, as well as SG&A for IDI for
the full quarter. We expect rising labor costs to continue as the labor market
in each of our locations remains competitive. The fiscal 2020 period included a
benefit of $0.3 million from payroll tax credits that were part of the CARES
Act.
SG&A for the nine months ended June 30, 2021 and 2020 were $18.2 million and
$16.1 million , respectively. SG&A increased compared to the prior year period
due primarily to costs associated with the data incident in April 2021 of $1.1
million . We expect to file an insurance claim during the fourth quarter related
to the incident. There is no guarantee that we will be fully reimbursed for all
expenses incurred. The fiscal 2020 period included a benefit of $0.3 million
from payroll tax credits that were part of the CARES Act.
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--------------------------------------------------------------------------------Research, Development and Engineering
Research, development and engineering ("RD&E") expenses consist of the cost of employees, consultants and contractors who design, engineer and develop new products and processes as well as materials and supplies used in producing prototypes. We receive reimbursements through governmental research and development grants which are netted against these expenses when certain conditions have been met.
RD&E expense, net of grants earned, for the three months endedJune 30, 2021 and 2020 were$1.5 million and$0.9 million , respectively, and$4.6 million and$2.4 million in the nine months endedJune 30, 2021 and 2020, respectively. The increase in RD&E expenses is due to increased labor expense related to a portion of our engineers as they completed customer-specific design projects and began work on strategic-development projects. We expect these strategic projects to be completed during fiscal 2022. Grants earned are immaterial in all periods presented. Restructuring Charges We recorded restructuring charges of$71,000 in the three and nine months endedJune 30, 2021 . These one-time charges relate to staff reductions in our Semiconductor operations. We recorded restructuring charges of$217,000 in the three and nine months endedJune 30, 2020 . These one-time charges were the result of staff reductions at ourMassachusetts operations as we evaluated staffing across our Semiconductor operations. Income Taxes Our effective tax rate continues to be higher than the statutory rate as a result of higher income in foreign jurisdictions. We expect this trend to continue throughout 2021. For the three months endedJune 30, 2021 and 2020, we recorded income tax expense at our continuing operations of$0.7 million and$0.1 million , respectively. For the nine months endedJune 30, 2021 and 2020, we recorded income tax expense of$1.3 million and$0.3 million , respectively. Tax expense for the nine months endedJune 30, 2021 , includes a benefit of approximately$0.3 million related to the reversal of previously recorded uncertain tax positions. In the nine months endedJune 30, 2020 , we recorded an income tax benefit of$47,000 in our discontinued operations. The income tax provisions are based upon estimates of annual income, annual permanent differences and statutory tax rates in the various jurisdictions in which we operate, except that certain loss jurisdictions and discrete items are treated separately. Generally accepted accounting principles require that a valuation allowance be established when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company's performance, the market environment in which the company operates and the length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. We have concluded that we will maintain a full valuation allowance for all net deferred tax assets related to the carryforwards ofU.S. net operating losses and foreign tax credits. We will continue to monitor our cumulative income and loss positions in theU.S. and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate. Our future effective income tax rate depends on various factors, such as the amount of income (loss) in each tax jurisdiction, tax regulations governing each region, non-tax deductible expenses incurred as a percent of pre-tax income and the effectiveness of our tax planning strategies.
Discontinued Operations
As disclosed previously in the "Solar and Automation Divestitures" section, we announced that our Board determined that it was in the long-term best interest of the Company to exit the solar business segment and focus our strategic efforts on our semiconductor and silicon carbide/polishing business segments in order to more fully realize the opportunities we believe are presented in those areas. The divestitures included our Tempress and SoLayTec subsidiaries, which comprised substantially all of our Solar segment. As such, we reported the results of the Solar segment as discontinued operations in our Condensed Consolidated Statements of Operations. SoLayTec was sold effectiveJune 7, 2019 , and Tempress was sold effectiveJanuary 22, 2020 (see Note 13 for additional information). 25
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Liquidity and Capital Resources
The following table sets forth for the periods presented certain consolidated cash flow information (in thousands):
Nine Months Ended June 30,
2021 2020
Net cash used in operating activities $ (2,772 ) $ (990 )
Net cash used in investing activities (5,872 ) (10,800 )
Net cash provided by (used in) financing activities 864 (1,486 )
Effect of exchange rate changes on cash, cash
equivalents and
restricted cash (250 ) 578
Net decrease in cash, cash equivalents and restricted cash
(8,030 ) (12,698 ) Cash, cash equivalents and restricted cash, beginning of period*
45,070 59,134
Cash, cash equivalents and restricted cash, end of period$ 37,040 $ 46,436 * Includes Cash, Cash Equivalents and Restricted Cash that are included in Held-For-Sale Assets on the Condensed Consolidated Balance Sheets for periods prior toJanuary 22, 2020 . Cash and Cash Flow The decrease in cash and cash equivalents fromSeptember 30, 2020 of$8.0 million was primarily due to cash paid for the acquisition of IDI and changes in working capital, partially offset by proceeds received from the exercise of stock options. We maintain a portion of our cash and cash equivalents in RMB at our Chinese operations; therefore, changes in the exchange rates have an impact on our cash balances. Our working capital was$65.8 million as ofJune 30, 2021 and$69.1 million as ofSeptember 30, 2020 . The decrease in working capital occurred primarily due to increases in inventory balances and related accounts payable in preparation to meet our shipment schedules for the next two quarters, as well as an increase in accounts receivable due to higher shipments late in the third quarter of fiscal 2021. Our ratio of current assets to current liabilities was 5.2:1 as ofJune 30, 2021 , and 10.2:1 as ofSeptember 30, 2020 . The success of our growth strategy is dependent upon the availability of additional capital resources on terms satisfactory to management. Our sources of capital in the past have included the sale of equity securities, which includes common stock sold in private transactions and public offerings, long-term debt and customer deposits. There can be no assurance that we can raise such additional capital resources when needed or on satisfactory terms. We believe that our principal sources of liquidity discussed above are sufficient to support operations for at least the next twelve months. We have never paid dividends on our common stock.
Cash Flows from Operating Activities
Cash used in our operating activities was approximately$2.8 million for the nine months endedJune 30, 2021 , compared to$1.0 million for the nine months endedJune 30, 2020 . During the nine months endedJune 30, 2021 , we increased our inventory balances in preparation for upcoming shipments scheduled for the fourth quarter of fiscal 2021 and the first quarter of fiscal 2022. Additionally, our accounts receivable increased during this period as most of our shipments occurred late in the third quarter and our customers generally have payment terms of 60-90 days. During the nine months endedJune 30, 2020 , we increased our inventory balances to mitigate risks in our supply chain resulting from the COVID-19 pandemic, as well as in preparation for a large shipment that occured in the first quarter of fiscal year 2021.
Cash Flows from Investing Activities
For the nine months endedJune 30, 2021 and 2020, cash used in investing activities was$5.9 million and$10.8 million , respectively. The fiscal 2021 amount includes$5.1 million net cash paid for the acquisition of IDI in addition to$0.8 million of cash used for capital expenditures. The fiscal 2020 amount reflects the divestiture of our solar business as well as approximately$0.9 million of capital expenditures. We expect capital expenditures to increase throughout fiscal 2021 and 2022 as we make targeted investments in our IT systems and as we complete the relocation of our Semiconductor manufacturing facility inShanghai, China , which is expected to occur inAugust 2021 . 26 --------------------------------------------------------------------------------
Cash Flows from Financing Activities
For the nine months endedJune 30, 2021 ,$0.9 million of cash provided by financing activities was comprised of approximately$1.1 million of proceeds received from the exercise of stock options, partially offset by payments on long-term debt of$0.3 million . For the nine months endedJune 30, 2020 ,$1.5 million of cash used in financing activities was comprised of$0.8 million of proceeds received from the exercise of stock options, which was fully offset by$2.0 million used for stock repurchases and payments on long-term debt of$0.3 million .
Off-Balance Sheet Arrangements
As ofJune 30, 2021 , we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K promulgated by theSEC that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Contractual Obligations Unrecorded purchase obligations at our continuing operations were$11.1 million as ofJune 30, 2021 , compared to$4.6 million as ofSeptember 30, 2020 , an increase of$6.5 million . This increase is primarily attributable to investments in inventory required to fulfill the increased orders for our diffusion furnaces as well as increased orders for products sold by ourShanghai, China location. There were no other material changes to the contractual obligations included in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year endedSeptember 30, 2020 .
Critical Accounting Policies
Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, accounts receivable collectability, warranty and impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. The results of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A critical accounting policy is one that is both important to the presentation of our financial position and results of operations, and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These uncertainties are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year endedSeptember 30, 2020 . We believe our critical accounting policies relate to the more significant judgments and estimates used in the preparation of our consolidated financial statements. We believe the critical accounting policies discussed in the section entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2020 represent the most significant judgments and estimates used in the preparation of our consolidated financial statements. There have been no significant changes in our critical accounting policies during the nine months endedJune 30, 2021 . 27 --------------------------------------------------------------------------------
Impact of Recently Issued Accounting Pronouncements
For discussion of the impact of recently issued accounting pronouncements, see "Part I, Item 1. Financial Information" under "Impact of Recently Issued Accounting Pronouncements."
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