inTEST (INTT) 2007年年度報告「NASDAQ」.pdf

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1、inTEST CorporationPositioned for Growth2007 Annual ReportCompany ProfileinTEST Corporation(Nasdaq:INTT)is an independent designer,manufac-turer and marketer of ATE(Automatic Test Equipment)interface solutions and temperature management products used by semiconductor manufactur-ers to perform final t

2、esting of integrated circuits(ICs)and electronic assem-blies.Our high-performance products are designed to enable semiconductor manufacturers to improve the speed,reliability,efficiency and profitability of IC test processes.Specific products include test head manipulators and docking hardware produ

3、cts,temperature management systems and custom-ized interface solutions.We have established strong relationships with semi-conductor manufacturers and ATE manufacturers globally,which we support through a network of local offices.Our largest customers include Analog Devices,Inc.,Avago Technologies,Ca

4、scade Microtech Inc.,Freescale Semi-conductor,Inc.,Finisar Corporation,Hakuto Co.,Ltd.,LTX Corporation,STMicroelectronics N.V.,Teradyne,Inc.,and Texas Instruments Incorporated.Headquartered in Cherry Hill,New Jersey,inTEST has approximately 200 highly skilled and trained technical personnel.We have

5、manufacturing facili-ties in New Jersey,Massachusetts,California,Germany and Singapore.We also have sales,service and support offices in Japan,the U.K.and Germany,with additional support personnel in other key semiconductor manufacturing areas around the world.Our goal is to grow through development

6、 of the existing business as well as through acquisition.We continued to face challenges in 2007.As you may know,we are primarily a supplier of capital equipment to the semiconductor industry.We supply both semiconductor manufacturers,directly,and ATE(Automatic Test Equipment)manufacturers,who in tu

7、rn supply test equipment to the semiconductor manufacturers.We define these two customer groups as End User and OEM,respectively.The major driver of the semiconductor industry for many years was the personal computer,the PC.For many years,semiconductor demand was tightly related to the sales of PCs.

8、As we entered the new millennium,the industry business drivers became more diverse.The semiconductor content of our world beyond the PC has increased dramatically including transportation,health,defense,food production,home entertainment,connectivitypractically every aspect of our existence today.A

9、defining characteristic of the semiconductor capital equipment business has been its cyclicality.Back in the days of PCdriven semiconductor demand,the cycles tended to be very large in amplitude and typically three to five years in duration.As the industry has matured and the business drivers have b

10、ecome more diverse,the cycles have tended to decrease in both amplitude and duration,typically lasting no more than two years and recently as little as one year.At the same time as we have seen changes in the business cycle,there has been a constant downward pressure on semiconductor manufacturing c

11、osts,especially the cost of capital equipment.This has led to the creation of powerful SLM(Supply Line Management)groups among both our End User and OEM customers whose purpose is to acquire adequate equipment at the lowest price.Our challenge is to provide the desired products at a price that provi

12、des the margin for a reasonable profit as well as the resources for continual product development.A Brief Look Back at 2007We entered 2007 with the business cycle trending down from the last quarter of 2006.On a quarterly basis,our net revenues were flat at about$12.1 million in the first two quarte

13、rs,up around$1 million to$13.1 million in the third quarter,and down about$1.7 million to$11.4 million in the fourth quarter.There was no clear trend in the business cycle as we exited 2007.Nevertheless,we fully expect the updown cycles of the industry to eventually persist.We believe that we are pr

14、esently bouncing along the bottom of a cycle and that an upturn is in the Dear Stockholders,We remain committed to maintaining the highest ethical standards in our relationships with employees,customers,shareholders and the public at large,and to exceeding our customers expectations while enhancing

15、shareholder value.future.However,there is no guarantee of this,and we must adjust our operations for the existing business level.Our Operating SegmentsDuring 2007,in our Manipulator and Docking Hardware segment,we concentrated on“cost”as a primary design criteria in our new product offerings.As exam

16、ples of this,two new lines of test head manipulators emanated from our design centers in Cherry Hill,NJ,and Amerang,Germany.The first is part of our pneumatic Aero series and is a dedicated“wafer prober only”type manipulator that offers an economical solution with a very small footprint to maximize

17、the utility of test room floor space.We began production shipments of this model in February of 2008.Also,on March 18,2008,we introduced the first of our new IU line of counterbalanced universal manipulators at the Semicon China trade show in Shanghai,China.We believe that these products will provid

18、e the combination of utility and price that our customers are demanding.As we begin 2008,our focus will remain on tailoring this business to the evolving realities of the semiconductor capital equipment business.Our Tester Interface segment has developed some very impressive interfaces in terms of b

19、oth mechanics and electrical performance.These products are gaining traction in the market place and we believe that they will drive a return to profitability for this group in 2008.Temptronic,our Temperature Management segment,continues to have success in the ThermoStream,ThermoChuck and Mobile Tem

20、p product lines.In addition to supplying our traditional semiconductor customers,Temptronic is our vehicle into markets outside of the semiconductor market including medical,telecom,automotive and aerospace.Temptronic has set a goal of penetrating the larger thermal chamber market this year.The Futu

21、reOur goal is to grow through development of the existing business as well as through acquisition.We remain committed to maintaining the highest ethical standards in our relationships with employees,customers,shareholders and the public at large,and to exceeding our customers expectations while enha

22、ncing shareholder value.Sincerely,Robert E.MatthiessenPresident&CEOMarch 31,2008inTEST CorporationPositioned for GrowthForm 10-KUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

23、 For the fiscal year ended December 31,2007 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _ Commission File Number 0-22529 inTEST Corporation(Exact name of registrant as specified in its charter)DELAWARE(State or Other

24、Jurisdiction of Incorporation or Organization)22-2370659(I.R.S.Employer Identification Number)7 ESTERBROOK LANE CHERRY HILL,NEW JERSEY(Address of Principal Executive Offices)08003(Zip Code)Registrants telephone number,including area code:(856)424-6886 Securities registered pursuant to Section 12(b)o

25、f the Act:Title of Each Class Common Stock,par value$0.01 per share Name of Each Exchange on Which Registered NASDAQ Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Ye

26、s No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No Indicate by check mark whether the Registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the pr

27、eceding 12 months(or for such shorter period that the Registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,

28、and will not be contained,to the best of Registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the Registrant is a large accelerated filer,an accelerated filer,a no

29、n-accelerated filer,or a smaller reporting company.See definitions of large accelerated filer,accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.(Check One):Large accelerated filer Accelerated filer Non-accelerated filer(Do not check if a smaller reporting company)Smal

30、ler reporting company Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold

31、on June 30,2007(the last business day of the Registrants most recently completed second quarter),was:$32,651,339.The number of shares outstanding of the Registrants Common Stock,as of March 14,2008,was 9,527,206.DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement of the Re

32、gistrant for the Registrants 2008 Annual Meeting of Stockholders,to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Report,are incorporated by reference into Part III of this Report.-2-inTEST CORPORATION FORM 10-K FOR THE YEAR END

33、ED DECEMBER 31,2007 INDEX PART I Page Item 1.Business.3 Item 1A.Risk Factors.11 Item 1B.Unresolved Staff Comments.16 Item 2.Properties.16 Item 3.Legal Proceedings.16 Item 4.Submission of Matters to a Vote of Security Holders.16 PART II Item 5.Market for Registrants Common Equity,Related Stockholder

34、Matters and Issuer Purchases of Equity Securities.17 Item 6.Selected Financial Data.17 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.18 Item 7A.Quantitative and Qualitative Disclosure About Market Risk.28 Item 8.Financial Statements and Supplementary Dat

35、a.29 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.29 Item 9A(T).Controls and Procedures.29 Item 9B.Other Information.30 PART III Item 10.Directors,Executive Officers and Corporate Governance.30 Item 11.Executive Compensation.30 Item 12.Security Ownersh

36、ip of Certain Beneficial Owners and Management and Related Stockholder Matters.30 Item 13.Certain Relationships and Related Transactions,and Director Independence.31 Item 14.Principal Accounting Fees and Services.31 PART IV Item 15.Exhibits,Financial Statement Schedules.31 Signatures.32 Index to Exh

37、ibits.33 Index to Consolidated Financial Statements and Financial Statement Schedule.34-3-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 PART I Item 1.BUSINESS Cautionary Statement Regarding Forward-Looking Statements From time to time,we make written or oral forward-looking statem

38、ents within the meaning of the Private Securities Litigation Reform Act of 1995,including statements contained in our filings with the Securities and Exchange Commission,or SEC,(including this Report on Form 10-K),our annual report to stockholders and in other communications.These statements do not

39、convey historical information,but relate to predicted or potential future events,such as statements of our plans,strategies and intentions,or our future performance or goals.Our forward-looking statements can often be identified by the use of forward-looking terminology such as believes,expects,inte

40、nds,may,will,should or anticipates or similar terminology,and include,but are not limited to,statements made in this Report regarding:the indicators of a change in the industry cycles in the integrated circuit,or IC,and automatic test equipment,or ATE,industries;developments and trends in the IC and

41、 ATE industries;the possibility of future acquisitions;our cost-containment initiatives;the implementation of current and future restructuring initiatives;costs associated with compliance with the Sarbanes-Oxley Act of 2002 and new SEC regulations;the development of new products and technologies by

42、us or our competitors;the availability of materials used to manufacture our products;the availability of qualified personnel;general economic conditions;net revenues generated by foreign subsidiaries;exchange rate fluctuations;the increasing use of front-end testing by semiconductor manufacturers;va

43、riable product warranty costs;pressure on prices from OEM customer supply line managers;stock price fluctuations;the anticipated market for our products;the sufficiency of cash balances,lines of credit and net cash from operations;and other projections of net revenues,taxable income(loss),net earnin

44、gs(loss),net earnings(loss)per share,capital expenditures and other financial items.Investors and prospective investors are cautioned that such forward-looking statements are only projections based on current estimations.These statements involve risks and uncertainties and are based upon various ass

45、umptions.We discuss many of these risks and uncertainties under Item 1A Risk Factors,below,and elsewhere in this Report.These risks and uncertainties,among others,could cause our actual future results to differ materially from those described in our forward-looking statements or from our prior resul

46、ts.We are not obligated to update these forward-looking statements,even though our situation may change in the future.INTRODUCTION We are an independent designer,manufacturer and marketer of manipulator and docking hardware,temperature management and tester interface products that are used by semico

47、nductor manufacturers in conjunction with automatic test equipment,or ATE,in the testing of integrated circuits,or ICs.Our high performance products are designed to enable semiconductor manufacturers to improve the efficiency of their IC test processes and,consequently,their profitability.We supply

48、our products worldwide to major semiconductor manufacturers and semiconductor test subcontractors directly and through leading ATE manufacturers.Our largest customers include Analog Devices,Inc.,Avago Technologies,Cascade Microtech,Inc.,Freescale Semiconductor,Inc.,Finisar Corporation,Hakuto Co.Ltd.

49、,LTX Corporation,STMicroelectronics N.V.,Teradyne,Inc.and Texas Instruments Incorporated.-4-The consolidated entity is comprised of inTEST Corporation(parent)and our wholly-owned subsidiaries.inTEST Corporation was incorporated in New Jersey in 1981 and reincorporated in Delaware in April 1997.We ma

50、nage our business as three product segments as more fully discussed under Our Segments below.Our Manipulator and Docking Hardware Product segment consists of our manufacturing operation in Cherry Hill,New Jersey as well as our subsidiaries in Singapore(inTEST Pte),Japan(inTEST KK)and Germany(Intestl

51、ogic GmbH).Our Temperature Management Product segment consists of our subsidiaries in Sharon,Massachusetts(Temptronic Corporation)and Germany(Temptronic GmbH).Our Tester Interface Product segment consists of our subsidiary in San Jose,California(inTEST Silicon Valley Corporation).INDUSTRY Overview T

52、he semiconductor market has been characterized by rapid technological change,wide fluctuations in demand and shortening product life cycles.Designers and manufacturers of a variety of electronic and industrial products,such as cell phones,telecom and datacom systems,Internet access devices,computers

53、,transportation and consumer electronics,require increasingly complex ICs to provide improved end-product performance demanded by their customers.Semiconductor manufacturers generally compete based on product performance and price.We believe that testing costs represent a significant portion of the

54、total cost of manufacturing ICs.Semiconductor manufacturers are under more pressure to maximize production yields and reduce testing costs.At the same time,the growing complexity of ICs has increased the difficulty of maximizing test yields.In order to address these market trends,semiconductor manuf

55、acturers strive for more effective utilization of ATE,smaller test areas and increased wafer level testing.Demand for new ATE and related equipment depends upon several factors,including the demand for products that incorporate ICs,the increasing complexity of ICs and the emergence of new IC design,

56、production and packaging technologies.Some of the evolutionary changes in IC technologies include the shift to 300 mm wafers in production,system-on-a-chip,or SOC,where digital,analog and memory functions are combined on a single IC,and chip scale packaging.As a result of these and other advances,se

57、miconductor manufacturers may require additional ATE not only to handle increases in production but also to handle the more sophisticated testing requirements of ICs.IC Test Process Semiconductor manufacturers typically produce ICs in multiples of several hundred on a silicon wafer which is later se

58、parated or diced into individual ICs.Extended leads are then attached to the individual ICs,for later connection to other electrical components.In most cases,the ICs are then encapsulated in a plastic,ceramic or other protective housing.These process steps are called packaging.Wafers are tested befo

59、re being diced and packaged,to ensure that only properly functioning ICs are packaged.This testing step has several names,including front-end test,wafer test,wafer probe or wafer sort.In front-end test,an electronic handling device known as a wafer prober automatically positions the wafer under a pr

60、obe card which is electronically connected to a test head,which connects electrically to a test system.During front-end testing there is a growing trend of thermally conditioning the wafer during test,especially in the memory and automotive markets.Once the good ICs have been identified,they are pac

61、kaged.The packaged ICs also require testing,called back-end test or final test,to determine if they meet design and performance specifications.Packaged ICs are tested after loading into another type of electronic handling device called a package handler or handler,which then transfers the packaged I

62、Cs into a test socket which is attached to the test head.These handlers may be temperature controlled for testing.Wafer probers and handlers are sometimes referred to in this Report collectively as electronic device handlers.Testers range in price from approximately$100,000 to over$3.0 million each,

63、depending primarily on the complexity of the IC to be tested and the number of test heads(typically one or two)with which each tester is configured.Probers and handlers range in price from approximately$50,000 to$500,000.A typical test floor of a large semiconductor manufacturer may have 100 test he

64、ads and 100 probers or 250 handlers supplied by various vendors for use at any one time.Test head manipulators,also referred to as positioners,facilitate the movement of the test head to the electronic device handler.Docking hardware mechanically connects the test head to the wafer prober or handler

65、.Tester interface products provide the electrical connection between the test head and the wafer or packaged IC.Traditionally,temperature management products are used in back-end test to allow a manufacturer to test packaged ICs under the extreme temperature conditions in which the IC may be require

66、d to operate.However,we believe that temperature-controlled testing will be an increasingly important part of front-end wafer testing as more parameters traditionally tested for in back end-test are moved to front-end test.-5-Trends in IC Testing ATE is used to identify unacceptable packaged ICs and

67、 bad die on wafers.ATE assists IC manufacturers in controlling test costs by performing IC testing in an efficient and cost-effective manner.In order to provide testing equipment that can help IC manufacturers meet these goals,we believe the ATE industry must address the following issues:Change in T

68、echnology.Currently,most semiconductor manufacturers use 200 mm and 300 mm wafer technology,with 300 mm technology gradually replacing 200 mm technology in order to increase throughput and lower manufacturing costs.In addition,end-user applications are demanding ICs with increasingly higher performa

69、nce,greater speeds,and smaller sizes.ICs that meet these higher standards are more complex and dense.SOC designs are likely to be more in demand in the future.These technology trends have significant implications for the IC testing process,including:the need for test heads of higher complexity;highe

70、r signal densities;increasing test speeds;and a new generation of testers for SOC and other technologies.Need for Plug-Compatibility and Integration.Semiconductor manufacturers need test methodologies that will perform increasingly complex tests while lowering the overall cost of testing.This can re

71、quire combining ATE manufactured by various companies into optimally performing systems.Semiconductor manufacturers have to work closely with various test hardware,software,interface and component vendors to resolve design and compatibility issues in order to make these vendors products plug-compati

72、ble with test equipment manufactured by other vendors.Testing Under Extreme Conditions.ICs will have to perform across a wider spectrum of temperature and environmental conditions than ever before because of the growing complexity of products in which they are deployed.Temperature testing will likel

73、y find an increasing role in front-end,wafer level testing.Creating a uniform thermal profile over much larger wafer areas represents a significant engineering and design challenge for ATE manufacturers.Demand for Higher Levels of Technical Support.As IC testing becomes more complex,semiconductor ma

74、nufacturers are demanding higher levels of technical support on a routine basis.ATE manufacturers must commit greater resources to technical support in order to develop close working relationships with their customers.This level of support also requires close proximity of service and support centers

75、 to customers facilities.Cost Reduction Through Increased Front-End Testing.As the cost of testing ICs increases,semiconductor manufacturers will continue to look for ways to streamline the testing process to make it more cost-effective,such as the recent trend to use massive parallel test,in which

76、semiconductor manufacturers test multiple ICs on the wafer simultaneously.We believe that this factor will lead to more front-end,wafer-level testing.OUR SOLUTIONS We focus our development efforts on designing and producing high quality products that provide superior performance and cost-effectivene

77、ss.We seek to address each manufacturers individual needs through innovative and customized designs,use of the best materials available,quality manufacturing practices and personalized service.We design solutions to overcome the evolving challenges facing the ATE industry which we believe provide th

78、e following advantages:Scalable,Universal,High Performance Interface Technology.Our universal test head manipulators provide a high degree of positioning flexibility with a minimum amount of effort.As a result,our products can be used in virtually any test setting.Our manipulator products are design

79、ed to accommodate the increased size of test heads.Our docking hardware offers precise control over the connection to test sockets,probing assemblies and interface boards,reducing downtime and minimizing costly damage to fragile components.Our tester interface products optimize the integrity of the

80、signals transmitted between the test head and the device under test by being virtually transparent to the test signals.This results in increased accuracy of the test data and may thus enable improved test yields.We believe that these characteristics will gain even more significance as testing become

81、s even more demanding.Compatibility and Integration.A hallmark of our products has been,and continues to be,compatibility with a wide variety of ATE.Our manipulators and docking hardware are all designed to be used with otherwise incompatible ATE.We believe this integrated approach to ATE facilitate

82、s smooth changeover from one tester to another,longer lives for interface components,better test results,increased ATE utilization and lower overall test costs.-6-Temperature-Controlled Testing.Our Thermostream(R)products are used by manufacturers in a number of industries to stress test a variety o

83、f semiconductor and electronic components,PC boards and sub-assemblies.Our Thermochuck(R)products are used by semiconductor manufacturers for front-end temperature stress screening at the wafer level.Factors motivating manufacturers to use temperature testing include design characterization,failure

84、analysis and quality control as well as determining performance under extreme operating temperatures,all of which contribute to manufacturing cost savings.Worldwide Customer Service and Support.We have long recognized the need to maintain a physical presence near our customers facilities.We have dom

85、estic manufacturing facilities in New Jersey,Massachusetts and California,as well as overseas facilities in Europe and Asia.We provide service to our customers from sales and service offices in the U.S.,Europe and Asia.Our engineers are easily accessible to,and can work directly with,most of our cus

86、tomers from the time we begin developing our initial proposal,through the delivery,installation and use of the product by our customer.In this way,we are able to develop and maintain close relationships with our customers.OUR STRATEGIES We remain committed to our goals of being recognized in our mar

87、kets as the designer and manufacturer of the highest quality and most cost effective products and becoming the key supplier of all of our customers ATE needs,other than probers,handlers and testers.Our strategies to achieve these goals include the following:Providing Technologically Advanced Solutio

88、ns.We are committed to designing and producing only the highest quality products which incorporate innovative designs to achieve optimal cost-effectiveness and functionality for each customers particular situation.Our engineering and design staff is continually engaged in developing new and improved

89、 products and manufacturing processes.Leveraging Our Strong Customer Relationships.Our technical personnel work closely with ATE manufacturers to design tester interface and docking hardware that are compatible with their ATE.As a result,we are often privy to proprietary technical data and informati

90、on about these manufacturers products.We believe that because we do not compete with ATE manufacturers in the prober,handler and tester markets,we have been able to establish strong collaborative relationships with these manufacturers that enable us to develop ancillary ATE products on an accelerate

91、d basis.Maintaining Our International Presence.Our existing and potential customers are concentrated in certain regions throughout the world.We believe that we must maintain a presence in the markets in which our customers operate.We currently have offices in the U.S.,Europe and Asia.Pursuing Synerg

92、istic Acquisitions.A key element of our growth strategy is to acquire businesses,technologies or products that are complementary to our current product offerings.Our TestDesign(now inTEST Silicon Valley),Temptronic and Intestlogic acquisitions have expanded our line of product offerings and have giv

93、en us the opportunity to market a broader range of products to our customer base and,in the case of the Temptronic acquisition,provided access to markets that are less sensitive to cyclicality than the ATE market.We seek to make acquisitions that will further expand our product lines,enabling us to

94、become a key supplier to the test floor for a complete selection of equipment compatible with testers,probers and handlers of all manufacturers.Pursuing Revenue Growth Opportunities Outside the Semiconductor ATE Market.Another element of our growth strategy is to pursue revenue growth opportunities

95、in markets we have not traditionally served,such as the aerospace,automotive,communications,consumer electronics,defense and medical industries.We believe that we may be able to reduce some of the cyclicality that we have historically experienced by further diversifying our revenue streams outside t

96、he semiconductor ATE market.We see the most potential for this within our Temperature Management Product segment.For the years ended December 31,2007,2006 and 2005 approximately$7.0 million or 15%,$6.1 million or 10%and$6.3 million or 12%,respectively,of our consolidated net revenues were derived fr

97、om markets outside semiconductor test.These revenues were all generated by our Temperature Management Product segment.We cannot determine at this time whether we will continue to be successful in building our sales in these non-traditional markets or what the growth rate of our sales in these market

98、s will be in future periods.Controlling costs.At the same time as we are pursuing growth opportunities,we will seek ways to more aggressively streamline our cost structure,so that we are positioned to offer products at prices that provide the margin for a reasonable profit as well as the resources f

99、or continual product development.-7-OUR SEGMENTS Our business is managed as three segments,which are also our reporting units:Manipulator and Docking Hardware Products,Temperature Management Products and Tester Interface Products.Semiconductor manufacturers use our manipulators and docking hardware

100、products during testing of wafers and specialized packaged ICs.They use our temperature management and tester interface products in both front-end and back-end testing of ICs.These ICs include microprocessors,digital signal processing chips,mixed signal devices,MEMS(Micro-Electro-Mechanical Systems)

101、,application specific ICs and specialized memory ICs,and are used primarily in the automotive,aerospace,computer,consumer products and telecommunications industries.We custom design most of our products for each customers particular combination of ATE.Manipulator and Docking Hardware Products Manipu

102、lator Products.We offer four lines of manipulator products:the in2(R),the M Series,the Aero Series and the recently introduced IU Series.These free-standing universal manipulators can hold a variety of test heads and enable an operator to reposition a test head for alternate use with any one of seve

103、ral probers or handlers on a test floor.Certain members of the Aero family are also available as a lower-cost solution for dedicated prober-only or handler-only test cell applications.The in2(R)and IU Series of manipulator products incorporate our balanced floating-head design.This design permits a

104、test head weighing up to 3,000 pounds to be held in an effectively weightless state,so it can be moved manually or with optional powered assistance,up or down,right or left,forward or backward and rotated around each axis(known as six degrees of motion freedom)by an operator using a modest amount of

105、 force.The same design features enable the operator to dock the test head without causing inadvertent damage to the fragile electrical contacts.As a result,after testing a particular production lot of ICs,the operator can quickly and easily disconnect a test head that is held in an in2(R)manipulator

106、 and equipped with our docking hardware and dock it to another electronic device handler for testing either a subsequent lot of the same packaged ICs or to test different ICs.The in2(R)and IU Series manipulators range in price from approximately$12,000 to$159,000.The M Series line of manipulator pro

107、ducts consists of the M400 and M500 manipulators.These compact universal manipulators are designed to handle test heads weighing less than 550 pounds.The up and down movement is counter-balanced by an air-pressure-based floating state technology.The M Series manipulators range in price from approxim

108、ately$12,000 to$32,000.The Aero Series of manipulator products consists of the Aero 650,Aero 450H and Aero 150P manipulators.These manipulators are designed to handle test heads weighing less than 1,500 pounds.The up and down movement is supported by an air-pressure-based floating state technology.T

109、he Aero Series manipulators range in price from$10,000 to$50,000.Docking Hardware Products.Our docking hardware products protect the delicate interface contacts and ensure proper repeatable and precise alignment between the test heads interface board and the probers probing assembly or the handlers

110、test socket as they are brought together,or docked.A simple cam action docks and locks the test head to the prober or handler,thus eliminating motion of the test head relative to the prober or handler.This minimizes deterioration of the interface boards,test sockets and probing assemblies which is c

111、aused by constant vibration during testing.Our docking hardware products are used primarily with floating-head universal manipulators when maximum mobility and inter-changeability of handlers and probers between test heads is required.By using our docking hardware products,semiconductor manufacturer

112、s can achieve cost savings through improved ATE utilization,improved accuracy and integrity of test results,and reduced repairs and replacements of expensive ATE interface products.We believe our docking hardware products offer our customers the ability to make various competing brands of test heads

113、 compatible with various brands of probers and handlers by only changing interface boards.This is called plug-compatibility.Plug-compatibility enables increased flexibility and utilization of test heads,probers and handlers purchased from various manufacturers.We believe that because we do not compe

114、te with ATE manufacturers in the sale of probers,handlers or testers,ATE manufacturers are willing to provide us with the information that is integral to the design of plug-compatible products.Our docking hardware products range in price from approximately$2,000 to$25,000.Temperature Management Prod

115、ucts Our temperature management products are sold into a wide variety of industries including the aerospace,automotive,communications,consumer electronics,defense,medical and semiconductor industries.Our temperature management systems enable a manufacturer to test a semiconductor wafer,IC or electro

116、nic,or in some instances,a mechanical sub-assembly over the extreme and variable temperature conditions that can occur in the actual use of the device.-8-ThermoChuck(R)Products:Our ThermoChuck(R)precision vacuum platform assemblies quickly change and stabilize the temperature of semiconductor wafers

117、 accurately and uniformly during testing without removing the wafer from its testing environment.Such temperatures can range from as low as-65 degrees Celsius to as high as+400 degrees Celsius.ThermoChucks(R)are incorporated into wafer prober equipment for laboratory analysis and for in-line product

118、ion testing of semiconductor wafers.ThermoChuck(R)products range in price from approximately$16,000 to$90,000.ThermoStream(R)Products:Our ThermoStream(R)stand-alone temperature management systems use a temperature-controlled air stream to rapidly change and stabilize the temperature of packaged ICs,

119、electronic sub-assemblies and printed circuit boards.ThermoStream(R)products provide a source of heated and cooled air which can be directed over the component or device under test.These systems are capable of controlling temperatures to within+/-0.1 degree Celsius over a range of-90 degrees Celsius

120、 to as high as+225 degrees Celsius within 1.0 degree Celsius of accuracy.Traditionally,our customers used ThermoStream(R)products primarily in engineering,quality assurance and small-run manufacturing environments.However,increasingly,our customers use ThermoStream(R)products in longer-run productio

121、n applications.ThermoStream(R)products range in price from approximately$6,000 to$40,000.Other Temperature Management Products:Our recently introduced MobileTemp(TM)Series combines our ThermoStream(R)products with a family of exclusive,high-speed ThermoChambers(TM)to offer environmental test systems

122、 with fast,uniform temperature control in a compact package enabling temperature testing at the test location.MobileTemp(TM)Systems are designed specifically for applications beyond the semiconductor market and have found application in the automotive,electronic,fiber optic,medical and oil field ser

123、vice industries.We also manufacture ancillary temperature management products,including temperature-controlled contact probes and precision temperature platforms.Other temperature management products range in price from$4,500 to$20,000.Tester Interface Products Tester interface products provide the

124、electrical connections between the tester and the wafer prober or IC handler to carry the electrical signals between the tester and the probe card on the prober or the test socket on the handler.Our designs optimize the integrity of the transmitted signal which increases the accuracy of the test dat

125、a.Therefore,our tester interface products can be used with high speed,high frequency,digital or mixed signal interfaces used in testing more complex ICs.Because our tester interface products enable the tester to provide more reliable yield data,our interfaces may also reduce IC production costs.We d

126、esign standard and modular interface products to address most possible tester/prober combinations on the market today.In addition,we provide a custom design service that will allow any of our customers to use virtually any tester,prober or handler combination with any type of device,such as analog,d

127、igital,mixed signal and radio frequency.For example,our Centaur(TM)modular interface is designed to provide flexibility and scalability through the use of replaceable signal modules which can be easily changed on the test floor as our customers testing requirements change.In addition to the Centaur(

128、TM)modular interface,we also offer over 200 different types of tester interface models that we custom designed for our customers specific applications.These products range in price from approximately$1,000 to$100,000.Financial Information About Product Segments and Geographic Areas Please see Note 1

129、6 of our consolidated financial statements included in Item 8 of this Report on Form 10-K for additional data regarding net revenues,profit or loss and total assets of each of our segments and revenues attributable to foreign countries.MARKETING,SALES AND CUSTOMER SUPPORT We market and sell our prod

130、ucts primarily in markets where semiconductors are manufactured.North American and European semiconductor manufacturers have located most of their back-end factories in Southeast Asia.The front-end wafer fabrication plants of U.S.semiconductor manufacturers are primarily in the U.S.Likewise,European

131、,Taiwanese,South Korean and Japanese semiconductor manufacturers generally have located their wafer fabrication plants in their respective countries.Manipulator,Docking Hardware and Tester Interface Products:In North America,we sell to semiconductor manufacturers principally through the use of indep

132、endent,commissioned sales representatives.North American sales representatives also coordinate product installation and support with our technical staff and participate in trade shows.Our regional and account managers handle sales to ATE manufacturers and are responsible for a portfolio of customer

133、accounts and for managing certain independent sales representatives.In addition,our account managers are responsible for pricing,quotations,proposals and transaction negotiations,and they assist with applications engineering and custom product design.Technical support is provided to North American c

134、ustomers and independent sales representatives by employees based in New Jersey,Minnesota,California,Texas and Arizona.-9-In Europe and Japan,we sell to semiconductor and ATE manufacturers through our account managers and through the use of independent sales representatives.In China,Malaysia,the Phi

135、lippines,Singapore,South Korea,Taiwan and Thailand,we sell through the use of independent sales representatives who are supervised by our direct sales staff in those regions.International sales representatives are responsible for sales,installation,support and trade show participation in their geogr

136、aphic market areas.Temperature Management Products:Sales to ATE manufacturers are handled directly by our own sales force.Sales to semiconductor manufacturers and customers in other industries in the U.S.are handled through independent sales representative organizations.In Singapore and Malaysia,our

137、 sales and service are handled through our own sales and service personnel.In the rest of Asia,our sales are handled through distributors.In Europe,sales managers at our office in Germany,as well as regional distributors and independent sales representatives,sell to semiconductor manufacturers and c

138、ustomers in other industries.We visit our distributors regularly and have trained them to sell and service all of our temperature management products.CUSTOMERS We market all of our products to end users,which include semiconductor manufacturers and third-party foundries,test and assembly houses as w

139、ell as original equipment manufacturers(OEMs),which include ATE manufacturers and their third-party outsource manufacturing partners.In the case of temperature management products,we also market our products to independent testers of semiconductors,manufacturers of electronic,automotive and aeronaut

140、ical products,and semiconductor research facilities.Our customers use our products principally in production testing,although our ThermoStream(R)products traditionally have been used largely in engineering development and quality assurance.We believe that we sell to most of the major semiconductor m

141、anufacturers in the world.Texas Instruments Incorporated accounted for 20%,19%and 16%of our consolidated net revenues in 2007,2006 and 2005,respectively.While all three of our operating segments sold to these customers,these revenues were primarily generated by our Manipulator and Docking Hardware a

142、nd Tester Interface Product segments.Our ten largest customers accounted for approximately 54%,59%and 56%of our net revenues in 2007,2006 and 2005,respectively.The loss of any one or more of our largest customers,or a reduction in orders by a major customer,could materially reduce our net revenues o

143、r otherwise materially affect our business,financial condition,or results of operations.Our largest customers include:Semiconductor Manufacturers ATE Manufacturers Other Analog Devices,Inc.Cascade Microtech,Inc.Finisar Corporation Freescale Semiconductor,Inc.LTX Corporation Hakuto Co.Ltd.STMicroelec

144、tronics N.V.Teradyne,Inc.Avago Technologies Texas Instruments Incorporated MANUFACTURING AND SUPPLY Our principal manufacturing operations consist of assembly and testing at our facilities in New Jersey,Massachusetts,California,Germany and Singapore.By maintaining manufacturing facilities and techni

145、cal support in geographic markets where most of our customers are located,we believe that we are able to respond more quickly and effectively to our customers needs.In March 2005,we announced the closing of our manufacturing operation located in the U.K.as part of our effort to better position ourse

146、lves to more effectively meet the needs and expectations of the fluid ATE market.We ceased manufacturing at this facility in June 2005 and dissolved this entity in December 2006.We do not believe this closure has adversely impacted our ability to effectively meet our customers needs.Most of this ope

147、rations customers were located outside the U.K.and we expect to be able to continue to provide appropriate customer support from our other operations in Europe and elsewhere.We assemble most of our products from a combination of standard components and custom parts that have been fabricated to our s

148、pecifications by either third party manufacturers or our own fabrication operation in New Jersey.Our practice is to use the highest quality raw materials and components in our products.The primary raw materials used in fabricated parts are all widely available.We purchase substantially all of our co

149、mponents from multiple suppliers.Although we purchase certain raw materials and components from single suppliers,we believe that all materials and components are available in adequate amounts from other sources.-10-We conduct inspections of incoming raw materials,fabricated parts and components usin

150、g sophisticated measurement equipment.This includes testing with coordinate measuring machines in all but one of our manufacturing facilities to ensure that products with critical dimensions meet our specifications.We have designed our inspection standards to comply with applicable MIL specification

151、s and ANSI standards.In 2001,we obtained ISO 9001:1994 certification at our New Jersey facility.During 2003,we made the determination to upgrade to ISO 9001:2000 at our Cherry Hill facility,which was completed in 2007.In May 2003,our California facility obtained ISO 9001:2000 certification and in No

152、vember 2004,our Massachusetts facility completed ISO 9001:2000 certification.Finally,our Singapore and German facilities have not yet begun the ISO certification process.ENGINEERING AND PRODUCT DEVELOPMENT Our success depends on our ability to provide our customers with products and solutions that a

153、re well engineered,and to design those products and solutions before,or at least no later than,our competitors.As of December 31,2007,we employed a total of 43 engineers,who were engaged full time in engineering and product development.In addition,when the demands of engineering and product developm

154、ent projects exceed the capacity or knowledge of our in-house staff,we retain temporary third-party engineering and product development consultants to assist us.Our practice in many cases is to assign engineers to work with specific customers,thereby enabling us to develop the relationships and exch

155、ange of information that is most conducive to successful product development and enhancement.In addition,some of our engineers are assigned to new product research and development and have worked on such projects as the development of new types of universal manipulators,the redesign and development

156、of new temperature management products and the development of high performance interfaces.Since most of our products are customized,we consider substantially all of our engineering activities to be engineering and product development.We spent approximately$5.5 million in 2007,$5.9 million in 2006 an

157、d$6.4 million in 2005 on engineering and product development,respectively.PATENTS AND OTHER PROPRIETARY RIGHTS Our policy is to protect our technology by filing patent applications for the technologies that we consider important to our business.We also rely on trade secrets,copyrights and unpatentab

158、le know-how to protect our proprietary rights.It is our practice to require that all of our employees and third-party product development consultants assign to us all rights to inventions or other discoveries relating to our business that were made while working for us.In addition,all employees and

159、third-party product development consultants agree not to disclose any private or confidential information relating to our technology,trade secrets or intellectual property.As of December 31,2007,we held 52 active U.S.patents and had 26 pending U.S.patent applications covering various aspects of our

160、technology.Our U.S.patents expire at various times beginning in 2008 and extending through 2025.During 2007,we had no U.S.patents expire and 9 U.S.patents were issued.We also hold foreign patents and file foreign patent applications,in selected cases corresponding to our U.S.patents and patent appli

161、cations,to the extent management deems appropriate.While we believe that our patents and other proprietary rights are important to our business,we also believe that,due to the rapid pace of technological change in the semiconductor equipment industry,the successful manufacture and sale of our produc

162、ts also depends upon our engineering,manufacturing,marketing and servicing skills.In the absence of patent protection,we would be vulnerable to competitors who attempt to copy or imitate our products or processes.We believe our intellectual property has value,and we have taken in the past,and will t

163、ake in the future,actions we deem appropriate to protect such property from misappropriation.There can be no assurance,however,that such actions will provide meaningful protection from competition.For additional information regarding risks related to our intellectual property,see Risk Factors.COMPET

164、ITION As described earlier,we operate in an increasingly competitive environment within each of our product segments.Some of our competitors have greater financial resources and more extensive design and production capabilities than we do.Certain markets in which we operate have recently become more

165、 fragmented,with smaller companies entering the market.These new smaller entrants typically have much lower levels of fixed operating overhead than we do,which enables them to be profitable with lower priced products.In order to remain competitive with these and other companies,we must be able to co

166、ntinue to commit a significant portion of our personnel,financial resources,research and development and customer support to developing new products and maintaining customer relationships worldwide.-11-Our competitors include independent manufacturers,ATE manufacturers and,to a lesser extent,semicon

167、ductor manufacturers in-house ATE interface groups.Competitive factors in our market include price,functionality,timely product delivery,customer service,applications support,product performance and reliability.We believe that our long-term relationships with the industrys leading semiconductor manu

168、facturers and other customers,and our commitment to,and reputation for,providing high quality products,are important elements in our ability to compete effectively in all of our markets.Our principal competitors for manipulator products are Esmo AG,Microhandling GmbH,Reid-Ashman Manufacturing and Ad

169、vantest Corporation.Our principal competitors for docking hardware products include Esmo AG,Knight Automation,Estra Technologies,Reid-Ashman Manufacturing and Microhandling GmbH.We also compete with the ATE manufacturer Teradyne(who is also our customer)on the sale of docking hardware.Our principal

170、competitors for Thermostream products are Thermonics and FTS Systems.Our principal competitors for Thermochuck products include ERS Electronik GmbH,Advances Temperature Systems GmbH and Espec Corp.In addition,we compete with most manufacturers of environmental chambers in the sales of our other temp

171、erature management products.Our principal competitors for Tester Interface products are Xandex,Inc.,Reid-Ashman Manufacturing,Esmo AG,Synergetix(a division of Interconnect Devices,Inc.),and Integrated Test Corporation.BACKLOG At December 31,2007,our backlog of unfilled orders for all products was ap

172、proximately$4.2 million compared with approximately$4.8 million at December 31,2006.Our backlog includes customer orders which we have accepted,substantially all of which we expect to deliver in 2008.While backlog is calculated on the basis of firm purchase orders,a customer may cancel an order or a

173、ccelerate or postpone currently scheduled delivery dates.Our backlog may be affected by the tendency of customers to rely on shorter lead times available from suppliers,including us,in periods of depressed demand.In periods of increased demand,there is a tendency towards longer lead times that has t

174、he effect of increasing backlog.As a result of these factors,our backlog at a particular date is not necessarily indicative of sales for any future period.EMPLOYEES At December 31,2007,we had 209 full time employees,including 93 in manufacturing operations,80 in customer support/operations and 36 in

175、 administration.Substantially all of our key employees are highly skilled and trained technical personnel.None of our employees are represented by a labor union,and we have never experienced a work stoppage.We believe that our relationship with our employees is very good.From time to time we retain

176、third-party consultants to assist us in engineering and product development projects and to assist us with our compliance efforts resulting from the Sarbanes-Oxley Act.ADDITIONAL INFORMATION Our Annual Report on Form 10-K,Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,and amendments

177、to these reports that are filed with the SEC pursuant to Section 13(a)or 15(d)of the Exchange Act,are available free of charge through our website()as soon as reasonably practicable after we electronically file them with,or furnish them to,the SEC.Item 1A.RISK FACTORS The following are some of the f

178、actors that could materially and adversely affect our future performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements.The risks and uncertainties described below are not the only ones facing us and we cannot predict every event

179、and circumstance that may adversely affect our business.However,these risks and uncertainties are the most significant factors that we have identified at this time.If one or more of these risks actually occurs,our business,results of operations,and financial condition would likely suffer,and the pri

180、ce of our stock would be negatively affected.Our sales are affected by the cyclicality of the semiconductor industry,which causes our operating results to fluctuate significantly.Our business depends in significant part upon the capital expenditures of semiconductor manufacturers.Capital expenditure

181、s by these companies depend upon,among other things,the current and anticipated market demand for semiconductors and the products that utilize them.Typically,semiconductor manufacturers curtail capital expenditures during periods of economic downtown.Conversely,semiconductor manufacturers increase c

182、apital expenditures when market demand requires the addition -12-of new or expanded production capabilities or the reconfiguration of existing fabrication facilities to accommodate new products.These market changes have contributed in the past,and will likely continue to contribute in the future,to

183、fluctuations in our operating results.Changes in the buying patterns of our customers have affected,and may continue to affect,demand for our products and our gross and net operating margins.Such changes in patterns are difficult to predict and may not be immediately apparent.In addition to the cycl

184、icality of the semiconductor market,demand for our products and our gross and net operating margins have also been affected by changes in the buying patterns of our customers.We now believe that in recent years there have been a variety of emerging changes within the ATE market,including,for example

185、,changing product requirements,longer time periods between new product offerings by OEMs and changes in customer buying patterns.In particular,demand for our Manipulator,Docking Hardware and Tester Interface products,which are sold exclusively within the ATE industry,and our operating margins in the

186、se product segments have been affected by shifts in the competitive landscape,including(i)customers placing heightened emphasis on shorter lead times(which places increased demands on our available engineering and production capacity increasing unit costs)and ordering in smaller quantities(which pre

187、vents us from acquiring component materials in larger volumes at lower cost and increasing unit costs),(ii)the increasing practice of OEM manufacturers to specify other suppliers as primary vendors,with less frequent opportunities to compete for such designations,(iii)customers requiring products wi

188、th a greater range of use at the lowest cost,and(iv)customer supply line management groups demanding lower prices and spreading purchases across multiple vendors.These recently emerging shifts in market practices have had,and may continue to have,varying degrees of impact on our net revenues and our

189、 gross and net operating margins.Such shifts are difficult to predict and may not be immediately apparent,and the impact of these practices is difficult to quantify from period to period.There can be no assurance that we will be successful in implementing effective strategies to counter these shifts

190、.If we are not able to reduce our operating expenses during periods of weak demand,or if we utilize significant amounts of cash to implement our acquisition strategy,we will erode our cash resources and may not have sufficient cash to operate our businesses.In recent years,we have implemented cost c

191、ontrols and restructured our operations with the goal of significantly reducing our fixed operating costs to position ourselves to more effectively meet the needs of the fluid ATE market.We are presently assessing additional ways to lower our cost structure and increase revenues.If we are not succes

192、sful in controlling our operating expenses,or if we utilize significant amounts of cash to implement our acquisition strategy,the level of our cash may be eroded and may not be sufficient to operate our businesses.As of December 31,2007 we had cash and cash equivalents of$12.2 million.While we belie

193、ve our cash balances will be sufficient to satisfy our cash requirements for the foreseeable future,we cannot determine with certainty that,if needed,we would be able to raise additional funding through either equity or debt financing under these circumstances or on what terms such financing would b

194、e available.Our operating results often change significantly from quarter to quarter and may cause fluctuations in our stock price.During the last several years,our operating results have fluctuated significantly from quarter to quarter.We believe that these fluctuations occur primarily due to the c

195、ycles of demand in the semiconductor manufacturing industry.In addition to the changing cycles of demand in the semiconductor manufacturing industry,other factors that have caused our quarterly operating results to fluctuate in the past,and that may cause fluctuations and losses in the future,includ

196、e:changes in the buying patterns of our customers;changes in our market share;the technological obsolescence of our inventories;quantities of our inventories greater than is reasonably likely to be utilized in future periods;significant product warranty charges;the recording of valuation allowances

197、against deferred tax assets;competitive pricing pressures;the impairment of our assets due to reduced future demand for our products;excess manufacturing capacity;our ability to control operating costs;costs associated with implementing our restructuring initiatives;delays in shipments of our produc

198、ts;the mix of our products sold;the mix of customers and geographic regions where we sell our products;-13-changes in the level of our fixed costs;costs associated with the development of our proprietary technology;costs and timing of integration of our acquisitions and plant relocations and expansi

199、ons;our ability to obtain raw materials or fabricated parts when needed;increases in costs of raw materials;cancellation or rescheduling of orders by our customers;and political or economic instability.Because the market price of our common stock has tended to vary based on,and in relation to,change

200、s in our operating results,fluctuations in the market price of our stock are likely to continue as variations in our quarterly results continue.Our customers purchasing patterns can vary significantly from month to month and cannot be easily predicted,thus resulting in fluctuations in our backlog an

201、d quarterly results.Our backlog at December 31,2007 was$4.2 million compared to$4.8 million at December 31,2006.Our backlog at the beginning of a quarter typically does not include all orders necessary to achieve our sales objectives for that quarter.Orders in our backlog are subject to cancellation

202、,delay or rescheduling by our customers with limited or no penalties or ability to collect bill back amounts.Throughout recent years,we have experienced customer-requested shipment delays and order cancellations,and we believe it is probable that orders will be cancelled and/or delayed in the future

203、.In addition,during a downturn,some of our customers may rely on short lead times generally available from suppliers,including us,whereas in periods of stronger demand,and longer lead times,customers need to book orders earlier.We have experienced varying levels of product warranty costs in recent p

204、eriods and cannot predict the level of such costs that we may incur in future periods.We accrue product warranty charges quarterly,based upon our historical claims experience.In addition,from time to time,we accrue additional amounts based upon known product warranty issues,such as product retrofits

205、.For the years ended December 31,2007,2006 and 2005,our product warranty charges(recoveries)were$(198,000),$378,000 and$549,000,or(0.4)%,0.6%and 1.0%of net revenues,respectively.The level of our product warranty charges both in absolute dollars and as a percentage of net revenues is affected by a nu

206、mber of factors including the cyclicality of demand in the ATE industry,the prototype nature of much of our business,the complex nature of many of our products,the introduction of new product families which typically have higher levels of warranty claims than existing product families and,at our dis

207、cretion,providing warranty repairs or replacements to customers after the contractual warranty period has expired in order to promote strong customer relations.If our products have reliability,quality or other problems,or the market perceives our products to be deficient,we may suffer reduced orders

208、,higher manufacturing costs,delays in collecting accounts receivable and higher service,support and warranty expenses.Changes in securities laws and regulations have increased,and may continue to increase,our costs of compliance with such laws and regulations.Changes in securities laws and regulatio

209、ns have increased our legal compliance and financial reporting costs.Additional recent changes and future changes in securities regulations are expected to continue to affect our costs.In order to comply with certain requirements of the Sabanes-Oxley Act,such as the internal control system requireme

210、nts of Section 404 of the Act,we have incurred,and expect to incur significant additional expenses in future periods to comply with these new requirements,including the requirement for future reviews of our internal control system by our independent accounting firm.We are continuing to evaluate and

211、monitor regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.The inability to maintain effective internal control over financial reporting may result in a loss of investor confidence in the accuracy and completeness of our financial reporti

212、ng.Section 404 of the Sarbanes-Oxley Act of 2002 and the accompanying rules and regulations promulgated by the SEC to implement that law require us to include in our Form 10-K for the year ending December 31,2007,an annual report by our management regarding the effectiveness of our internal control

213、over financial reporting.In the future,we will be required to include in our Annual Reports on Form 10-K attestation reports by our independent registered public accounting firm(our IRPAF),reporting as to whether it believes we maintained,in all material respects,effective internal control over fina

214、ncial reporting as of the end of the relevant year.During our assessment process,if our management identifies one or more material weaknesses in our internal controls over financial reporting that cannot be remediated in a timely manner,we may be unable to assert that our internal control is effecti

215、ve.While our assessment(as reported in Item 9A(T)of this Report)is that our internal control over financial reporting was effective as of December 31,2007,the effectiveness of our internal control in future-14-periods cannot be assured,and the effectiveness of our internal control over financial rep

216、orting may deteriorate.If we are unable to assert that our internal control over financial reporting is effective as of any future date,or if our IRPAF does not attest to the effectiveness of our internal control,we could lose investor confidence in the accuracy and completeness of our financial rep

217、orts,which could have an adverse effect on our stock price.We seek to acquire additional businesses.If we are unable to do so,our future rate of growth may be reduced or limited.A key element of our growth strategy is to acquire businesses,technologies or products that expand and complement our curr

218、ent businesses.We may not be able to execute our acquisition strategy if:we are unable to identify suitable businesses or technologies to acquire;we do not have the cash or access to required capital at the necessary time;or we are unwilling or unable to outbid larger,more resourceful companies.Our

219、acquisition strategy involves financial and management risks which may adversely affect our results in the future.If we acquire additional businesses,technologies or products,we will face the following additional risks:future acquisitions could divert managements attention from daily operations or o

220、therwise require additional management,operational and financial resources;we might not be able to integrate future acquisitions into our business successfully or operate acquired businesses profitably;we may realize substantial acquisition related expenses which would reduce our net earnings in fut

221、ure years;and our investigation of potential acquisition candidates may not reveal problems and liabilities of the companies that we acquire.If any of the events described above occur,our earnings could be reduced.If we issue shares of our stock or other rights to purchase our stock in connection wi

222、th any future acquisitions,we would dilute our existing stockholders interests and our earnings per share may decrease.If we issue debt in connection with any future acquisitions,lenders may impose covenants on us which could,among other things,restrict our ability to increase capital expenditures o

223、r to acquire additional businesses.Our industry is subject to rapid technological change,and our business prospects would be negatively affected if we are unable to quickly and effectively respond to innovation in the semiconductor industry.Semiconductor technology continues to become more complex a

224、s manufacturers incorporate ICs into an increasing variety of products.This trend,and the changes needed in automatic testing systems to respond to developments in the semiconductor industry,are likely to continue.We cannot be certain that we will be successful or timely in developing,manufacturing

225、or selling products that will satisfy customer needs or that will attain market acceptance.Our failure to provide products that effectively and timely meet customer needs or gain market acceptance will negatively affect our business prospects.If we are not able to obtain patents on or otherwise pres

226、erve and protect our proprietary technologies,our business may suffer.We have obtained domestic and foreign patents covering some of our products which expire between the years 2008 and 2025,and we have applications pending for additional patents.Some of our products utilize proprietary technology t

227、hat is not covered by a patent or similar protection,and,in many cases,cannot be protected.We cannot be certain that:any additional patents will be issued on our applications;any patents we own now or in the future will protect our business against competitors that develop similar technology or prod

228、ucts;our patents will be held valid if they are challenged or subjected to reexamination or reissue;others will not claim rights to our patented or other proprietary technologies;or others will not develop technologies which are similar to,or can compete with,our unpatented proprietary technologies.

229、If we cannot obtain patent or other protection for our proprietary technologies,our ability to compete in our markets could be impaired.-15-Claims of intellectual property infringement by or against us could seriously harm our businesses.From time to time,we may be forced to respond to or prosecute

230、intellectual property infringement claims to defend or protect our rights or a customers rights.These claims,regardless of merit,may consume valuable management time,result in costly litigation or cause product shipment delays.Any of these factors could seriously harm our business and operating resu

231、lts.We may have to enter into royalty or licensing agreements with third parties who claim infringement.These royalty or licensing agreements,if available,may be costly to us.If we are unable to enter into royalty or licensing agreements with satisfactory terms,our business could suffer.In instances

232、 where we have had reason to believe that we may be infringing the patent rights of others,or that someone may be infringing our patent rights,we have asked our patent counsel to evaluate the validity of the patents in question,as well as the potentially infringing conduct.If we become involved in a

233、 dispute,neither the third parties nor the courts are bound by our counsels conclusions.Our business will suffer if we cannot compete successfully with manufacturers whose products are similar to ours.We compete with numerous manufacturers,many of whom have greater financial resources and more exten

234、sive design and production capabilities than we do.Some of our principal competitors in the sale of manipulator,docking and tester interface products are Reid-Ashman Manufacturing Inc.,Microhandling GmbH,Esmo AG,Credence Systems Corp.,LTX Corporation,Teradyne Inc.and Xandex Inc.Some of our principal

235、 competitors in the sale of temperature management products are Thermonics Inc.,ERS Elektronik GmbH and Advances Temperature Test Systems GmbH.In order to remain competitive with these and other companies,we must be able to continue to commit a significant portion of our personnel,financial resource

236、s,research and development and customer support to developing new products and maintaining customer satisfaction worldwide.If we are not able to compete successfully,our business will suffer.We generate a large portion of our sales from a small number of customers.If we were to lose one or more of o

237、ur large customers,operating results could suffer dramatically.Texas Instruments Inc.accounted for 20%,19%and 16%of our consolidated net revenues in 2007,2006 and 2005,respectively.While all three of our operating segments sold to these customers,these revenues were primarily generated by our Manipu

238、lator and Docking Hardware and Tester Interface Product segments.Our ten largest customers accounted for approximately 54%,59%and 56%of our net revenues in 2007,2006 and 2005,respectively.The loss of any one or more of our largest customers,or a reduction in orders by a major customer,could material

239、ly reduce our net revenues or otherwise materially affect our business,financial condition or results of operations.Significant fluctuations in our net revenues and operating results strain our management,employees and other resources.Over the last several years,we have experienced significant fluct

240、uations in our net revenues and operating results.As a result of these sometimes sudden and significant changes in our market,we have implemented cost controls,including salary and benefit reductions,and restructured our operations.We are presently considering new initiatives to more closely align o

241、ur cost structure with current market demands.Such fluctuations in our net revenues and operating results,compensation changes and restructuring place strain on our management,employees and other resources.If we do not continue to retain the services of key personnel,relationships with,and sales to,

242、some of our customers could suffer,which could have a negative impact on our business.The loss of key personnel could adversely affect our ability to manage our business effectively.Our future success will depend largely upon the continued services of our senior management and certain other key empl

243、oyees.We do not have employment agreements with any of our executive officers or other key employees.Our future success will depend,in part,upon our ability to retain our managers,engineers and other key employees.Our business could suffer if we were unable to retain one or more of our senior office

244、rs or other key employees.A substantial portion of our operations exists outside the U.S.,which exposes us to foreign political and economic risks.We have operated internationally for many years and expect to expand our international operations as necessary to continue expansion of our sales and ser

245、vice to our non-U.S.customers.Our foreign subsidiaries generated 26%and 32%of consolidated net revenues in 2007 and 2006,respectively.Export sales from our U.S.manufacturing facilities totaled$17.2 million,or 35%of consolidated net revenues,in 2007 and$16.8 million,or 27%of consolidated net revenues

246、,in 2006.The portion of our consolidated net revenues that were derived from sales by our subsidiaries in the Asia-Pacific region was 12%in 2007 and 23%in 2006.We expect our international revenues will continue to represent a significant portion of total net revenues.However,in addition to the risks

247、 generally associated with sales and operations in the U.S.,sales to customers outside the U.S.and operations in foreign countries are subject to additional risks,which may,in the future,affect our operations.These risks include:-16-political and economic instability in foreign countries;the imposit

248、ion of financial and operational controls and regulatory restrictions by foreign governments;the need to comply with a wide variety of U.S.and foreign import and export laws;trade restrictions;changes in tariffs and taxes;longer payment cycles;fluctuations in currency exchange rates;and the greater

249、difficulty of administering business abroad.We conduct business in foreign currencies,and fluctuations in the values of those currencies could result in foreign exchange losses.In 2007,approximately 3%of our net revenues were denominated in Japanese yen and approximately 14%were denominated in Euros

250、.During 2007,we recorded foreign exchange currency transaction losses of$187,000.Future fluctuations in the value of the Japanese Yen or the Euro could result in foreign exchange gains or losses.Any strengthening of the U.S.dollar in relation to the currencies of our competitors or customers,or stre

251、ngthening or weakening of the Japanese yen or Euro in relation to other currencies in which our customers or competitors do business,could adversely affect our competitiveness.Moreover,a strengthening of the U.S.dollar or other competitive factors could put pressure on us to denominate a greater por

252、tion of our sales in foreign currencies,thereby increasing our exposure to fluctuations in exchange rates.Any devaluation of these currencies would hurt our business.We do not undertake hedging activities against the majority of our exchange rate risk.Fluctuations in exchange rates may adversely aff

253、ect our competitive position or result in foreign exchange losses,either of which could cause our business to suffer.Item 1B.UNRESOLVED STAFF COMMENTS None.Item 2.PROPERTIES At December 31,2007,we leased 9 facilities worldwide.The following chart provides information regarding each of our principal

254、facilities which we occupied at December 31,2007.Location Lease ExpirationApprox.Square Footage Principal Uses Cherry Hill,NJ 9/10 80,000 Corporate headquarters and design,manufacturing,service and sales-manipulator and docking hardware products.Sharon,MA 2/11 62,400 Design,manufacturing,service and

255、 sales-temperature management products.San Jose,CA 4/12 25,088 Design,manufacturing,service and sales-tester interface products We currently have adequate space to meet our current and foreseeable future needs.During 2007,we determined that we had excess capacity in our Cherry Hill facility and sub-

256、leased a portion of that facility.We are presently evaluating alternatives to better align our cost structure with current market demands.As a result of this review,we may reduce the amount of square footage leased or close certain facilities where we determine we have excess capacity for our forese

257、eable future needs.Item 3.LEGAL PROCEEDINGS From time to time we may be a party to legal proceedings occurring in the ordinary course of business.We are not currently involved in any material legal proceedings.Item 4.SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to o

258、ur stockholders for a vote during the fourth quarter of 2007.-17-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 PART II Item 5.MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on NASDAQ under the s

259、ymbol INTT.The following table sets forth the high and low sale prices of our common stock,as reported on the NASDAQ Global Market,for the periods indicated.Sale prices have been rounded to the nearest full cent.Sales Price 2007 High Low First Quarter.$4.86$4.01 Second Quarter.4.93 4.07 Third Quarte

260、r.4.86 3.00 Fourth Quarter.3.39 2.05 2006 First Quarter.4.65 3.20 Second Quarter.4.52 3.47 Third Quarter.6.50 3.92 Fourth Quarter.6.97 3.15 On March 14,2008,the closing price for our common stock as reported on the NASDAQ Global Market was$1.95.As of March 14,2008,we had 9,527,206 shares outstanding

261、 that were held of record by approximately 1,200 shareholders.We have not paid dividends on our common stock since our initial public offering 1997,and we do not plan to pay cash dividends in the foreseeable future.Our current policy is to retain any future earnings for reinvestment in the operation

262、 and expansion of our business,including possible acquisitions of other businesses,technologies or products.Payment of any future dividends will be at the discretion of our board of directors.In addition,our current credit agreement prohibits us from paying cash dividends without the lenders prior c

263、onsent.Item 6.SELECTED FINANCIAL DATA The following table contains certain selected consolidated financial data of inTEST and is qualified by the more detailed Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K and should be read in conjunction

264、with Managements Discussion and Analysis of Financial Condition and Results of Operations and the other financial information included in this Annual Report on Form 10-K.Years Ended December 31,2007 2006 2005 2004 2003 (in thousands,except per share data)Condensed Consolidated Statement of Operation

265、s Data:Net revenues.$48,705$62,346$53,359$71,211$48,028 Gross margin.18,781 26,39419,780 28,86918,892 Operating income(loss).(6,853)3,520(3,508)1,745(3,791)Net earnings(loss).(6,739)2,871(3,620)1,270(5,451)Net earnings(loss)per common share:Basic.$(0.73)$0.32$(0.41)$0.15$(0.65)Diluted.$(0.73)$0.31$(

266、0.41)$0.14$(0.65)Weighted average common shares outstanding:Basic.9,215 9,0478,8078,4808,332 Diluted.9,215 9,1888,8078,8048,332-18-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 6.SELECTED FINANCIAL DATA(Continued)As of December 31,2007 2006 2005 2004 2003 (in thousands)Conden

267、sed Consolidated Balance Sheet Data:Cash and cash equivalents.$12,215$13,174$7,295$7,686$5,116Working capital.18,64920,39316,19518,42815,670Total assets.27,72335,75930,86933,16729,977Long-term debt,net of current portion.8162347117Total stockholders equity.21,50726,82222,80626,11822,591 Item 7.MANAG

268、EMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Our business and results of operations are substantially dependent upon the demand for ATE by semiconductor manufacturers and companies that specialize in the testing of ICs.Demand for ATE is driven by semicondu

269、ctor manufacturers that are opening new,or expanding existing,semiconductor fabrication facilities or upgrading existing equipment,which in turn is dependent upon the current and anticipated market demand for semiconductors and products incorporating semiconductors.In the past,the semiconductor indu

270、stry has been highly cyclical with recurring periods of oversupply,which often have a severe impact on the semiconductor industrys demand for ATE,including the products we manufacture.This can cause wide fluctuations in both our orders and net revenues and,depending on our ability to react quickly t

271、o these shifts in demand,can significantly impact our results of operations.These industry cycles are difficult to predict and in recent years have become more volatile and shorter in duration.Because the industry cycles are generally characterized by sequential periods of growth or declines in orde

272、rs and net revenues during each cycle,year over year comparisons of operating results may not always be as meaningful as comparisons of periods at similar points in either up or down cycles.In addition,during both downward and upward cycles in our industry,in any given quarter,the trend in both our

273、orders and net revenues can be erratic.This can occur,for example,when orders are canceled or currently scheduled delivery dates are accelerated or postponed by a significant customer or when customer forecasts and general business conditions fluctuate during a quarter.We believe that purchases of m

274、ost of our products are typically made from semiconductor manufacturers capital expenditure budgets.Certain portions of our business,however,are generally less dependent upon the capital expenditure budgets of the end users.For example,purchases of certain related ATE interface products,such as sock

275、ets and interface boards,which must be replaced periodically,are typically made from the end users operating budgets.In addition,purchases of certain of our products,such as docking hardware,for the purpose of upgrading or improving the utilization,performance and efficiency of existing ATE,tend to

276、be counter cyclical to sales of new ATE.Moreover,we believe a portion of our sales of temperature management products results from the increasing need for temperature testing of circuit boards and specialized components that do not have the design or quantity to be tested in an electronic device han

277、dler.In addition,in recent years we have begun to market our Thermostream temperature management systems in industries outside semiconductor test,such as the automotive,aerospace,medical and telecommunications industries.We believe that these industries usually are less cyclical than the ATE industr

278、y.While the majority of our orders and net revenues are derived from the ATE market,our operating results do not always follow the overall trend in the ATE market in any given period.We now believe that these anomalies may be driven by a variety of emerging changes within the ATE market,including,fo

279、r example,changing product requirements,longer time periods between new product offerings by OEMs and changes in customer buying patterns.In particular,demand for our manipulator,docking hardware and tester interface products,which are sold exclusively within the ATE industry,and our operating margi

280、ns in these product segments have been affected by recent shifts in the competitive landscape,including(i)customers placing heightened emphasis on shorter lead times(which places increased demands on our available engineering and production capacity increasing unit costs)and ordering in smaller quan

281、tities(which prevents us from acquiring component materials in larger volumes at lower cost and increasing unit costs),(ii)the increasing practice of OEM manufacturers to specify other suppliers as primary vendors,with less frequent opportunities to compete for such designations,(iii)the increased r

282、ole of third-party test and assembly houses in the ATE market and their requirement of products with a greater range of use at the lowest cost,and(iv)customer supply line management groups demanding lower prices and spreading purchases across multiple vendors.These recently emerging shifts in market

283、 practices have had,and may continue to have,varying levels of impact on our operating results,but it is difficult to-19-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Continued)quantify the

284、 impact of these practices from period to period.Management has taken,and will continue to take,such actions it deems appropriate to adjust our strategies,products and operations to counter such shifts in market practices as they become evident.Net Revenues and Orders The following table sets forth,

285、for the periods indicated,a breakdown of the net revenues from unaffiliated customers both by product segment and geographic area(based on the location of the selling entity).Years Ended December 31,2007 2006 2005 Net revenues from unaffiliated customers:Manipulator and Docking Hardware.$22,070$35,2

286、44$28,838Temperature Management.22,064 22,794 19,967Tester Interface.6,673 7,328 6,778Intersegment sales.(2,102)(3,020)(2,224)$48,705$62,346$53,359Intersegment sales:Manipulator and Docking Hardware.$8$4$1Temperature Management.1,746 2,475 1,863Tester Interface.348 541 360$2,102$3,020$2,224 Net reve

287、nues from unaffiliated customers(net of intersegment sales):Manipulator and Docking Hardware.$22,062$35,240$28,837Temperature Management.20,318 20,319 18,104Tester Interface.6,325 6,787 6,418$48,705$62,346$53,359 Net revenues from unaffiliated customers:U.S.$36,377$42,559$36,894Europe.6,637 5,742 6,

288、050Asia-Pacific.5,691 14,045 10,415$48,705$62,346$53,359 Our consolidated net revenues for the year ended December 31,2007 decreased$13.6 million or 22%as compared to 2006.During 2006,we experienced higher levels of demand than were present in 2007,with our peak demand occurring during the second qu

289、arter of 2006.Throughout 2007,we experienced reduced levels of demand,particularly in our Manipulator and Docking Hardware Product segment,where our net revenues(net of intersegment sales)declined$13.2 million or 37%.In our Tester Interface Product segment,net revenues also declined$462,000 or 7%in

290、2007 as compared to 2006.The net revenues of our Temperature Management Product segment remained relatively unchanged in 2007 as compared to 2006.During 2007,our net revenues from customers in the U.S.and Asia decreased 15%and 59%,respectively,while our net revenues from customers in Europe increase

291、d 16%over the comparable period in 2006.Adjusted to eliminate the impact of changes in foreign currency exchange rates,the decrease in net revenues from customers in Asia would have been 61%and the increase from customers in Europe would have been 5%.The higher percentage decrease for our customers

292、in Asia primarily reflects the decline in sales of third-party products by our Japanese subsidiary.The increase for our European customers primarily reflects higher net revenues for our operation in northern Germany which sells our temperature management products to customers in Europe.-20-inTEST CO

293、RPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Continued)Total orders for the year ended December 31,2007 decreased to$48.1 million on a consolidated basis as compared to$61.2 million for 2006.For ou

294、r Manipulator and Docking Hardware,Temperature Management and Tester Interface Product segments,total orders for 2007 were$21.4 million,$20.1 million and$6.6 million,respectively compared to$33.9 million,$20.7 million and$6.6 million,respectively,for 2006.We believe that the decline in our net reven

295、ues and orders in 2007 reflects many of the factors discussed in the Overview.Both our Manipulator and Docking Hardware and Tester Interface Product segments continue to be significantly affected by the aforementioned shifts in the competitive landscape within the ATE market,while our Temperature Ma

296、nagement Product segment has been less impacted by these changes in demand as a result of our ability to successfully market our Thermostream products outside the semiconductor industry.In 2007,32%of our Temperature Management Product segments net revenues were attributable to customers in markets o

297、utside of semiconductor test.The reduction in net revenues in our Manipulator and Docking Hardware Product segment during 2007 was compounded by the reduction in revenues from sales of certain third-party manufactured products distributed by our Japanese subsidiary,which were$963,000 in 2007 compare

298、d to$6.3 million in 2006.In early 2007,we were notified that the contract under which we sold these products would be ending,and,after the second quarter of 2007,we had no additional sales of these products.Backlog At December 31,2007,our backlog of unfilled orders for all products was approximately

299、$4.2 million compared with approximately$4.8 million at December 31,2006.Our backlog includes customer orders which we have accepted,substantially all of which we expect to deliver in 2008.While backlog is calculated on the basis of firm purchase orders,a customer may cancel an order or accelerate o

300、r postpone currently scheduled delivery dates.Our backlog may be affected by the tendency of customers to rely on short lead times available from suppliers,including us,in periods of depressed demand.In periods of increased demand,there is a tendency towards longer lead times that has the effect of

301、increasing backlog.As a result,our backlog at a particular date is not necessarily indicative of sales for any future period.Business Restructuring Initiatives In response to the cyclical nature of the ATE market in which we operate,we have taken various actions to restructure our operations in rece

302、nt years.The goal of these actions was to significantly reduce our fixed operating costs and position ourselves to more effectively meet the needs and expectations of the cyclical ATE market.In the past,these restructuring actions have included workforce reductions and facility closures which allowe

303、d us to eliminate excess manufacturing capacity at certain of our locations.Additional information regarding the various restructuring plans implemented in recent years,including the costs incurred,is set forth in Note 10 to the consolidated financial statements.In early 2008,we commenced a review o

304、f our operations to more aggressively streamline our cost structure in line with the current business environment.As part of this process,we will also focus on methods to increase our profitability worldwide,including pursuing other types of revenue streams and additional growth opportunities.As a r

305、esult of this process,we will likely incur restructuring charges in future periods,however,we cannot predict the amount of such charges at this time.Impairment Charges Generally accepted accounting principles require us to perform at least an annual assessment for impairment of good will and other i

306、ndefinite life intangible assets and to monitor events and changes in circumstances that could indicate carrying amounts of long-lived asset may not be recoverable.Due to the significant operating losses experienced by our Manipulator and Docking Hardware Product segment during 2007,combined with ou

307、r forecasts that indicated potential future losses for this segment,we determined that our goodwill for this segment(which had resulted from prior acquisitions of our foreign subsidiaries in this segment)was fully impaired,resulting in a charge of$2.8 million,and that a charge of$535,000 for the imp

308、airment of certain property and equipment at our manufacturing facility in Cherry Hill was appropriate.Please refer to Note 2 of the footnotes to our consolidated financial statements for further discussion of this charge.-21-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 7.MA

309、NAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Continued)Excess and Obsolete Inventory Charges On a quarterly basis,we review our inventories and record charges for excess and obsolete inventory based upon our established objective excess and obsolete inventory cr

310、iteria.These criteria identify material that has not been used in a work order during the prior twelve months and the quantity of material on hand that is greater than the average annual usage of that material over the prior three years.In certain cases,additional excess and obsolete inventory charg

311、es are recorded based upon current industry conditions,anticipated product life cycles,new product introductions and expected future use of the inventory.The excess and obsolete inventory charges we record establish a new cost basis for the related inventory.See also the section entitled Critical Ac

312、counting Policies.We incurred charges for excess and obsolete inventory of$830,000,$431,000 and$1.0 million for the years ended December 31,2007,2006 and 2005,respectively.The level of these charges was based upon a variety of factors,including changes in demand for our products and new product desi

313、gns.The increase in excess and obsolete inventory charges in 2007 reflects the reduced demand for certain of our products,primarily in our Manipulator and Docking Hardware and Tester Interface Product segments.See also the section entitled Critical Accounting Policies.During the years ended December

314、 31,2007,2006 and 2005 we utilized$155,000,$335,000 and$239,000,respectively,of material in production that had been written off as obsolete in prior periods.When previously written off inventory material is used in production,it has a zero cost basis and as a result,has the impact of improving our

315、gross margin in the period used.For the years ended December 31,2007,2006 and 2005,the use of previously obsoleted inventory materials did not materially change our gross margin.Product Warranty Charges We accrue product warranty charges quarterly,based upon our historical claims experience.In addit

316、ion,from time to time,we accrue additional amounts based upon known product warranty issues,such as product retrofits.For the years ended December 31,2007,2006 and 2005,our product warranty charges(recoveries)were$(198,000),$378,000 and$549,000,or(0.4)%,0.6%and 1.0%of net revenues,respectively.The d

317、ownward trend in our product warranty charges has been driven by a number of factors including recent improvements in product quality.In addition,warranty claims are typically highest when new products are introduced,and during these years there were no significant sales of newly introduced product

318、families in our Manipulator and Docking Hardware Product segment.The level of our product warranty charges both in absolute dollars and as a percentage of net revenues is affected by a number of factors including the cyclicality of demand in the ATE industry,the prototype nature of much of our busin

319、ess,the complex nature of many of our products,the introduction of new product families which typically have higher levels of warranty claims than existing product families,and,at our discretion,providing warranty repairs or replacements to customers after the contracted warranty period has expired

320、in order to promote strong customer relations.See also Critical Accounting Policies.Product/Customer Mix Our three product segments each have multiple products that we design,manufacture and sell to our customers.The gross margin on each product we offer is impacted by a number of factors including

321、the amount of intellectual property(such as patents)utilized in the product,the number of units ordered by the customer at one time,or the amount of inTEST designed and fabricated material included in our product compared with the amount of third-party designed and fabricated material included in ou

322、r product.The weight of each of these factors,as well as the current market conditions,determines the ultimate sales price we can obtain for our products and the resulting gross margin.The mix of products we sell in any period is ultimately determined by our customers needs.Therefore,the mix of prod

323、ucts sold in any given period can change significantly from the prior period.As a result,our consolidated gross margin can be significantly impacted in any given period by a change in the mix of products sold in that period.-22-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 7.

324、MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Continued)We sell most of our products to semiconductor manufacturers and third-party test and assembly houses(end user sales)and to ATE manufacturers(OEM sales)who ultimately resell our equipment with theirs to sem

325、iconductor manufacturers.Our Temperature Management Product segment also sells into a variety of other industries including the aerospace,automotive,communications,consumer electronics,defense,and medical industries.The mix of customers during any given period will affect our gross margin due to dif

326、fering sales discounts and commissions.For the years ended December 31,2007,2006 and 2005,our OEM sales as a percentage of net revenues were 21%,23%and 22%,respectively.OEM sales generally have a lower gross margin than end user sales,as OEM sales historically have had a more significant discount.Ou

327、r current net operating margins on most OEM sales,however,are only slightly less than margins on end user sales because of the payment of third party sales commissions on most end user sales.We have also continued to experience demands from our OEM customers supply line managers to reduce our sales

328、prices to them.If we cannot further reduce our manufacturing and operating costs,these pricing pressures will continue to reduce our gross and operating margins.Risk Factors Please see Item 1A Risk Factors for a discussion of other important factors that could cause our results to differ materially

329、from our prior results or those expressed or implied by our forward-looking statements.Results of Operations All of our products are used by semiconductor manufacturers in conjunction with ATE in the testing of ICs.Consequently,the results of operations for each product segment are generally affecte

330、d by the same factors.Separate discussions and analyses for each product segment would be repetitive and obscure any unique factors that affected the results of operations of our different product segments.The discussion and analysis that follows,therefore,is presented on a consolidated basis for th

331、e Company as a whole and includes discussion of factors unique to each product segment where significant to an understanding of each segment.The following table sets forth for the periods indicated the principal items included in the Consolidated Statements of Operations as a percentage of total net

332、 revenues.Percentage of Net Revenues Years Ended December 31,2007 2006 2005 Net revenues.100.0%100.0%100.0%Cost of revenues.61.4 57.7 62.9 Gross margin.38.6 42.3 37.1 Selling expense.17.5 14.4 16.8 Engineering and product development expense.11.3 9.5 11.9 General and administrative expense.16.9 12.8

333、 13.9 Impairment of goodwill.5.9 0.0 0.0 Impairment of long-lived assets.1.0 0.0 0.0 Restructuring and other charges.0.0 0.0 1.1 Operating income(loss).(14.1)5.6(6.6)Other income(loss).0.8 0.8 0.3 Earnings(loss)before income taxes.(13.3)6.4(6.3)Income tax expense.0.5 1.8 0.5 Net earnings(loss).(13.8)%4.6%(6.8)%-23-inTEST CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31,2007 Item 7.MANAGEMENTS