Oregon
(State
or jurisdiction of
incorporation
or organization)
|
93-0822509
(I.R.S.
Employer
Identification
No.)
|
PART I. | ||
Item
1.
|
||
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
Item
2.
|
13
|
|
Item
3.
|
20
|
|
Item
4.
|
20
|
PART
II.
|
||
Item
2.
|
21
|
|
Item
6.
|
22
|
23
|
PART I. |
FINANCIAL
INFORMATION
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
June
30,
|
September
30,
|
|||||||||
2005
|
2004
|
|||||||||
(in
thousands)
|
||||||||||
Assets
|
||||||||||
Current
assets:
|
||||||||||
Cash
and cash equivalents
|
$
|
13,158
|
$
|
8,817
|
||||||
Trade
accounts receivable, net
|
10,720
|
9,336
|
||||||||
Inventories:
|
||||||||||
Raw
materials
|
6,574
|
6,460
|
||||||||
Work-in-process
and sub-assemblies
|
4,880
|
4,749
|
||||||||
Finished
goods
|
3,695
|
2,424
|
||||||||
Total
inventories
|
15,149
|
13,633
|
||||||||
Deferred
income taxes
|
2,217
|
2,119
|
||||||||
Other
current assets
|
1,616
|
1,097
|
||||||||
Total
current assets
|
42,860
|
35,002
|
||||||||
Property,
plant and equipment, net
|
4,387
|
5,046
|
||||||||
Deferred
income taxes
|
10
|
6
|
||||||||
Investment
in joint venture
|
1,420
|
1,914
|
||||||||
Goodwill,
net
|
2,524
|
2,524
|
||||||||
Intangibles
and other assets, net
|
7,080
|
8,022
|
||||||||
Total
|
$
|
58,281
|
$
|
52,514
|
||||||
Liabilities
and Shareholders' Equity
|
||||||||||
Current
liabilities:
|
||||||||||
Accounts
payable
|
$
|
2,621
|
$
|
1,599
|
||||||
Accrued
payroll liabilities and commissions
|
3,860
|
3,781
|
||||||||
Accrued
customer support and warranty costs
|
1,388
|
1,283
|
||||||||
Other
accrued liabilities
|
2,837
|
2,007
|
||||||||
Customers'
deposits
|
3,784
|
2,536
|
||||||||
Current
portion of long-term debt and capital lease obligations
|
1,148
|
1,210
|
||||||||
Current
portion of mandatorily redeemable preferred stock
|
1,124
|
1,279
|
||||||||
Current
portion of warrants
|
255
|
316
|
||||||||
Total
current liabilities
|
17,017
|
14,011
|
||||||||
Long-term
debt and capital lease obligations
|
1,439
|
2,323
|
||||||||
Deferred
income taxes
|
840
|
136
|
||||||||
Total
shareholders' equity
|
38,985
|
36,044
|
||||||||
Total
|
$
|
58,281
|
$
|
52,514
|
2005
|
2004
|
|||||||||
(in
thousands, except per share data)
|
||||||||||
Net
sales
|
$
|
25,917
|
$
|
22,170
|
||||||
Cost
of sales
|
14,732
|
11,954
|
||||||||
Gross
profit
|
11,185
|
10,216
|
||||||||
Operating
expenses:
|
||||||||||
Sales
and marketing
|
3,395
|
3,458
|
||||||||
Research
and development
|
1,186
|
1,545
|
||||||||
General
and administrative
|
2,052
|
2,026
|
||||||||
Amortization
of intangibles
|
334
|
331
|
||||||||
Total
operating expenses
|
6,967
|
7,360
|
||||||||
Gain
on sale of assets
|
15
|
-
|
||||||||
Earnings
from operations
|
4,233
|
2,856
|
||||||||
Other
expense
|
(140
|
)
|
(3
|
)
|
||||||
Earnings
before income taxes
|
4,093
|
2,853
|
||||||||
Income
tax expense
|
1,384
|
845
|
||||||||
Net
earnings
|
2,709
|
2,008
|
||||||||
Assumed
dividends on mandatorily redeemable preferred stock
|
(40
|
)
|
(37
|
)
|
||||||
Net
earnings available to common shareholders
|
$
|
2,669
|
$
|
1,971
|
||||||
Earnings
per share
|
||||||||||
-
basic
|
$
|
0.53
|
$
|
0.40
|
||||||
-
diluted
|
$
|
0.52
|
$
|
0.38
|
||||||
Shares
used in per share calculations - basic
|
5,037
|
4,947
|
||||||||
Shares
used in per share calculations - diluted
|
5,218
|
5,269
|
2005
|
2004
|
|||||||||
(in
thousands, except per share data)
|
||||||||||
Net
sales
|
$
|
58,757
|
$
|
61,674
|
||||||
Cost
of sales
|
35,239
|
35,511
|
||||||||
Gross
profit
|
23,518
|
26,163
|
||||||||
Operating
expenses:
|
||||||||||
Sales
and marketing
|
9,532
|
10,112
|
||||||||
Research
and development
|
3,702
|
4,180
|
||||||||
General
and administrative
|
5,821
|
5,639
|
||||||||
Amortization
of intangibles
|
998
|
992
|
||||||||
Total
operating expenses
|
20,053
|
20,923
|
||||||||
Gain
on sale of assets
|
28
|
6
|
||||||||
Earnings
from operations
|
3,493
|
5,246
|
||||||||
Other
income
|
86
|
34
|
||||||||
Earnings
before income taxes
|
3,579
|
5,280
|
||||||||
Income
tax expense
|
1,145
|
1,630
|
||||||||
Net
earnings
|
2,434
|
3,650
|
||||||||
Assumed
dividends on mandatorily redeemable preferred stock
|
(39
|
)
|
(70
|
)
|
||||||
Net
earnings available to common shareholders
|
$
|
2,395
|
$
|
3,580
|
||||||
Earnings
per share
|
||||||||||
-
basic
|
$
|
0.48
|
$
|
0.73
|
||||||
-
diluted
|
$
|
0.47
|
$
|
0.70
|
||||||
Shares
used in per share calculations - basic
|
5,013
|
4,886
|
||||||||
Shares
used in per share calculations - diluted
|
5,201
|
5,223
|
2005
|
2004
|
|||||||||
(in
thousands)
|
||||||||||
Net
cash provided by operating activities
|
$
|
6,639
|
$
|
3,746
|
||||||
Cash
flows from investing activities:
|
||||||||||
Proceeds
from sale of property
|
26
|
190
|
||||||||
Additions
to property, plant and equipment
|
(644
|
)
|
(894
|
)
|
||||||
Cash
paid for acquired company, net of cash acquired
|
(1,059
|
)
|
-
|
|||||||
Net
cash used in investing activities
|
(1,677
|
)
|
(704
|
)
|
||||||
Cash
flows from financing activities:
|
||||||||||
Repayment
of long-term debt
|
(935
|
)
|
(815
|
)
|
||||||
Redemption
of preferred stock
|
(155
|
)
|
(88
|
)
|
||||||
Redemption
of warrants
|
(61
|
)
|
(39
|
)
|
||||||
Proceeds
from issuance of common stock
|
521
|
1,457
|
||||||||
Net
cash provided by (used in) financing activities
|
(630
|
)
|
515
|
|||||||
Effect
of exchange rates on cash
|
9
|
372
|
||||||||
Net
increase in cash and cash equivalents
|
4,341
|
3,929
|
||||||||
Cash
and cash equivalents, beginning of the period
|
8,817
|
6,442
|
||||||||
Cash
and cash equivalents, end of the period
|
$
|
13,158
|
$
|
10,371
|
||||||
Supplemental
information:
|
||||||||||
Cash
paid during the period for interest
|
$
|
139
|
$
|
154
|
||||||
Cash
paid during the period for income taxes
|
$
|
27
|
$
|
993
|
||||||
Equipment
obtained through lease financing
|
$
|
-
|
$
|
245
|
||||||
Depreciation
and amortization
|
$
|
2,369
|
$
|
2,370
|
1.
|
Condensed
unaudited consolidated financial
statements
|
2.
|
Acquisitions
|
Fair
value of assets acquired
|
||||
Tangible
assets
|
$
|
1,041
|
||
Note
receivable from previous owner
|
672
|
|||
Patents
/ developed technologies
|
152
|
|||
Liabilities
assumed
|
(806
|
)
|
||
Cash
paid for common stock, less cash acquired of $418
|
$
|
1,059
|
3.
|
Stock
Compensation
|
Three
months ended March 31,
|
Six
months ended March 31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
earnings (loss), as reported
|
$
|
2,709
|
$
|
2,008
|
$
|
(2,434
|
)
|
$
|
3,650
|
||||
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards, net of related tax
effects
|
(72
|
)
|
$
|
(180
|
)
|
(226
|
)
|
$
|
(477
|
)
|
|||
Pro
forma net earnings (loss)
|
$
|
2,637
|
$
|
975
|
$
|
2,208
|
|
$
|
3,173
|
||||
Earnings
(loss) per share:
|
|||||||||||||
Basic
- as reported
|
$
|
0.53
|
$
|
0.40
|
$
|
(0.48
|
)
|
$
|
0.73
|
||||
Basic
- pro forma
|
$
|
0.52
|
$
|
0.37
|
$
|
(0.43
|
)
|
$
|
0.64
|
||||
|
|||||||||||||
Diluted
- as reported
|
$
|
0.52
|
$
|
0.38
|
$
|
(0.47
|
)
|
$
|
0.70
|
||||
Diluted
- pro forma
|
$
|
0.51
|
$
|
0.35
|
$
|
(0.43
|
)
|
$
|
0.61
|
4.
|
Earnings
per share
|
For
the three months ended
June
30, 2005
|
For
the three months ended
June
30, 2004
|
||||||||||||||||||
Earnings
|
Shares
|
Per-Share
Amount
|
Earnings
|
Shares
|
Per-Share
Amount
|
||||||||||||||
Net
earnings from continuing operations
|
$
|
2,709
|
$
|
2,008
|
|||||||||||||||
Less:
Assumed dividends on mandatorily redeemable preferred
stock
|
(40
|
)
|
(37
|
)
|
|||||||||||||||
Basic
EPS:
|
|||||||||||||||||||
Net
earnings available to common shareholders
|
2,669
|
5,037
|
$
|
0.53
|
1,971
|
4,947
|
$
|
0.40
|
|||||||||||
Effect
of dilutive securities:
|
|||||||||||||||||||
Common
stock options
|
105
|
231
|
|||||||||||||||||
Mandatorily
redeemable preferred stock
|
40
|
76
|
37
|
91
|
|||||||||||||||
Diluted
EPS:
|
|||||||||||||||||||
Earnings
available to common shareholders plus assumed conversions
|
$
|
2,709
|
5,218
|
$
|
0.52
|
$
|
2,008
|
5,269
|
$
|
0.38
|
For
the nine months ended
June
30, 2005
|
For
the nine months ended
June
30, 2004
|
||||||||||||||||||
Earnings
|
Shares
|
Per-Share
Amount
|
Earnings
|
Shares
|
Per-Share
Amount
|
||||||||||||||
Net
earnings from continuing operations
|
$
|
2,434
|
$
|
3,650
|
|||||||||||||||
Less:
Assumed dividends on mandatorily redeemable preferred
stock
|
(39
|
)
|
(70
|
)
|
|||||||||||||||
Basic
EPS:
|
|||||||||||||||||||
Net
earnings available to common shareholders
|
2,395
|
5,013
|
$
|
0.48
|
3,580
|
4,886
|
$
|
0.73
|
|||||||||||
Effect
of dilutive securities:
|
|||||||||||||||||||
Common
stock options
|
107
|
-
|
241
|
||||||||||||||||
Mandatorily
redeemable preferred stock
|
39
|
81
|
70
|
96
|
|||||||||||||||
Diluted
EPS:
|
|||||||||||||||||||
Earnings
available to common shareholders plus assumed conversions
|
$
|
2,434
|
5,201
|
$
|
0.47
|
$
|
3,650
|
5,223
|
$
|
0.70
|
Three
months ended June 30,
|
Nine
months ended June 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Common
shares from:
|
|||||||||||||
Assumed
exercise of stock options
|
259,000
|
183,600
|
279,000
|
183,600
|
|||||||||
Assumed
conversion of warrants
|
25,466
|
31,671
|
25,466
|
31,671
|
5.
|
Income
taxes
|
6.
|
Comprehensive
income
|
Three
months ended
|
|||||||
June
30, 2005
|
June
30, 2004
|
||||||
Components
of comprehensive income:
|
|||||||
Net
earnings
|
$
|
2,709
|
$
|
2,008
|
|||
Other
comprehensive income -
|
|||||||
foreign
currency translation adjustment, net of tax
|
(240
|
)
|
(56
|
)
|
|||
Total
comprehensive income
|
$
|
2,469
|
$
|
1,952
|
Nine
months ended
|
|||||||
June
30, 2005
|
June
30, 2004
|
||||||
Components
of comprehensive income:
|
|||||||
Net
earnings
|
$
|
2,434
|
$
|
3,650
|
|||
Other
comprehensive income -
|
|||||||
foreign
currency translation adjustment, net of tax
|
(43
|
)
|
139
|
||||
Total
comprehensive income
|
$
|
2,391
|
$
|
3,789
|
7.
|
Contractual
guarantees and indemnities
|
Nine
months ended
|
|||||||
June
30, 2005
|
June
30, 2004
|
||||||
Beginning
balance
|
$
|
889
|
$
|
837
|
|||
Warranty
costs incurred
|
(1,321
|
)
|
(1,243
|
)
|
|||
Warranty
expense accrued
|
1,283
|
1,156
|
|||||
Translation
adjustments
|
(1
|
)
|
10
|
||||
Ending
balance
|
$
|
850
|
$
|
760
|
8.
|
Future
accounting changes
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
·
|
adverse
economic conditions, particularly in the food processing industry,
may
adversely affect the Company's revenues;
|
·
|
competition
and advances in technology may adversely affect sales and
prices;
|
·
|
the
Company's new products may not compete successfully in either existing
or
new markets;
|
·
|
the
limited availability and possible cost fluctuations of materials
used in
the Company's products could adversely affect the Company's gross
profits;
|
·
|
the
Company's inability to protect its intellectual property may adversely
affect the Company's competitive
advantage;
|
·
|
intellectual
property-related litigation expenses and other costs resulting from
infringement claims asserted against the Company or its customers
by third
parties may adversely affect the Company’s results of operations and its
customer relations; and
|
·
|
the
other factors discussed in Exhibit 99.1 to the Company’s Annual Report on
Form 10-K filed with the SEC on December 17, 2004, which exhibit
is hereby
incorporated by reference.
|
·
|
Revenue
recognition
|
·
|
Allowances
for doubtful accounts
|
·
|
Valuation
of inventories
|
·
|
Long-lived
assets
|
·
|
Allowances
for warranties
|
·
|
Accounting
for income taxes
|
Payments
due by period (in Thousands)
|
||||||||||||||||
Contractual
Obligations
|
Total
|
Less
than 1 year
|
1
-
3 years
|
4
-
5 years
|
After
5 years
|
|||||||||||
Long-term
debt *
|
$
|
2,385
|
$
|
948
|
$
|
1,165
|
$
|
121
|
$
|
151
|
||||||
Capital
lease obligations
|
202
|
200
|
2
|
-
|
-
|
|||||||||||
Operating
leases
|
15,028
|
1,494
|
2,489
|
1,696
|
9,349
|
|||||||||||
Warrant
redemption obligations
|
255
|
255
|
-
|
-
|
-
|
|||||||||||
Series
B redemption obligations
|
1,124
|
1,124
|
-
|
-
|
-
|
|||||||||||
Total
contractual cash obligations
|
$
|
18,994
|
$
|
4,021
|
$
|
3,656
|
$
|
1,817
|
$
|
9,500
|
* |
Includes
the revolving credit line, term loan and mortgage payments on the
Company’s owned facility in Europe.
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
|
·
|
Translation
adjustments of ($43,000), net of income tax, were recognized as a
component of comprehensive income as a result of converting the Euro
denominated balance sheet of Key Technology B.V. into U.S. dollars,
and to
a lesser extent, the Australian dollar balance sheets of Key Technology
Australia Pty. Ltd. and Freshline Machines Pty. Ltd., and the Peso
balance
sheet of Productos Key Mexicana.
|
·
|
Foreign
exchange losses of $80,000 were recognized in the other income and
expense
section of the consolidated statement of operations as a result of
conversion of Euro and other foreign currency denominated receivables
and
cash carried on the balance sheet of the U.S. operations, as well
as the
result of the conversion of other non-functional currency receivables,
payables and cash carried on the balance sheet of the European, Australian
and Mexican operations.
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
PART II. |
OTHER
INFORMATION
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
Mandatorily
Redeemable Series B Convertible Preferred Stock (1)
|
|||||||||||||
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Maximum
Number of Shares that May Yet Be Purchased Under the Plans or
Programs
|
|||||||||
April
1 - 30, 2005
|
580
|
$
|
10
|
-
|
|||||||||
May
1 - 31, 2005
|
1,003
|
$
|
10
|
-
|
|||||||||
June
1 - 30, 2005
|
1,335
|
$
|
10
|
-
|
|||||||||
Total
|
2,918
|
112,419
|
Warrants
(2)
|
|||||||||||||
Period
|
Total
Number of Warrants Purchased
|
Average
Price Paid per Warrant
|
Total
Number of Warrants Purchased as Part of Publicly Announced Plans
or
Programs
|
Maximum
Number of Warrants that May Yet Be Purchased Under the Plans or
Programs
|
|||||||||
April
1 - 30, 2005
|
4,466
|
$
|
10
|
-
|
|||||||||
May
1 - 31, 2005
|
12
|
$
|
10
|
-
|
|||||||||
June
1 - 30, 2005
|
407
|
$
|
10
|
-
|
|||||||||
Total
|
4,885
|
25,466
|
(1)
|
The
Company issued 1,340,366 shares of Series B convertible preferred
stock
(“Series B”) at a price of $8.60 per share in conjunction with the
acquisition of Advanced Machine Vision Corporation on July 12, 2000.
Each
share of Series B, par value of $0.01 per share, was able to be
converted into 2/3 of a share of common stock. The Series B was
convertible at the option of the holder at any time, unless previously
redeemed, or by the Company upon a merger, consolidation, share exchange
or sale of substantially all of its assets. The holders of Series B
were able to require the Company to repurchase any or all of their
shares
at any time after July 12, 2002 at the redemption price of $10.00. If
not converted to common stock or redeemed at the option of the
Series B holder after July 12, 2002, the Company was required to
redeem the Series B for $10.00 per share on July 11, 2005.
|
(2)
|
The
Company issued 365,222 warrants at a fair market value of $10.00
per
warrant in conjunction with the issuance of the Series B. Each warrant
entitled its holder to purchase at any time for a period of five
years
from July 12, 2000 one share of common stock at $15.00 per share,
subject to certain adjustments. The warrants permitted the holder
to
engage in a net exercise of the warrants if the fair market value
of one
share of common stock was greater than $15.00 per share on the date
of
exercise. Prior to the expiration date of the warrant, July 11, 2005,
the
holder may have required the Company to redeem the warrant for cash
at a
price equal to $10.00 for each whole share of common stock that may
be
purchased under the warrant.
|
ITEM
6.
|
EXHIBITS
|
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
SIGNATURES
|
||
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
||
KEY
TECHNOLOGY, INC.
|
||
(Registrant)
|
||
Date:
August 12, 2005
|
By
|
/s/
Kirk W. Morton
|
Kirk W. Morton | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date:
August 12, 2005
|
By
|
/s/
Ronald W. Burgess
|
Ronald W. Burgess | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002
|