form10-q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_____________________________________________
FORM
10-Q
x QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
for the
quarterly period ended June 30, 2008
or
o TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
for the
transition period from ____ to ____
Commission
File No. 0-21820
____________________________________________
KEY
TECHNOLOGY, INC.
(Exact
name of registrant as specified in its charter)
Oregon
(State
or jurisdiction of
incorporation
or organization)
|
93-0822509
(I.R.S.
Employer
Identification
No.)
|
150 Avery
Street
Walla
Walla, Washington 99362
(Address
of principal executive offices and zip code)
(509) 529-2161
(Registrant's
telephone number, including area code)
_____________________________________________
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 ý No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer ¨
Non-accelerated
filer ¨
(Do
not check if a smaller reporting company)
|
Accelerated
filer ý
Smaller
reporting company ¨
|
Indicated
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No ý
The
number of shares outstanding of the registrant's common stock, no par value, on
July 31, 2008 was 5,632,911 shares.
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 2008
TABLE OF
CONTENTS
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED
UNAUDITED CONSOLIDATED BALANCE SHEETS
JUNE 30,
2008 AND SEPTEMBER 30, 2007
|
|
June
30, 2008
|
|
|
September
30, 2007
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
33,132 |
|
|
$ |
27,880 |
|
Trade
accounts receivable
|
|
|
16,118 |
|
|
|
14,020 |
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
11,425 |
|
|
|
7,104 |
|
Work-in-process
and sub-assemblies
|
|
|
7,140 |
|
|
|
6,803 |
|
Finished
goods
|
|
|
7,454 |
|
|
|
4,846 |
|
Total
inventories
|
|
|
26,019 |
|
|
|
18,753 |
|
Deferred
income taxes
|
|
|
2,088 |
|
|
|
2,120 |
|
Prepaid
expenses and other assets
|
|
|
1,897 |
|
|
|
1,954 |
|
Total
current assets
|
|
|
79,254 |
|
|
|
64,727 |
|
Property,
plant and equipment, net
|
|
|
6,203 |
|
|
|
4,671 |
|
Deferred
income taxes
|
|
|
14 |
|
|
|
- |
|
Goodwill,
net
|
|
|
2,524 |
|
|
|
2,524 |
|
Intangibles
and other assets, net
|
|
|
2,655 |
|
|
|
3,575 |
|
Total
|
|
$ |
90,650 |
|
|
$ |
75,497 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
7,354 |
|
|
$ |
5,692 |
|
Accrued
payroll liabilities and commissions
|
|
|
7,978 |
|
|
|
6,663 |
|
Customers'
deposits
|
|
|
11,311 |
|
|
|
7,850 |
|
Accrued
customer support and warranty costs
|
|
|
2,138 |
|
|
|
1,946 |
|
Customer
purchase plans
|
|
|
1,185 |
|
|
|
651 |
|
Income
taxes payable
|
|
|
799 |
|
|
|
181 |
|
Other
accrued liabilities
|
|
|
695 |
|
|
|
798 |
|
Total
current liabilities
|
|
|
31,460 |
|
|
|
23,781 |
|
Long-term
deferred rent
|
|
|
604 |
|
|
|
601 |
|
Other
long-term liabilities
|
|
|
150 |
|
|
|
- |
|
Deferred
income taxes
|
|
|
288 |
|
|
|
722 |
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
18,980 |
|
|
|
17,105 |
|
Retained
earnings and other shareholders' equity
|
|
|
39,168 |
|
|
|
33,288 |
|
Total
shareholders' equity
|
|
|
58,148 |
|
|
|
50,393 |
|
Total
|
|
$ |
90,650 |
|
|
$ |
75,497 |
|
|
|
|
|
|
|
|
|
|
See
notes to condensed unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands, except per share data) |
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
35,831 |
|
|
$ |
31,019 |
|
Cost
of sales
|
|
|
20,795 |
|
|
|
18,546 |
|
Gross
profit
|
|
|
15,036 |
|
|
|
12,473 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
5,552 |
|
|
|
4,462 |
|
Research
and development
|
|
|
1,984 |
|
|
|
1,175 |
|
General
and administrative
|
|
|
3,083 |
|
|
|
2,365 |
|
Amortization
of intangibles
|
|
|
327 |
|
|
|
327 |
|
Total
operating expenses
|
|
|
10,946 |
|
|
|
8,329 |
|
Gain
(loss) on sale of assets
|
|
|
13 |
|
|
|
(17 |
) |
Earnings
from operations
|
|
|
4,103 |
|
|
|
4,127 |
|
Other
income
|
|
|
252 |
|
|
|
327 |
|
Earnings
before income taxes
|
|
|
4,355 |
|
|
|
4,454 |
|
Income
tax expense
|
|
|
1,392 |
|
|
|
1,515 |
|
Net
earnings
|
|
$ |
2,963 |
|
|
$ |
2,939 |
|
|
|
|
|
|
|
|
|
|
Net
earnings per share
|
|
|
|
|
|
|
|
|
-
basic
|
|
$ |
0.54 |
|
|
$ |
0.56 |
|
-
diluted
|
|
$ |
0.53 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
Shares
used in per share calculations - basic
|
|
|
5,461 |
|
|
|
5,288 |
|
|
|
|
|
|
|
|
|
|
Shares
used in per share calculations - diluted
|
|
|
5,574 |
|
|
|
5,408 |
|
|
|
|
|
|
|
|
|
|
See
notes to condensed unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands, except per share data) |
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
93,884 |
|
|
$ |
75,793 |
|
Cost
of sales
|
|
|
56,083 |
|
|
|
46,258 |
|
Gross
profit
|
|
|
37,801 |
|
|
|
29,535 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
15,726 |
|
|
|
12,573 |
|
Research
and development
|
|
|
5,958 |
|
|
|
4,018 |
|
General
and administrative
|
|
|
8,532 |
|
|
|
6,233 |
|
Amortization
of intangibles
|
|
|
981 |
|
|
|
981 |
|
Total
operating expenses
|
|
|
31,197 |
|
|
|
23,805 |
|
Gain
on sale of assets
|
|
|
44 |
|
|
|
21 |
|
Earnings
from operations
|
|
|
6,648 |
|
|
|
5,751 |
|
Gain
on sale of investment in joint venture
|
|
|
- |
|
|
|
750 |
|
Other
income
|
|
|
1,066 |
|
|
|
859 |
|
Earnings
before income taxes
|
|
|
7,714 |
|
|
|
7,360 |
|
Income
tax expense
|
|
|
2,468 |
|
|
|
2,247 |
|
Net
earnings
|
|
$ |
5,246 |
|
|
$ |
5,113 |
|
|
|
|
|
|
|
|
|
|
Net
earnings per share
|
|
|
|
|
|
|
|
|
-
basic
|
|
$ |
0.97 |
|
|
$ |
0.97 |
|
-
diluted
|
|
$ |
0.95 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
|
Shares
used in per share calculations - basic
|
|
|
5,417 |
|
|
|
5,247 |
|
|
|
|
|
|
|
|
|
|
Shares
used in per share calculations - diluted
|
|
|
5,533 |
|
|
|
5,363 |
|
|
|
|
|
|
|
|
|
|
See
notes to condensed unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
NINE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
5,246 |
|
|
$ |
5,113 |
|
Adjustments
to reconcile net earnings to net cash
|
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
|
Gain
on sale of joint venture
|
|
|
- |
|
|
|
(750 |
) |
Gain
on sale of assets
|
|
|
(44 |
) |
|
|
(21 |
) |
Foreign
currency exchange (gain) loss
|
|
|
(390 |
) |
|
|
(421 |
) |
Depreciation
and amortization
|
|
|
2,064 |
|
|
|
1,920 |
|
Share
based payments
|
|
|
1,142 |
|
|
|
721 |
|
Excess
tax benefits from share based payments
|
|
|
(749 |
) |
|
|
(320 |
) |
Deferred
income taxes
|
|
|
(188 |
) |
|
|
1,023 |
|
Deferred
rent
|
|
|
3 |
|
|
|
(42 |
) |
Bad
debt expense
|
|
|
7 |
|
|
|
26 |
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
|
(1,696 |
) |
|
|
(2,260 |
) |
Inventories
|
|
|
(6,479 |
) |
|
|
(2,182 |
) |
Prepaid
expenses and other current assets
|
|
|
8 |
|
|
|
304 |
|
Income
taxes receivable
|
|
|
74 |
|
|
|
181 |
|
Accounts
payable
|
|
|
1,506 |
|
|
|
853 |
|
Accrued
payroll liabilities and commissions
|
|
|
1,146 |
|
|
|
1,827 |
|
Customers’
deposits
|
|
|
3,238 |
|
|
|
1,625 |
|
Accrued
customer support and warranty costs
|
|
|
113 |
|
|
|
523 |
|
Income
taxes payable
|
|
|
1,372 |
|
|
|
988 |
|
Other
accrued liabilities
|
|
|
376 |
|
|
|
562 |
|
Other
|
|
|
(38 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
|
6,711 |
|
|
|
9,670 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of property
|
|
|
49 |
|
|
|
49 |
|
Purchases
of property, plant, and equipment
|
|
|
(2,473 |
) |
|
|
(384 |
) |
Sale
of investment in joint venture
|
|
|
- |
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) investing activities
|
|
|
(2,424 |
) |
|
|
415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
|
See
notes to condensed unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
NINE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Payments
on long-term debt
|
|
$ |
- |
|
|
$ |
(1 |
) |
Repurchases
of common stock
|
|
|
- |
|
|
|
(1,303 |
) |
Excess
tax benefits from share based payments
|
|
|
749 |
|
|
|
320 |
|
Exchange
of shares for statutory withholding
|
|
|
(639 |
) |
|
|
- |
|
Proceeds
from issuance of common stock
|
|
|
661 |
|
|
|
1,267 |
|
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities
|
|
|
771 |
|
|
|
283 |
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
|
|
194 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
5,252 |
|
|
|
10,601 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
|
|
|
27,880 |
|
|
|
15,246 |
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF THE PERIOD
|
|
$ |
33,132 |
|
|
$ |
25,847 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW
|
|
|
|
|
|
|
|
|
INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$ |
2 |
|
|
$ |
10 |
|
Cash
paid during the period for income taxes
|
|
$ |
1,194 |
|
|
$ |
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Concluded)
|
|
See
notes to condensed unaudited consolidated financial
statements.
|
|
|
|
|
|
|
|
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
THREE MONTHS ENDED JUNE 30, 2008
1.
|
Condensed
unaudited consolidated financial
statements
|
Certain
information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) have been omitted from these condensed
unaudited consolidated financial statements. These condensed
unaudited consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2007. The
results of operations for the three- and nine-month periods ended June 30, 2008
are not necessarily indicative of the operating results for the full
year.
The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
In the
opinion of management, all adjustments, consisting only of normal recurring
accruals, have been made to present fairly the Company's financial position at
June 30, 2008 and the results of its operations and its cash flows for the three
and nine-month periods ended June 30, 2008 and 2007.
Certain
reclassifications have been made to prior year amounts to conform to the current
year presentation.
During
the nine-month period ended June 30, 2008, the Company granted 60,488 shares of
service-based stock awards. The fair value of these grants ranged
from $26.80 to $36.25 per share based on the fair market value at the grant
date. The restrictions on the grants lapse at the end of the required
service periods ranging from September 2008 through May 2011. During
the nine-month period ended June 30, 2008, the Company also granted 26,603
shares of performance-based stock awards. The fair value of these
grants ranged from $34.74 to $34.97 per share based on the fair market value at
the grant date. The restrictions on these grants lapse upon
achievement of performance-based objectives for the three-year period ending
September 30, 2010 and continuous employment through December 15,
2010. The Company also granted 2,000 shares of non-employee
service-based stock awards during the quarter ended December 31,
2007. The shares immediately vested and had a grant date fair value
of $33.40 per share.
Stock
compensation expense included in the Company’s results was as follows (in
thousands):
|
|
Three
months ended June 30,
|
|
|
Nine
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Cost
of goods sold
|
|
$ |
36 |
|
|
$ |
61 |
|
|
$ |
172 |
|
|
$ |
144 |
|
Operating
expenses
|
|
|
364 |
|
|
|
208 |
|
|
|
970 |
|
|
|
577 |
|
Total
stock compensation expense
|
|
$ |
400 |
|
|
$ |
269 |
|
|
$ |
1,142 |
|
|
$ |
721 |
|
Stock
compensation expense remaining capitalized in inventory at June 30, 2008 and
2007 was $15,000 and $37,000, respectively.
The
calculation of the basic and diluted earnings per share (“EPS”) is as follows
(in thousands except per share data):
|
|
For
the three months ended
June
30, 2008
|
|
|
For
the three months ended
June
30, 2007
|
|
|
|
Earnings
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
Earnings
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
2,963 |
|
|
|
5,461 |
|
|
$ |
0.54 |
|
|
$ |
2,939 |
|
|
|
5,288 |
|
|
$ |
0.56 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
|
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
77 |
|
|
|
|
|
Common
stock awards
|
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
43 |
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
plus assumed conversions
|
|
$ |
2,963 |
|
|
|
5,574 |
|
|
$ |
0.53 |
|
|
$ |
2,939 |
|
|
|
5,408 |
|
|
$ |
0.54 |
|
|
|
For
the nine months ended
June
30, 2008
|
|
|
For
the nine months ended
June
30, 2007
|
|
|
|
Earnings
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
Earnings
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
5,246 |
|
|
|
5,417 |
|
|
$ |
0.97 |
|
|
$ |
5,113 |
|
|
|
5,247 |
|
|
$ |
0.97 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
|
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
|
|
Common
stock awards
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
plus assumed conversions
|
|
$ |
5,246 |
|
|
|
5,533 |
|
|
$ |
0.95 |
|
|
$ |
5,113 |
|
|
|
5,363 |
|
|
$ |
0.95 |
|
The
weighted-average number of diluted shares does not include potential common
shares which are anti-dilutive or performance-based restricted stock awards if
the performance measurement has not been met. The following potential
common shares at June 30, 2008 and 2007 were not included in the calculation of
diluted EPS as they were anti-dilutive or the performance measurement has not
been met:
|
|
Three
months ended June 30,
|
|
|
Nine
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Common
shares from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed
exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Assumed
lapse of restrictions on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Service-based stock grants
|
|
|
1,650 |
|
|
|
- |
|
|
|
2,650 |
|
|
|
- |
|
-
Performance-based stock grants
|
|
|
35,408 |
|
|
|
58,801 |
|
|
|
35,408 |
|
|
|
58,801 |
|
The
options expire on dates beginning in February 2009 through February
2015. The restrictions on stock grants may lapse between August 2008
and May 2011.
The
provision (benefit) for income taxes is based on the estimated effective income
tax rate for the year.
The
Company adopted the provisions of FASB Interpretation 48, Accounting for
Uncertainty in Income Taxes, on October 1, 2007. Previously, the Company had
accounted for tax contingencies in accordance with Statement of Financial
Accounting Standards 5, Accounting for Contingencies. As required by
Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes,
the Company recognizes the financial statement benefit of a tax position only
after determining that the relevant tax authority would more likely than not
sustain the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. At
the adoption date, the Company applied Interpretation 48 to all tax positions
for which the statute of limitations remained open. As a result of the
implementation of Interpretation 48, the Company recognized a decrease of
approximately $250,000 in the liability for unrecognized tax benefits, which was
accounted for as an increase to the October 1, 2007 balance of retained
earnings.
The
amount of unrecognized tax benefits as of October 1, 2007 was approximately
$91,000 which, if ultimately recognized, will reduce the Company’s annual
effective tax rate. There have been no material changes in unrecognized tax
benefits since October 1, 2007.
The
Company is subject to income taxes in the U.S. federal jurisdiction and various
state and foreign jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Company is no
longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for the years before 2002.
The
Company is not currently under examination by any U.S. federal or state
jurisdictions, or foreign jurisdictions, and there are no expected material
changes in the unrecognized tax benefit liability within the next twelve
months.
The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in other income and expense for all periods
presented. The Company had accrued approximately $37,000 for the payment of
interest and penalties at October 1, 2007. Subsequent changes to accrued
interest and penalties have not been significant.
The
calculation of comprehensive income is as follows (in thousands):
|
|
Three
months ended June 30,
|
|
|
Nine
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
2,963 |
|
|
$ |
2,939 |
|
|
$ |
5,246 |
|
|
$ |
5,113 |
|
Other
comprehensive income -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment, net of tax
|
|
|
(15 |
) |
|
|
41 |
|
|
|
386 |
|
|
|
157 |
|
Total
comprehensive income
|
|
$ |
2,948 |
|
|
$ |
2,980 |
|
|
$ |
5,632 |
|
|
$ |
5,270 |
|
6.
|
Contractual
guarantees and indemnities
|
Product
warranties
The
Company provides a warranty on its products ranging from ninety days to five
years following the date of shipment. Management establishes
allowances for customer support and warranty costs based upon the types of
products shipped, customer support and product warranty
experience. The provision of customer support and warranty costs is
charged to cost of sales at the point of sale, and it is periodically assessed
for adequacy based on changes in these factors.
A
reconciliation of the changes in the Company’s allowances for warranties for the
nine months ended June 30, 2008 and 2007 (in thousands) is as
follows:
|
|
Nine
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
Beginning
balance
|
|
$ |
1,433 |
|
|
$ |
979 |
|
Warranty
costs incurred
|
|
|
(1,731 |
) |
|
|
(1,502 |
) |
Warranty
expense accrued
|
|
|
1,632 |
|
|
|
1,738 |
|
Translation
adjustments
|
|
|
42 |
|
|
|
29 |
|
Ending
balance
|
|
$ |
1,376 |
|
|
$ |
1,244 |
|
Intellectual
property and general contractual indemnities
The
Company, in the normal course of business, provides specific, limited
indemnification to its customers for liability and damages related to
intellectual property rights. In addition, the Company may enter into
contracts with customers where it has agreed to indemnify the customer for
personal injury or property damage caused by the Company’s products and
services. Indemnification is typically limited to replacement of the items or
the actual price of the products and services. The Company maintains
product liability insurance as well as errors and omissions insurance, which may
provide a source of recovery in the event of an indemnification claim, but does
not maintain insurance coverage for claims related to intellectual property
rights.
Historically,
any amounts payable under these indemnifications have not had a material effect
on the Company’s business, financial condition, results of operations, or cash
flows. The Company has not recorded any provision for future obligations under
these indemnifications. If the Company determines it is probable that
a loss has occurred under these indemnifications, then any such reasonably
estimable loss would be recognized.
Director
and officer indemnities
The
Company has entered into indemnification agreements with its directors and
certain executive officers which require the Company to indemnify such
individuals against certain expenses, judgments and fines in third-party and
derivative proceedings. The Company may recover some of the expenses
and liabilities that arise in connection with such indemnifications under the
terms of its directors’ and officers’ insurance policies. The Company
has not recorded any provision for future obligations under these
indemnification agreements.
Bank
guarantees and letters of credit
At June
30, 2008, the Company had standby letters of credit totaling $4.4 million, which
includes secured bank guarantees under the Company’s credit facility in Europe
and letters of credit securing certain self-insurance contracts and lease
commitments. If the Company fails to meet its contractual
obligations, these bank guarantees and letters of credit may become liabilities
of the Company. This amount is comprised of approximately $4.0
million of outstanding performance guarantees secured by bank guarantees under
the Company’s European subsidiaries’ credit facility in Europe, a standby letter
of credit for $150,000 securing certain self-insurance contracts related to
workers compensation and a standby letter of credit for $230,000 securing
payments under a lease contract for a domestic production
facility. Bank guarantees arise when the European subsidiary collects
customer deposits prior to order fulfillment. The customer deposits
received are recorded as current liabilities on the Company’s balance
sheet. The bank guarantees repayment of the customer deposit in the
event an order is not completed. The bank guarantee is canceled upon
shipment and transfer of title. These bank guarantees arise in the
normal course of the Company’s European business and are not deemed to expose
the Company to any significant risks since they are satisfied as part of the
design and manufacturing process.
Purchase
Obligations
The
Company had contractual obligations to purchase certain materials and supplies
aggregating $686,000 by December 31, 2008. As of June 30, 2008, the
Company had fulfilled its obligations under the contract. The Company
has entered into a commitment to acquire capital equipment of approximately
$700,000.
7.
|
Future
accounting changes
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements,” which establishes guidelines
for measuring fair value and expands disclosures regarding fair value
measurements. SFAS No. 157 does not require any new fair
value measurements but rather it eliminates inconsistencies in the guidance
found in various prior accounting
pronouncements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. The Company is evaluating the
potential effects of this standard, although the Company does not expect the
adoption of SFAS No. 157 to have a material effect on its financial
position, results of operation, or cash flows.
In
February 2007, the FASB issued Statement 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” This Statement permits
entities to elect to measure certain financial instruments and other items at
fair value. The fair value option may be applied on an instrument by
instrument basis, is irrevocable and is applied only to entire
instruments. SFAS 159 requires additional financial statement
presentation and disclosure requirements for those entities that elect to adopt
the standard and is effective for fiscal years beginning after November 15,
2007. The Company does not expect the adoption of SFAS 159 to have a
material effect on its financial position, results of operations or cash
flows.
In June
2008, the FASB issued FASB Staff Position EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.” This position states that unvested share-based payment awards that
contain nonforfeitable rights to dividends (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share (EPS) under the two-class method described in paragraphs 60 and 61 of
FASB Statement No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning after December 15, 2008.
All prior period EPS data will be required to be adjusted to conform to the
provisions of this pronouncement and early application is prohibited. The
Company does have participating securities as described under this pronouncement
and is currently evaluating the impact of FSP EITF 03-6-1.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
From time
to time, Key Technology, Inc. (“Key” or the “Company”), through its management,
may make forward-looking public statements with respect to the Company
regarding, among other things, expected future revenues or earnings,
projections, plans, future performance, product development and
commercialization, and other estimates relating to the Company’s future
operations. Forward-looking statements may be included in reports
filed under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), in press releases or in oral statements made with the approval of an
authorized executive officer of Key. The words or phrases “will
likely result,” “are expected to,” “intends,” “is anticipated,” “estimates,”
“believes,” “projects” or similar expressions are intended to identify
“forward-looking statements” within the meaning of Section 21E of the Exchange
Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the
Private Securities Litigation Reform Act of 1995.
Forward-looking
statements are subject to a number of risks and uncertainties. The
Company cautions investors not to place undue reliance on its forward-looking
statements, which speak only as of the date on which they are
made. Key’s actual results may differ materially from those described
in the forward-looking statements as a result of various factors, including
those listed below:
·
|
adverse
economic conditions, particularly in the food processing industry, either
globally or regionally, may adversely affect the Company's
revenues;
|
·
|
competition
and advances in technology may adversely affect sales and
prices;
|
·
|
failure
of the Company’s new products to 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
inability of the Company to protect its intellectual property, especially
as the Company expands geographically, may adversely affect the Company’s
competitive advantage; and
|
·
|
intellectual
property-related litigation expenses and other costs resulting from
infringement claims asserted against the Company by third parties may
adversely affect the Company’s results of operations and its customer
relations.
|
More
information may be found in Item 1A, “Risk Factors,” in the Company’s Annual
Report on Form 10-K filed with the SEC on December 14, 2007, which item is
hereby incorporated by reference.
Given
these uncertainties, readers are cautioned not to place undue reliance on the
forward-looking statements. The Company disclaims any obligation
subsequently to revise or update forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Overview
General
The
Company and its operating subsidiaries design, manufacture, sell and service
process automation systems that process product streams of discrete pieces to
improve safety and quality. These systems integrate electro-optical
automated inspection and sorting systems with process systems that include
specialized conveying and preparation systems. The Company provides
parts and service for each of its product lines to customers throughout the
world. Industries served include food processing, as well as tobacco,
plastics, and pharmaceuticals. The Company maintains two domestic
manufacturing facilities and a European manufacturing facility located in the
Netherlands. The Company markets its products directly and through
independent sales representatives.
In recent
years, 40% or more of the Company’s sales have been made to customers located
outside the United States. In its export and international sales, the
Company is subject to the risks of conducting business internationally,
including unexpected changes in regulatory requirements; fluctuations in the
value of the U.S. dollar which could increase or decrease the sales prices in
local currencies of the Company’s products; tariffs and other barriers and
restrictions; and the burdens of complying with a variety of international
laws.
Current
period – third quarter of fiscal 2008
The
results for the third quarter of fiscal 2008 showed continued growth in net
sales and backlog compared to the same period in the prior fiscal
year. Net sales of $35.8 million in the third fiscal quarter of 2008
were a new quarterly record, and $4.8 million, or 16%, higher than net sales of
$31.0 million in the corresponding quarter a year ago. Backlog of
$42.2 million at the end of the third fiscal quarter of 2008 was also at a
record level for any third fiscal quarter and represented a $5.5 million, or
15%, increase over the ending backlog of $36.7 million in the corresponding
quarter a year ago. Net earnings for the third quarter of fiscal 2008
were $3.0 million or $0.53 per diluted share. Net earnings for the
same period last year were $2.9 million, or $0.54 per diluted
share. Customer orders in the third quarter of fiscal 2008 of $30.7
million were down $2.9 million, or 9%, compared to the record-setting orders of
$33.6 million in the third quarter of fiscal 2007. During the third
quarter of fiscal 2008, the Company continued to focus on growing market share
and revenues in its established markets and geographies, strengthening its
presence in the pharmaceutical and nutraceutical market, increasing upgrade
system sales, and continuing to establish its global market presence.
Additionally,
in the third quarter, the Company continued its work toward the implementation
of a new global enterprise resource planning (“ERP”)
system. Implementation will be spread over a three-year period, with
an estimated cost of $5.5 million, including both internal and external
resources. A significant portion of these implementation costs will
be capitalized. Operating expenses of $291,000 and capital
expenditures of approximately $625,000 related to the ERP implementation were
incurred during the third quarter of fiscal 2008.
First
nine months of fiscal 2008
The
results for the first three quarters of fiscal 2008 included records for order
volume and net sales. Customer orders for the first three quarters of
fiscal 2008 were $105.1 million which represented a $15.8 million, or 18%,
increase over customer orders of $89.2 million in the same period in fiscal
2007. This increase in orders is attributable to the increasing
global concern regarding food safety and security; the continuing decline of
available labor in the food processing industry; the growth of our business in
North America, Latin America and Europe; and, finally, the continued confidence
of our customers in the Company’s ability to provide high quality processing
solutions.
Net sales
of $93.9 million for the first nine months of fiscal 2008 were $18.2 million, or
24%, higher than the net sales of $75.8 million in the corresponding period a
year ago. Net earnings for the first nine months of fiscal 2008 were
$5.2 million, or $0.95 per diluted share. Net earnings for the
corresponding nine-month period last year were $5.1 million, or $0.95 per
diluted share. Net earnings in the first nine months of fiscal 2007
included a $750,000 gain, or $0.14 per share, from the sale of the Company’s
InspX joint venture.
For the
first nine months of fiscal 2008, the Company incurred operating expenses of
$845,000 and capital expenditures of approximately $1.2 million associated with
the implementation of the ERP system. Cumulative ERP-related
operating expenses and capital expenditures through June 30, 2008, including
amounts incurred in fiscal 2007, are $845,000 and $2.0 million,
respectively.
Application of Critical
Accounting Policies
The
Company has identified its critical accounting policies, the application of
which may materially affect the financial statements, either because of the
significance of the financial statement item to which they relate, or because
they require management judgment to make estimates and assumptions in measuring,
at a specific point in time, events which will be settled in the
future. The critical accounting policies, judgments and estimates
which management believes have the most significant effect on the financial
statements are set forth below:
|
·
|
Allowances
for doubtful accounts
|
|
·
|
Valuation
of inventories
|
|
·
|
Allowances
for warranties
|
|
·
|
Accounting
for income taxes
|
Management
has discussed the development, selection and related disclosures of these
critical accounting estimates with the audit committee of the Company’s board of
directors.
Revenue
Recognition. The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred or services have been
provided, the sale price is fixed or determinable, and collectability is
reasonably assured. Additionally, the Company sells its goods on
terms which transfer title and risk of loss at a specified location, typically
shipping point, port of loading or port of discharge, depending on the final
destination of the goods. Accordingly, revenue recognition from
product sales occurs when all criteria are met, including transfer of title and
risk of loss, which occurs either upon shipment by the Company or upon receipt
by customers at the location specified in the terms of sale. Sales of
system upgrades are recognized as revenue upon completion of the conversion of
the customer’s existing system when this conversion occurs at the customer
site. Revenue earned from services (maintenance, installation
support, and repairs) is recognized ratably over the contractual period or as
the services are performed. If any contract provides for both
equipment and services (multiple deliverables), the sales price is allocated to
the various elements based on objective evidence of fair value. Each
element is then evaluated for revenue recognition based on the previously
described criteria. The Company’s sales arrangements provide for no
other significant post shipment obligations. If all conditions of
revenue recognition are not met, the Company defers revenue
recognition. In the event of revenue deferral, the sale value is not
recorded as revenue to the Company, accounts receivable are reduced by any
amounts owed by the customer, and the cost of the goods or services deferred is
carried in inventory. In addition, the Company periodically evaluates
whether an allowance for sales returns is necessary. Historically,
the Company has experienced few sales returns. If the Company
believes there are potential sales returns, the Company will provide any
necessary provision against sales. In accordance with the Financial
Accounting Standard Board’s Emerging Issues Task Force Issue No. 01-9, “Accounting for Consideration Given
by a Vendor to a Customer or a Reseller of the Vendor’s Product,” the
Company accounts for cash consideration (such as sales incentives) that are
given to customers or resellers as a reduction of revenue rather than as an
operating expense unless an identified benefit is received for which fair value
can be reasonably estimated. The Company believes that revenue
recognition is a “critical accounting estimate” because the Company’s terms of
sale vary significantly, and management exercises judgment in determining
whether to recognize or defer revenue based on those terms. Such
judgments may materially affect net sales for any period. Management
exercises judgment within the parameters of accounting principles generally
accepted in the United States of America (GAAP) in determining when contractual
obligations are met, title and risk of loss are transferred, the sales price is
fixed or determinable and collectability is reasonably assured. At
June 30, 2008, the Company had invoiced $3.4 million compared to $2.3 million at
September 30, 2007 for which the Company has not recognized
revenue.
Allowances for doubtful
accounts. The Company establishes allowances for doubtful
accounts for specifically identified, as well as anticipated, doubtful accounts
based on credit profiles of customers, current economic trends, contractual
terms and conditions, and customers’ historical payment
patterns. Factors that affect collectability of receivables include
general economic or political factors in certain countries that affect the
ability of customers to meet current obligations. The Company
actively manages its credit risk by utilizing an independent credit rating and
reporting service, by requiring certain percentages of down payments, by
requiring secured forms of payment for customers with uncertain credit profiles
or located in certain countries, and by obtaining credit insurance on specific
transactions. Forms of secured payment could include irrevocable
letters of credit, bank guarantees, third-party leasing arrangements or EX-IM
Bank guarantees, each utilizing Uniform Commercial Code filings, or the like,
with governmental entities where possible. The Company believes that
the accounting estimate related to allowances for doubtful accounts is a
“critical accounting estimate” because it requires management judgment in making
assumptions relative to customer or general economic factors that are outside
the Company’s control. As of June 30, 2008, the balance sheet
included allowances for doubtful accounts of $283,000. Amounts
charged to bad debt expense for the nine-month period ended June 30, 2008 and
2007 were $7,000 and $26,000, respectively. Actual charges to the
allowance for doubtful accounts for the nine-month period ended June 30, 2008
and 2007 were $163,000 and $39,000, respectively. If the
Company experiences actual bad debt expense in excess of estimates, or if
estimates are adversely adjusted in future periods, the carrying value of
accounts receivable would decrease and charges for bad debts would increase,
resulting in decreased net earnings.
Valuation of
inventories. Inventories are stated at the lower of cost or
market. The Company’s inventory includes purchased raw materials, manufactured
components, purchased components, service and repair parts, work in process,
finished goods and demonstration equipment. Write downs of excess and
obsolete inventories are made after periodic evaluation of historical sales,
current economic trends, forecasted sales, estimated product lifecycles and
estimated inventory levels. The factors that contribute to inventory
valuation risks are the Company’s purchasing practices, electronic component
obsolescence, accuracy of sales and production forecasts, introduction
of
new
products, product lifecycles and the associated product support. The
Company actively manages its exposure to inventory valuation risks by
maintaining low safety stocks and minimum purchase lots, utilizing just in time
purchasing practices, managing product end-of-life issues brought on by aging
components or new product introductions, and by utilizing inventory minimization
strategies such as vendor-managed inventories. The Company believes
that the accounting estimate related to valuation of inventories is a “critical
accounting estimate” because it is susceptible to changes from period to period
due to the requirement for management to make estimates relative to each of the
underlying factors ranging from purchasing to sales to production to after-sale
support. At June 30, 2008, cumulative inventory adjustments to lower
of cost or market totaled $1.8 million, approximately the same amount as of
September 30, 2007. Amounts charged to expense to record inventory at
lower of cost or market for the nine-month period ended June 30, 2008 and 2007
were $312,000 and $241,000, respectively. Actual charges to the
cumulative inventory adjustments upon disposition or sale of inventory were
$419,000 and $1.0 million for the nine-month period ended June 30, 2008 and
2007, respectively. If actual demand, market conditions or product
lifecycles are adversely different from those estimated by management, inventory
adjustments to lower market values would result in a reduction to the carrying
value of inventory, an increase in inventory write-offs, and a decrease to gross
margins.
Long-lived
assets. The Company regularly reviews all of its long-lived
assets, including property, plant and equipment, and amortizable intangible
assets, for impairment whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. If the total of projected
future undiscounted cash flows is less than the carrying amount of these assets,
an impairment loss based on the excess of the carrying amount over the fair
value of the assets is recorded. In addition, goodwill is reviewed
based on its fair value at least annually. As of June 30, 2008, the
Company held $11.4 million of property, plant and equipment, goodwill and other
intangible assets, net of depreciation and amortization. There were
no changes in the Company’s long-lived assets that would result in an adjustment
of the carrying value for these assets. Estimates of future cash
flows arising from the utilization of these long-lived assets and estimated
useful lives associated with the assets are critical to the assessment of
recoverability and fair values. The Company believes that the
accounting estimate related to long-lived assets is a “critical accounting
estimate” because: (1) it is susceptible to change from period to
period due to the requirement for management to make assumptions about future
sales and cost of sales generated throughout the lives of several product lines
over extended periods of time; and (2) the potential effect that recognizing an
impairment could have on the assets reported on the Company’s balance sheet and
the potential material adverse effect on reported earnings or
loss. Changes in these estimates could result in a determination of
asset impairment, which would result in a reduction to the carrying value and a
reduction to net earnings in the affected period.
Allowances for
warranties. The Company’s products are covered by standard
warranty plans included in the price of products ranging between 90 days and
five years, depending upon the product and contractual terms of
sale. The Company establishes allowances for warranties for
specifically identified, as well as anticipated, warranty claims based on
contractual terms, product conditions and actual warranty experience by product
line. Company products include both manufactured and purchased
components and, therefore, warranty plans include third-party sourced parts
which may not be covered by the third-party manufacturer’s
warranty. Ultimately, the warranty experience of the Company is
directly attributable to the quality of its products. The Company
actively manages its quality program by using a structured product introduction
plan, process monitoring techniques utilizing statistical process controls,
vendor quality metrics, a quality training curriculum for every employee and
feedback loops to communicate warranty claims to designers and engineers for
remediation in future production. The Company believes that the
accounting estimate related to allowances for warranties is a “critical
accounting estimate” because: (1) it is susceptible to significant
fluctuation period to period due to the requirement for management to make
assumptions about future warranty claims relative to potential unknown issues
arising in both existing and new products, which assumptions are derived from
historical trends of known or resolved issues; and (2) risks associated with
third-party supplied components being manufactured using processes that the
Company does not control. As of June 30, 2008, the balance sheet
included warranty reserves of $1.4 million, while $1.7 million of warranty
charges were incurred during the nine-month period ended June 30, 2008, compared
to warranty reserves of $1.2 million as of June 30, 2007 and warranty charges of
$1.5 million for the nine-month period then ended. If the Company’s
actual warranty costs are higher than estimates, future warranty plan coverages
are different, or estimates are adversely adjusted in future periods, reserves
for warranty expense would need to increase, warranty expense would increase and
gross margins would decrease.
Accounting for income
taxes. The Company’s provision for income taxes and the
determination of the resulting deferred tax assets and liabilities involves a
significant amount of management judgment. The quarterly provision
for income taxes is based partially upon estimates of pre-tax financial
accounting income for the full year and is
affected
by various differences between financial accounting income and taxable
income. Judgment is also applied in determining whether the deferred
tax assets will be realized in full or in part. In management’s
judgment, when it is more likely than not that all or some portion of specific
deferred tax assets, such as foreign tax credit carryovers, will not be
realized, a valuation allowance must be established for the amount of the
deferred tax assets that are determined not to be realizable. At June
30, 2008, the Company had valuation reserves of approximately $450,000 for
deferred tax assets related to the sale of the investment in the InspX joint
venture and the valuation reserve for notes receivable and contingent payments;
and offsetting amounts for U.S. and Chinese deferred tax assets and liabilities,
primarily related to net operating loss carryforwards in the foreign
jurisdictions. During the nine-month period ended June 30, 2008,
$60,000 of net valuation reserves for combined U.S. and Australian deferred
taxes were eliminated due to the final dissolution of the related Australian
entity. There were no other valuation allowances at June 30, 2008 due
to anticipated utilization of all the deferred tax assets as the Company
believes it will have sufficient taxable income to utilize these
assets. The Company maintains reserves for estimated tax exposures in
jurisdictions of operation. These tax jurisdictions include federal,
state and various international tax jurisdictions. Potential income
tax exposures include potential challenges of various tax credits,
export-related tax benefits, and issues specific to state and local tax
jurisdictions. Exposures are typically settled primarily through
audits within these tax jurisdictions, but can also be affected by changes in
applicable tax law or other factors, which could cause management of the Company
to believe a revision of past estimates is appropriate. During fiscal
2007 and thus far in fiscal 2008, there have been no significant changes in
these estimates other than the adoption of FASB Interpretation 48, Accounting
for Uncertainty in Income Taxes, as discussed further
below. Management believes that an appropriate liability has been
established for estimated exposures; however, actual results may differ
materially from these estimates. The Company believes that the
accounting estimate related to income taxes is a “critical accounting estimate”
because it relies on significant management judgment in making assumptions
relative to temporary and permanent timing differences of tax effects, estimates
of future earnings, prospective application of changing tax laws in multiple
jurisdictions, and the resulting ability to utilize tax assets at those future
dates. If the Company’s operating results were to fall short of
expectations, thereby affecting the likelihood of realizing the deferred tax
assets, judgment would have to be applied to determine the amount of the
valuation allowance required to be included in the financial statements
established in any given period. Establishing or increasing a
valuation allowance would reduce the carrying value of the deferred tax asset,
increase tax expense and reduce net earnings.
Adoption of FASB
Interpretation 48, Accounting for Uncertainty in Income
Taxes
The
Company adopted the provisions of FASB Interpretation 48, Accounting for
Uncertainty in Income Taxes, on October 1, 2007. Previously, the Company had
accounted for tax contingencies in accordance with Statement of Financial
Accounting Standards 5, Accounting for Contingencies. As required by
Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes,
the Company recognizes the financial statement benefit of a tax position only
after determining that the relevant tax authority would more likely than not
sustain the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. At
the adoption date, the Company applied Interpretation 48 to all tax positions
for which the statute of limitations remained open. As a result of the
implementation of Interpretation 48, the Company recognized a decrease of
approximately $250,000 in the liability for unrecognized tax benefits, which was
accounted for as an increase to the October 1, 2007 balance of retained
earnings.
The
amount of unrecognized tax benefits as of October 1, 2007 was approximately
$91,000 which, if ultimately recognized, will reduce the Company’s annual
effective tax rate. There have been no material changes in unrecognized tax
benefits since October 1, 2007.
The
Company is subject to income taxes in the U.S. federal jurisdiction and various
state and foreign jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Company is no
longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for the years before 2002.
The
Company is not currently under examination by any U.S. federal or state
jurisdictions, or foreign jurisdictions, and there are no expected material
changes in the unrecognized tax benefit liability within the next twelve
months.
The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in other income and expense for all periods
presented. The Company had accrued approximately $37,000 for the
payment of interest and penalties
at October 1, 2007. Subsequent changes to accrued interest and penalties have
not been significant.
Results of
Operations
For
the three months ended June 30, 2008 and 2007
Net sales
increased $4.8 million, or 16%, to $35.8 million in the third quarter of fiscal
2008 over the $31.0 million in net sales recorded in the same quarter a year
ago. This was a new record net sales level for any quarter, up from
the previous record of $31.7 million in the fourth quarter of fiscal
2007. International sales for the three-month period were 55% of net
sales compared to 42% in the corresponding prior year
period. Increases in net sales occurred in automated inspection
systems sales, up $1.6 million, or 12%; process systems sales, up $2.9 million,
or 24%; and parts and service sales, up $318,000, or 6%. The
increases in automated inspection systems sales and process system sales related
to significantly increased shipments in upgrade systems and vibratory products,
respectively. Automated inspection systems sales, including upgrade
systems, represented 42% of net sales in the third quarter of fiscal 2008
compared to 44% of net sales in the third quarter of fiscal
2007. Process systems sales represented 42% of net sales in the third
quarter of fiscal 2008 compared to 39% during the third quarter of fiscal 2007,
while parts and service sales accounted for 16% of the more recent quarter's net
sales, down from 17% in the same quarter a year ago.
Total
backlog was $42.2 million at the end of the third quarter of fiscal 2008 and was
$5.5 million higher than the $36.7 million backlog at the end of the third
quarter in the prior fiscal year. Backlog for automated inspection
systems was up $3.4 million, or 17%, to $23.4 million at June 30, 2008 compared
to $20.1 million at June 30, 2007. The increased automated inspection
systems backlog included increases in pharmaceutical systems, the Optyx and
Raptor products, and the new Manta product. Process systems backlog
increased by $1.9 million, or 12%, to $17.4 million at the end of the third
quarter of fiscal 2008 compared to $15.5 million at the same time a year
ago. The backlog increase for process systems was primarily related
to vibratory products and pharmaceutical systems. Backlog by product
line at June 30, 2008 was 56% automated inspection systems, 41% process systems,
and 3% parts and service, compared to 55% automated inspection systems, 42%
process systems, and 3% parts and service on June 30, 2007.
Orders
decreased by $2.9 million, or 9%, to $30.7 million in the third quarter of
fiscal 2008 compared to the third quarter record for new orders of $33.6 million
during the same period a year ago. Orders for automated inspection
systems remained strong during the third quarter of fiscal 2008, increasing $1.5
million, or 11%, to $15.1 million from $13.6 million in the comparable quarter
of fiscal 2007. The increase was driven by orders in North America
and Latin America. Process system orders decreased $4.9 million, or
nearly 35%, during the third quarter of fiscal 2008 to $9.2 million compared to
$14.1 million in the third quarter of fiscal 2007. The decrease in
process systems orders from the third quarter of fiscal 2007 was due
significantly to decreased orders for vibratory products in both North America
and Europe. Orders for parts and service were $6.4 million, up
$468,000, or 8%, from $5.9 million for the same period in the prior
year.
Gross
profit for the third quarter of fiscal 2008 was $15.0 million compared to $12.5
million in the corresponding period last year. Gross profit in the
third quarter of fiscal 2008, as a percentage of net sales, increased to 42.0%
compared to the 40.2% reported the same quarter of fiscal 2007. The
margin improvement from the same quarter a year ago was primarily a result of
increased efficiency of manufacturing operations due to higher product shipment
volumes, slightly offset by the mix of increased sales of lower margin process
systems.
Operating
expenses of $10.9 million for the third quarter of fiscal 2008 were 30.5% of net
sales compared with $8.3 million, or 26.9%, of net sales for the third quarter
of fiscal 2007. Spending increased $2.6 million as a result of higher
research and development spending, increased sales activity, additional general
and administrative expenses, and higher stock-based and incentive compensation
expenses. As previously announced, the Company has increased spending
throughout fiscal 2008 on research and development to continue to expand
capabilities and to provide new and innovative solutions. The Company
also continues to invest in sales and marketing efforts, which contributed to
record year-to-date orders in fiscal 2008. The Company also
experienced increased sales commissions in the third quarter of fiscal 2008 due
to a higher mix of sales through our outside sales
representatives. General and administrative expenses during the third
quarter of fiscal 2008 were up compared to the prior year third quarter, a
result of work to implement a new global enterprise resource planning system and
increases in staffing driven by the Company’s growth.
Other
income for the third quarter of fiscal 2008 was $252,000 compared to $327,000
for the same period in fiscal 2007. Other income consisted of
interest income and foreign exchange gains.
Net
earnings for the quarter ending June 30, 2008 were $3.0 million, or $0.53 per
diluted share. Net earnings for the same period last year were $2.9
million, or $0.54 per diluted share. In the third quarter of fiscal
2008, higher revenues and stronger gross margins were also partially offset by
higher operating expenses. Operating expenses are anticipated to
remain higher in the fourth quarter of fiscal 2008 than in the prior year fourth
quarter due to expenditures to support the higher sales levels and the Company’s
investments in research and development, as well as the new ERP
system.
For
the nine months ended June 30, 2008 and 2007
Net sales
in the first nine months of fiscal 2008 increased by $18.2 million, or 24%, to
$93.9 million compared to $75.8 million for the same period in fiscal
2007. International sales for the more recent nine-month period were
53% of net sales compared to 43% for the first nine months of fiscal
2007. Increases in total net sales for the first nine months of
fiscal 2008 compared to the same period in the prior year occurred in process
systems sales, up $11.1 million, or 37%; automated inspection systems sales, up
$5.8 million, or 18%; and parts and service sales, up $1.2 million, or
8%. The increase in process system sales was primarily the result of
increased shipments of vibratory products in North America, Europe and Latin
America. The increase in automated inspection systems sales resulted
significantly from upgrade sales, which increased $3.7 million to $13.0 million
in the first nine months of fiscal 2008 compared to the same period in the prior
year. Automated inspection systems net sales, including upgrade
systems, represented 40% of net sales in the first three quarters of fiscal 2008
compared to 42% of net sales for the same period of fiscal
2007. Process systems represented 44% of net sales in the first nine
months of fiscal 2008 compared to 39% of net sales in the first nine months of
fiscal 2007. Parts and service accounted for 17% of net sales in the
first three quarters of fiscal 2008, down from 19% for the same period in fiscal
2007.
New
orders for the first nine months of fiscal 2008 increased $15.8 million, or 18%,
to $105.1 million compared to orders of $89.2 million for the first nine months
of fiscal 2007. Orders for automated inspection systems increased
approximately $7.8 million, or 20%, to $46.6 million compared to $38.9 million
in fiscal 2007. This increase occurred primarily in North American,
Europe and Latin American and was driven by system upgrades, the Optyx and
Raptor products, and the new Manta product. Orders for process
systems increased $6.8 million, or 19%, to over $42.3 million compared to $35.5
million in fiscal 2007. The increase in process systems orders in the
first nine months of fiscal 2008 over the first three quarters of fiscal 2007
was due to increased orders for vibratory products in North America and Latin
America. New orders for system upgrades were $13.1 million, up $1.8
million, or 16%, from $11.2 million in the prior year. Orders for
parts and service were $16.1 million, up $1.2 million, or 8%, from $14.9 million
in the prior year.
Gross
profit for the first nine months of fiscal 2008 was $37.8 million compared to
$29.5 million in the corresponding period last year. Gross profit as
a percentage of sales in the first nine of fiscal 2008 increased to 40.3%,
compared to the 39.0% reported for the same period of fiscal
2007. The margin improvement for the first nine months of fiscal 2008
compared to the same period in fiscal 2007 was primarily a result of increased
efficiency of manufacturing operations and favorable material pricing, partially
offset by the mix of increased sales of lower margin process
systems.
Operating
expenses of $31.2 million for the first nine months of fiscal 2008 were 33.2% of
net sales compared with $23.8 million, or 31.4%, of net sales for the first nine
months of fiscal 2007. Spending increased by $7.4 million as a result
of higher research and development spending, increased sales activity,
additional general and administrative expenditures, and higher stock-based and
incentive compensation expenses. The Company has increased spending
throughout fiscal 2008 on research and development to continue to expand
capabilities and to provide new and innovative solutions. The Company
continues to invest in sales and marketing efforts. These efforts
have contributed to record year-to-date orders in fiscal year
2008. The Company also experienced increased sales commissions due to
a higher mix of sales through our outside sales
representatives. General and administrative expenses during the first
nine months of fiscal 2008 increased compared to the prior year as a result of
work to implement the global ERP system, increased recruiting expenses and
increased staffing driven by the Company’s growth.
Other
income for the first three quarters of fiscal 2008 was $1.1 million compared to
$859,000 for the same period in fiscal 2007. Other income consisted
primarily of interest income, foreign exchange gains and gains from reductions
in other liabilities. The first nine months of fiscal 2007 also
included a $750,000 gain from the sale of the Company’s 50% interest in the
InspX joint venture.
Net
earnings for the first nine months of fiscal 2008 were $5.2 million, or $0.95
per diluted share. The net earnings for the same period in fiscal
2007 were $5.1 million, or $0.95 per diluted share, which included a $750,000
gain, or $0.14 per share, from the sale of the Company’s 50% interest in its
InspX joint venture. In the first nine months of fiscal 2008, higher
revenues and better gross margins were also significantly offset by the higher
operating expenses. Operating expenses are anticipated to remain
higher in the last three months of fiscal 2008 than in the prior year due to
expenditures to support the higher sales levels and the Company’s investments in
research and development, as well as the new ERP system.
Liquidity and Capital
Resources
For the
nine months ended June 30, 2008, net cash increased by $5.3 million to $33.1
million on June 30, 2008 from $27.9 million on September 30,
2007. Cash provided by operating activities was $6.7 million during
the nine-month period ended June 30, 2008. Investing activities
consumed $2.4 million of cash, a result of $2.5 million in capital expenditures,
while financing activities generated $771,000 of cash. The effect of
exchange rate changes on cash was a positive $194,000 during the first nine
months of fiscal 2008.
Cash
provided by operating activities during the nine-month period ended June 30,
2008 was $6.7 million compared to $9.7 million of cash provided by operating
activities for the comparable period in fiscal 2007. The primary
contributor was the change in non-cash working capital. In the first
nine months of fiscal 2007, changes in non-cash working capital provided $2.4
million of cash from operating activities. During the first nine
months of fiscal 2008, changes in non-cash working capital used $380,000 of cash
from operating activities. The major changes in current assets and
current liabilities during the first nine months of fiscal 2008 were increased
trade receivables of $1.7 million as a result of increase sales volumes, and
increased inventories of $6.5 million related to higher production levels and
new product introductions. These were offset by an increase in
accounts payable of $1.5 million and customer deposits of $3.2
million. In addition, there were increases in accrued payroll
liabilities and commissions of $1.1 million.
The net
cash used in investing activities of $2.4 million for the first nine months of
fiscal 2008 represents a $2.8 million change from the $415,000 of net cash
generated from investing activities in the corresponding period a year
ago. The major change in investing activities resulted from the
$750,000 in proceeds from the sale of the Company’s interest in the InspX joint
venture during the first quarter of fiscal 2007. In addition, the
Company’s investments in property, plant and equipment increased by $2.1 million
in the first nine months of fiscal 2008 from the corresponding period a year
ago, the largest component of which related to investment in a new ERP
system.
Net cash
provided by financing activities during the first nine months of fiscal 2008 was
$771,000, compared with net cash provided of $283,000 during the corresponding
period in fiscal 2007. The net cash provided by financing activities
during the first nine months of fiscal 2008 resulted from excess tax benefits
from share-based payments and proceeds from issuance of common stock for
employee stock option exercises, offset by the exchange of shares for statutory
tax withholding. Financing activities during the first nine months of
the prior fiscal year included $1.3 million used in the stock repurchase program
offset by $1.3 million generated from the issuance of common stock relating to
employee stock option exercises and $320,000 from excess tax benefits from
share-based payments. No stock was purchased under the Company’s
stock repurchase program in the first nine months of fiscal 2008.
The
Company’s domestic credit facility provides for a revolving credit line of up to
$10 million and credit sub-facilities of $3.0 million each for sight commercial
letters of credit and standby letters of credit. The credit facility
matures on June 30, 2009. The credit facility bears interest, at the
Company’s option, of either the bank prime rate minus 1.75% or LIBOR plus 1.0%
per annum. At June 30, 2008, the interest rate would have been
3.25%. The credit facility is secured by all U.S. accounts
receivable, inventory and fixed assets. The credit facility contains
covenants which require the maintenance of a defined net worth ratio, a
liquidity ratio and an EBITDA coverage ratio. The credit facility
also restricts mergers and acquisitions, incurrence of additional indebtedness,
and transactions, including purchases and retirements, in the Company’s own
common stock, without the prior consent of the lender. At June 30,
2008, the Company had no borrowings outstanding under the credit facility and
$380,000 in
standby
letters of credit. At June 30, 2008, the Company was in compliance
with its loan covenants and had received the consent of the lender for its stock
repurchase program.
The
Company’s credit accommodation with a commercial bank in the Netherlands
provides a credit facility for its European subsidiary. This credit
accommodation totals $4.0 million and includes an operating line of the
lesser of $2.4 million or the available borrowing base, which is based on
varying percentages of eligible accounts receivable and inventories, and a bank
guarantee facility of $1.6 million. The operating line and bank
guarantee facility are secured by all of the subsidiary’s personal
property. The credit facility bears interest at the bank’s prime
rate, with a minimum of 3.00%, plus 1.75%. At June 30, 2008, the
interest rate was 7.40%. At June 30, 2008, the Company had no
borrowings under this facility and had received bank guarantees of $4.0 million
under the bank guarantee facility. The credit facility allows
overages on the bank guarantee facility. Any overages reduce the
available borrowings from the operating line.
The
Company’s continuing contractual obligations and commercial commitments existing
on June 30, 2008 are as follows:
|
|
|
|
|
Payments
due by period (in thousands)
|
|
Contractual
Obligations (1)
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1 –
3 years
|
|
|
4 –
5 years
|
|
|
After
5 years
|
|
Operating
leases
|
|
$ |
13,462 |
|
|
$ |
1,499 |
|
|
$ |
2,756 |
|
|
$ |
2,555 |
|
|
$ |
6,652 |
|
Purchase
obligations
|
|
|
700 |
|
|
|
700 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
contractual cash obligations
|
|
$ |
14,162 |
|
|
$ |
2,199 |
|
|
$ |
2,756 |
|
|
$ |
2,555 |
|
|
$ |
6,652 |
|
(1) The
Company also has $105,000 of contractual obligations related to uncertain tax
positions for which the timing and amount of payment can not be reasonably
estimated due to the nature of the uncertainties and the unpredictability of
jurisdictional examinations in relation to the statute of
limitations.
As of
June 30, 2008, the Company has entered into a commitment to acquire capital
equipment of approximately $700,000.
The
Company anticipates that current cash balances and ongoing cash flows from
operations will be sufficient to fund the Company’s operating needs in the near
term. At June 30, 2008, the Company had standby letters of credit
totaling $4.4 million, which includes secured bank guarantees under the
Company’s credit facility in Europe and letters of credit securing certain
self-insurance contracts and lease commitments. If the Company fails
to meet its contractual obligations, these bank guarantees and letters of credit
may become liabilities of the Company. The Company has no off-balance
sheet arrangements or transactions, or arrangements or relationships with
“special purpose entities.”
Future Accounting
Changes
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements,” which establishes guidelines
for measuring fair value and expands disclosures regarding fair value
measurements. SFAS No. 157 does not require any new fair
value measurements but rather it eliminates inconsistencies in the guidance
found in various prior accounting
pronouncements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. The Company is evaluating the
potential effects of this standard, although the Company does not expect the
adoption of SFAS No. 157 to have a material effect on its financial
position, results of operation, or cash flows.
In
February 2007, the FASB issued Statement 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” This Statement permits
entities to elect to measure certain financial instruments and other items at
fair value. The fair value option may be applied on an instrument by
instrument basis, is irrevocable and is applied only to entire
instruments. SFAS 159 requires additional financial statement
presentation and disclosure requirements for those entities that elect to adopt
the standard and is effective for fiscal years beginning after November 15,
2007. The Company does not expect the adoption of SFAS 159 to have a
material effect on its financial position, results of operations or cash
flows.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” This position states that unvested share-based
payment
awards that contain nonforfeitable rights to dividends (whether paid or unpaid)
are participating securities and shall be included in the computation of
earnings per share (EPS) under the two-class method described in paragraphs 60
and 61 of FASB Statement No. 128, “Earnings per Share.” FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. All prior period EPS data will be required to be adjusted to
conform to the provisions of this pronouncement and early application is
prohibited. The Company does have participating securities as described under
this pronouncement but has not yet determined the effect of FSP EITF
03-6-1.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
|
The
Company has assessed its exposure to market risks for its financial instruments
and has determined that its exposures to such risks are generally limited to
those affected by the value of the U.S. dollar compared to the Euro and to a
lesser extent the Australian dollar, Mexican Peso and Chinese Renminbi
(RMB).
The terms
of sales to European customers are typically denominated in either Euros or U.S.
dollars. The terms of sales to customers in Australia are typically
denominated in their local currency. The Company expects that its standard terms
of sale to international customers, other than those in Europe and Australia,
will continue to be denominated in U.S. dollars, although as the Company expands
its operations in Latin America and China, transactions denominated in those
countries’ local currencies may increase. For sales transactions
between international customers, including European customers, and the Company’s
domestic operations, which are denominated in currencies other than U.S.
dollars, the Company assesses its currency exchange risk and may enter into
forward contracts to minimize such risk. At June 30, 2008, the
Company was not a party to any currency hedging transaction. As of
June 30, 2008, management estimates that a 10% change in foreign exchange rates
would affect net earnings before taxes by approximately $630,000 on an annual
basis as a result of converted cash, accounts receivable, loans to foreign
subsidiaries, and sales or other contracts denominated in foreign
currencies.
As of
June 30, 2008, the Euro gained a net of 9.4% in value against the U.S. dollar
compared to its value at September 30, 2007. During the nine-month
period ended June 30, 2008, changes in the value of the Euro against the U.S.
dollar ranged between a 2.3% gain and a 9.7% gain for the
period. Other currencies also gained in value against the U.S.
dollar. The effect of these fluctuations on the operations and
financial results of the Company were:
·
|
Translation
adjustments of $386,000, net of income tax, were recognized as a component
of comprehensive income for the first nine months of fiscal 2008 as a
result of converting the Euro denominated balance sheet of Key Technology
B.V. and Suplusco Holding B.V. into U.S. dollars and, to a lesser extent,
the conversion of the Australian dollar balance sheet of Key Technology
Australia Pty. Ltd., the RMB balance sheet of Key Technology (Shanghai)
Trading Co. Ltd., the Singapore dollar balance sheet of Key Technology
Asia-Pacific Pte Ltd., and the Peso balance sheet of Productos Key
Mexicana into U.S. dollars.
|
·
|
Foreign
exchange gains of $390,000 for the first nine months of fiscal 2008 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, intercompany loans 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,
Chinese, Singapore, and Mexican
operations.
|
The U.S.
dollar weakened during the nine-month period ended June 30, 2008 and the U.S.
dollar is still in a relatively weak position on the world markets. A
relatively weaker U.S. dollar on the world markets makes the Company’s
U.S.-manufactured goods relatively less expensive to international customers
when denominated in U.S. dollars or potentially more profitable to the Company
when denominated in a foreign currency. In addition, the Company’s
products may be relatively less expensive to domestic customers compared to
products imported to the U.S. On the other hand, materials or
components imported into the U.S. by the Company may be more
expensive. A relatively weaker U.S. dollar on the world markets,
especially as measured against the Euro, may favorably affect the Company’s
market and economic outlook for international sales. The Company’s
Netherlands-based subsidiary transacts business primarily in Euros and does not
have significant exports to the U.S.
Under the Company’s credit facilities, the Company may borrow at
the lender’s prime rate minus 175 basis points or LIBOR plus 100 basis points on
its domestic credit facility and at the lender’s prime rate plus 175 basis
points on its European credit facility. At June 30, 2008, the Company
had no borrowings which had variable interest
rates. During
the nine-month period then ended, interest rates applicable to its variable rate
credit facilities ranged from 3.25% to 7.4%. At June 30, 2008, the
rate was 3.25% on its domestic credit facility and 7.4% on its European credit
facility. As of June 30, 2008 management estimates that a 100 basis
point change in these interest rates would not affect net income before taxes
because the Company had no borrowings outstanding under its variable interest
rate facilities.
The
Company’s management, with the participation of its Chief Executive Officer and
Chief Financial Officer, have evaluated the disclosure controls and procedures
relating to the Company at June 30, 2008 and concluded that such controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by the Company in reports filed or submitted by the
Company under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms. There were no changes in the
Company’s internal control over financial reporting during the quarter ended
June 30, 2008 that materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
The
following table provides information about purchases made by or on behalf of the
Company during the quarter ended June 30, 2008 of equity securities registered
by the Company under Section 12 of the Securities Exchange Act of
1934.
Issuer Purchases of Equity
Securities
Stock Repurchase Program
(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
- 30, 2008
|
|
|
0 |
|
|
|
|
0 |
|
|
May
1 - 31, 2008
|
|
|
0 |
|
|
|
|
0 |
|
|
June
1 - 30, 2008
|
|
|
0 |
|
|
|
|
0 |
|
|
Total
|
|
|
0 |
|
|
|
|
0 |
|
411,748
|
(1)
|
The
Company initiated a stock repurchase program effective November 27,
2006. The Company may purchase up to 500,000 shares of its own
common stock under the program.
|
|
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
|
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
SIGNATURES
|
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 8, 2008
|
By /s/ David M.
Camp
|
|
David M.
Camp
|
|
President and Chief Executive
Officer
|
|
(Principal Executive
Officer)
|
|
|
|
|
Date:
August 8, 2008
|
By /s/ John J.
Ehren
|
|
John J.
Ehren
|
|
Senior Vice President and Chief
Financial Officer
|
|
(Principal Financial
Officer)
|
|
|
KEY
TECHNOLOGY, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 2008
Exhibit
|
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
|
26