Exhibit 99.1
News Release
For Further Information Call:
Walter A. Shephard
Chief Financial Officer
Voice: 860-704-3955
inquire@zygo.com
ZYGO REPORTS FISCAL 2010 THIRD QUARTER RESULTS
Revenues Increase 27% Year-to-Year
Acquisition of Zemetrics Completed
MIDDLEFIELD, CT, May 4, 2010 – Zygo Corporation (NASDAQ: ZIGO) today announced revenues of $25.4 million for the third quarter of fiscal 2010, which ended on March 31, 2010, an increase of 27% compared with revenues of $20.0 million in the third quarter of fiscal 2009, reflecting year-to-year improvement in the Company’s core optical and metrology markets.
Bookings for the third quarter of fiscal 2010 were $27.3 million, a slight decrease from bookings of $28.6 million in the second quarter of fiscal 2010 and an increase of 75% as compared with bookings of $15.6 million in the third quarter of fiscal 2009. Bookings for the Metrology Solutions division accounted for 59% of the bookings received in the third quarter, with the Optical Systems division contributing the remaining 41%.
For the third quarter of fiscal 2010, Zygo reported a net loss of $2.7 million ($2.5 million loss from continuing operations), or a loss of $0.16 ($0.15 loss from continuing operations) per diluted share, as compared with a net loss of $15.1 million ($12.5 million loss from continuing operations), or $0.90 ($0.75 loss from continuing operations) per diluted share, for the third quarter of fiscal 2009. The third quarter of fiscal 2010 loss from continuing operations included $3.3 million of operating expenses primarily related to costs for the acquisition of Zemetrics, including the subsequent charge relating to the impairment of goodwill as part of the purchase price valuation, the Company’s evaluation of the unsolicited offer by II-VI Incorporated, and search costs for our new chief executive officer. The third quarter of fiscal 2009 loss from continuing operations included $9.8 million of charges primarily related to the termination of the proposed ESI merger, inventory adjustments, severance charges, and asset impairment charges. Excluding these charges in both 2010 and 2009, the Company would have reported net income from continuing operations in the third quarter of fiscal 2010 of $762,000, or $0.04 per diluted share, as compared with a net loss from continuing operations of $7.0 million, or $0.42 per diluted share, for the prior year quarter. A reconciliation between GAAP (Accounting Principles Generally Accepted in the United States of America) operating results and non-GAAP operating results is provided following the financial statements that are part of this release.
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Commenting on the third quarter results, Walter Shephard, Chief Financial Officer of Zygo Corporation, said, “We are especially pleased with the 45% gross margin achieved in this quarter as compared with an adjusted 35% in the comparable prior year quarter. Cost containment actions as well as improved factory processes contributed to the best gross margin percentage in over five years. The reduction in operating expenses to $10.3 million in the third quarter of fiscal 2010 from $13.8 million in the prior year quarter (in each case, after excluding the non-GAAP charges) is also a significant improvement and will help us realize an increase in return on future sales growth.”
“Zygo continued to execute on its objectives to advance its operating model, reducing operating costs while improving its gross margins to levels not seen in a few years,” said Dr. Chris Koliopoulos, President and Chief Executive Officer of Zygo Corporation. “We also saw better than expected order volume in stage metrology for lithography systems during the quarter and our Electro-Optics Group continued to receive large follow-on orders, especially from our life sciences customers. We are also pleased that our balance sheet has remained strong. Our current cash and marketable securities increased $3.1 million during the third quarter.”
For the first nine months of fiscal 2010, the Company recorded revenues of $72.8 million and a net loss of $10.4 million ($7.7 million loss from continuing operations), or a loss of $0.61 ($0.45 from continuing operations) per diluted share, compared with revenues of $90.9 million and a net loss of $18.6 million ($15.5 million loss from continuing operations), or $1.11 ($0.92 loss from continuing operations) per diluted share, for the first nine months of fiscal 2009.
“There has been a great deal of activity at Zygo during this quarter as the organization adjusted to a new CEO while completing the acquisition of Zemetrics,” said Dr. Koliopoulos. “I am pleased with the level of commitment and cohesiveness I have seen from our employees in the early stages of this integration. Already we are moving on opportunities to improve and expand our product offerings through the synergies created with this merger. Everyone is working hard to create a total business model at Zygo that will offer high value advanced technology to our customers while providing opportunities for growth for our employees as we increase shareholder value going forward. With the third quarter results to build on, and the potential of new products from our development teams, my optimism in our future is further reinforced.”
Zygo Corporation is a worldwide supplier of optical metrology instruments, precision optics, and electro-optical design and manufacturing services serving customers in the semiconductor capital equipment and industrial markets.
Note: Zygo’s teleconference to discuss the results of the third quarter of fiscal 2010 will be held at 5 PM Eastern Time on May 4, 2010 and can be accessed by dialing 800-925-4693. This call is web cast live on Zygo’s web site at www.zygo.com. The call may also be accessed for 30 days following the teleconference.
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Forward-Looking Statements
All statements other than statements of historical fact included in this news release regarding financial performance, condition and operations, and the business strategy, plans, anticipated revenues, bookings, market acceptance, growth rates, market opportunities, and objectives of management of the Company for future operations are forward-looking statements. Forward-looking statements are intended to provide management’s current expectations or plans for the future operating and financial performance of the Company based upon information currently available and assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plans,” “strategy,” “project,” and other words of similar meaning in connection with a discussion of future operating or financial performance. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are fluctuations in capital spending of our customers; fluctuations in revenues to our major customer; manufacturing and supplier risks; risks of order cancellations, push-outs and de-bookings; dependence on timing and market acceptance of new product development; rapid technological and market change; risks in international operations; risks related to the reorganization of our business; dependence on proprietary technology and key personnel; length of the revenues cycle; environmental regulations; investment portfolio returns; fluctuations in our stock price; the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; risks related to the acquisition of Zemetrics and integration of the business and employees; the risk related to the Company’s transition to new senior management; and the risk associated with unsolicited proposals to purchase outstanding shares of the Company’s common stock. Zygo Corporation undertakes no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date of this news release. Further information on potential factors that could affect Zygo Corporation’s business is described in our reports on file with the Securities and Exchange Commission, including our Form 10-K, as amended by two Form 10-K/A filings, for the fiscal year ended June 30, 2009, filed with the Securities and Exchange Commission on September 14, 2009, October 26, 2009, and December 23, 2009, respectively.
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Zygo Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(Thousands, except per share amounts)
| | | Three Months Ended
March 31, | | Nine Months Ended
March 31, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | | | | | |
Revenues | | $25,439 | | $20,020 | | $72,845 | | $90,913 |
Cost of goods sold | | 13,962 | | 15,311 | | 43,241 | | 57,461 |
Gross margin | | 11,477 | | 4,709 | | 29,604 | | 33,452 |
| | | | | | | | | |
Selling, general, and administrative expenses | | 10,130 | | 15,120 | | 25,218 | | 36,349 |
Research, development, and engineering expenses | | 3,546 | | 6,262 | | 11,089 | | 17,129 |
Provision for doubtful accounts and notes | | (155) | | 15 | | (102) | | 1,014 |
Operating expenses | | 13,521 | | 21,397 | | 36,205 | | 54,492 |
Operating loss | | (2,044) | | (16,688) | | (6,601) | | (21,040) |
| | | | | | | | | |
Other income (expense) | | | | | | | | |
Interest income | | 5 | | 140 | | 79 | | 800 |
Miscellaneous expense | | (101) | | (233) | | (17) | | (210) |
Total other income (expense) | | (96) | | (93) | | 62 | | 590 |
Loss from continuing operations before income tax, including non-controlling interest | | (2,140) | | (16,781) | | (6,539) | | (20,450) |
Income tax benefit (expense) | | (131) | | 4,347 | | (505) | | 5,669 |
Net loss from continuing operations | | | (2,271) | | (12,434) | | (7,044) | | (14,781) |
| | | | | | | | | |
Loss from discontinued operations, net of tax | | | (193) | | (2,564) | | (2,667) | | (3,107) |
| | | | | | | | | |
Net loss including noncontrolling interest | | | (2,464) | | (14,998) | | (9,711) | | (17,888) |
Less: Net earnings attributable to noncontrolling interest | | | 232 | | 103 | | 677 | | 751 |
Net loss attributable to Zygo Corporation | | | $(2,696) | | $(15,101) | | $(10,388) | | $(18,639) |
| | | | | | | | | |
Basic and Diluted - Loss per share attributable | | | | | | | | |
to Zygo Corporation | | | | | | | | |
Continuing operations | | $ (0.15) | | $ (0.75) | | $ (0.45) | | $ (0.92) |
Discontinued operations | | (0.01) | | (0.15) | | (0.16) | | (0.19) |
Net loss per share | | $ (0.16) | | $(0.90) | | $(0.61) | | $(1.11) |
| | | | | | | | | |
Weighted average shares outstanding | | | | | | | | |
Basic and diluted shares | | 17,342 | | 16,872 | | 17,091 | | 16,826 |
| | | | | | | | | |
Net loss from continuing operations attributable to Zygo Corporation | | $(2,503) | | $(12,537) | | $(7,721) | | $(15,532) |
| | | | | | | | | |
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Zygo Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Thousands)
| | March 31, 2010 | | June 30, 2009 |
Assets | | | |
Current assets: | | | |
| Cash and cash equivalents | $40,891 | | $32,723 |
| Marketable securities | 1,000 | | 4,015 |
| Receivables, net | 19,471 | | 20,874 |
| Inventories | 25,157 | | 30,452 |
| Prepaid expenses and other | 1,690 | | 1,527 |
| Income tax receivable | 1,041 | | 1,022 |
| Current assets of discontinued operations | 17 | | 294 |
| Total current assets | 89,267 | | 90,907 |
| | | | |
Marketable securities | 980 | | 499 |
Property, plant, and equipment, net | 23,978 | | 27,325 |
Intangible assets, net | 5,541 | | 4,211 |
Other assets | 1,030 | | 1,013 |
Non-current assets of discontinued operations | - | | 144 |
Total assets | $120,796 | | $124,099 |
| | | | |
Liabilities and Stockholders' Equity | | | |
Current liabilities: | | | |
| Accounts payable | $5,143 | | $5,089 |
| Accrued expenses | 14,951 | | 15,745 |
| Income tax payable | 317 | | - |
| Current liabilities of discontinued operations | 221 | | 331 |
| Total current liabilities | 20,632 | | 21,165 |
| | | | |
Long-term income tax payable | 1,826 | | 1,826 |
Other long-term liabilities | 1,525 | | 1,081 |
Non-current liabilities of discontinued operations | 365 | | - |
| | | | |
Commitments and contingencies | - | | - |
| | | | |
Total stockholders' equity - Zygo Corporation | 94,381 | | 98,583 |
Noncontrolling interest | 2,067 | | 1,444 |
Total stockholders' equity | 96,448 | | 100,027 |
Total liabilities and stockholders' equity | $120,796 | | $124,099 |
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Zygo Corporation and Subsidiaries
Reported Results to Non-GAAP Results
(Unaudited)
(Thousands, except per share amounts)
| | Three Months Ended March 31, | | Nine Months Ended March 31, |
| | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | | | | |
GAAP operating loss (as reported) | $(2,044) | | $(16,688) | | $(6,601) | | $(21,040) |
| | | | | | | | |
| Adjustments to cost of goods sold | | | | | | | |
| Severance charges (COGS) | - | | 354 | | - | | 354 |
| Inventory adjustments (COGS) *1 | - | | 1,862 | | - | | 1,862 |
| | | | | | | | |
| Adjustments to bad debt *2 | | | | | | | |
| Bad debt (one-time) | - | | - | | - | | 924 |
| | | | | | | | |
| Adjustments to operating expenses | | | | | | | |
| Zemetrics acquisition: goodwill (SG&A) | 2,003 | | - | | 2,003 | | - |
| Zemetrics acquisition costs (SG&A) | 377 | | - | | 457 | | - |
| II-VI related cost (SG&A) | 736 | | - | | 736 | | - |
| CEO retirement and search costs (SG&A) | 112 | | - | | 929 | | - |
| Severance charges (SG&A) | 37 | | 343 | | 472 | | 343 |
| Severance charges (RD&E) | - | | 172 | | 377 | | 172 |
| ESI merger related expenses (SG&A) | - | | 6,059 | | - | | 8,253 |
| Asset impairment charges (SG&A) | - | | 286 | | - | | 286 |
| Asset impairment charges (RD&E) | - | | 761 | | - | | 761 |
| Royalty claim (SG&A) | - | | - | | - | | 1,360 |
| Property lease expense (SG&A) | - | | - | | 19 | | - |
| Total non-GAAP adjustments to operating expenses | 3,265 | | 9,837 | | 4,993 | | 14,315 |
| | | | | | | | |
| Non-GAAP operating profit (loss), as adjusted | $1,221 | | $(6,851) | | $(1,608) | | $(6,725) |
| | | | | | | | |
| Other income (expense) (as reported) | (96) | | (93) | | 62 | | 590 |
| Income tax benefit (expense) *3 | (131) | | - | | (505) | | - |
| | | | | | | | |
| Less: Net earnings attributable to noncontrolling interest (as reported) | 232 | | 103 | | 677 | | 751 |
| | | | | | | | |
| Non-GAAP net earnings (loss) - continuing operations, as adjusted | $762 | | $(7,047) | | $(2,728) | | $(6,886) |
| | | | | | | | |
| GAAP loss per share - continuing operations (as reported) | ($0.15) | | ($0.75) | | ($0.45) | | ($0.92) |
| Non-GAAP net earnings (loss) per share - continuing operations, as adjusted | $0.04 | | ($0.42) | | ($0.16) | | ($0.41) |
| Weighted average shares used in basic shares calculation | 17,342 | | 16,872 | | 17,091 | | 16,826 |
| Weighted average shares used in diluted shares calculation | 17,656 | | - | | - | | - |
*1 Management has included certain fiscal 2009 inventory adjustments for specific inventory in this reconciliation as such adjustments are considered unusual due to their size and severity. Inventory adjustments of a nature that occur in the ordinary course have not been included in such reconciliation.
*2 Management has included the provision for fiscal 2009 related to the extension of a note receivable to Solvision in this reconciliation as a significant, unusual item. Provisions for doubtful accounts of a nature that occur in the ordinary course have not been included in such reconciliation.
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*3 The Company’s reported results for fiscal 2010 and full year 2009 include a full valuation allowance on its deferred tax assets. Accordingly, for purposes of computing non-GAAP net earnings (loss), as adjusted, the Company has assumed no tax benefit would be recorded in fiscal 2010 and 2009.
Non-GAAP operating profit (loss), as adjusted, non-GAAP net earnings (loss), as adjusted, and non-GAAP net earnings (loss) per share, as adjusted, are operating performance measures defined by the Company and used by the Company’s management to evaluate its operating activities and a reconciliation of such amounts to reported results is presented above. These non-GAAP financial measures are not intended to replace reported amounts of operating profit (loss), net earnings (loss) or net earnings (loss) per share, which respectively are the most directly comparable GAAP financial measures. The Company believes that providing such a reconciliation is useful to users of the financial statements, since it excludes certain significant and unusual charges in the Company’s results, thus enhancing comparability of the Company’s results between periods presented. These non-GAAP measures are not alternatives to the most directly comparable reported measures under GAAP and should not be considered as alternatives to operating profit (loss), net earnings (loss), and net earnings (loss) per shares or any other measure of consolidated operating results under GAAP.
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