SG&A decreased in the three months ended September 30, 2012 by $1.0 million from the comparable prior year period. The decrease was primarily due to a decrease in costs related to performance-based compensation, partially offset by an increase in salaries and wages related to increased headcount.
RD&E for the three months ended September 30, 2012 increased by $0.5 million compared with the prior year period. The increase was primarily due to the increases in spending in our lithography-related product line and in the Optical Systems segment.
Other income for the three months ended September 30, 2011 consisted of a loss on marketable securities, miscellaneous tax expense and certain costs related to our then German joint venture.
Income tax expense for the three months ended September 30, 2012 included income taxes in United States federal, state and foreign jurisdictions, while income tax expense for the three months ended September 30, 2011 included income taxes for state and foreign jurisdictions only. In the prior year, the valuation allowance recorded on substantially all of our net deferred tax assets, including those in the United States, effectively eliminated U.S. federal tax expense. Income tax expense for the three months ended September 30, 2012 also included a tax benefit of $0.4 million to correct an error in recording deferred tax asset balances as of June 30, 2012 relating to fixed assets and foreign tax credits.
TRANSACTIONS WITH SHAREHOLDER
Revenues from Canon Inc., a shareholder, and Canon Sales Co., Inc., a distributor of certain of our products in Japan and a subsidiary of Canon Inc. (collectively referred to as “Canon”), amounted to $2.8 million and $4.8 million (7% and 11% of net revenues, respectively) for the three months ended September 30, 2012 and 2011, respectively. Selling prices of products sold to Canon are based, generally, on the terms customarily given to distributors. At September 30, 2012 and June 30, 2012, there were, in the aggregate, $1.5 million and $1.6 million, respectively, of trade accounts receivable from Canon.
LIQUIDITY AND CAPITAL RESOURCES
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our principal source of liquidity is our cash reserves and operating cash flows. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include: capital expenditures, customer credit requirements, investments in businesses and the availability of bank lines of credit.
At September 30, 2012, cash and cash equivalents were $78.8 million, a decrease of $5.3 million from $84.1 million at June 30, 2012. Cash in a money market account is invested primarily in U.S. government securities. We do not believe there is any risk to liquidity in the money market account, nor are there currently any limits on redemptions.
Cash provided by operating activities from continuing operations decreased period over period by $4.8 million to $0.3 million, due primarily to a decrease in net income of $4.0 million and cash flows from fiscal 2012 to fiscal 2013 generated by inventories, revenue recognized in excess of billings and deferred income taxes.
Cash used for investing activities increased $3.9 million to $4.2 million, due primarily to the buyout of the noncontrolling interest of ZygoLOT for $3.2 million (€2.5 million), a decrease in the proceeds from sales of marketable securities, and an increase in additions to property, plant and equipment of $0.7 million.
Cash used for financing activities increased $0.5 million to $1.5 million, due primarily to increases in the repurchase of restricted stock of $0.8 million and in a dividend payment to noncontrolling interest of $0.3 million, partially offset by an increase in exercise of employee stock options of $0.6 million.
We currently have no lines of credit. In the future, if the need for debt or credit lines arises, there is no assurance that we would be able to secure such financing. We believe we have sufficient cash flows from operations and cash reserves to maintain adequate amounts of liquidity and to meet our future liquidity requirements for at least the next twelve months.
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OFF-BALANCE SHEET ARRANGEMENTS
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt, or operating parts of our business that are not consolidated into our financial statements. We have not guaranteed any obligations of a third party.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our quantitative and qualitative market risk disclosures during the three months ended September 30, 2012. Please refer to Item 7a., “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended June 30, 2012, filed with the Securities and Exchange Commission (the “2012 Annual Report”) for a discussion of our exposure to market risk.
Item 4. Controls and Procedures
The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. In designing, implementing, and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We identified a material weakness as of June 30, 2012 related to inadequate design of processes, procedures and controls regarding our accounting for income taxes and, subsequently, concluded that our internal control over financial reporting was not effective at June 30, 2012. In the first quarter of fiscal 2013, we implemented, and are continuing to implement, additional controls in our financial reporting process, including adding control processes to aid in preparing the amounts related to certain tax assets and liabilities and the current and deferred income tax expense to ensure those amounts are recorded in accordance with accounting principles generally accepted in the United States of America, and have added external accounting resources to prepare and assist in the review of our accounting for income taxes. Certain controls designed and implemented to address the identified material weakness in the period-end financial reporting process have not had a sufficient period of time to operate for our management to conclude that they are operating effectively at September 30, 2012.
Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, carried out an evaluation, as of the end of the period covered by this report (the quarter ended September 30, 2012), of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), including controls and procedures implemented to address the material weakness described above. Based upon their evaluation and the lack of a sufficient period of time for the additional controls and processes to operate, the Chief Executive Officer and Principal Financial Officer concluded that, as of the end of such period, a material weakness still existed and our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting within the time periods specified in the Securities and Exchange Commission’s rules and forms information required to be disclosed by us in the reports that we file or submit under the Exchange Act and were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Except as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred in the most recent fiscal quarter (the quarter ended September 30, 2012) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - Other Information
Item 1A. Risk Factors
Part I, “Item 1A. Risk Factors” in our 2012 Annual Report includes a listing of risk factors that could materially affect our business, financial condition, or future results. There have been no material changes in our risk factors from those set forth in our 2012 Annual Report; however, the risks described in our 2012 Annual Report are not the only risks facing our Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about our purchases during the quarter ended September 30, 2012, of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934.
| | | | | | | | | | | | | |
Period | | Total number of
shares purchased | | Average price
paid per share | | Total number of
shares purchased as
part of publicly
announced
plans or programs (1) | | Approximate dollar
value of shares that
may yet be purchased
under the plans or
programs (in millions) | |
| |
| |
| |
| |
| |
|
July 1, 2012 - July 31, 2012 | | | 25,591 | | $ | 18.57 | | | — | | $ | 5.0 | |
August 1, 2012 - August 31, 2012 | | | 31,086 | | $ | 19.07 | | | — | | $ | 5.0 | |
September 1, 2012 - September 30, 2012 | | | — | | | n/a | | | — | | $ | 5.0 | |
| | |
| (1) | In August 2007, our Board of Directors authorized the repurchase of up to $25.0 million of our outstanding common stock. During the three months ended September 30, 2012, there were no repurchases of common stock in the open market. The previous share repurchases under this program have been effected pursuant to plans in conformity with Rule 10b5-1 under the Securities Exchange Act of 1934. This rule allows public companies to adopt written, pre-arranged stock trading plans when they do not have material, non-public information in their possession. The adoption of this stock trading plan allows us to repurchase our shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. |
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Item 6. Exhibits
| | |
(a) | Exhibits: |
| | |
| 10.1* | ZygoLot Share Purchase Agreement, dated September 28, 2012 |
| | |
| 31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
| 31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted 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 |
| | |
| 101.INS** XBRL Instance Document |
| |
| 101.SCH** XBRL Taxonomy Extension |
| |
| 101.CAL** XBRL Taxonomy Extension Calculation Linkbase |
| |
| 101.DEF** XBRL Taxonomy Extension Definition Linkbase |
| |
| 101.LAB** XBRL Taxonomy Extension Label Linkbase |
| |
| 101.PRE** XBRL Taxonomy Extension Presentation Linkbase |
*Confidential treatment has been requested for certain confidential information contained in this exhibit, marked by brackets. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
**To be furnished by amendment as soon as practicable after the date hereof.
23
SIGNATURE
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.
| | | | |
| Zygo Corporation | |
|
| |
| (Registrant) | |
| | |
| | |
| /s/ Chris L. Koliopoulos | | |
|
| | |
| Chris L. Koliopoulos | |
| President and Chief Executive Officer |
| | |
| | |
| /s/ John P. Jordan | | |
|
| | |
| John P. Jordan | |
| Vice President, Chief Financial Officer and Treasurer |
Date: November 9, 2012
24
EXHIBIT INDEX
| |
10.1* | ZygoLot Share Purchase Agreement, dated September 28, 2012 |
| |
31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted 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 |
| |
101.INS** XBRL Instance Document |
| |
101.SCH** XBRL Taxonomy Extension |
| |
101.CAL** XBRL Taxonomy Extension Calculation Linkbase |
|
101.DEF** XBRL Taxonomy Extension Definition Linkbase |
|
101.LAB** XBRL Taxonomy Extension Label Linkbase |
|
101.PRE** XBRL Taxonomy Extension Presentation Linkbase |
*Confidential treatment has been requested for certain confidential information contained in this exhibit, marked by brackets. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
**To be furnished by amendment as soon as practicable after the date hereof.
