SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 16, 2000
KEY TECHNOLOGY, INC.
(Exact name of registrant as specified in charter)
OREGON 0-21820 93-0822509
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
150 AVERY STREET
WALLA WALLA, WASHINGTON 99362
(Address of principal executive offices) (Zip Code)
(509) 529-2161
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The undersigned registrant, Key Technology, Inc. ("Key Technology" or the
"Company") hereby amends Item 7 of its Current Report on Form 8-K, dated May 16,
2000 (initially filed with the Securities and Exchange Commission on May 31,
2000), to include the financial statements identified in Item 7 below. The
initially filed Form 8-K described the Stock Purchase Agreement among the
Company, Farmco, Inc., an Oregon corporation ("Farmco"), Ro-Tech, Inc., an
Oregon corporation ("Ro-Tech") and John E. Mobley, an officer of each of Farmco
and Ro-Tech and a principal shareholder of Farmco and the sole shareholder of
Ro-Tech, and Nancy L. Mobley relating to the purchase by Key Technology of all
of the outstanding Common Stock of each of Farmco and Ro-Tech.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION.
(a) Financial Statements of Business Acquired.
The following combined financial statements of Farmco and Ro-Tech and
the report of Deloitte & Touche, independent auditors, are included in this
report:
Independent Auditors' Report
Combined Balance Sheets as of March 31, 2000 (unaudited) and December
31, 1999
Combined Statements of Earnings for the Three Months Ended March 31, 2000
and 1999 (unaudited) and the Year Ended December 31, 1999
Combined Statements of Shareholders' Equity for the Three Months Ended
March 31, 2000 (unaudited) and the Year Ended December 31, 1999
Combined Statements of Cash Flows for the Three Months Ended March 31,
2000 and 1999 (unaudited) and the Year Ended December 31, 1999
Notes to Combined Financial Statements for the Three Months Ended March
31, 2000 and 1999 (unaudited) and the Year Ended December 31, 1999
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Key Technology, Inc.
Walla Walla, Washington
We have audited the accompanying combined balance sheet of Farmco, Inc. and
Ro-Tech, Inc. as of December 31, 1999, and the related combined statements of
earnings, shareholders' equity, and cash flows for the year then ended. The
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of Farmco, Inc. and Ro-Tech, Inc. as
of December 31, 1999, and the results of their operations and their cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -------------------------------------------
Portland, Oregon
July 11, 2000
FARMCO, INC. AND RO-TECH, INC.
COMBINED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN THOUSANDS)
- -------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 889 $ 1,654
Trade accounts and notes receivable 385 598
Inventories 401 438
Other 5 -
------ ------
Total current assets 1,680 2,690
PROPERTY, PLANT, AND EQUIPMENT, Net 524 550
OTHER ASSETS 45 37
------ ------
TOTAL $ 2,249 $ 3,277
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to shareholder $ 502 $ 502
Accounts payable 85 108
Accrued expenses 305 663
Current portion of capital lease obligation 19 19
------ ------
Total current liabilities 911 1,292
------ ------
CAPITAL LEASE OBLIGATION 54 59
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Common stock (Farmco, Inc.) - voting, no par value; 100,000 shares
authorized; 100 shares issued and outstanding 34 34
Common stock (Farmco, Inc.) - nonvoting, no par value; 100,000 shares
authorized; 400 shares issued and outstanding 20 20
Common stock (Ro-Tech, Inc.) - no par value; 500 shares authorized;
100 shares issued and outstanding 1 1
Retained earnings 1,229 1,871
------ ------
Total shareholders' equity 1,284 1,926
------ ------
TOTAL $ 2,249 $ 3,277
======== ========
See notes to combined financial statements.
2
FARMCO, INC. AND RO-TECH, INC.
COMBINED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
- -------------------------------------------------------------------------------
YEAR
THREE MONTHS ENDED
ENDED MARCH 31, DECEMBER 31,
2000 1999 1999
(UNAUDITED)
NET SALES $ 1,264 $ 831 $ 4,169
COST OF SALES 482 347 1,466
------ ------ ------
Gross profit 782 484 2,703
------ ------ ------
OPERATING EXPENSES:
Selling 154 123 573
General and administrative 228 181 775
Depreciation 30 32 127
Research and development 5 7 56
------ ------ ------
Total operating expenses 417 343 1,531
------ ------ ------
INCOME FROM OPERATIONS 365 141 1,172
OTHER INCOME 6 7 40
------ ------ ------
EARNINGS BEFORE INCOME TAXES 371 148 1,212
INCOME TAX EXPENSE 3 - 28
------ ------ ------
NET EARNINGS $ 368 $ 148 $ 1,184
====== ====== =======
See notes to combined financial statements.
3
FARMCO, INC. AND RO-TECH, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
- -------------------------------------------------------------------------------
COMMON STOCK
----------------------------------------
FARMCO, INC. VOTING FARMCO, INC. NONVOTING RO-TECH, INC.
------------------- ---------------------- ----------------
RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
BALANCE AT JANUARY 1, 1999 100 $ 34 - $ - 100 $ 1 $ 1,162 $ 1,197
Common stock issued - - 400 20 - - - 20
Net earnings - - - - - - 1,184 1,184
Shareholder distributions - - - - - - (475) (475)
----- ----- ----- ----- ----- ---- ---------- ---------
BALANCE AT DECEMBER 31, 1999 100 34 400 20 100 1 1,871 1,926
Net earnings (unaudited) - - - - - - 368 368.00
Shareholder distributions (unaudited) - - - - - - (1,010) (1,010)
----- ----- ----- ----- ----- ---- ---------- ---------
BALANCE AT MARCH 31, 2000 (Unaudited) 100 $ 34 400 $ 20 100 $ 1 $1,229 $1,284
===== ===== ===== ===== ===== ==== ========== =========
See notes to combined financial statements.
4
FARMCO, INC. AND RO-TECH, INC.
COMBINED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
- -------------------------------------------------------------------------------
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
2000 1999 1999
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 368 $ 148 $ 1,184
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 30 32 127
Changes in assets and liabilities:
Trade accounts and notes receivable 213 (205) (264)
Inventories 37 (112) (149)
Other assets (13) - (15)
Accounts payable (17) 84 84
Accrued expenses and other (364) 433 318
------ ---- ---
Cash provided by operating activities 254 380 1,285
---- ---- -----
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property, plant, and equipment (4) (3) (55)
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 53 20
Shareholder distributions (1,010) (240) (475)
Repayment of capital lease obligation (5) - (8)
---- ---- ---
Cash used in financing activities (1,015) (187) (463)
-------- ------ -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (765) 190 767
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,654 887 887
------ ---- ---
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 889 $ 1,077 $ 1,654
====== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 2 $ 2 $ 46
Cash paid during the period for income taxes 3 - 28
See notes to combined financial statements.
5
FARMCO, INC. AND RO-TECH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
1. THE COMPANIES
Farmco, Inc. designs, manufactures, sells, and services
automation systems for the food processing industry that process
product streams of discrete pieces to improve food safety and
quality with its principal place of business located in Redmond,
Oregon. Ro-Tech, Inc. has operated throughout its corporate
existence exclusively as a technology provider and manufacturer
for Farmco, Inc. and for no other accounts or customers.
In May 2000, the shareholders of Farmco, Inc. and Ro-Tech, Inc.
(collectively the "Company") sold all of their issued and outstanding
shares of common stock to Key Technology, Inc. for approximately
$5,000,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION - The accompanying combined financial statements
include the accounts of Farmco, Inc. and Ro-Tech, Inc. All significant
intercompany transactions have been eliminated in combination.
REVENUE RECOGNITION - Sales revenue net of allowances is generally
recognized at the time equipment is shipped to customers or when title
passes. Upon receipt of an order and throughout the production process,
the Company generally receives deposits which are recorded as customers'
deposits. The Company makes periodic evaluations of the creditworthiness
of its customers and generally does not require collateral.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments with original maturities of 90 days or less at date of
acquisition to be cash equivalents.
INVENTORIES are stated at the lower of cost (first-in, first-out method)
or market.
PROPERTY, PLANT, AND EQUIPMENT are recorded at cost and depreciated over
estimated useful lives on the straight-line method. The range in lives for
the assets is as follows:
Years
Leasehold improvements 30 to 40
Manufacturing equipment 7 to 10
Office equipment, furniture, and fixtures 5 to 7
OTHER ASSETS consist primarily of patent costs which are amortized over
the estimated useful lives of 17 years. Management periodically evaluates
the recoverability of other assets based upon current and anticipated net
income and undiscounted future cash flows. Amortization of other assets
was approximately $2,000 for the year ended December 31, 1999.
6
INCOME TAXES - The Company has elected S corporation status under
provisions of the Internal Revenue Code. Payment of federal and state
taxes on income is the responsibility of the shareholders rather than the
Company. The Company is subject only to state income taxes in certain
states at nominal rates of tax. The Company's policy is to make
distributions to shareholders in amounts at a minimum equal to the
shareholders' federal and state tax liabilities on the earnings of the
Company.
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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.
RESEARCH AND DEVELOPMENT - Costs associated with research and development
activities are expensed as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates its long-lived
assets for financial impairments and will continue to evaluate them if
events or changes in circumstances indicate the carrying amount of such
assets may not be fully recoverable.
FINANCIAL INSTRUMENTS - Statement of Financial Accounting Standards
("SFAS") No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of the estimated fair value of financial instruments.
The carrying value of the Company's cash, receivables, trade payables,
and accrued expenses and notes payable approximates their estimated fair
values due to the short maturities of those instruments.
3. TRADE ACCOUNTS AND NOTES RECEIVABLE
Trade accounts and notes receivable at December 31, 1999 consist of the
following (in thousands):
Trade accounts receivable $592
Employee notes 6
----
Total trade accounts and notes receivable $598
====
4. INVENTORIES
Inventories at December 31, 1999 consist of the following (in thousands):
Raw materials $317
Work-in-process and finished goods 121
----
Total inventories $438
====
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at December 31, 1999 consists of the
following (in thousands):
Leasehold improvements $ 77
Manufacturing equipment 1,133
Office equipment, furniture, and fixtures 45
-----
1,255
Accumulated depreciation (705)
-----
Total property, plant, and equipment - net $ 550
=====
7
Land and buildings include $85,000 of property under capital leases, and
accumulated depreciation and amortization includes $14,000 of amortization
for these leases.
6. ACCRUED EXPENSES
Accrued expenses at December 31, 1999 consist of the following (in
thousands):
Commissions $ 117
Customer deposits 430
Pension, profit sharing, and other liabilities 116
-----
Total accrued expenses $ 663
=====
7. NOTE PAYABLE TO SHAREHOLDER
Farmco, Inc. has a $500,000 demand note payable to the majority
shareholder with interest payable monthly at a rate of prime plus
1% (9.5% at December 31, 1999). The note is secured by equipment
and other assets owned by Farmco, Inc.
8. LEASES
Farmco, Inc. has entered into an operating lease agreement for
its operating facility with the majority shareholder which
expires on December 31, 2000. Lease expense on this facility for
the year ended December 31, 1999 was $115,000.
Also, Farmco, Inc. has entered into a capital lease agreement for
machinery which expires on June 30, 2003. Lease payments on this machine
for the year ended December 31, 1999 were $17,743. The future minimum
payments under these leases for the next five years and thereafter are as
follows (in thousands):
Operating Capital
(Facility) (Machinery)
2000 $ 115 $ 26
2001 - 26
2002 - 26
2003 - 13
------ ----
Subtotal 115 91
Less amount representing interest ------ (13)
- ----
Total $ 115 $ 78
====== ====
9. EMPLOYEE BENEFIT PLANS
Farmco, Inc. has a money purchase pension plan and profit sharing plan
which covers substantially all employees. Under the money purchase pension
plan, participants receive a matching contribution of 5% of eligible
compensation reduced by forfeitures. Under the profit sharing plan,
participants receive a matching contribution of 15% of eligible
compensation reduced by forfeitures. During the year ended December 31,
1999, Farmco, Inc. contributed $25,000 and $79,000 to the money purchase
pension plan and profit sharing plan, respectively.
8
10. CUSTOMERS
During fiscal 1999, sales to four customers amounted to approximately 60%
of total net sales. The Company's customers often make periodic large
purchases of complete systems. The Company believes that the loss of any
such customer would have a significant effect on the Company.
11. INTERIM FINANCIAL INFORMATION (UNAUDITED)
The accompanying interim financial statements as of March 31, 2000 and for
the three months ended March 31, 2000 and 1999 are unaudited. In the
opinion of management, the unaudited interim financial statements have
been prepared on the same basis as the annual audited financial statements
and reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial position
as of March 31, 2000 and their results of operations and their cash flows
for the three months ended March 31, 2000 and 1999. The results for the
three months ended March 31, 2000 and 1999 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000.
* * * * * *
9
(b) Pro Forma Financial Information.
The following pro forma financial information is included in this report:
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
2000
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 2000
Unaudited Pro Forma Condensed Combined Statement of Earnings for the
Six Months Ended March 31, 2000
Notes to Unaudited Pro Forma Condensed Combined Statement of Earnings
for the Six Months Ended March 31, 2000
Unaudited Pro Forma Condensed Combined Statement of Earnings for the
Year Ended September 30, 1999
Notes to Unaudited Pro Forma Condensed Combined Statement of Earnings
for the Year Ended September 30, 1999
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Effective May 16, 2000 Key Technology entered into an agreement to purchase the
outstanding stock of Farmco and its sister corporation Ro-Tech. The purchase
price was $5,040,000, including acquisition costs. Key Technology will account
for the acquisition using the purchase method of accounting.
The combined financial statements of Farmco and Ro-Tech use a different fiscal
year than the financial statements of Key Technology. For purposes of the pro
forma statements of earnings, the fourth quarter of Farmco and Ro-Tech's fiscal
year ending December 31, 1999 is included in both the pro forma statements of
earnings for the year ended September 30, 1999 and the six months ended March
31, 2000. The fourth quarter of Farmco and Ro-Tech's fiscal year ended December
31, 1999 reflected sales of $957,000 and net income of $43,000.
The Unaudited Pro Forma Condensed Combined Balance Sheet is prepared as of March
31, 2000 and illustrates the effects of the acquisition as if it had occurred on
that date. The Unaudited Pro Forma Statements of Earnings are prepared for the
six months ended March 31, 2000 and for the year ended September 30, 1999 and
illustrate the effects of the acquisition as if they had occurred as of the
beginning of the earliest period presented.
The Unaudited Pro Forma Condensed Combined Financial Statements should be read
in conjunction with the 1999 audited consolidated financial statements of Key
Technology, including the notes thereto, which were included in a Registration
Statement on Form S-4 (Registration No. 333-36920), as amended by pre-effective
Amendment No. 1, which was declared effective by the Securities and Exchange
Commission on June 7, 2000, the audited combined financial statements of Farmco
and Ro-Tech, included elsewhere herein, and the Notes to the Unaudited Pro Forma
Condensed Combined Financial Statements. The pro forma condensed combined
financial information is presented for illustrative purposes only and is not
necessarily indicative of the financial position or the results of operations
that would have actually been reported had the acquisition occurred at the
beginning of the period presented, nor is it necessarily indicative of future
financial positions or results of operations. The cost of the acquisition has
been allocated to the assets acquired and liabilities assumed based on their
estimated fair values as determined by management. The determination of the
purchase price as well as the allocation of the costs of the acquisition are
preliminary, and may be subject to further change as the company finalizes its
estimates.
Key Technology, Inc and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2000
Historical Historical Pro Forma Pro Forma
Key Farmco Adjustments Combined
----------- ----------- ----------- ---------
(Dollars in Thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 6,351 $ 889 $ (5,631) 1) $1,609
Short-term Investments 2,485 - - 2,485
Trade Accounts Receivable, net 11,939 385 - 12,324
Inventories -
Raw Materials 4,694 301 - 4,995
Work-in-process and sub-assemblies 5,625 100 - 5,725
Finished Goods 2,753 - - 2,753
----------- ------------ ----------- -----------
Total Inventories 13,072 401 - 13,473
Other Current Assets 1,935 5 - 1,940
----------- ------------ ----------- -----------
Total Current Assets 35,782 1,680 (5,631) 31,831
Property, Plant, and Equipment, Net 8,073 524 - 8,597
Goodwill and Other Intangibles, Net 1,501 45 5,695 1) 7,241
Other Assets 624 - - 624
----------- ------------ ----------- -----------
Total $45,980 $ 2,249 $ 64 $48,293
=========== ============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Note Payable to Shareholder $ - $ 502 $ (502) 1) $ -
Accounts Payable and Accrued Liabilities 9,404 349 9,753
Customer Deposits 2,559 43 - 2,602
Short-term Borrowings and Debt 291 19 - 310
----------- ------------ ----------- -----------
Total Current Liabilities 12,254 913 (502) 12,665
Long-term Debt 510 52 562
Deferred Income Taxes - - 1,850 1) 1,850
Total Shareholders Equity 33,216 1,284 (1,284) 1)& 2) 33,216
----------- ------------ ----------- -----------
Total $45,980 $ 2,249 $ 64 $48,293
=========== ============ =========== ===========
Key Technology Inc.
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2000
Adjustments
1) To record the acquisition and adjust the purchased assets to fair market
value, including recognition of goodwill. For illustrative purposes, the
acquisition price has been calculated as follows:
PURCHASE PRICE:
Cash $4,990,000
Acquisition costs, paid in cash 50,000
--------------
Total purchase price $5,040,000
==============
THE PURCHASE PRICE IS ALLOCATED AS FOLLOWS:
Cash $298,000
Accounts Receivable 385,000
Inventory 401,000
Other Current Assets 5,000
Property, Plant and Equipment 524,000
Goodwill and Other Intangibles 5,740,000
Liabilities Assumed (463,000)
Deferred Tax Liability (1,850,000)
--------------
Total $5,040,000
==============
Cash, liabilities and equity has been reduced to reflect the payment of a
$502,000 loan to the primary shareholder of Farmco and payment of $89,000
of S Corporation distributions as required by the purchase agreement.
Included in goodwill and other intangibles is $5,000,000 related to
existing patents and technologies and $740,000 of goodwill.
2) To eliminate the acquired company's remaining shareholders equity.
Key Technology, Inc and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the Six Months Ended March 31, 2000
Historical Historical Pro Forma Pro Forma
Key Farmco Adjustments Combined
----------- ----------- ------------ -------------
(Dollars in Thousands, except per share data)
Net Sales $32,160 $ 2,221 $ $ 34,381
-
Cost of Sales 20,285 893 - 21,178
----------- ----------- ----------- ------------
Gross Profit 11,875 1,328 - 13,203
Operating Expenses:
Selling and Marketing 5,739 299 - 6,038
Research and Development 2,404 14 - 2,418
General and Administrative 2,632 606 275 1) 3,513
----------- ----------- ----------- ------------
Total Operating Expense 10,775 919 275 11,969
----------- ----------- ----------- ------------
Income From Operations 1,100 409 (275) 1,234
Other Income 279 5 - 284
----------- ----------- ----------- ------------
Earnings (Loss) Before Income Taxes 1,379 414 (275) 1,518
Income Tax Expense 455 3 56 2) 3) 514
----------- ----------- ----------- ------------
Net Earnings (Loss) $ 924 $ 411 $(331) $ 1,004
=========== =========== =========== ============
Net Earnings Per Share - Basic $ 0.20 $ 0.21
=========== ============
Net Earnings Per Share - Diluted $ 0.20 $ 0.21
=========== ============
Shares used in Per Share Calculation - Basic 4,717 4,717
=========== ============
Shares used in Per Share Calculation - Diluted 4,720 4,720
=========== ============
Key Technology Inc.
Notes to Unaudited Pro Forma Condensed Combined Statement of Earnings
For the Six Months Ended March 31, 2000
Adjustments
1) To record the amortization of purchased intangibles and goodwill. The
adjustment consists of the following:
Amortization of patents and existing technologies
over 10 years on a straight line basis $250,000
Amortization of goodwill over 15 years on a straight line basis 25,000
---------
Total $275,000
=========
2) To add Federal income taxes at the statutory rate of 34%. The acquired
companies were subchapter S corporations and as such Federal income taxes
pass through to the shareholders and are not incurred at the corporate
level. This adjustment reflects the income tax rate had these companies
been merged as of the beginning of the period.
3) To record the income tax effect of pro forma adjustments using the
statutory rate of 34%. There is no income tax benefit from the $25,000
amortization of goodwill as this is a permanent book/tax difference.
Key Technology, Inc and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the Year Ended September 30, 1999
Historical Historical Pro Forma Pro Forma
Key Farmco Adjustments Combined
----------- ----------- ----------- -----------
(Dollars in Thousands, except per share data)
Net Sales $68,028 $ 4,147 $ - $ 72,175
Cost of Sales 42,281 1,586 - 43,867
----------- ----------- ----------- -----------
Gross Profit 25,747 2,561 - 28,308
Operating Expenses:
Selling and Marketing 11,125 614 - 11,739
Research and Development 4,347 31 - 4,378
General and Administrative 5,550 697 549 1) 6,796
----------- ----------- ----------- -----------
Total Operating Expense 21,022 1,342 549 22,913
----------- ----------- ----------- -----------
Income From Operations 4,725 1,219 (549) 5,395
Other Income (Expense) 436 (5) - 431
----------- ----------- ----------- -----------
Earnings(Loss) Before Income Taxes 5,161 1,214 (549) 5,826
Income Tax Expense 1,632 28 243 2) 3) 1,903
----------- ----------- ----------- -----------
Net Earnings(Loss) $ 3,529 $ 1,186 $ (792) $ 3,923
=========== =========== =========== ===========
Net Earnings Per Share - Basic $ 0.75 $ 0.83
=========== ===========
Net Earnings Per Share - Diluted $ 0.75 $ 0.83
=========== ===========
Shares used in Per Share Calculation - Basic 4,707 4,707
=========== ===========
Shares used in Per Share Calculation - Diluted 4,711 4,711
=========== ===========
Key Technology Inc.
Notes to Unaudited Pro Forma Condensed Combined Statement of Earnings
For the Year Ended September 30, 1999
Adjustments
1) To record the amortization of purchased intangibles and goodwill. The
adjustment consists of the following:
Amortization of patents and existing technologies over
10 years on a straight line basis $500,000
Amortization of goodwill over 15 years on a straight
line basis 49,000
--------------
Total $549,000
==============
2) To add Federal income taxes at the statutory rate of 34%. The acquired
companies were subchapter S corporations and as such Federal income taxes
pass through to the shareholders and are not incurred at the corporate
level. This adjustment reflects the income tax rate had these companies
been merged as of the beginning of the period.
3) To record the income tax effect of pro forma adjustments using the
statutory rate of 34%. There is no income tax benefit from the $49,000
amortization of goodwill as this is a permanent book/tax difference.
(c) Exhibits.
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
KEY TECHNOLOGY, INC.
By: /s/ Thomas C. Madsen
------------------------------------
Thomas C. Madsen, President and
Chief Executive Officer
Dated: July 27, 2000