Exhibit 99.1
FORWARD-LOOKING STATEMENT RISK AND UNCERTAINTY FACTORS
December 1999
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 you not to place undue reliance on its
forward-looking statements, which speak only as to 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. 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.
Pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Key hereby files the following cautionary
statements identifying certain factors that could cause its actual results to
differ materially from those described in its forward-looking statements.
UNCERTAINTIES RELATING TO PATENTS AND PROPRIETARY INFORMATION. The
Company's competitive position may be affected by its ability to protect its
proprietary technology. The Company has obtained certain patents and has filed a
number of patent applications. Key also anticipates filing applications for
protection of its future products and technology. There can be no assurance that
any such patents will provide meaningful protection for Key's product
innovations. There also can be no assurance that the Company will obtain any
patent for which it applies, that existing patents to which Key has rights will
not be challenged, or that the issuance of a patent will give the Company any
material advantage over its competition in connection with any of its products.
Key may experience additional intellectual property risks in international
markets where it may lack patent protection. The patent laws of other countries
may differ from those of the U.S. as to the patentability of the Company's
products and processes. Moreover, the degree of protection afforded by foreign
patents may be different from that of U.S. patents.
POTENTIAL FOR PATENT-RELATED LITIGATION EXPENSES AND OTHER COSTS RESULTING
FROM CLAIMS ASSERTED AGAINST THE COMPANY OR ITS CUSTOMERS BY THIRD PARTIES. The
technologies used by the Company may infringe the patents or proprietary
technology of others. In the past, the Company has been required to initiate
litigation to protect its patents. The cost of enforcing Key's patent rights in
lawsuits that it may bring against infringers or of defending itself against
infringement charges by other patent holders or other third parties, including
customers, may be high and could have an adverse effect on the Company's results
of operations and its customer relations.
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Certain users of the Company's products have received notice of patent
infringement from the Lemelson Medical, Educational and Research Foundation
Limited Partnership (the "Partnership") alleging that their use of the Company's
products may infringe certain patents transferred to the Partnership by the late
Jerome H. Lemelson. Certain of these users have notified the Company that, in
the event it is subsequently determined that their use of the Company's products
infringes any of the Partnership's patents, they may seek indemnification from
the Company for damages or expenses resulting from this matter. The Company does
not believe its products infringe any valid and enforceable claims of the
Partnership's patents. Furthermore, the Partnership has stated that it is not
the Company's products that infringe the Partnership's patents, but rather the
use of those products by the Company's customers. The Company cannot predict the
outcome of this matter nor any related litigation or other costs related to
mitigation activities that may arise in the future, the effect of such
litigation or mitigation activities on the financial results of the Company, or
the effect upon its customer relations.
EXPIRATION OF CERTAIN PATENTS AND ANY RESULTING EFFECT UPON COMPETITION AND
SALES OF RELATED PRODUCT LINES. From time to time, certain of the Company's
patents expire. In calendar 1999, the U.S. and certain international patents
held by the Company related to its Iso-Flo vibratory conveyor system expired.
There can be no assurance that the expiration of the Iso-Flo patent, or any
other expiring patent held by the Company, will not result in increased
competition and decreased sales of the related product line.
ACHIEVEMENT OF PRODUCT PERFORMANCE SPECIFICATIONS AND ANY RELATED EFFECT ON
PRODUCT UPGRADE OR WARRANTY EXPENSES. The Company provides a one year warranty
on its products. In addition, for certain standard or custom-designed systems,
the Company contracts to meet certain performance specifications for a specific
application or set of applications. In the past, the Company has incurred higher
warranty expenses related to new products than it typically incurs with
established products. There can be no assurance that the Company will not incur
substantial warranty expenses in the future with respect to new products, as
well as established products, or with respect to its obligations to meet, or
provide product upgrades to meet, performance specifications, which may have an
adverse effect on its results of operations and customer relations.
ABILITY OF NEW PRODUCTS TO COMPETE SUCCESSFULLY IN EITHER EXISTING OR NEW
MARKETS. The future success and growth of the Company is dependent upon
continuing sales in certain food processing markets, particularly the french fry
and vegetable processing markets, as well as successful penetration of new
products into other existing and potential markets. The Company also intends to
expand the marketing of its current and new products into new markets, including
international markets. There can be no assurance the Company can successfully
penetrate these potential markets or expand into foreign markets with its
current or new products.
POTENTIAL FOR ADVERSE FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES. The
terms of sales to European and other international customers of products
manufactured by the Company's domestic operations have typically been
denominated in U.S. dollars, although exceptions do occur on an individual case
basis. The Company expects that its standard terms of sales to international
customers, other than those in Europe, will continue substantially in their
present form. However the Company does expect to increasingly price its products
sold to European customers in euros. For sales transactions between
international 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 limited currency hedging transactions
to minimize the impact of foreign currency fluctuations. However, there is no
assurance that foreign currency fluctuations will not have an adverse effect on
the Company's results of operations
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EFFECT OF PRODUCT OR MARKET DEVELOPMENT ACTIVITIES. The Company's future
operating results will depend upon its ability to improve and market existing
products and to develop and successfully market new products and services There
is no assurance that the Company will be able to enhance its existing products
or to develop new products or services in response to customer requirements or
product introductions by competitors, which could have an adverse effect on the
Company's results of operations.
AVAILABILITY AND FUTURE COSTS OF MATERIALS AND OTHER OPERATING EXPENSES.
Certain of the components, subassemblies and materials for the Company's
products are obtained from single sources or a limited group of suppliers.
Although the Company seeks to reduce dependence on sole or limited source
suppliers, the partial or complete loss of certain of these sources could have
an adverse effect on the Company's results of operations and customer
relationships. In addition, certain basic materials, such as stainless steel,
are used extensively in the Company's product fabrication processes. Such basic
materials may also be subject to worldwide shortages or price fluctuations
related to the supply of or demand for raw materials, such as nickel, which are
used in their production by the Company's suppliers. A significant increase in
the price or decrease in the availability of one or more of these components,
subassemblies or basic materials could also adversely effect the Company's
results of operations.
COMPETITIVE FACTORS. The markets for the Company's products are highly
competitive. Some of the Company's competitors may have substantially greater
financial, technical, marketing and other resources than the Company. Important
competitive factors in the Company's markets include price, performance,
reliability, customer support and service. Although the Company believes that it
currently competes effectively with respect to these factors, there can be no
assurance that the Company will be able to continue to compete effectively in
the future.
RISKS INVOLVED IN EXPANDING INTERNATIONAL OPERATIONS AND SALES. During the
fiscal years 1999, 1998 and 1997, export and international sales accounted for
46%, 37% and 32%, respectively, of the Company's net sales in each such year.
The Company expects to continue to expand its selling, marketing and other
operational activities in international markets. The Company's current and
future foreign operations are, and will be, subject to risks involved in
international operations and sales, such as currency fluctuations, export
controls and other government regulations. In addition, the laws of certain
foreign countries may not protect the Company's intellectual property rights to
the same extent as do the laws of the United States.
COSTS OR EXPENDITURES ASSOCIATED WITH REMEDIATING POTENTIAL YEAR 2000
ISSUES. The Company believes it has substantially completed an enterprise-wide
program to prepare its computer systems, applications and products for the year
2000 date conversion. The total cost of compliance and its effect on the
Company's future results of operations continues to be determined as a part of
the detailed and on-going compliance-planning program. However, there can be no
assurance that any such plans will fully mitigate all failures or problems
associated with the year 2000 date conversion. In addition, there are third
parties, such as utilities, transportation and telecommunication companies,
where alternative arrangements or sources are limited or unavailable.
PERFORMANCE AND NEEDS OF INDUSTRIES SERVED BY THE COMPANY AND THE FINANCIAL
CAPACITY OF CUSTOMERS IN THESE INDUSTRIES TO PURCHASE CAPITAL EQUIPMENT. A
substantial portion of the Company's historical sales has been in the potato and
vegetable processing markets. The Company also expects to expand its selling and
marketing activities into other domestic and international markets, such as
coffee and tobacco. Reductions in capital equipment expenditures by processors
in such markets due to commodity surpluses, product price fluctuations, changing
consumer preferences, fluctuations in foreign currency exchange rates or other
factors could have an adverse effect on the Company's results of operations.
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