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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2001
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-12944
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ZYGO CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 06-0864500
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
LAUREL BROOK ROAD, MIDDLEFIELD, CONNECTICUT 06455
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(Address of principal executive offices) (Zip Code)
(860) 347-8506
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Registrant's telephone number, including area code
N/A
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(Former name, former address, and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 X NO
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
17,389,987 Common Stock, $.10 Par Value, at November 9, 2001
================================================================================
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in this Form
10-Q Quarterly Report, regarding the Company's financial position, business
strategy, plans and objectives of management of the Company for future
operations, are forward-looking statements. These forward looking statements
include without limitation statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." 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 such as those disclosed under "Risk Factors" which references
the Form 10-K405. Such statements reflect the current views of the Company with
respect to future events and are subject to these and other risks, uncertainties
and assumptions relating to the operations, results of operations, and growth
strategy of the Company.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands, except per share amounts)
Three Months Ended
September 30,
--------------------
2001 2000
-------- --------
Net sales ............................................ $ 20,956 $ 23,932
Cost of good sold .................................... 13,931 13,963
-------- --------
Gross profit .................................... 7,025 9,969
Selling, general and administrative expenses ......... 5,812 5,391
Research, development and engineering expenses ....... 5,224 3,255
Amortization of goodwill and other intangibles ....... 199 199
-------- --------
Operating (loss) profit ......................... (4,210) 1,124
Other income (expense):
Interest income ................................. 555 322
Interest expense ................................ (229) (3)
Miscellaneous income (expense), net ............. 173 (64)
-------- --------
Total other income ......................... 499 255
-------- --------
(Loss) earnings before income taxes and
minority interest ........................ (3,711) 1,379
Income tax (benefit) expense ......................... (1,410) 469
-------- --------
(Loss) earnings before minority interest ............. (2,301) 910
Minority interest .................................... 70 93
-------- --------
Net (loss) earnings .................................. $ (2,371) $ 817
======== ========
(Loss) earnings per common and common
equivalent share:
Basic (1) ....................................... $ (.14) $ .06
======== ========
Diluted (1) ..................................... $ (.14) $ .05
======== ========
Weighted average common shares and common dilutive
equivalents outstanding:
Basic (2) ....................................... 17,389 14,300
======== ========
Diluted (2) ..................................... 17,389 15,209
======== ========
- ------------
(1) Accounting principles generally accepted in the United States of America
require the computation of the net loss per share to be based on the
weighted average basic shares outstanding.
(2) The difference between basic shares outstanding and diluted shares
outstanding is the assumed conversion of common stock equivalents (stock
options) in the amount of 909 shares for the three months ended September
30, 2000.
CONSOLIDATED BALANCE SHEETS
(Thousands, except share amounts)
SEPTEMBER 30, June 30,
2001 2001
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 40,977 $ 52,630
Marketable securities ........................... 7,188 7,121
Receivables ..................................... 21,451 27,278
Inventories ..................................... 25,651 24,261
Costs in excess of billings ..................... 1,600 1,802
Prepaid expenses ................................ 1,246 1,393
Deferred income taxes ........................... 4,055 4,076
--------- ---------
Total current assets ....................... 102,168 118,561
--------- ---------
Property, plant and equipment, net ................... 53,903 47,475
Deferred income taxes ................................ 15,819 15,819
Goodwill and other intangibles, net .................. 4,805 4,867
Other assets ......................................... -- 110
--------- ---------
TOTAL ASSETS ......................................... $ 176,695 $ 186,832
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............... $ 488 $ 279
Accounts payable ................................ 7,271 8,648
Accrued progress payments ....................... 364 549
Accrued salary and wages ........................ 2,285 7,153
Other accrued liabilities ....................... 4,680 4,688
Income taxes payable ............................ 1,428 3,132
--------- ---------
Total current liabilities .................. 16,516 24,449
--------- ---------
Long-term debt ....................................... 12,072 12,281
Minority interest .................................... 1,033 963
Stockholders' equity:
Common stock, $.10 par value per share:
40,000,000 shares authorized;
17,837,192 shares issued (17,803,812
at June 30, 2001); 17,389,987 shares
outstanding (17,356,607 at June 30, 2001) .. 1,784 1,780
Additional paid-in capital ...................... 134,887 134,380
Retained earnings ............................... 17,343 19,714
Accumulated other comprehensive income:
Currency translation effects ............... (873) (1,786)
Net unrealized gain (loss) on swap agreement (868) 31
Net unrealized gain on marketable securities 88 37
--------- --------
152,361 154,156
Less treasury stock, at cost;
447,205 common shares (447,205 shares at
June 30, 2001) .............................. 5,287 5,017
--------- ---------
Total stockholders' equity ................ 147,074 149,139
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........... $ 176,695 $ 186,832
========= =========
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Thousands)
Accum.
Other
Comp. Common Paid-In Retained Comp. Treasury
Total Income Stock Capital Earnings Income Stock
--------- -------- ---------- --------- ---------- --------- --------
Balance at June 30, 2001 ................. $ 149,139 $ 1,780 $ 134,380 $ 19,714 $ (1,718) $(5,017)
Comprehensive loss
Net loss (2,371) (2,371) (2,371)
------
Other comprehensive loss, net of tax
Unrealized gain on marketable
securities 51 51
Unrealized loss on swap agreement (899) (899)
Foreign currency translation effect 913 913
------
Other comprehensive loss 65 65
------
Comprehensive loss (2,306)
======
Repurchased common stock adjustment (270) (270)
Exercise of employee stock options
and related tax effect 511 4 507
--------- --------- --------- --------- --------- -------
Balance at September 30, 2001 ............ $ 147,074 $ 1,784 $ 134,887 $ 17,343 $ (1,653) $(5,287)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
Three Months Ended
September 30,
-------------------
2001 2000
-------- -------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net (loss) earnings ..................................... $ (2,371) $ 817
Adjustments to reconcile net earnings (loss) to cash
provided by (used for) operating activities:
Depreciation and amortization ...................... 1,782 1,146
Loss on disposal of assets ......................... 38 --
Deferred income taxes .............................. 21 --
Changes in operating accounts:
Receivables ................................... 5,828 (1,897)
Costs in excess of billings ................... 201 2,379
Inventories ................................... (1,390) (3,891)
Prepaid expenses .............................. 148 438
Accounts payable and accrued expenses ......... (8,129) (3,229)
Minority interest ............................. 70 93
-------- --------
Net cash provided by (used for) operating activities (3,802) (4,144)
-------- --------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant and equipment .............. (8,049) (4,433)
Investment in marketable securities ..................... (2,991) (9)
Investments in other assets ............................. (27) (2,353)
Proceeds from the sale of marketable securities ......... 2,975 --
-------- --------
Net cash provided by (used for) investing activities ... (8,092) (6,795)
-------- --------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Proceeds of debt ........................................ -- 250
Exercise of employee stock options ...................... 511 3,122
Repurchased common stock adjustment ..................... (270) --
-------- --------
Net cash provided by (used for) financing activities .... 241 3,372
-------- --------
Net increase (decrease) in cash and cash equivalents ......... (11,653) (7,567)
Cash and cash equivalents, beginning of year ................. 52,630 15,598
-------- --------
Cash and cash equivalents, end of period ..................... $ 40,977 $ 8,031
======== ========
These interim financial statements should be read in conjunction with the
financial statements and notes included in the Company's June 30, 2001 Annual
Report on Form 10-K405 including items incorporated by reference therein.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Thousands of dollars, except for share and per share amounts
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Balance Sheet at September 30, 2001, the Consolidated
Statements of Earnings for the three-months ended September 30, 2001 and 2000,
the Consolidated Statement of Stockholders' Equity for the three months ended
September 30, 2001, and the Consolidated Statements of Cash Flows for the three
months ended September 30, 2001 and 2000 are unaudited but, in the opinion of
the Company, include all adjustments, consisting only of normal recurring
accruals, necessary for a fair statement of the results of the interim periods.
The accompanying consolidated financial statements include the accounts of Zygo
Corporation and its subsidiaries ("ZYGO" or the "Company"). All material
transactions and accounts with the subsidiaries have been eliminated from the
consolidated financial statements. The results of operations for the period
ended September 30, 2001 are not necessarily indicative of the results to be
expected for the full fiscal year.
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."
The following table sets forth the reconciliation of weighted average shares
outstanding and diluted weighted average shares outstanding:
SEPTEMBER 30, September 30,
2001 2000
----------- -------------
Weighted average shares outstanding ....... 17,389 14,300
Dilutive effect of stock options .......... -- 909
------ ------
Diluted weighted average shares outstanding 17,389 15,209
====== ======
For the first quarter of fiscal 2002, the Company recorded a loss and 331 stock
options were excluded from the computation because of the anti-dilutive effect
on earnings per share.
INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market. At September 30, 2001 and June 30, 2001, inventories were as
follows:
SEPTEMBER 30, June 30,
2001 2001
------------ ---------
Raw materials and manufactured parts $ 18,528 $ 20,359
Work in process .................... 6,860 5,674
Finished goods ..................... 2,239 1,308
-------- --------
27,627 27,341
Reserves ........................... (1,976) (3,080)
-------- --------
$ 25,651 $ 24,261
======== ========
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Costs of additions,
replacements and improvements are capitalized. Maintenance and repairs are
charged to expense as incurred. At September 30, 2001 and June 30, 2001,
property, plant and equipment, at cost, were as follows:
SEPTEMBER 30, June 30,
2001 2001
------------- ---------
Land and land improvements ............... $ 3,816 $ 3,778
Buildings and building improvements ...... 24,164 9,199
Machinery, equipment, and office furniture 36,275 31,101
Leasehold improvements ................... 372 625
Construction in progress ................. 11,423 23,849
-------- --------
76,050 68,552
Accumulated depreciation ................. (22,147) (21,077)
-------- --------
$ 53,903 $ 47,475
======== ========
Depreciation is based on the estimated useful lives ranging from 3-40 years for
the various classes of assets and is computed using the straight-line method.
LONG-TERM DEBT
On May 14, 2001, the Company entered into a mortgage on the newly constructed
facility located in Westborough, Massachusetts. The mortgage amount is $12,560
at an interest rate of LIBOR plus 100 basis points (approximately 3.7% at
September 30, 2001) and is payable in full on May 14, 2007. Interest only
payments are to be made through February 14, 2002. The mortgage is then
amortizing on a 15-year level amortization schedule requiring level monthly
principal and interest payments. As of September 30, 2001, long-term debt was
$12,072 with a current portion of long-term debt of $488. The agreement contains
financial covenants, which among others relate to debt service and consolidated
debt ratios. As of September 30, 2001, the Company is in compliance with the
financial covenants.
In conjunction with the mortgage, the Company entered into an interest rate swap
agreement that provides for a fixed interest rate of approximately 7% for the
duration of the mortgage. As of September 30, 2001, the market value of the
agreement is $(868) and is recorded as a liability with a corresponding charge
to stockholders' equity.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations" which addresses the financial accounting and
reporting for business combinations and supercedes Accounting Principles Board
(APB) Opinion No. 16, "Business Combinations," and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 requires
that all business combinations be accounted for by a single method, the purchase
method, modifies the criteria for recognizing intangible assets, and expands
disclosure requirements. The provisions of SFAS No. 141 apply to all business
combinations initiated after June 30, 2001. We do not expect the adoption of
SFAS No. 141 to have a material effect on our results of operations or
statements of financial position.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" which addresses financial accounting and reporting for acquired goodwill
and other intangible assets
and supersedes APB No. 17, "Intangible Assets." SFAS No. 142 addresses how
intangible assets that are acquired individually or with a group of other assets
should be accounted for in financial statements upon their acquisition and after
they have been initially recognized in the financial statements. SFAS No. 142
requires that goodwill and intangible assets that have indefinite useful lives
not be amortized but rather tested at least annually for impairment, and
intangible assets that have finite useful lives be amortized over their useful
lives. SFAS No. 142 provides specific guidance for testing goodwill and
intangible assets that will not be amortized for impairment. In addition, SFAS
No. 142 expands the disclosure requirements for goodwill and other intangible
assets in the years subsequent to their acquisition. SFAS No. 142 is effective
for our fiscal year 2003, with early adoption permitted at the beginning of our
fiscal year 2002. Impairment losses for goodwill and indefinite-life intangible
assets that arise due to the initial application of SFAS No. 142 are to be
reported as resulting from a change in accounting principles. However, goodwill
and intangible assets acquired after June 30, 2001 will be subject immediately
to provisions of SFAS No. 142. We do not expect the adoption of SFAS No. 142 to
have a material effect on our results of operations or statements of financial
position and will adopt SFAS No. 142 effective for our fiscal year 2003.
NOTE 3: SEGMENT INFORMATION
FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards, using a management approach, for reporting
information regarding operating segments in annual financial statements. The
management approach designates the internal reporting that is used by the chief
operating decision-maker when making operating decisions and assessing
performance as the source of the Company's reportable segments. The Company's
president has been determined to be its chief operating decision-maker, as
defined under Statement 131.
The Company operates in three principal business segments globally:
Semiconductor, Industrial, and Telecommunications. The segment data is presented
below in a manner consistent with management's internal measurement of the
business.
Three Months Ended
September 30,
---------------------
2001 2000
------- --------
SEMICONDUCTOR
Sales ................... $10,385 $15,090
Gross profit ............ 3,931 6,226
Gross profit as a % sales 38% 41%
INDUSTRIAL
Sales ................... $ 8,272 $ 7,518
Gross profit ............ 2,649 3,141
Gross profit as a % sales 32% 42%
TELECOMMUNICATIONS
Sales ................... $ 2,299 $ 1,324
Gross profit ............ 445 602
Gross profit as a % sales 19% 45%
TOTAL
Sales ................... $20,956 $23,932
Gross profit ............ $ 7,025 $ 9,969
Gross profit as a % sales 34% 42%
Separate financial information by segment for total assets, capital
expenditures, and depreciation and amortization is not available and is not
evaluated by the chief operating decision-maker of the Company.
Substantially all of the Company's operating results, assets, depreciation, and
amortization are U.S. based. The Company's sales by geographic area were as
follows:
Three Months Ended
September 30,
-------------------
2001 2000
-------- --------
Americas (primarily United States) $10,391 $14,503
Far East:
Japan .......................... 5,901 5,197
Pacific Rim .................... 1,387 2,050
------- -------
Total Far East .................... $ 7,288 $ 7,247
Europe and Other (primarily Europe) 3,277 2,182
------- -------
Total ............................. $20,956 $23,932
======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of $20,956,000 for the first quarter of fiscal 2002 ended September
30, 2001 decreased by $2,976,000, or 12%, from $23,932,000 for the comparable
quarter ended September 30, 2000. For the first quarter of fiscal 2002, net
sales in the semiconductor segment were $10,385,000, or 50% of total net sales,
as compared to $15,090,000, or 63%, in the prior year period; net sales in the
industrial segment were $8,272,000, or 39% of total net sales, as compared to
$7,518,000, or 31%, in the prior year period; and net sales in the
telecommunications segment were $2,299,000, or 11% of total net sales, as
compared to $1,324,000, or 6%, in the prior year period. The Company was
impacted significantly by the downturn in the semiconductor industry.
Company sales to the Americas, the vast majority of which are in the United
States, amounted to $10,391,000 in the first quarter of fiscal 2002, a decrease
of $4,112,000, or 28%, from the first quarter of fiscal 2001 levels of
$14,503,000. The Company's sales to outside the Americas amounted to $10,565,000
in the first quarter of fiscal 2002, an increase of $1,136,000, or 12%, from the
first quarter of fiscal 2001 levels of $9,429,000. Sales to Japan during the
first quarter of fiscal 2002 amounted to $5,901,000, an increase of $704,000, or
14%, from the first quarter of fiscal 2001 sales levels. Japan sales were driven
by demand for metrology instrumentation components in the semiconductor and
industrial markets. Sales to Europe/Other, primarily Europe, amounted to
$3,277,000, an increase of $1,095,000, or 50%, from the first quarter of fiscal
2001 due to increased sales in the industrial and semiconductor markets. Sales
to the Pacific Rim, excluding Japan, amounted to $1,387,000, a decrease of
$663,000, or 32%, from the first quarter of fiscal 2001 sales levels due to
reductions in sales in the semiconductor market. Substantially all of the
Company's sales and costs are negotiated and paid in U.S. dollars. Significant
changes in the values of foreign currencies relative to the value of the U.S.
dollar can impact the sales of the Company's products in its export markets, as
would changes in the general economic conditions in those markets. The impact of
such changes in foreign currency values on the Company's sales cannot be
measured.
Gross profit in the first quarter of fiscal 2002 amounted to $7,025,000, a
decrease of $2,944,000, or 30%, from gross profit of $9,969,000 in the first
quarter of fiscal 2001. Gross profit as a percentage of sales in the first
quarter of fiscal 2002 was 34%, as compared to 42% in the first quarter of
fiscal 2001. The decrease in gross profit and gross profit as a percentage of
sales primarily were due to lower production volumes and a change in product mix
from the semiconductor to the industrial segment, which carries a lower margin.
Selling, general and administrative expenses ("SG&A") in the first quarter of
fiscal 2002 amounted to $5,812,000, an increase of $421,000, or 8%, from the
first quarter of fiscal 2001. As a percentage of net sales, SG&A for the first
quarter of fiscal 2002 was 28%, as compared to 23% in the first quarter of
fiscal 2001. The increase in SG&A for the first quarter of fiscal 2002 resulted
from the increase in the sales infrastructure for the telecommunications market,
partially offset by lower incentive compensation costs due to lower sales
volume.
Research, development and engineering expenses ("R&D") in the first quarter of
fiscal 2002 totaled $5,224,000 and increased by $1,969,000, or 60%. R&D as a
percentage of net sales for the first quarter of fiscal 2002 was 25%, as
compared to 14% in the first quarter of fiscal 2001. The increase in R&D for the
first quarter of fiscal 2002 primarily was due to continued
investment in the semiconductor and telecommunication segments, including
telecommunication automation.
Amortization expense remained constant at $199,000 for the first quarter of both
fiscal 2002 and fiscal 2001.
The Company recorded an operating loss of $4,210,000 in the first quarter of
fiscal 2002, as compared to operating profit of $1,124,000 in the first quarter
of fiscal 2001. The operating loss as a percentage of sales in the first quarter
of fiscal 2002 was (20%), as compared to an operating profit as a percentage of
sales of 5% in the first quarter of fiscal 2001.
Income tax benefit in the first quarter of fiscal 2002 totaled $1,410,000, or
38% of pretax losses, which compares with an income tax expense of $469,000, or
34% of pretax profits, in the first quarter of fiscal 2001. The effective tax
rate of 38% for first quarter fiscal 2002 has increased from the 24% tax rate
used for fiscal 2001. The lower effective tax rate in fiscal 2001 primarily was
due to the impact of transactions involving the early sale of stock resulting
from the exercise of incentive stock options by former employees of Firefly
Technologies, Inc.
The Company recorded a net loss of $2,371,000 for the first quarter ended
September 30, 2001 as compared to net earnings of $817,000 for the comparable
quarter ended September 30, 2000. On a diluted per share basis, the net loss was
$.14 per share for the quarter ended September 30, 2001, compared with a net
earnings of $.05 per share in the comparable prior year period. The net loss per
share is based on the weighted average basic shares outstanding which equals the
diluted weighted average shares. The basic and fully diluted weighted average
number of shares outstanding for the quarter ended September 30, 2001 were
17,389,000 as compared to 14,300,000 basic shares and 15,209,000 fully diluted
shares for the quarter ended September 30, 2000. The increases in the number of
shares outstanding were due to the 2,924,500 shares issued in March 2001 in the
secondary offering of the Company's common stock and the exercise of stock
options.
Backlog at September 30, 2001 was $54,746,000, a decrease of $756,000, or 1%, as
compared to $55,502,000 at June 30, 2001, and a decrease of $1,733,000, or 3%,
from $56,479,000 at September 30, 2000. The backlog at September 30, 2001
consisted of $30,818,000, or 56%, in the semiconductor segment; $13,028,000, or
24%, in the industrial segment; and $10,900,000, or 20%, in the
telecommunications segment. Orders for first quarter of fiscal 2002 totaled
$20,200,000 and consisted of $6,262,000, or 31%, in the semiconductor segment;
$9,551,000, or 47%, in the industrial segment; and $4,387,000, or 22%, in the
telecommunications segment.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, working capital was $85,652,000, a decrease of $8,460,000
from the $94,112,000 at June 30, 2001. The Company maintained cash, cash
equivalents, and marketable securities of $48,165,000 at September 30, 2001,
which primarily are invested in securities with maturities of 30 days or less.
This represents a decrease of $11,586,000 from June 30, 2001, primarily due to
investments in property, plant, and equipment and reductions in current
liabilities, partially offset by a decrease in accounts receivable. The increase
in property, plant, and equipment in the first quarter of fiscal 2002 primarily
related to investment in the new Zygo TeraOptix facility in Westborough,
Massachusetts ($4,173,000) and in optical equipment ($1,306,000). The decrease
in current liabilities primarily was due to the payment of profit sharing and
other incentive compensation attributable to fiscal 2001 results ($3,473,000)
and a reduction in income taxes payable related to the tax benefit generated by
the loss for the first quarter of fiscal 2002 ($1,410,000). As of September 30,
2001 the Company
had $12,560,000 in long-term debt related to a mortgage on the new plant in
Westborough, Massachusetts. There were no borrowings outstanding under the
Company's $3,000,000 bank line of credit at September 30, 2001. Stockholders
equity at September 30, 2001 decreased by $2,065,000 from June 30, 2001 to
$147,074,000, primarily due to the net loss in the first quarter of fiscal 2002.
RISK FACTORS THAT MAY IMPACT FUTURE RESULTS
There have been no significant changes in our assessment of risk factors that
may impact future results from that disclosed in our Form 10-K405 for the year
ended June 30, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk involves forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements. We are exposed to market risk related to changes in
interest rates and foreign currency exchange rates. We do not use derivative
financial instruments for speculative or trading purposes.
INTEREST RATE SENSITIVITY
We maintain a portfolio of cash equivalents and marketable securities including
money market funds, commercial paper, corporate bonds and tax-exempt bonds. Our
interest income on our variable rate investments are sensitive to changes in the
general level of U.S. interest rates, particularly since the majority of our
investments are short-term instruments. The impact of interest rate changes on
the Company's results cannot be measured.
During fiscal 2001, the Company entered into a mortgage on its Westborough
facility of $12,560,000 at an interest rate of LIBOR plus 100 basis points (3.7%
at September 30, 2001) which is payable in full on May 14, 2007. In conjunction
with the mortgage, the Company entered into an interest rate swap agreement that
provides for a fixed interest rate of approximately 7% for the duration of the
mortgage. Due to the existence of the swap agreement, we do not believe that a
material risk exposure exists.
EXCHANGE RATE SENSITIVITY
Substantially all of the Company's sales and costs are negotiated and paid in
U.S. dollars. Significant changes in the values of foreign currencies relative
to the value of the U.S. dollar can impact the sales of the Company's products
in its export markets as would changes in the general economic conditions in
those markets. The impact of such changes in foreign currency values on the
Company's sales cannot be measured.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None.
(b) None.
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
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(Registrant)
/s/ J. BRUCE ROBINSON
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J. Bruce Robinson
President, Chairman, and Chief Executive
Officer
/s/ RICHARD M. DRESSLER
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Richard M. Dressler
Vice President, Finance, Chief Financial
Officer, and Treasurer
Date: NOVEMBER 14, 2001