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 March 26, 2004
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- ---------------
Commission File Number 0-12944
ZYGO CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0864500
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Laurel Brook Road, Middlefield, Connecticut 06455
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(860) 347-8506
--------------------------------------------------
Registrant's telephone number, including area code
N/A
---------------------------------------------------------------------
(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.
[X] YES [_] NO
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[X] 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.
17,865,591 shares of Common Stock, $.10 Par Value, at April 28, 2004
1
FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in this Form
10-Q Quarterly Report, regarding our financial position, business strategy,
plans, anticipated growth rates, and objectives of management 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 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 in the
semiconductor industry, fluctuations in net sales to our major customer,
manufacturing and supplier risks, dependence on new product development, rapid
technological and market change, international operations, dependence on
proprietary technology and key personnel, length of the sales cycle,
environmental regulations, and changes in expected costs of discontinued
operations. Further information on potential factors that could affect our
business is described in our reports on file with the Securities and Exchange
Commission, including our Form 10-K for the fiscal year ended June 30, 2003.
2
PART I - Financial Information
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands, except per share amounts)
Three Months Ended Nine Months Ended
--------------------- ---------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales
Products $23,425 $22,450 $66,996 $ 62,003
Development services 5,008 6,560 13,338 13,726
------- ------- ------- --------
28,433 29,010 80,334 75,729
------- ------- ------- --------
Cost of goods sold
Products 14,878 14,250 42,050 38,906
Development services 4,153 5,258 10,718 10,960
------- ------- ------- --------
19,031 19,508 52,768 49,866
------- ------- ------- --------
Gross profit 9,402 9,502 27,566 25,863
Selling, general, and administrative expenses 5,358 5,716 16,802 16,574
Research, development, and engineering expenses 2,725 2,510 9,344 8,696
------- ------- ------- --------
Operating profit 1,319 1,276 1,420 593
------- ------- ------- --------
Other income (expense):
Interest income 219 220 638 712
Miscellaneous income (expense), net 138 (108) 213 (275)
------- ------- ------- --------
Total other income 357 112 851 437
------- ------- ------- --------
Earnings from continuing operations before
income taxes and minority interest 1,676 1,388 2,271 1,030
Income tax expense (637) (515) (863) (384)
Minority interest (71) (93) (175) (324)
------- ------- ------- --------
Earnings from continuing operations 968 780 1,233 322
------- ------- ------- --------
Discontinued TeraOptix operations, net of tax (340) (338) (1,221) (2,482)
Charges and adjustments on the disposal of
TeraOptix, net of tax (327) 39 (1,520) (9,079)
------- ------- ------- --------
Loss from discontinued operations (667) (299) (2,741) (11,561)
------- ------- ------- --------
Net earnings (loss) $ 301 $ 481 $(1,508) $(11,239)
======= ======= ======= ========
Basic - Earnings (loss) per share:
Continuing operations $ 0.05 $ 0.04 $ 0.07 $ 0.02
Discontinued operations $ (0.03) $ (0.01) $ (0.15) $ (0.66)
------- ------- ------- --------
Net earnings (loss) $ 0.02 $ 0.03 $ (0.08) $ (0.64)
======= ======= ======= ========
Diluted - Earnings (loss) per share:
Continuing operations $ 0.05 $ 0.04 $ 0.07 $ 0.02
Discontinued operations $ (0.03) $ (0.01) $ (0.15) $ (0.65)
------- ------- ------- --------
Net earnings (loss) $ 0.02 $ 0.03 $ (0.08) $ (0.63)
======= ======= ======= ========
Weighted average shares outstanding:
Basic shares 17,858 17,560 17,775 17,527
======= ======= ======= ========
Diluted shares 18,422 17,738 18,248 17,708
======= ======= ======= ========
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Thousands of dollars, except share amounts)
March 26, 2004 June 30, 2003
-------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 18,830 $ 31,209
Marketable securities 7,931 14,929
Receivables 19,808 12,868
Inventories 21,128 18,444
Prepaid expenses 1,234 1,791
Deferred income taxes 5,529 5,179
Assets of discontinued unit held for sale 9,595 11,899
-------- --------
Total current assets 84,055 96,319
Marketable securities 7,344 6,712
Property, plant, and equipment, net 27,265 26,648
Deferred income taxes 27,568 26,364
Intangible assets, net 4,821 4,464
Other assets 1,138 561
-------- --------
Total assets $152,191 $161,068
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ - $ 11,374
Payables 8,943 5,254
Progress payments received from customers 603 2,319
Accrued salaries and wages 3,522 3,612
Other accrued liabilities 3,679 5,129
Income taxes payable 1,593 1,750
-------- --------
Total current liabilities 18,340 29,438
Other long-term liabilities 328 609
Minority interest 1,101 1,161
-------- --------
Total liabilities 19,769 31,208
-------- --------
Stockholders' equity:
Common Stock, $.10 par value per share:
40,000,000 shares authorized;
18,312,371 shares issued (18,042,917 at
June 30, 2003);
17,865,166 shares outstanding (17,595,712 at
June 30, 2003) 1,831 1,804
Additional paid-in capital 140,952 138,333
Retained earnings (accumulated deficit) (4,097) (2,589)
Accumulated other comprehensive income (loss):
Currency translation effects (1,050) (1,623)
Net unrealized loss on swap agreement - (914)
Net unrealized gain on marketable securities 73 136
-------- --------
137,709 135,147
Less treasury stock, at cost (447,205 shares) 5,287 5,287
-------- --------
Total stockholders' equity 132,422 129,860
-------- --------
Total liabilities and stockholders' equity $152,191 $161,068
======== ========
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Thousands of dollars)
Nine Months Ended
---------------------
March 26, March 28,
2004 2003
--------- ---------
Cash provided by (used for) operating activities:
Net loss $ (1,508) $(11,239)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Loss from discontinued operations 2,741 11,561
Depreciation and amortization 4,271 4,277
Gain on disposal of assets 173 740
Deferred income taxes 629 234
Other, net 347 57
Changes in operating accounts:
Receivables (7,086) 230
Inventories (2,684) 3,559
Prepaid expenses 559 567
Accounts payable and accrued expenses 2,003 3,794
Minority interest 175 324
-------- --------
Net cash provided by (used for) continuing operations (380) 14,104
Net cash used for discontinued operations (1,852) (4,522)
-------- --------
Net cash provided by (used for) operating activities (2,232) 9,582
-------- --------
Cash provided by (used for) investing activities:
Additions to property, plant, and equipment (5,521) (3,446)
Investment in marketable securities (4,941) (5,019)
Investments in other assets (743) (893)
Interest and restricted cash from sale of Automation
Systems Group - 1,225
Proceeds from the sale or maturity of marketable securities 11,226 2,696
-------- --------
Net cash provided by (used for) continuing operations 21 (5,437)
Net cash provided by discontinued operations - 2,822
-------- --------
Net cash provided by (used for) investing activities 21 (2,615)
-------- --------
Cash provided by (used for) financing activities:
Dividend payments to minority interest (235) (268)
Employee stock purchase 578 731
Exercise of employee stock options 863 6
-------- --------
Net cash provided by continuing operations 1,206 469
Net cash used for discontinued operations (11,374) (628)
-------- --------
Net cash used for financing activities (10,168) (159)
-------- --------
Net increase (decrease) in cash and cash equivalents (12,379) 6,808
Cash and cash equivalents, beginning of period 31,209 28,513
-------- --------
Cash and cash equivalents, end of period $ 18,830 $ 35,321
======== ========
See accompanying notes to consolidated financial statements
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except for per share amounts)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
Zygo Corporation is a worldwide supplier of optical metrology instruments,
precision optics, and electro-optical design and manufacturing services for the
semiconductor capital equipment and industrial markets. The accompanying
consolidated financial statements include the accounts of Zygo Corporation and
our subsidiaries ("ZYGO," "we," "our," "us," or "Company"). All material
intercompany transactions and accounts have been eliminated from the
consolidated financial statements. The results of operations for the three and
nine month periods ended March 26, 2004 are not necessarily indicative of the
results to be expected for the full fiscal year.
The Consolidated Balance Sheet at March 26, 2004, the Consolidated Statements of
Operations for the three and nine months ended March 26, 2004 and March 28,
2003, and the Consolidated Statements of Cash Flows for the nine months ended
March 26, 2004 and March 28, 2003 are unaudited but, in management's opinion,
include all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the results of the interim periods. The accompanying
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in our June 30, 2003 Annual
Report on Form 10-K, including items incorporated by reference therein.
Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are calculated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share."
The following table sets forth the reconciliation of basic weighted average
shares outstanding and diluted weighted average shares outstanding:
Three Months Ended Nine Months Ended
----------------------- -----------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Basic weighted average shares
outstanding 17,858,346 17,559,978 17,774,599 17,526,965
Dilutive effect of stock options 563,322 178,053 473,561 181,365
---------- ---------- ---------- ----------
Diluted weighted average
shares outstanding 18,421,668 17,738,031 18,248,160 17,708,330
========== ========== ========== ==========
Stock Compensation Plans
As of March 26, 2004, we have two stock-based compensation plans, which are
described below. A third stock-based compensation plan expired in September
2002. We apply Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
our plans. Since all options were granted with an exercise price equal to the
market value of the stock on the date of grant, no compensation cost has been
recognized for our fixed option plans. Pro forma information regarding net
income and earnings per share is required by SFAS No. 123 "Accounting for
Stock-Based Compensation," which requires that the information be determined as
if we have accounted for our stock options granted in fiscal years beginning
after December 15, 1994 under the fair value method of the Statement.
The Zygo Corporation Amended and Restated Non-Employee Director Stock Option
Plan permits the granting of non-qualified options to purchase a total of
620,000 shares (adjusted for splits) of common stock at prices not less than the
market value of the stock on the date of grant. Under the terms of the Plan, as
amended on August 19, 2003, each new non-employee director (other than a person
who was previously an employee of ZYGO or any of our subsidiaries) is granted an
option to purchase 12,000 shares of common stock, generally, on his or her first
day of service as a non-employee director; and each other non-employee director
is granted an option to purchase 6,000 shares of common stock on an annual
basis. All options are fully exercisable on the date of grant and have a 10-year
term. The Plan, as amended, will expire on November 17, 2009.
6
The Zygo Corporation 2002 Equity Incentive Plan permits the granting of
restricted stock and stock options to purchase shares of common stock up to a
total of 1,500,000 shares. The exercise price per share of common stock covered
by an option may not be less than the par value per share on the date of grant,
and in the case of an incentive stock option, the exercise price may not be less
than the market value per share on the date of grant. The Plan will expire on
August 27, 2012. Pursuant to the terms of the Plan, the Board of Directors may
also amend the Plan to authorize the grant of other types of equity-based
awards, without further action by our stockholders.
The Zygo Corporation Amended and Restated Non-Qualified Stock Option Plan
permitted the granting of non-qualified options to purchase a total of 4,850,000
shares (adjusted for splits) of common stock at prices not less than the market
value of the stock on the date of grant. Options generally became exercisable at
the rate of 25% of the shares each year commencing one year after the date of
grant. The Plan, as amended, expired on September 3, 2002.
The fair value of options at date of grant was estimated using the Black-Scholes
model. Our pro forma information is as follows:
Three Months Ended Nine Months Ended
--------------------- ---------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss), as reported $ 301 $ 481 $(1,508) $(11,239)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of related
tax effects (1,446) (1,093) (4,272) (3,861)
------- ------- ------- --------
Pro forma net loss $(1,145) $ (612) $(5,780) $(15,100)
======= ======= ======= ========
Net income (loss) per share
Basic - as reported $ 0.02 $ 0.03 $ (0.08) $ (0.64)
======= ======= ======= ========
Basic - pro forma $ (0.06) $ (0.03) $ (0.33) $ (0.86)
======= ======= ======= ========
Diluted - as reported $ 0.02 $ 0.03 $ (0.08) $ (0.63)
======= ======= ======= ========
Diluted - pro forma $ (0.06) $ (0.03) $ (0.32) $ (0.86)
======= ======= ======= ========
Comprehensive Income (Loss)
Our total comprehensive income (loss) was as follows:
Three Months Ended Nine Months Ended
--------------------- ---------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss) $ 301 $ 481 $(1,508) $(11,239)
Unrealized gain (loss) on
marketable securities, net of tax (16) (21) (63) 15
Unrealized gain (loss) on
swap agreement, net of tax - 29 337 (317)
Reclassification adjustment for
loss on swap agreement included
in net loss, net of tax - - 577 -
Foreign currency translation effect (212) (221) 573 307
----- ----- ------- --------
Comprehensive income (loss) $ 73 $ 268 $ (84) $(11,234)
===== ===== ======= ========
7
Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market. At March 26, 2004 and June 30, 2003, inventories were as
follows:
March 26, June 30,
2004 2003
--------- --------
Raw materials and manufactured parts $11,341 $10,103
Work in process 9,276 7,816
Finished goods 511 525
------- -------
$21,128 $18,444
======= =======
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred. Management evaluates, on an ongoing basis, the
carrying value of our property, plant, and equipment and makes adjustments when
impairments are identified. Depreciation is based on the estimated useful lives
of the various classes of assets and is computed using the straight-line method.
At March 26, 2004 and June 30, 2003, property, plant, and equipment were as
follows:
Estimated
March 26, June 30, Useful Life
2004 2003 (Years)
--------- -------- -----------
Land $ 615 $ 615 -
Building and improvements 11,437 11,355 15-40
Machinery, equipment, and office furniture 39,083 39,545 3-8
Leasehold improvements 314 166 1-5
Construction in progress 5,109 2,222 -
------- -------
56,558 53,903
Accumulated depreciation (29,293) (27,255)
------- -------
$27,265 $26,648
======= =======
Depreciation expense for the three months ended March 26, 2004 and March 28,
2003 was $1,131 and $1,322, respectively. Depreciation expense for the nine
months ended March 26, 2004 and March 28, 2003 was $3,917 and $4,077,
respectively.
Intangible Assets
Intangible assets include patents, trademarks, and license agreements. The cost
of intangible assets is amortized on a straight-line basis, which ranges from
4-20 years. Intangible assets, at cost, at March 26, 2004 and June 30, 2003 were
as follows:
March 26, June 30,
2004 2003
--------- --------
Intangible assets $ 6,454 $ 5,775
Accumulated amortization (1,633) (1,311)
------- -------
$ 4,821 $ 4,464
======= =======
Intangible amortization expense was $110 and $99 for the three months ended
March 26, 2004 and March 28, 2003, respectively. Intangible amortization expense
was $322 and $394 for the nine months of fiscal 2004 and fiscal 2003,
respectively. Amortization expense related to certain intangible assets is
included in cost of goods sold in the Consolidated Statements of Operations.
8
Warranty
A limited warranty is provided on our products for periods ranging from 3 to 12
months and allowances for estimated warranty costs are recorded during the
period of sale. The determination of such allowances requires management to make
estimates of product return rates and expected costs to repair or replace
products under warranty. If actual return rates or repair and replacement costs,
or both, differ significantly from management's estimates, adjustments to the
expense may be required.
The following is a reconciliation of the beginning and ending balances of our
accrued warranty liability, which is included in the "Other accrued liabilities"
line item in the Consolidated Balance Sheets:
Nine Months Ended
---------------------
March 26, March 28,
2004 2003
--------- ---------
Beginning balance $ 1,215 $ 830
Reductions for payments made (1,894) (724)
Changes in accruals related to
warranties issued in
the current period 1,216 183
Changes in accruals related
to pre-existing warranties 757 1,098
------- ------
Ending balance $ 1,294 $1,387
======= ======
Supplemental Cash Flow Information
Interest payments on debt were $480 and $765 for the nine months ended March 26,
2004 and March 28, 2003, respectively. We also paid $1,109 in the second quarter
of fiscal 2004 in connection with the settlement of the interest rate swap
agreement.
Income tax payments amounted to $92 and $109 for the nine months ended March 26,
2004 and March 28, 2003, respectively.
NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities," which amends and clarifies financial accounting and
reporting for derivative instruments. SFAS No. 149 became effective for us in
July 2003. The adoption of SFAS No. 149 did not have a material affect on our
results of operations or financial position.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity.
Generally, the statement is effective for financial instruments entered into or
modified after November 5, 2003 and is otherwise effective for the beginning of
the first interim period beginning after June 15, 2003. The adoption of SFAS No.
150 did not have a material affect on our results of operations or financial
position.
The FASB's Emerging Issues Task Force ("EITF") reached a consensus on Issue No.
00-21, "Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21
provides guidance on how to account for arrangements that involve the delivery
or performance of multiple products, services, and/or rights to use assets. The
provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in
fiscal periods beginning after June 15, 2003. The adoption of EITF Issue No.
00-21 did not have a material effect on our results of operations or financial
position.
In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which expands
financial statement disclosures for defined benefit plans. The change replaces
existing FASB disclosure requirements for pensions. The adoption of SFAS No. 132
(revised) did not have a material affect on our results of operations or
financial position.
9
NOTE 3: DIVESTITURES AND DISCONTINUED OPERATIONS
In September 2002, we recognized an after-tax loss of $9,352, net of a tax
benefit of $5,870, for the planned disposition of our TeraOptix business unit
("TeraOptix"). The charges related to the disposal of TeraOptix consisted of
impairment charges recorded on the equipment and Westborough, Massachusetts
facility of $13,349, estimated severance payments of $850, a write-down to fair
market value of the inventory of $650, and $373 of other costs and write-downs
related to the disposition of the remaining assets. During the remainder of
fiscal 2003, adjustments made to the estimated charges resulted in an overall
fiscal 2003 after-tax loss of $9,652, net of a tax benefit of $5,101. In
December 2003, we recorded an additional impairment charge on the vacant
facility of $2,304 reflecting the continued weakness of the local real estate
market for this type of facility. This charge is recorded, net of tax, as
"charges and adjustments on the disposal of TeraOptix, net of tax" in the
consolidated statements of operations. The current estimated fair market
value of the facility is $9,595, net of selling expenses, based on a
third-party appraisal. We are presently marketing the facility and the
asset is classified under current assets as "assets of discontinued unit
held for sale" in the consolidated balance sheets. In December 2003, we
paid off the remaining mortgage debt of $10,955 on the facility. The mortgage
debt had carried interest at 7.5% per annum at the time of repayment, and
required monthly principal payments of $70, plus interest, until April 2007
and a balloon payment of $8,200 in May 2007. In connection with the debt
repayment, the Company also paid the balance of a related interest rate
swap agreement of $1,109. This payment resulted in an additional charge
to discontinued TeraOptix operations, recorded net of tax. Prior to the
payment, in accordance with SFAS No. 133, as amended, the swap liability
was recorded with a corresponding debit, net of tax, to stockholders'
equity. The aggregate payment of $12,064 on the mortgage debt and swap
agreement was funded from the Company's available cash and marketable
securities.
The results and loss on disposal of the TeraOptix business unit have been
presented as separate line items in the accompanying Consolidated Statements of
Operations as "discontinued TeraOptix operations, net of tax", for all periods
presented. The components of cash flow from discontinued operations are as
follows:
Nine Months Ended
---------------------
March 26, March 28,
2004 2003
--------- ---------
Cash flow from operating activities from discontinued operations:
Loss from discontinued operations $ (2,741) $(11,561)
Depreciation and amortization - -
Loss on sale and impairment of assets 2,304 12,880
Deferred income taxes (1,413) (5,674)
Receivables - 845
Income taxes - (1,311)
Inventories - 815
Accounts payable and accrued expenses - (726)
Other, net (2) 210
-------- --------
Net cash used for operating activities from discontinued operations (1,852) (4,522)
-------- --------
Cash flow from investing activities from discontinued operations:
Proceeds from sale of assets - 2,822
-------- --------
Net cash provided by investing activities from discontinued operations - 2,822
-------- --------
Cash flow from financing activities from discontinued operations:
Payment of long-term debt (11,374) (628)
-------- --------
Net cash used for financing activities from discontinued operations (11,374) (628)
-------- --------
Net cash used by discontinued operations $(13,226) $ (2,328)
======== ========
10
NOTE 4: SEGMENT INFORMATION
We operate in two principal business segments globally: Semiconductor and
Industrial. The segment data is presented below in a manner consistent with
management's internal measurement of the business. Segment data for the nine
months in fiscal year 2003 was restated to reflect our exit from the
telecommunications segment.
Three Months Ended Nine Months Ended
--------------------- ---------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Semiconductor
Sales $18,027 $17,793 $46,401 $44,132
Gross profit 6,289 4,773 15,388 14,939
Gross profit as a % of sales 35% 27% 33% 34%
Industrial
Sales $10,406 $11,217 $33,933 $31,597
Gross profit 3,113 4,729 12,178 10,924
Gross profit as a % of sales 30% 42% 36% 35%
Total
Sales $28,433 $29,010 $80,334 $75,729
Gross profit 9,402 9,502 27,566 25,863
Gross profit as a % of sales 33% 33% 34% 34%
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.
Substantially all of our operating expenses, assets, and depreciation and
amortization are U.S. based. Sales by geographic area were as follows:
Three Months Ended Nine Months Ended
--------------------- ---------------------
March 26, March 28, March 26, March 28,
2004 2003 2004 2003
--------- --------- --------- ---------
Americas (primarily United States) $ 6,567 $ 9,124 $21,136 $23,379
Far East:
Japan 16,342 16,127 43,736 39,601
Pacific Rim 3,624 1,118 10,491 5,230
------- ------- ------- -------
Total Far East $19,966 $17,245 $54,227 $44,831
Europe and Other (primarily Europe) 1,900 2,641 4,971 7,519
------- ------- ------- -------
Total $28,433 $29,010 $80,334 $75,729
======= ======= ======= =======
11
NOTE 5: RELATED PARTY TRANSACTIONS AND MAJOR CUSTOMER
Sales to Canon Inc., one of our significant stockholders, and Canon Sales Co.,
Inc., a distributor of certain of our products in Japan and a subsidiary of
Canon Inc., amounted to $19,493 (69% of net sales) and $44,328 (55% of net
sales) for the three months and nine months ended March 26, 2004, as compared
with $15,606 (54% of net sales) and $38,640 (51% of net sales) for the
comparable prior year periods. These sales include revenues generated from the
development agreements referenced below. Selling prices of products sold to
Canon Inc. and Canon Sales Co., Inc. are based, generally, on the terms
customarily given to distributors. Revenues generated from the development
agreements are recorded on a cost-plus basis. At March 26, 2004 and June 30,
2003, there were, in the aggregate, $9,412 and $3,972, respectively, of trade
accounts receivable from Canon Inc. and Canon Sales Co., Inc.
In September 2002, we entered into a contract with Canon Inc. related to the
development of certain interferometers. The contract had a total value of
$29,690, which was fully billed to Canon by the end of the second quarter of
fiscal 2004. We are continuing the development work with approval from Canon,
which will result in the total contract value exceeding $33,000. During the
three months and nine months ended March 26, 2004, we recognized revenue in the
semiconductor segment of $3,420 and $11,750, respectively, from this contract.
During the quarter we signed a new agreement letter with Canon Inc. authorizing
the start of a new project with the expectation that a follow-on agreement will
be signed by the fall of this year. Revenue of $1,588 related to this agreement
was recognized during the three months ended March 26, 2004.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Introduction
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. Optical
instruments products encompass non-contact optical measurement instruments.
Optics products consist of high performance macro-optics components, optical
coatings, and optical system assemblies.
In September 2002, we entered into a development services agreement with Canon
Inc. We have generated a total of approximately $33 million in revenues from
this agreement, including $3.4 million and $11.7 million in the third quarter
and first nine months of fiscal 2004, respectively. Delivery under this
agreement will be in July 2004. During the third quarter of fiscal 2004 we
signed an agreement letter that allows us to begin a new developmental project
with the expectation that a follow-on contract will be signed by the fall of
this year. For the third quarter of fiscal 2004, revenue of $1.6 million has
been recognized under this new agreement. Significant revenues can be expected
from any such follow-on contract. Our period over period comparable sales would
be significantly adversely affected if we do not continue to provide these
development services.
We achieved an order level for the third quarter of fiscal 2004 of $31.6 million
as compared to $23.7 million for the third quarter of fiscal 2003. This order
flow boosted backlog at March 26, 2004 to $49.0 million, which is our highest
level since fiscal 2001. Orders for the third quarter of fiscal 2004 were down
$4.8 million from the second quarter of fiscal 2004. As expected, bookings for
the industrial segment decreased to $12.7 million, down 22% over the second
quarter of fiscal 2004, due to several large orders that occurred in the second
quarter within the industrial markets.
We discontinued our telecommunications TeraOptix business unit during fiscal
2003. Accordingly, the results of TeraOptix have been presented as a separate
line item on the Consolidated Statements of Operations as discontinued TeraOptix
operations, net of tax, for all periods presented. In addition, the charges on
the disposal of TeraOptix, net of tax, have been recorded as a separate line
item for all periods presented. All continuing operations line items presented
exclude TeraOptix results.
Continuing Operations
We recorded earnings from continuing operations for the third quarter of fiscal
2004 of $1.0 million, or $0.05 per share, as compared with $0.8 million, or
$0.04 per share, for the third quarter of fiscal 2003; earnings from continuing
operations for the first nine months of fiscal 2004 were $1.2 million, or $0.07
per share, as compared with earnings of $0.3 million, or $0.02 per share, for
the first nine months of fiscal 2003.
Net sales of $28.4 million for the third quarter of fiscal 2004 decreased by
$0.6 million, or 2%, over the comparable prior year period sales of $29.0
million. Net sales for the third quarter of fiscal 2004 included $5.0 million
from development services agreements with Canon, Inc., as compared with $6.6
million in the comparable prior year period. Net sales of $80.3 million for the
first nine months of fiscal 2004 increased by $4.6 million, or 6%, over the
comparable prior year period sales of $75.7 million. Net sales for the first
nine months of fiscal 2004 included $13.3 million from the development services
agreements, as compared with $13.7 million in the comparable prior year period.
For the third quarter of fiscal 2004, net sales in the semiconductor segment
were $18.0 million, or 63% of total net sales, as compared with $17.8 million,
or 61% of total net sales, in the prior year period; and net sales in the
industrial segment were $10.4 million, or 37% of total net sales, as compared
with $11.2 million, or 39% of total net sales, in the prior year period.
Semiconductor product sales increased $1.8 million, primarily due to shipments
to the Pacific Rim region for flat panel systems, partially offset by a decrease
in revenues from the development services agreements. Industrial sales decreased
primarily due to the weak economy in Europe. For the first nine months of fiscal
2004, net sales in the semiconductor segment were $46.4 million as compared with
$44.1 million in the comparable prior year period (58% of total net sales in
both periods), and net sales in the industrial segment were $33.9 million, as
compared with $31.6 million in the comparable prior year period (42% of total
net sales in both periods). The increase in the nine month sales in both
semiconductor and industrial segments is primarily due to an increase in sales
to Canon, including under the development services agreements, and the delivery
of flat panel systems to the Pacific Rim region.
13
Sales in the Americas, substantially all of which are in the United States,
amounted to $6.6 million in the third quarter of fiscal 2004, a decrease of $2.5
million, or 27%, from the third quarter of fiscal 2003 levels of $9.1 million.
Sales in the third quarter of fiscal 2003 included the delivery of several large
systems, which we did not have in the current quarter. Sales outside the
Americas amounted to $21.8 million in the third quarter of fiscal 2004, an
increase of $1.9 million, or 10%, from the third quarter of fiscal 2003 levels
of $19.9 million. Sales in Japan during the third quarter of fiscal 2004
amounted to $16.3 million, an increase of $0.1 million, or 1%, from the third
quarter of fiscal 2003 sales levels. Europe/Other, primarily Europe, amounted to
$1.9 million, a decrease of $0.7 million, or 27%, from the third quarter of
fiscal 2003. Sales in the Pacific Rim during the third quarter of fiscal 2004,
excluding Japan, amounted to $3.6 million, an increase of $2.5 million, or 227%,
from the third quarter of fiscal 2003 sales levels. This increase was primarily
due to the delivery of a greater number of large metrology systems, including
flat panel systems, in the first nine months of fiscal 2004 than in the
comparable prior year period.
Sales in the Americas amounted to $21.1 million in the first nine months of
fiscal 2004, a decrease of $2.3 million, or 10%, from the first nine months of
fiscal 2003 of $23.4 million. Sales outside the Americas amounted to $59.2
million in the first nine months of fiscal 2004, an increase of $6.9 million, or
13%, from the first nine months of fiscal 2003 levels of $52.3 million. Sales in
Japan during the first nine months of fiscal 2004 amounted to $43.7 million, an
increase of $4.1 million, or 10%, from the first nine months of fiscal 2003
sales levels. Sales in Europe/Other during the first nine months of fiscal 2004,
primarily Europe, amounted to $5.0 million, a decrease of $2.5 million, or 33%,
from the first nine months of fiscal 2003. Sales in Europe continue to be
impacted negatively by the weak economy. Sales in the Pacific Rim, excluding
Japan, during the first nine months of fiscal 2004 amounted to $10.5 million, an
increase of $5.3 million, or 102%, from the first nine months of fiscal 2003
sales levels. This increase was primarily due to increased sales of flat panel
systems.
Sales in U.S. dollars for the third quarter of fiscal 2004 were $25.9 million,
or 91%, of all net sales for the period. For the first nine months of fiscal
2004, sales in U.S dollars were $72.2 million, or 90% of all net sales for the
period. Significant changes in the values of foreign currencies relative to the
value of the U.S. dollar can impact the sales of our products in export markets,
as would changes in the general economic conditions in those markets. Sales
outside the Americas represent approximately 70-80% of our total sales. For our
sales which are based in local currency, we are exposed to foreign exchange
fluctuations from the time customers are invoiced in local currency until
collection occurs. The majority of our foreign currency transactions are in
euros and Japanese yen. The impact of changes in foreign currency values on our
sales cannot be measured.
Gross profit for the third quarter of fiscal 2004 totaled $9.4 million, a
decrease of $0.1 million, or 1%, from $9.5 million in the third quarter of
fiscal 2003. Gross profit as a percentage of sales for the third quarters of
fiscal 2004 and 2003 were both 33%. Gross profit as a percentage of sales in the
third quarter of fiscal 2004 was negatively impacted by low margins on the
delivery of our initial flat panel systems. Gross profit for the first nine
months of fiscal 2004 totaled $27.6 million, an increase of $1.7 million, or 7%,
from $25.9 million in the first nine months of fiscal 2003. Gross profit as a
percentage of sales for the first nine months of fiscal 2004 and 2003 was 34%.
We are continually working on improvements in the manufacturing process in order
to increase our gross profit as a percentage of sales.
Selling, general, and administrative expenses ("SG&A") in the third quarter of
fiscal 2004 amounted to $5.4 million, a decrease of $0.3 million, or 5%, from
$5.7 million in the third quarter of fiscal 2003. As a percentage of net sales,
SG&A for the third quarter of fiscal 2004 and fiscal 2003 was 19% and 20%,
respectively. For the first nine months of fiscal 2004, SG&A was $16.8 million,
an increase of $0.2 million, or 1%, from $16.6 million in the first nine months
of fiscal 2003. As a percentage of net sales, SG&A for the first nine months of
fiscal 2004 and fiscal 2003 was 21% and 22%, respectively. The decrease in SG&A
for the third quarter of fiscal 2004 was primarily a result of a cost savings
initiative partially offset by costs related to one-time personnel costs and
increased insurance costs. The increase during the first nine months of fiscal
2004 is primarily due to one-time personnel costs and increased insurance costs.
Research, development, and engineering expenses ("R&D") for the third quarter of
fiscal 2004 totaled $2.7 million, an increase of $0.2 million, or 8%, from $2.5
million in the third quarter of fiscal 2003. For the first nine months of fiscal
2004, R&D expenses totaled $9.3 million, an increase of $0.6 million, or 7%,
from $8.7 million in the first nine months of fiscal 2003. These increases were
primarily due to costs associated with our Zygo Applied Optics group in Southern
California, which commenced operations in the second half of fiscal 2003, and
costs with certain projects associated with new products and improvements to
existing products.
14
The income tax expense from continuing operations in the third quarter of fiscal
2004 totaled $0.6 million, or 38% of pre-tax earnings, which compares with
income tax expense of $0.5 million, or 37% of pre-tax earnings, in the third
quarter of fiscal 2003. The income tax expense from continuing operations in the
first nine months of fiscal 2004 totaled $0.9 million, or 38% of pre-tax
earnings, which compares with income tax expense of $0.4 million, or 37% of
pre-tax losses, in the first nine months of fiscal 2003. Our overall effective
tax rate, including discontinued operations, was 29% for the first nine months
of fiscal 2004 as compared with 37% for the first nine months of fiscal 2003.
The change in the overall effective tax rate is due to a shift in the mix of
pre-tax income between domestic and foreign operations and a reduction in
anticipated R&D credits.
Discontinued Operations
In September 2002, we made a decision to discontinue our TeraOptix
telecommunications business unit. The discontinuation of this business unit has
had a significant impact on our financial position and results of operations.
For the quarter and first nine months ended March 26, 2004, we recorded charges
for discontinued operations, net of tax, of $0.7 million and $2.7 million,
respectively ($0.03 and $0.15, respectively, per share). The charges for the
quarter ended March 26, 2004 were primarily related to a change in the tax rate
applied to existing charges after calculating the overall effective tax rate for
the nine months ended March 26, 2004. We anticipate future expenses to maintain
the facility to approximate $0.1 million per quarter until the facility is sold.
In addition, we may incur a further impairment charge on the value of the
facility in the event we are unable to dispose of it at its current carrying
value. The facility is presently being marketed for sale.
RELATED PARTY TRANSACTIONS
In September 2002, we entered into a contract with Canon, Inc. related to the
development of certain interferometers (refer to note 5 of our unaudited
financial statements for additional information). The original contract was for
$29.7 million, which was fully billed to Canon by the end of the second quarter
of fiscal 2004 and an additional billing of $3.4 million related to this
contract occurred in the third quarter of fiscal 2004. Our net sales for the
first nine months of fiscal 2004 included $11.8 million from this contract.
Delivery under this contract will be made in July 2004. During the quarter we
signed an agreement letter with Canon Inc. authorizing the initial start of a
new project with the expectation that a follow-on agreement will be signed by
the fall of this year. Revenue of $1.6 million related to this follow-on
agreement was recognized during the third quarter of fiscal 2004.
LIQUIDITY AND CAPITAL RESOURCES
At March 26, 2004, working capital was $65.7 million, a decrease of $1.2 million
from $66.9 million at June 30, 2003. We maintained cash, cash equivalents, and
marketable securities at March 26, 2004 totaling $34.1 million, a decrease of
$18.7 million from June 30, 2003. The decrease was due to the pay off of the
mortgage debt of $11.0 million and the swap agreement of $1.1 million associated
with our TeraOptix facility in Westborough, Massachusetts, with the balance of
$6.6 million comprised of increases in accounts receivable, inventory and
purchases of capital equipment, partially offset by an increase in accounts
payable. The payment of the mortgage debt and swap agreement was funded from the
Company's available cash and marketable securities. The mortgage debt had
required monthly principal payments of $0.1 million, plus interest (7.5% at the
time of repayment), until April 2007, and a principal balloon payment of $8.2
million in May 2007.
We are currently marketing for sale the facility of our discontinued TeraOptix
unit located in Westborough, Massachusetts. The net proceeds from the sale of
the facility would be an addition to our cash balances.
Our cash used by continuing operations was $0.4 million for the first nine
months in fiscal 2004, a decrease of $14.5 million from the $14.1 million in
cash provided by operations for the first nine months in fiscal 2003. This
difference was primarily related to changes in accounts receivable and
inventories. Accounts receivable accounted for $7.3 million of the change in
periods and inventories accounted for $6.2 million of the change between
periods. The change in accounts receivable is primarily due to an increase in
receivables from Canon for product sales and sales related to the development
services agreements, all of which are within terms at March 26, 2004, and an
increase in receivables in the Pacific Rim region on large shipments. The
changes in inventories are due to the increase in orders while the prior year
decrease was primarily due to shipments of optics with long lead times. There
were no borrowings outstanding under our $3.0 million bank line of credit at
March 26, 2004. The line of credit was extended to November 2004.
15
Acquisitions of property, plant, and equipment were $1.6 million and $5.5
million for the three and nine month periods ended March 26, 2004, respectively.
In addition to normal recurring acquisitions, we expect to build an addition to
our existing facility at an anticipated cost of $2.5-$3.0 million over the next
six months to be funded from existing cash reserves. The additional space is
expected to be used primarily for manufacturing. Although cash requirements will
fluctuate based on the timing and extent of various factors, management believes
that cash generated from operations, together with the liquidity provided by
existing cash balances, will be sufficient to satisfy our liquidity
requirements for the next 12 months.
CRITICAL ACCOUNTING POLICIES, SIGNIFICANT JUDGMENTS, AND ESTIMATES
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, and expenses, and related disclosures at the date of our consolidated
financial statements. On an on-going basis, management evaluates its estimates
and judgments, including those related to bad debts, inventories, warranty
obligations, income taxes, and long-lived assets. Management bases its estimates
and judgments on historical experience and current market conditions and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. We consider certain accounting policies related to
revenue recognition and allowance for doubtful accounts, inventory valuation,
warranty costs, accounting for income taxes, and valuation of long-lived assets
to be critical policies due to the estimates and judgments involved in each.
Revenue Recognition and Allowance for Doubtful Accounts
We recognize revenue based on guidance provided in Securities and Exchange
Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 104, "Revenue
Recognition" and in accordance with EITF Issue No. 00-21, "Revenue Arrangements
with Multiple Deliverables." We recognize revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered, there
is no significant risk pertaining to customer acceptance, our price is fixed or
determinable, and collectibility is reasonably assured.
We maintain an allowance for doubtful accounts based on a continuous review of
customer accounts, payment patterns, and specific collection issues. We perform
on-going credit evaluations of our customers and do not require collateral from
our customers. For many of our international customers, we require an
irrevocable letter of credit to be issued by the customer before a shipment is
made. If the financial condition of our customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances would
be required.
Inventory Valuation
Inventories are valued at the lower of cost or market, cost being determined on
a first-in, first-out basis. Management evaluates the need to record adjustments
for impairment of inventory on a monthly basis. Our policy is to assess the
valuation of all inventories, including raw materials, work-in-process, and
finished goods. Obsolete inventory or inventory in excess of management's
estimated future usage is written down to estimated market value, if less than
its cost. Contracts with fixed prices are evaluated to determine if estimated
total costs will exceed revenues. A loss provision is recorded when the judgment
is made that actual costs incurred plus estimated costs remaining to be incurred
will exceed total revenues from the contract. Inherent in the estimates of
market value are management's estimates related to current economic trends,
future demand for our products, and technological obsolescence. Significant
management judgments must be made when providing for obsolete and excess
inventory and losses on contracts. If actual market conditions are different
than those projected by management, additional inventory write-downs and loss
accruals may be required.
Warranty Costs
We provide for the estimated cost of product warranties at the time revenue is
recognized. We consider historical warranty costs actually incurred and
specifically identified circumstances to establish the warranty liability. The
warranty liability is reviewed on a quarterly basis. Should actual costs or
revised estimated costs differ from management's prior estimates, revisions to
the estimated warranty liability would be required.
Accounting for Income Taxes
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective income
tax bases, and operating loss and tax credit carryforwards. Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting
16
for Income Taxes," requires the establishment of a valuation allowance to
reflect the likelihood of the realization of deferred tax assets. We record a
valuation allowance to reduce our deferred tax assets to an estimated realizable
amount based on historical and forecasted results. While management has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event
management were to determine that Zygo would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
valuation allowance would increase income in the period such determination was
made. Likewise, should management determine that Zygo would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the valuation allowance would be charged to income in the period such
determination was made. Our effective tax rate may vary from period to period,
generally based on changes in estimated taxable income or loss, changes to the
valuation allowance, changes to federal, state or foreign tax laws, and
deductibility of certain costs and expenses by jurisdiction.
Valuation of Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," the carrying value of intangible assets and other long-lived
assets is reviewed on a regular basis for the existence of facts or
circumstances, both internally and externally, that may suggest impairment. Some
factors we consider important, which could trigger the impairment review,
include a significant decrease in the market value of an asset, a significant
change in the extent or manner in which an asset is used, a significant adverse
change in the business climate that could affect the value of an asset, an
accumulation of costs for an asset in excess of the amount originally expected,
a current period operating or cash flow loss combined with a history of
operating or cash flow losses or a projection that demonstrates continuing
losses, and a current expectation that, more likely than not, a long-lived asset
will be disposed of significantly before the end of its estimated useful life.
If such circumstances exist, we evaluate the carrying value of long-lived assets
to determine if impairment exists based upon estimated undiscounted future cash
flows over the remaining useful life of the assets and comparing that value with
the carrying value of the assets. If the carrying value of the assets is greater
than the estimated future cash flows, the assets are written down to the
estimated fair value. We determine the estimated fair value of the assets based
on a current market value of the assets. If a current market value is not
readily available, a projected discounted cash flow method is applied using a
discount rate determined by management to be commensurate with the risk inherent
in the current business model. Our cash flow estimates are based upon
management's best estimates, using appropriate and customary assumptions and
projections at the time.
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.
RISK FACTORS THAT MAY IMPACT FUTURE RESULTS
Risk factors that may impact future results include those disclosed in our Form
10-K for the year ended June 30, 2003.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The payment of the mortgage debt and related interest rate swap agreement
eliminated interest rate risks associated with the debt. Other than this
reduction in risk, there were no other material changes that have occurred in
our quantitative and qualitative market risk disclosures during the first nine
months of fiscal 2004.
For discussion of our exposure to market risk, refer to Item 7a. Quantitative
and Qualitative Disclosures about Market Risk, presented in our Annual Report
filed with the Securities and Exchange Commission on Form 10-K for the year
ended June 30, 2003.
Item 4. Controls and Procedures
ZYGO maintains "disclosure controls and procedures," as such term is defined
under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized, and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief
17
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing 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 have carried out an evaluation, as of the end of the period
covered by this report, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon their evaluation and subject to the foregoing, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective in ensuring that material information
relating to ZYGO is made known to the Chief Executive Officer and Chief
Financial Officer by others within our company during the period in which this
report was being prepared.
There were no changes in our internal controls over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
18
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
14.1 Zygo Corporation Code of Ethics
31.1 Certification of Chief Executive Officer under Rule 13a-14(a)
31.2 Certification of Chief Financial Officer under Rule 13a-14(a)
32.1 Certification of Chief Executive Officer and Chief Financial Officer
(b) Current Reports on Form 8-K during the fiscal quarter ended March 26, 2004.
Zygo Corporation Earnings Press release, dated January 27, 2004.
19
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/ J. BRUCE ROBINSON
--------------------------------------
J. Bruce Robinson
President, Chairman, and
Chief Executive Officer
/s/ WALTER A. SHEPHARD
--------------------------------------
Walter A. Shephard
Vice President, Finance,
Chief Financial Officer, and Treasurer
Date: April 30, 2004
20
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as..................... 'r'