UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 1999
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 No. 0-21820
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KEY TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
Oregon 93-0822509
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(State of Incorporation) (I.R.S. Employer Identification No.)
150 Avery Street, Walla Walla, Washington 99362
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(Address of principal executive offices) (Zip Code)
(509) 529-2161
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 /_/
The number of shares outstanding of the Registrant's common stock, no
par value, on July 31, 1999 was 4,710,643 shares.
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1999
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Condensed consolidated balance sheets, June 30, 1999
(unaudited) and September 30, 1998..........................................................3
Condensed unaudited consolidated statements of earnings for the
three months ended June 30, 1999 and 1998 ..................................................4
Condensed unaudited consolidated statements of earnings for the
nine months ended June 30, 1999 and 1998 ...................................................5
Condensed unaudited consolidated statements of cash flows for
the nine months ended June 30, 1999 and 1998...............................................6
Notes to condensed unaudited consolidated financial statements..................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................................................14
SIGNATURES.......................................................................................................15
EXHIBIT INDEX....................................................................................................16
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2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 (UNAUDITED) AND SEPTEMBER 30, 1998
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June 30, September 30,
1999 1998
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(in thousands)
Assets
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Current assets:
Cash and cash equivalents $ 9,302 $ 6,333
Trade accounts receivable, net 8,603 7,051
Inventories:
Raw materials 4,599 4,726
Work-in-process and sub-assemblies 8,183 5,353
Finished goods 3,577 2,604
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Total inventories 16,359 12,683
Other current assets 1,985 1,821
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Total current assets 36,249 27,888
Property, plant and equipment, net 8,628 9,584
Other assets 1,917 1,885
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Total $ 46,794 $39,357
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Liabilities and Shareholders' Equity
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Current liabilities:
Accounts payable $ 3,694 $ 2,471
Accrued payroll liabilities and commissions 3,381 2,146
Income tax payable 460 279
Other accrued liabilities 1,881 2,072
Customers' deposits 4,907 1,392
Short-term borrowings and debt 490 579
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Total current liabilities 14,813 8,939
Long-term debt 776 1,103
Total shareholders' equity 31,205 29,315
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Total $46,794 $39,357
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See notes to condensed unaudited consolidated financial statements
3
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
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1999 1998
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(in thousands, except per share data)
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Net sales $15,836 $14,431
Cost of sales 8,962 8,934
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Gross profit 6,874 5,497
Operating expenses:
Selling 2,892 1,937
Research and development 1,073 1,232
General and administrative 1,373 1,440
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Total operating expenses 5,338 4,609
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Income from operations 1,536 888
Other income 193 69
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Earnings before income taxes 1,729 957
Income tax expense 533 336
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Net earnings $ 1,196 $ 621
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Net earnings per common share - basic $ .25 $ .13
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Net earnings per common share - diluted $ .25 $ .13
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Shares used in per share calculation - basic
4,709 4,694
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Shares used in per share calculation - diluted
4,712 4,724
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See notes to condensed unaudited consolidated financial statements
4
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
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1999 1998
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(in thousands, except per share data)
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Net sales $46,331 $40,377
Cost of sales 28,315 25,284
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Gross profit 18,016 15,093
Operating expenses:
Selling 7,623 5,879
Research and development 3,154 3,735
General and administrative 4,370 3,854
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Total operating expenses 15,147 13,468
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Income from operations 2,869 1,625
Other income 316 133
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Earnings before income taxes 3,185 1,758
Income tax expense 1,018 616
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Net earnings $ 2,167 $ 1,142
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Net earnings per common share - basic $ .46 $ .24
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Net earnings per common share - diluted $ .46 $ .24
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Shares used in per share calculation - basic 4,705 4,690
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Shares used in per share calculation - diluted 4,706 4,728
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See notes to condensed unaudited consolidated financial statements
5
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND 1998
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1999 1998
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(in thousands)
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Net cash provided by operating activities $4,093 $3,770
Cash flows from investing activities:
Additions to property, plant and equipment, net (907) (1,289)
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Net cash used in investing activities (907) (1,289)
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Cash flows from financing activities:
Proceeds from issuance of long-term debt - 408
Repayments of long-term debt (273) (631)
Proceeds from issuance of common stock 56 114
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Net cash used in financing activities (217) (109)
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Net increase in cash and cash equivalents 2,969 2,372
Cash and cash equivalents, beginning of the year 6,333 2,896
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Cash and cash equivalents, end of period $9,302 $5,268
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Supplemental information:
Cash paid during the period for interest $ 91 $ 253
Cash paid during the period for income taxes $ 899 $ 710
See notes to condensed unaudited consolidated financial statements
6
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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1. Condensed unaudited consolidated financial statements
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted from these condensed unaudited consolidated
financial statements. These condensed unaudited consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-K for the fiscal year ended
September 30, 1998. The results of operations for the three- and nine-month
periods ended June 30, 1999 are not necessarily indicative of the operating
results for the full year.
In the opinion of management, all adjustments, consisting only of normal
recurring accruals, have been made to present fairly the Company's
financial position at June 30, 1999 and the results of its operations for
the three- and nine-month periods ended June 30, 1999 and 1998 and its cash
flows for the nine-month periods ended June 30, 1999 and 1998.
The balance sheet at September 30, 1998 has been condensed from the audited
balance sheet as of that date.
2. Income taxes
The provision for income taxes is based on the estimated effective income
tax rate for the year.
3. Comprehensive Income
On October 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." The Company's
consolidated comprehensive income was $1,091,000 and $708,000 for the three
months ended June 30, 1999 and 1998, respectively, and $1,834,000 and
$1,188,000 for the nine months ended June 30, 1999 and 1998, respectively.
The differences between the net earnings reported in the consolidated
statement of earnings and the consolidated comprehensive net income for the
periods consisted of changes in foreign currency translation adjustments.
4. Segment Information
On October 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company's business
units serve customers in its primary market - the food processing and
agricultural products industry - through common sales and distribution
channels. Therefore, the Company reports on one segment.
7
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PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Conditions and
Results of Operations
KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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COMMENTS INCLUDED IN THIS DOCUMENT MAY INCLUDE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. THESE STATEMENTS AS TO
ANTICIPATED FUTURE RESULTS ARE BASED ON CURRENT EXPECTATIONS AND ARE SUBJECT TO
A NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED OR DISCUSSED HERE. SUCH RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO: THE POTENTIAL FOR PATENT-RELATED LITIGATION
EXPENSES AND OTHER COSTS RESULTING FROM CLAIMS ASSERTED AGAINST THE COMPANY OR
ITS CUSTOMERS BY THIRD PARTIES; THE IMPACT ON QUARTERLY REVENUES OF BEGINNING
BACKLOG LEVELS AND ORDER-TO-SHIPMENT LEAD TIME INTERVALS IN CERTAIN PRODUCT
LINES; THE MIX OF PRODUCTS INCLUDED IN THOSE REVENUES AND THE RESULTING EFFECT
UPON GROSS MARGINS; AND THE RECEIPT OF LARGE ORDERS THAT MAY NOT BE REPEATED IN
SUBSEQUENT PERIODS. ADDITIONAL RISKS AND UNCERTAINTIES INCLUDE: THE ABILITY OF
THE TEGRA PRODUCT LINE TO REBOUND AND SUSTAIN AN IMPROVED LEVEL OF CUSTOMER
ACCEPTANCE; ACHIEVEMENT OF PRODUCT PERFORMANCE SPECIFICATIONS AND RELATED
REDUCTION IN PRODUCT UPGRADE OR WARRANTY EXPENSES; THE ABILITY OF NEW PRODUCTS
TO COMPETE SUCCESSFULLY IN EITHER EXISTING OR NEW MARKETS; PRODUCT DEVELOPMENT
ACTIVITIES; FUTURE COSTS OF MATERIALS AND OTHER OPERATING EXPENSES; COMPETITIVE
FACTORS; THE RISKS INVOLVED IN EXPANDING INTERNATIONAL OPERATIONS AND SALES; THE
COSTS ASSOCIATED WITH REMEDIATING POTENTIAL YEAR 2000 ISSUES; THE PERFORMANCE
AND NEEDS OF INDUSTRIES SERVED BY THE COMPANY AND THE FINANCIAL CAPACITY OF
CUSTOMERS IN THESE INDUSTRIES TO PURCHASE CAPITAL EQUIPMENT. THE COMPANY
CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE UPON ANY SUCH FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY DISCLAIMS ANY
OBLIGATION SUBSEQUENTLY TO REVISE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS
OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE
OF ANTICIPATED OR UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS
- ---------------------
For the three-month period ended June 30, 1999, net earnings were $1.2 million
or $.25 per share on net sales of $15.8 million, compared to net earnings of
$621,000 or $.13 per share on net sales of $14.4 million for the comparable
period in fiscal 1998. Net earnings were 7.5% and 4.3% of net sales in the two
periods, respectively. For the nine months ended June 30, 1999, the Company's
operating activities resulted in net income of $2.2 million or $.46 per share on
net sales of $46.3 million, compared to net income of $1.1 million or $.24 per
share on net sales of $40.4 million for the corresponding period in fiscal 1998.
Net income was 4.7% and 2.8% of net sales in the two nine-month periods,
respectively.
THREE MONTHS. Net sales increased $1.4 million or 10% to $15.8 million in the
three-month period ended June 30, 1999 compared to the corresponding period in
fiscal 1998. The increase in net sales between the two periods resulted
principally from increased sales of specialized conveying systems and increased
parts and service revenues. Within the specialized conveying systems product
group in the most recent quarter, increased sales to domestic U.S. customers
were partially offset by decreased sales to European and other international
customers. Although sales of automated inspection systems to European and other
international customers increased by approximately 60% in the third quarter of
fiscal 1999 compared to the similar period last year, total sales of this
product group were essentially the same as in the corresponding period in 1998.
8
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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New orders for the June 1999 quarter totaled $18.7 million, increasing 50% over
the fiscal 1998 third quarter. New orders for the most recent quarter were also
the second highest in the Company's history and were exceeded only by the record
$23.1 million of orders booked in the quarter ended March 31, 1999. Order
volumes were strongest in the Specialized Conveying System (SCS) business unit,
which increased by 121% compared to the third quarter last year and were nearly
all from domestic customers. New order volume for the Automated Inspection
System (AIS) business unit increased by 24% with about 40% of those orders
coming from international customers.
During the June 1999 quarter, as a result of the continuing strong order
activity, backlog increased by $2.7 million to $17.6 million from $14.9 million
at the beginning of the period and compared to $8.1 million at the close of the
third quarter last year. The backlog for the specialized conveying systems
product group, domestically and in Europe, accounted for approximately 60% of
the backlog level at quarter-end and increased by over 185% from a year ago.
Automated inspection system backlog represented about 30% of the backlog at
quarter-end and increased by about 20% over the backlog of one year ago. The
backlog at June 30, 1999 included approximately $2 million of third-party
supplied equipment that the Company expects to deliver in the fourth quarter of
this fiscal year.
Gross profit increased to $6.9 million or 43% of sales for the three months
ended June 30, 1999 compared to $5.5 million or 38% of sales in the
corresponding period last year. The improved margin resulted principally from
decreased manufacturing labor, overhead and other cost variances as a percentage
of sales due to improved manufacturing efficiencies resulting from increased
production volumes together with decreased warranty expenses.
Operating expenses were $5.3 million in the three-month period ended June 30,
1999 compared to $4.6 million for the three-month period ended June 30, 1998.
Selling expenses increased by almost $1.0 million or 49% to $2.9 million in the
more recent period due principally to increased expenses in advertising and
product promotion, commissions on international shipments and staffing costs.
General and administrative expenses decreased slightly to just below $1.4
million in the more recent quarter. Research and development operating expenses
include expenditures associated with two separate functions: development of new
products and, secondly, engineering activities related to sold orders for custom
systems and equipment. Research and development expenses decreased by 13% to
$1.1 million primarily due an increased level of engineering costs charged to
cost of sales, a direct result of the increased sales volumes, particularly in
the SCS business unit. However, research and development expenses related to new
product development projects during the most recent quarter increased by 9% for
the third quarter over last year. In the near term, management expects that
general and administrative expense should remain fairly stable, with any
increases in operating expenses occurring in both sales and marketing, and
research and development expenses as the Company continues to expand its program
initiatives on those fronts and introduce new products.
9
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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For the fiscal quarter ended June 30, 1999, other income increased to $193,000
compared to $69,000 for the corresponding period in fiscal 1998. The increase in
other income was due principally to increased royalty and miscellaneous income
combined with decreased interest expense resulting from lower long-term debt.
NINE MONTHS. Net sales for the nine-month period ended June 30, 1999 increased
15% to $46.3 million from $40.4 million in the comparable period last year. The
increase in net sales resulted from increased sales of products principally in
the specialized conveying systems product group followed by increased sales of
processing equipment systems, parts and maintenance service. The increase in
sales of specialized conveying systems and processing systems in the current
fiscal year compared to 1998 has occurred primarily in the U.S. domestic market
and in international markets other than Europe, which has decreased moderately.
However, sales of automated inspection systems to European customers have
increased by 98% and sales of parts and maintenance service to these customers
have increased 84% during the nine months ended June 30, 1999 compared to the
corresponding period last year. For the first nine months of fiscal 1999, sales
to international customers increased to approximately 40% of the Company's total
net sales compared to approximately 35% during the first three quarters of
fiscal 1998.
For the nine months ended June 30, 1999, gross profit increased by $2.9 million
or 19% to $18.0 million, or 39% of sales, compared to $15.1 million, or 37% of
sales, in the nine months ended June 30, 1998. Gross profit during the
nine-month period ended June 30, 1999 increased over the corresponding period in
1998 due principally to the increased volume of product sales, decreased
warranty and installation expenses and decreased manufacturing overhead as a
percentage of sales. Total operating expenses increased by $1.7 million to $15.1
million in the nine-month period ended June 30, 1999 from $13.5 million in the
comparable period in the previous fiscal year. Operating expenses in the 1999
period increased principally as a result of increases in selling and marketing
expenses and general and administrative costs, offset somewhat by decreased
research and development expenditures. For the nine-month period ended June 30,
1999, other income was $316,000 compared to other income of $133,000 for the
corresponding period in fiscal 1998. The increase in other income during the
fiscal 1999 period was due principally to increased interest income net of
interest expense, and to a lesser extent, increased royalty income and
miscellaneous income from a variety of sources.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the nine-month period ended June 30, 1999, net cash provided by operating
activities totaled $4.1 million compared to net cash totaling $3.8 million
provided by operating activities in the corresponding period in fiscal 1998.
Principal sources of cash during the nine months ended June 30, 1999 were
provided by increases in customers' deposits of $3.6 million together with
increases in accounts payable and accrued payroll liabilities, offset by
increases in inventories and trade accounts receivable. In the corresponding
period last year, a principal source of cash was provided by a decrease in
inventories of $714,000.
10
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Cash flows from investing activities for the nine-month period ended June 30,
1999 included the use of net cash resources totaling $907,000 to fund the
acquisition of capital equipment compared to $1.3 million in the corresponding
period last year. At June 30, 1999, the Company had no material commitments for
capital expenditures.
The Company's cash flows from financing activities for the nine months ended
June 30, 1999 were principally affected by repayments of $273,000 in long-term
debt. By comparison, repayments of long-term debt for the nine months ended June
30, 1998 totaled $631,000. Proceeds from the issuance of common stock during the
more recent period under the Company's employee stock option and stock purchase
plans totaled $56,000 compared to $114,000 during the first three quarters of
fiscal 1998.
During the nine-month period ended June 30, 1999, working capital increased by
$2.5 million to $21.4 million. Cash and cash equivalents increased by $3.0
million to $9.3 million as a result of operating activities. Trade accounts
receivable and inventories increased by $1.6 million and $3.7 million,
respectively, principally as a result of a high level of shipments and the
increased backlog at the end of the period. Deposits from customers increased by
$3.5 million and trade accounts payable increased by $1.2 million primarily as a
result of the increased customer order and backlog levels. Income taxes payable
and other accrued liabilities did not increase during the nine months ended June
30, 1999 when compared to the corresponding period in fiscal 1998. Payments for
income taxes during the fiscal 1999 period totaled $899,000 compared to $710,000
during the nine months ended June 30, 1998.
The Company's facility with a domestic commercial bank provides for an operating
line of credit up to $4.0 million. At June 30, 1999, the Company had no
borrowings under this credit facility.
The Company also maintains a credit facility with a Dutch bank, which provides
for operating lines of credit totaling 1.5 million guilders, or approximately
$704,000, to the Company's subsidiary in the Netherlands. At June 30, 1999, the
Company also had no borrowings under this credit facility.
The Company's operating, investing and financing activities resulted in a $3.0
million increase in cash and cash equivalents. At the end of the period, the
balance of cash and cash equivalents totaled $9.3 million. The Company believes
that its cash and cash equivalents, cash generated from operations and available
borrowings under its operating lines of credit will be sufficient to provide for
its working capital needs and to fund future growth.
YEAR 2000 CONVERSION
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The Company has initiated an enterprise-wide program to prepare its computer
systems, applications and products for the year 2000 date conversion. The
Company expects to incur internal staff costs as well as consulting expenses,
investments in capital equipment and other remediation expenditures related to
11
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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enhancements necessary to achieve a year 2000 date conversion with no effect on
customers or disruption to business operations. 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.
Management currently believes that total expenditures for the Company's year
2000 compliance program will range between $200,000 and $250,000, including both
capital equipment and operating expense. Expenditures through June 30, 1999
totaled approximately $180,000.
The Company's year 2000 assessment program that addresses internal issues for
its domestic operations was substantially completed by January 1999. Based on
the assessment program, management believes that the year 2000 date conversion
related to internal issues poses only a low level of risk. The Company's
European operation continues to make progress toward completion of its year 2000
assessment program, which is expected to be fully completed prior to the end of
fiscal 1999. The Company also expects to continue its assessment of external
issues related to suppliers, customers, utilities and other third parties. These
activities are expected to continue throughout 1999 and beyond, as applicable.
The Company assigns a higher level of risk to such issues since they are outside
of its immediate control.
The Company has identified its supplier base as a primary third-party risk
element. In that regard, management continues to monitor and assess the year
2000 compliance status of the sources of supply for its raw material and
purchased component inventories. This assessment has indicated that the Company
may need to purchase and stockpile selected inventory components, as a
contingency measure, in advance of their typical delivery lead times. Although
the ultimate requirements for, and value of, such advance inventory purchases
will be subject to a number of factors, management currently estimates that it
may place orders with its vendors for inventory valued in a range of $1.0
million to $1.3 million. Delivery of these inventory items is expected during
the first quarter of fiscal 2000 prior to December 31, 1999.
The Company expects to implement other contingency plans as the requirements for
such plans are identified. The costs, if any, for such contingency plans are
expected to be incremental to the Company's estimated year 2000 compliance
program expenditures.
THE EURO CONVERSION
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On January 1, 1999, certain member countries of the European Union, including
the Netherlands, established fixed conversion rates between their existing
sovereign (legacy) currencies and the euro, leading to the adoption of the euro
by these countries as their common legal currency. The legacy currencies are
scheduled to remain legal tender in the participating countries as denominations
of the euro from the date of adoption until January 1, 2002. The Company
continues its assessment of the effect, if any, that the adoption of the euro by
these countries will have upon its business.
12
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The terms of sales to European and other international customers of products
manufactured by the Company's domestic operations are typically 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 will
continue substantially in their present form. For the infrequent 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 a currency
hedging transaction to minimize such risk. At June 30, 1999, the Company was not
a party to any currency hedging transaction. The Company does not believe that
it should experience a material effect on its business as a result of the euro
conversion which would be inherently different than risks that currently exist.
The terms of sales to European customers by KEY/Superior, the Company's European
subsidiary, are typically denominated in either Dutch guilders or the respective
legacy currencies of its customers. KEY/Superior's information systems software
currently accommodates such multiple currency transactions and is expected to
integrate euro denominated transactions with relatively minor difficulty. The
Company's European subsidiary expects to implement a complete conversion of its
business systems to the euro on or about October 1, 1999, concurrent with the
beginning of the Company's next fiscal year and well before the January 1, 2002
deadline.
The Company's European subsidiaries maintain long-term credit facilities with a
Dutch bank and also long-term facility and equipment leases, all of which
currently specify periodic debt service or lease payments denominated in Dutch
guilders. It is the Company's current understanding that no modifications to
these agreements will be required since the guilder to euro conversion rate has
been fixed and there are no other changes expected in the other terms of the
respective agreements.
13
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27.1) Financial Data Schedule for the nine-month period
ended June 30, 1999.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed during the three
months ended June 30, 1999.
14
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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SIGNATURES
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.
KEY TECHNOLOGY, INC.
(Registrant)
Date: August 11, 1999 By /S/ THOMAS C. MADSEN
------------------------------------------
Thomas C. Madsen,
President and Chief Executive Officer
Date: August 11, 1999 By /S/ STEVEN D. EVANS
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Steven D. Evans,
Vice President of Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)
15
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KEY TECHNOLOGY, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1999
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EXHIBIT INDEX
EXHIBIT PAGE
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27.1 Financial Data Schedule for the nine-month period
ended June 30, 1999...............................................17
16
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KEY
TECHNOLOGY, INC.'S CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 9,302
<SECURITIES> 0
<RECEIVABLES> 9,119
<ALLOWANCES> (516)
<INVENTORY> 16,359
<CURRENT-ASSETS> 36,249
<PP&E> 20,443
<DEPRECIATION> (11,815)
<TOTAL-ASSETS> 46,794
<CURRENT-LIABILITIES> 14,813
<BONDS> 776
0
0
<COMMON> 9,163
<OTHER-SE> 22,042
<TOTAL-LIABILITY-AND-EQUITY> 46,794
<SALES> 46,331
<TOTAL-REVENUES> 46,733
<CGS> 28,315
<TOTAL-COSTS> 28,315
<OTHER-EXPENSES> 15,172
<LOSS-PROVISION> (25)
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 3,185
<INCOME-TAX> 1,018
<INCOME-CONTINUING> 2,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,167
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.46
</TABLE>
