-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BNK8XBgDBVMx7vXuby1r7pH1z8OAIascQmTQeqLlCpNgwNfHIIR8pgX1iEcB08ZS SXHE9ZLcUKJSRb56yTJMZg== 0000950110-02-000743.txt : 20021108 0000950110-02-000743.hdr.sgml : 20021108 20021108155542 ACCESSION NUMBER: 0000950110-02-000743 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020927 FILED AS OF DATE: 20021108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZYGO CORP CENTRAL INDEX KEY: 0000730716 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 060864500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12944 FILM NUMBER: 02814296 BUSINESS ADDRESS: STREET 1: LAUREL BROOK RD CITY: MIDDLEFIELD STATE: CT ZIP: 06455 BUSINESS PHONE: 8603478506 MAIL ADDRESS: STREET 1: LAUREL BROOK ROAD CITY: MIDDLEFIELD STATE: CT ZIP: 06455 10-Q 1 e90331_10-q.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 27, 2002 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 incorporation or organization) Identification No.) 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. YES NO X (1) ------ -------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES NO ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 17,509,749 shares of Common Stock, $.10 Par Value, at November 4, 2002 1 (1) The Company erroneously omitted to file by EDGAR, with the Securities and Exchange Commission, a copy of the Company's proxy statement dated October 6, 2001, in connection with the Annual Meeting of Stockholders held on November 14, 2001. The proxy and the consequent amendment to the Company's Annual Report on Form 10-K dated June 30, 2001 were filed by the Company on February 13, 2002. 2 FORWARD LOOKING STATEMENTS All statements other than statements of historical fact included in this Form 10-Q Quarterly Report, regarding the Company's financial position, business strategy, plans and objectives of management of the Company for future operations, are forward-looking statements. These forward-looking statements include without limitation statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements are intended to provide management's current expectations or plans for the future operating and financial performance of the Company, based upon information currently available and assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "plans," "strategy," "project" and other words of similar meaning in connection with a discussion of future operating or financial performance. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors such as those disclosed under "Risk Factors" which references the Form 10-K filed by the Company for the fiscal year ended June 30, 2002. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, and growth strategy of the Company. 3 PART I - Financial Information ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Thousands, except per share amounts)
Three Months Ended ------------------------------------- SEPTEMBER 27, September 30, 2002 2001 (2) ------------- ------------- Net sales Products ............................................... $ 17,701 $19,704 Development services ................................... 2,708 - -------- ------- 20,409 19,704 -------- ------- Cost of goods sold Products ............................................... 10,992 12,721 Development services ................................... 2,051 - -------- ------- 13,043 12,721 -------- ------- Gross profit ........................................... 7,366 6,983 Selling, general, and administrative expenses ................... 5,460 5,267 Research, development, and engineering expenses ................. 2,998 4,164 Amortization of intangibles ..................................... 104 185 -------- ------- Operating loss ......................................... (1,196) (2,633) -------- ------- Other income (expense): Interest income ........................................ 407 555 Interest expense ....................................... (181) (2) Miscellaneous (expense), net ........................... (167) 82 -------- ------- Total other income ..................................... 59 635 -------- ------- Loss from continuing operations before income taxes and minority interest .................. (1,137) (1,998) Income tax benefit .............................................. (432) (919) Minority interest ............................................... 143 70 -------- ------- Loss from continuing operations ........................ (848) (1,149) -------- ------- Discontinued TeraOptix operations, net of tax ................... (1,682) (1,222) Charges related to the disposal of TeraOptix, net of tax ........ (9,352) - -------- ------- Loss from discontinued operations ...................... (11,034) (1,222) -------- ------- Net loss ........................................................ $(11,882) $(2,371) ======== ======= Basic and diluted - Loss per share: Continuing operations .................................. $ (0.05) $ (0.07) Discontinued operations ................................ (0.63) (0.07) -------- ------- Net loss ............................................... $ (0.68) $ (0.14) ======== ======= Weighted average number of shares (1): Basic and diluted ...................................... 17,510 17,389 ======== =======
See accompanying notes to consolidated financial statements. (1) Accounting principles generally accepted in the United States of America require the computation of the net loss per share to be based on the weighted average basic shares outstanding. (2) The consolidated statement of operations for the three month-period ended September 30, 2001 has been reclassified to conform with the current period presentation of the discontinued operations and loss on disposal of TeraOptix. 4 CONSOLIDATED BALANCE SHEETS (Thousands)
SEPT. 27, 2002 June 30, 2002 (UNAUDITED) -------------- ------------- ASSETS Current assets: Cash and cash equivalents .......................................... $ 28,243 $ 28,513 Restricted cash .................................................... 1,230 1,225 Marketable securities .............................................. 8,777 8,734 Receivables ........................................................ 17,629 21,241 Income tax receivable .............................................. 24 - Inventories ........................................................ 23,842 23,612 Prepaid expenses ................................................... 1,213 1,444 Deferred income taxes .............................................. 4,888 4,899 Assets of discontinued unit held for sale .......................... 14,178 - -------- -------- Total current assets .......................................... 100,024 89,668 Property, plant, and equipment, net ......................................... 26,284 55,045 Deferred income taxes ....................................................... 27,371 19,981 Intangible assets, net ...................................................... 4,590 4,507 -------- -------- TOTAL ASSETS ................................................................ $158,269 $169,201 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt .................................. $ 837 $ 837 Accounts payable ................................................... 5,384 5,020 Accrued progress payments .......................................... 693 368 Accrued salaries and wages ......................................... 3,640 3,451 Other accrued liabilities .......................................... 5,428 5,132 Income taxes payable - 929 -------- -------- Total current liabilities ..................................... 15,982 15,737 Long-term debt, excluding current portion ................................... 11,164 11,374 Other long-term liabilities ................................................. 1,086 1,115 Minority interest ........................................................... 1,113 970 -------- -------- Total liabilities ...................................................... 29,345 29,196 -------- -------- Stockholders' equity: Common Stock, $.10 par value per share: 40,000 shares authorized; 17,957 shares issued (17,892 at June 30, 2002); 17,510 shares outstanding (17,445 at June 30, 2002) ................ 1,796 1,789 Additional paid-in capital ............................................... 137,843 137,390 Retained earnings (accumulated deficit) .................................. (3,901) 7,981 Accumulated other comprehensive income (loss): Currency translation effects ....................................... (736) (1,369) Net unrealized loss on swap agreement .............................. (836) (515) Net unrealized gain on marketable securities ....................... 45 16 -------- -------- 134,211 145,292 Less treasury stock, at cost; 447 common shares .................................................. 5,287 5,287 -------- -------- Total stockholders' equity ......................................... 128,924 140,005 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $158,269 $169,201 ======== ========
See accompanying notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Thousands)
Three Months Ended -------------------------------- SEPT. 27, 2002 Sept. 30, 2001 -------------- -------------- Cash provided by (used for) operating activities: Loss from continuing operations .......................................... $ (848) $ (1,149) Adjustments to reconcile net loss to cash provided by (used for) operating activities: Depreciation and amortization ......................................... 1,882 1,782 Loss on disposal of assets ............................................ 55 38 Deferred income taxes ................................................. (1,483) 21 Non-cash compensation charges related to stock options ................ 19 - Changes in operating accounts: Receivables ........................................................ 3,405 5,828 Costs in excess of billings ........................................ - 201 Inventories ........................................................ (880) (1,390) Prepaid expenses ................................................... 231 148 Accounts payable and accrued expenses .............................. (382) (8,129) Minority interest .................................................. 143 70 ------- -------- Net cash provided by (used for) operating activities from continuing operations ........................................................ 2,142 (2,580) ------- -------- Cash used for investing activities: Additions to property, plant, and equipment .............................. (547) (8,049) Investment in marketable securities ...................................... (480) (2,991) Investments in other assets .............................................. (429) (27) Interest from restricted cash from sale of Automation Systems Group ...... (5) - Proceeds from the sale or maturity of marketable securities .............. 500 2,975 ------- -------- Net cash used for investing activities from continuing operations ..... (961) (8,092) ------- -------- Cash provided by financing activities: Payments of debt ......................................................... (210) - Employee stock purchase .................................................. 441 - Exercise of employee stock options ....................................... - 511 Issuance and repurchase of common stock .................................. - (270) ------- -------- Net cash provided by financing activities from continuing operations ....................................................... 231 241 ------- -------- Net increase (decrease) in cash and cash equivalents from continuing operations .............................................................. 1,412 (10,431) Net decrease in cash and cash equivalents from discontinued operations ..... (1,682) (1,222) ------- -------- Net decrease in cash and cash equivalents .................................. (270) (11,653) Cash and cash equivalents, beginning of period ............................. 28,513 52,630 ------- -------- Cash and cash equivalents, end of period ................................... $28,243 $ 40,977 ======= ========
See accompanying notes to consolidated financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands, except per share amounts) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND PRESENTATION The accompanying consolidated financial statements include the accounts of Zygo Corporation and its subsidiaries ("Company"). All material transactions and accounts with the subsidiaries have been eliminated from the consolidated financial statements. The results of operations for the period ended September 27, 2002 are not necessarily indicative of the results to be expected for the full fiscal year. The Consolidated Balance Sheet at September 27, 2002, the Consolidated Statements of Operations for the three months ended September 27, 2002 and September 30, 2001, and the Consolidated Statements of Cash Flows for the three months ended September 27, 2002 and September 30, 2001 are unaudited but, in the opinion of the Company, include all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results of the interim periods. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's June 30, 2002 Annual Report on Form 10-K including items incorporated by reference therein. EARNINGS PER SHARE Basic and diluted earnings 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 weighted average shares outstanding and diluted weighted average shares outstanding: Three Months Ended ------------------------------------ SEPTEMBER 27, September 30, 2002 2001 ----------------- --------------- Basic weighted average shares outstanding ....................... 17,510 17,389 Dilutive effect of stock options ..... - - ----------------- --------------- Diluted weighted average shares outstanding ....................... 17,510 17,389 ================= =============== For the first quarter of fiscal 2003 and 2002, the Company recorded net losses. Due to these net losses, stock options to acquire 171 shares of common stock and 331 shares of common stock for the three month periods, respectively, were excluded from the computation of diluted earnings per share because of the anti-dilutive effect on loss per share. 7 COMPREHENSIVE LOSS The Company's total comprehensive loss was as follows:
SEPTEMBER 27, 2002 September 30, 2001 --------------------- ------------------ Net loss ............................................ $(11,882) $(2,371) Unrealized gain on marketable securities ............ 29 51 Unrealized loss on swap agreement ................... (321) (899) Foreign currency translation effect ................. 633 913 --------------------- ------------------ Comprehensive loss .................................. $(11,541) $(2,306) ===================== ==================
INVENTORIES Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market. At September 27, 2002 and June 30, 2002, inventories were as follows:
SEPTEMBER 27, June 30, 2002 2002 ----------------------- ------------------- Raw materials and manufactured parts ........................ $17,896 $18,695 Work in process ............................................. 9,380 8,477 Finished goods .............................................. 241 179 ----------------------- ------------------- 27,517 27,351 Valuation reserves for excess and obsolete inventory ........ (3,675) (3,739) ----------------------- ------------------- $23,842 $23,612 ======================= ===================
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at cost. Costs of additions, replacements, and improvements are capitalized. Maintenance and repairs are charged to expense as incurred. At September 27, 2002 and June 30, 2002, property, plant, and equipment, at cost, were as follows:
SEPTEMBER 27, June 30, 2002 2002 --------------------- ----------------- Land and land improvements ................................... $ 1,461 $ 3,822 Buildings and building improvements .......................... 9,697 25,252 Machinery, equipment, and office furniture ................... 37,747 47,640 Leasehold improvements ....................................... 237 237 Construction in progress ..................................... 1,244 2,878 --------------------- ----------------- 50,386 79,829 Accumulated depreciation ..................................... (24,102) (24,784) --------------------- ----------------- $ 26,284 $ 55,045 ===================== =================
Depreciation is based on the estimated useful lives ranging from 3-40 years for the various classes of assets and is computed using the straight-line method. The Company reclassified $14,178 of machinery, equipment, and office furniture and buildings and building improvements under current assets, as assets held for sale (See note 3). 8 LONG-TERM DEBT On May 14, 2001, the Company entered into a mortgage on its Westborough, Massachusetts facility. The original mortgage amount was $12,560 at an interest rate of LIBOR plus 150 basis points (approximately 3.3% in total at September 27, 2002) and is payable in full on May 14, 2007. Interest only payments were made through February 14, 2002. The mortgage principal is amortizing on a 15-year level amortization schedule requiring monthly principal and interest payments. As of September 27, 2002, long-term debt was $11,164 and the current portion of long-term debt was $837. The agreement contains financial covenants, which among others relate to debt service and consolidated debt ratios. As of September 27, 2002, the Company is in compliance with the financial covenants. In conjunction with the mortgage, the Company entered into an interest rate swap agreement that provides for a fixed interest rate of approximately 7% for the duration of the mortgage. As of September 27, 2002, the market value of the agreement is ($1,348) and is recorded as a liability with a corresponding charge to stockholders' equity, net of taxes. NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets" which addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes Accounting Principles Board ("APB") Opinion No. 17, "Intangible Assets." SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition and after they have been initially recognized in the financial statements. SFAS No. 142 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but rather tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their useful lives. SFAS No. 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. In addition, SFAS No. 142 expands the disclosure requirements for goodwill and other intangible assets in the years subsequent to their acquisition. SFAS No. 142 is effective for our fiscal year 2003. The adoption of SFAS No. 142 did not have a material effect on our results of operations or statements of financial position. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which addresses financial accounting and reporting for retirement obligations associated with the retirement of tangible long-lived assets and for the associated asset retirement costs. SFAS No. 143 requires a company to record the fair value of an asset retirement obligation in the period in which it is incurred. When the retirement obligation is initially recorded, the company also records a corresponding increase to the carrying amount of the related tangible long-lived asset and depreciates that cost over the useful life of the tangible long-lived asset. The retirement obligation is increased at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the initial fair value measurement. Upon settlement of the retirement obligation, the company either settles the retirement obligation for its recorded amount or incurs a gain or loss upon settlement. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002 with earlier application encouraged. The adoption of SFAS No. 143 did not have a material effect on our results of operations or statements of financial position. 9 In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and also affects certain aspects of accounting for discontinued operations. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to be Disposed of, " and certain aspects of APB No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. See note 3 for discontinued operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with the exit or disposal activities. SFAS No. 146 nullifies Emerging Issues Task Force Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires companies to record liabilities for exit or disposal activities in the period in which they are incurred, except for certain types of transactions. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. NOTE 3: DIVESTITURES AND DISCONTINUED OPERATIONS On December 12, 2001, the Company sold its Automation Systems Group in Longmont, Colorado, to Brooks Automation, Inc. of Chelmsford, Massachusetts, in a cash transaction, for $12,165. Substantially all of the assets were sold to Brooks and substantially all the liabilities were assumed by Brooks. The gain on the sale was $6,117 before related exit costs of $1,920 to be paid from the proceeds, inventory write-downs of $808, and tax expense of $1,288. As of September 27, 2002, the restricted cash balance of $1,230 related to the Automation sale is being held in escrow for a period of one year from the date of sale. In September 2002, the Company recognized an after-tax loss of $9,352 (net of a tax benefit of $5,870) for the planned disposition of its TeraOptix business unit ("TeraOptix"). The charges related to the disposal of TeraOptix consisted of impairment charges recorded on the equipment and 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. The remaining value of the equipment and facility of $14,178 at September 27, 2002 represents the estimated fair market value for the assets based on third-party appraisals, which are subject to future market conditions. The assets are classified under current assets as assets held for sale, and the Company expects to sell these assets over the next twelve months. Proceeds from the sale of the facility would be used to pay down the mortgage loan. The results and loss on disposal of the TeraOptix business unit have been presented as a separate line item in the accompanying consolidated statements of operations as discontinued operations, net of tax, for both periods presented. NOTE 4: SEGMENT INFORMATION FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" establishes standards, using a management approach, for reporting information regarding operating segments in annual financial statements. The management approach 10 designates the internal reporting that is used by the chief operating decision-maker when making operating decisions and assessing performance as the source of the Company's reportable segments. The Company's president has been determined to be its chief operating decision-maker, as defined under Statement 131. The Company operates in 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 2001 was restated to reflect the Company's exit from the telecommunications segment.
Three Months Ended ----------------------------------- SEPTEMBER 27, September 30, 2002 2001 ------------- ------------- SEMICONDUCTOR Sales .................................... $10,751 $10,385 Gross profit ............................. 4,178 3,931 Gross profit as a % of sales ............. 39% 38% INDUSTRIAL Sales .................................... $9,658 $9,319 Gross profit ............................. 3,188 3,052 Gross profit as a % of sales ............. 33% 33% TOTAL Sales .................................... $20,409 $19,704 Gross profit ............................. 7,366 6,983 Gross profit as a % of sales ............. 36% 35%
Separate financial information by segment for total assets, capital expenditures, and depreciation and amortization is not available and is not evaluated by the chief operating decision-maker of the Company. Substantially all of the Company's operating results, assets, depreciation and amortization are U.S. based. The Company's sales by geographic area were as follows: Three Months Ended --------------------------------- SEPTEMBER 27, September 30, 2002 2001 ------------- ------------- Americas (primarily United States) ......... $ 6,840 $ 9,623 Far East: Japan ................................... 9,066 5,880 Pacific Rim ............................. 1,540 1,387 ------------- ------------- Total Far East ............................. $10,606 $ 7,267 Europe and Other (primarily Europe) ........ 2,963 2,814 ------------- ------------- Total ...................................... $20,409 $19,704 ============= ============= 11 NOTE 5: RELATED PARTY TRANSACTIONS Sales to Canon Inc., a stockholder, and Canon Sales Co., Inc., a distributor of certain of the Company's products in Japan and a subsidiary of Canon Inc., amounted to $9,000 (44% of net sales) for the three months ended September 27, 2002, as compared to $4,795 (24% of net sales) for the comparable prior year period. 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 a development contract are recorded on a cost-plus basis. At September 27, 2002 and June 30, 2002, there was approximately, in the aggregate, $5,205 and $3,849, respectively, of trade accounts receivable from Canon Inc. and Canon Sales Co., Inc. In September 2002, the Company and Canon Inc. entered into a contract related to the development of certain interferometers. The contract currently has a value of $29,690 and generally covers the period to February 2004, subject to meeting certain milestones during that period. During the quarter ended September 27, 2002, the Company recognized revenue of $2,708 for this contract in the semiconductor segment. 12 ITEM.2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. 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 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 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. The Company considers 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 The Company recognizes revenue based on guidance provided in Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The Company recognizes 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. The Company maintains 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 the Company's 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. The Company's 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 usage is written down to its 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 the Company's products, and technological 13 obsolescence. Significant management judgments must be made when establishing the reserve for obsolete and excess inventory and losses on contracts. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. WARRANTY COSTS The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company considers historical warranty costs actually incurred to establish the warranty liability. Should actual costs differ from management's 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. SFAS No. 109, "Accounting for Income Taxes," requires the establishment of a valuation allowance to reflect the likelihood of the realization of deferred tax assets. The Company records a valuation allowance to reduce its deferred tax assets to an estimated 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 it 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 it 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 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 to the carrying value of the assets. If the carrying value of the asset is greater than the estimated future cash flows, the asset is written down to the estimated fair value. We determine the estimated fair value of the assets based on a current market value of the asset. If a current market value is not readily available, a projected discounted cash flow method is applied using a discount rate determined by 14 management to be commensurate with the risk inherent in the current business model. Our cash flow estimates contain 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. RESULTS OF OPERATIONS As previously announced on September 27, 2002, the Company is discontinuing its telecommunications-focused TeraOptix business unit and disposing of its equipment and facility located in Westborough, Massachusetts. Accordingly, the results of TeraOptix have been presented as a separate line item on the consolidated statement of operations as discontinued operations, net of tax, for both periods presented. In addition, the loss on disposal of the business, net of tax, has been recorded as a separate line item for the first quarter of fiscal 2003. Net sales of $20.4 million for the first quarter of fiscal 2003 increased by $0.7 million, or 4%, from the comparable prior year period of $19.7 million. The net sales exclude sales for the first quarter of fiscal 2003 and 2002 related to TeraOptix of $0.3 million and $1.3 million, respectively. Net sales include product sales and related services and revenues derived from development agreements. For the first quarter of fiscal 2003, net sales in the semiconductor segment were $10.8 million, or 53% of total net sales, as compared to $10.4 million, or 53%, in the prior year period and net sales in the industrial segment were $9.6 million, or 47% of total net sales, as compared to $9.3 million, or 47%, in the prior year period. Company sales to the Americas, the vast majority of which are in the United States, amounted to $6.8 million in the first quarter of fiscal 2003, a decrease of $2.8 million, or 29%, from the first quarter of fiscal 2002 levels of $9.6 million. This decrease was primarily due to weakness in the semiconductor sector. The Company's sales outside the Americas amounted to $13.6 million in the first quarter of fiscal 2003, an increase of $3.5 million, or 35%, from the first quarter of fiscal 2002 levels of $10.1 million. Sales to Japan during the first quarter of fiscal 2003 amounted to $9.1 million, an increase of $3.2 million, or 54%, from the first quarter of fiscal 2002 sales levels. This increase was primarily due to increased sales to Canon Inc. (see related party transactions), including revenues of $2.7 million generated from a recently signed development agreement. Sales to Europe/Other, primarily Europe, amounted to $3.0 million, an increase of $0.2 million, or 7%, from the first quarter of fiscal 2002. Sales to the Pacific Rim, excluding Japan, amounted to $1.5 million, an increase of $0.1 million, or 7%, from the first quarter of fiscal 2002 sales levels. Sales in U.S. dollars, for the quarter ended September 27, 2002, were $17.4 million, or 85% of all Company sales for both periods. Significant changes in the values of foreign currencies relative to the value of the U.S. dollar can impact the sales of the Company's products in its export markets, as would changes in the general economic conditions in those markets. The impact of such changes in foreign currency values on the Company's sales cannot be measured. 15 Gross profit for the first quarter of fiscal 2003 totaled $7.4 million (excluding $0.9 million of a gross loss associated with the discontinued operations of TeraOptix), an increase of $0.4 million, or 6%, from $7.0 million (excluding $40,000 of gross profit associated with the discontinued operations of TeraOptix) in the first quarter of fiscal 2002. Gross profit as a percentage of sales for the first quarters of fiscal 2003 and fiscal 2002 was 36%. The gross profit as a percentage of sales for each segment remained relatively stable between the periods. Gross profit for the first quarter of fiscal 2003 included $0.6 million related to a recently signed development agreement with Canon Inc. (See related party transactions). Selling, general and administrative expenses ("SG&A") in the first quarter of fiscal 2003 amounted to $5.5 million (excluding $0.5 million of SG&A expenses associated with the discontinued operations of TeraOptix), an increase of $0.2 million, or 4%, from $5.3 million (excluding $0.5 million of SG&A expenses associated with the discontinued operations of TeraOptix) in the first quarter of fiscal 2002. As a percentage of net sales, SG&A for the first quarters of fiscal 2003 and fiscal 2002 were 27%. Research, development, and engineering expenses ("R&D") for the first quarter of fiscal 2003 totaled $3.0 million (excluding $0.9 million of R&D expenses associated with the discontinued operations of TeraOptix), a decrease of $1.2 million, or 29%, from $4.2 million (excluding $1.1 million of R&D expenses associated with the discontinued operations of TeraOptix) in the comparable prior year period. The decrease in the first quarter of fiscal 2003 was primarily related to the completion of several large research and development projects in the semiconductor segment in the prior year. The Company recorded an operating loss of $1.2 million (excluding $2.3 million of operating loss associated with the discontinued operations of TeraOptix) in the first quarter of fiscal 2003, as compared to an operating loss of $2.6 million (excluding $1.5 of operating loss associated with the discontinued operations of TeraOptix) in the first quarter of fiscal 2002. The operating loss as a percentage of sales in the first quarter of fiscal 2003 was 6%, as compared to 13% in the first quarter of fiscal 2002. The income tax benefit from continuing operations in the first quarter of fiscal 2003 totaled $0.4 million, or 38% of pretax losses, which compares with $0.9 million, or 46% of pretax losses, in the first quarter of fiscal 2002. The decrease in tax rates is primarily attributed to a decrease in expected R&D credits and anticipated taxable income in fiscal 2003. The income tax benefit from discontinued operations in the first quarter of fiscal 2003 totaled $0.8 million, or 34% of pretax losses, which compares with $0.5 million, or 29% of pretax losses, in the first quarter of fiscal 2002. The income tax benefit associated with the change in the valuation of the assets and other charges related to the discontinued TeraOptix unit in the first quarter of fiscal 2003 totaled $5.8 million, or 38% of pretax losses. The Company recorded a net loss of $11.9 million for the first quarter of fiscal 2003 as compared to a net loss of $2.4 million for the first quarter of fiscal 2002. On a diluted per share basis, the net loss was $0.68 per share for the first quarter of fiscal 2003 as compared to a net loss of $0.14 per share for the first quarter of fiscal 2002. The net loss for the first quarter of fiscal 2003 includes losses related to the operations of our discontinued TeraOptix unit ($1.7 million) and charges related to the disposal of our discontinued TeraOptix unit ($9.4 million). The loss from continuing operations for the quarter was $0.8 million, or $0.05 per share, compared to a loss of $1.1 million, or $0.07 per share, in the comparable prior year quarter. 16 The net loss for the first quarter of fiscal 2002 includes operating results of the Automation Systems Group in Longmont, Colorado, which was sold in December 2001. Backlog at September 27, 2002 totaled $42.9 million, an increase of $2.4 million, or 6%, from $40.5 million (excluding $6.6 million of backlog associated with the discontinued operations of TeraOptix) at June 30, 2002. Backlog at September 27, 2002 decreased $4.1 million, or 9%, from $47.0 million (excluding $7.7 million of backlog associated with the discontinued operations of TeraOptix) at September 30, 2001. Orders for the first quarter of fiscal 2003 totaled $22.8 million, net of debookings of $0.8 million. Net orders by segment for the first quarter of fiscal 2003 consisted of $12.7 million, or 56%, in the semiconductor segment and $10.1 million, or 44%, in the industrial segment. Telecommunication orders (a net debookings of $0.8 million) not associated with TeraOptix were included in the industrial segment. RELATED PARTY TRANSACTIONS Sales to Canon Inc., a stockholder, and Canon Sales Co., Inc., a distributor of certain of the Company's products in Japan and a subsidiary of Canon Inc., amounted to $9.0 million (44% of net sales) for the three months ended September 27, 2002, as compared to $4.8 million (24% of net sales) for the comparable prior year period. Selling prices of products sold to Canon Inc. and Canon Sales Co., Inc. are based, generally, on terms customarily given to distributors. At September 27, 2002 and June 30, 2002, there was approximately, in the aggregate, $5.2 million and $3.8 million, respectively, of trade accounts receivable from Canon Inc. and Canon Sales Co., Inc. In September 2002, the Company and Canon Inc. entered into a contract related to the development of certain interferometers. The contract currently has a value of $29.7 million and generally covers the period to February 2004, subject to meeting certain milestones during this period. During the quarter ended September 27, 2002, the Company recognized revenue of $2.7 million for this contract in the semiconductor segment. LIQUIDITY AND CAPITAL RESOURCES At September 27, 2002, working capital was $84.0 million, an increase of $10.1 million from $73.9 million at June 30, 2002. The Company maintained cash, cash equivalents, and marketable securities (excluding restricted cash of $1.2 million) at September 27, 2002 totaling $37.0 million. This represents a decrease of $0.2 million from June 30, 2002. The decrease primarily was due to the operating loss (including the loss from discontinued operations) offset by a decrease in receivables. The decrease in property, plant, and equipment of $28.7 million to $26.3 million as of September 27, 2002 from $55.0 million as of June 30, 2002 is primarily due to an impairment charge on the TeraOptix assets of $13.3 million and the reclassification of the balance of these assets of $14.2 million to current assets as assets held for sale. The decrease also includes depreciation charges of $1.7 million, partially offset by current period acquisitions of $0.5 million. Proceeds from the sale of the TeraOptix facility will be used to pay down the mortgage loan described below. As of September 27, 2002 the mortgage balance on the Company's Westborough, Massachusetts facility was $12.0 million comprised of long-term debt of $11.2 million and a 17 current portion of long-term debt of $0.8 million. The mortgage has an interest rate of LIBOR plus 150 basis points (approximately 3.3% in total at September 27, 2002) which is payable in full on May 14, 2007. Interest only payments were made through February 14, 2002. The mortgage principal is amortizing on a 15-year level amortization schedule requiring monthly principal and interest payments. Future mortgage principal payments by fiscal years ended June 30 will total $0.6 million for 2003; $0.8 million for each year 2004-2006; and $0.7 million for the first 10 months of 2007 with a final payment of $8.2 million in May 2007. In conjunction with the mortgage, the Company entered into an interest rate swap agreement (with a highly rated financial institution) that provides for a fixed interest rate of approximately 7% for the duration of the mortgage. There were no borrowings outstanding under the Company's $3.0 million bank line of credit at September 27, 2002. Stockholders equity at September 27, 2002 decreased by $11.1 million from June 30, 2002 to $128.9 million, primarily due to the net loss in the first quarter of fiscal 2003. 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 and borrowing capability, will be sufficient to satisfy the Company's liquidity requirements for the next 12 months. 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, 2002. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion about our market risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates, foreign currency exchange rates, and real estate and equipment valuations. We do not use derivative financial instruments for speculative or trading purposes. INTEREST RATE SENSITIVITY We maintain a portfolio of cash equivalents and marketable securities including institutional money market funds (which may include commercial paper, certificates of deposit, and U.S. treasury securities), government agency securities, and corporate bonds. Our interest income on our variable rate investments is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are short-term instruments. The impact of interest rate changes on the Company's results cannot be measured. During fiscal 2001, the Company entered into a mortgage on its Westborough facility of $12.6 million at an interest rate of LIBOR plus 150 basis points (3.3% in total at September 27, 2002) which is payable in full on May 14, 2007. As of September 27, 2002, long-term debt was $11.2 million and the current portion of long-term debt was $0.8 million. In conjunction with the mortgage, the Company entered into an interest rate swap agreement that provides for a fixed 18 interest rate of approximately 7% for the duration of the mortgage. Due to the existence of the swap agreement, we do not believe that a material interest rate risk exposure exists. EXCHANGE RATE SENSITIVITY Approximately 85% of the Company's sales for the quarter ended September 27, 2002 were in U.S. dollars. At September 27, 2002, the Company's backlog included orders in U.S. dollars of $36.1 million, or 84% of the total backlog. Substantially all of the Company's costs are negotiated and paid in U.S. dollars. Significant changes in the values of foreign currencies relative to the value of the U.S. dollar can impact the sales of the Company's products in its export markets as would changes in the general economic conditions in those markets. The impact of such changes in foreign currency values on the Company's sales and backlog cannot be measured. COSTS OF DISCONTINUED OPERATIONS The Company is currently in the process of exiting the telecommunications segment of its business and closing the TeraOptix facility in Westborough, Massachusetts. The facility, which is financed with a mortgage note, and equipment are being actively marketed, and it is the Company's intention to sell these assets within one year. The mortgage note payable has a balance at September 27, 2002 of $12.0 million and a swap agreement to fix the interest rate on the mortgage at 7% has a balance at September 27, 2002 of $1.3 million. The Company intends to use the proceeds from the sale of the facility to pay down the mortgage note and swap agreement. To the extent that the proceeds from the sale of the facility are less than the balance of the mortgage note and swap agreement, the Company would have to use existing cash balances to pay down the remaining portion of the mortgage note and/or swap agreement. There is no guarantee that the Company will be able to sell the facility at a price that yields proceeds in a sufficient amount to pay down the entire debt. The equipment and facility at TeraOptix have been valued at an estimated fair market value based on third-party appraisals. The Company recorded an impairment charge to reduce the value of the equipment and facility to the fair market value. To the extent the final selling price of the equipment and facility is lower than the fair market value, the Company may need to take additional impairment charges. If, prior to the sale of the equipment and facility, the Company determines that the estimated fair market value has decreased, the Company may need to take an additional impairment charge at that time. 19 ITEM 4. CONTROLS AND PROCEDURES During the 90-day period prior to the filing date of this report, management, including the Corporation's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Corporation files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required. There have been no significant changes in the Corporation's internal controls or in other factors known to us that could significantly affect internal controls subsequent to the date of such evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 20 PART II - Other Information ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K filed during the current quarter: On September 17, 2002, the Company filed a Current Report on Form 8-K with respect to a development contract between Canon Inc. and the Company. On September 27, 2002, the Company filed a Current Report on Form 8-K with respect to the disposal of its Zygo TeraOptix business unit and facility located in Westborough, Massachusetts. 21 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/ RICHARD M. DRESSLER ------------------------------------- Richard M. Dressler Vice President, Finance, Chief Financial Officer, and Treasurer Date: November 8, 2002 22 CERTIFICATIONS I, J. Bruce Robinson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Zygo Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 /s/ J. Bruce Robinson --------------------- J. Bruce Robinson Chairman, President, and Chief Executive Officer 23 CERTIFICATIONS I, Richard M. Dressler, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Zygo Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2002 /s/ Richard M. Dressler ----------------------- Richard M. Dressler Vice President, Finance Chief Financial Officer 24 EX-99.1 3 e90331_ex99-1.txt CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), each of the undersigned officers of Zygo Corporation, a Delaware corporation (the "Company"), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the period ended September 27, 2002 as filed with the Securities and Exchange Commission (the "10-Q Report") that: (1) the 10-Q Report fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934: and (2) the information contained in the 10-Q Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: November 8, 2002 /s/ J. Bruce Robinson - -------------------------- J. Bruce Robinson Chairman, President, and Chief Executive Officer of Zygo Corporation Dated: November 8, 2002 /s/ Richard M. Dressler - -------------------------- Richard M. Dressler Vice President, Finance, Chief Financial Officer of Zygo Corporation 25 -----END PRIVACY-ENHANCED MESSAGE-----