-----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, L6HPSkxQsEUb2uBxGNgEBuAW5JtO1/UtFuVD3J5gdalXzFBWH1RfE5z1FsBjgRU7 VJR71G0ypGzHfLuxIxkxhA== 0001157523-04-010403.txt : 20041105 0001157523-04-010403.hdr.sgml : 20041105 20041105075509 ACCESSION NUMBER: 0001157523-04-010403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040926 FILED AS OF DATE: 20041105 DATE AS OF CHANGE: 20041105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALPEY FISHER CORP CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 060737363 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04184 FILM NUMBER: 041121113 BUSINESS ADDRESS: STREET 1: 75 SOUTH ST CITY: HOPKINTON STATE: MA ZIP: 01748 BUSINESS PHONE: 5084359039 MAIL ADDRESS: STREET 1: 75 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748 FORMER COMPANY: FORMER CONFORMED NAME: MATEC CORP/DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RSC INDUSTRIES INC DATE OF NAME CHANGE: 19840515 FORMER COMPANY: FORMER CONFORMED NAME: REEVES INDUSTRIES INC DATE OF NAME CHANGE: 19710520 10-Q 1 a4757398.txt VALPEY FISHER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 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 September 26, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-4184 Valpey-Fisher Corporation (Exact name of registrant as specified in its charter) Maryland 06-0737363 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 75 South St., Hopkinton, Massachusetts 01748 (Address of principal executive offices) (Zip Code) (508) 435-6831 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes [ ] No [X] As of November 5, 2004, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 4,220,315. 1
Valpey-Fisher Corporation INDEX PAGE ----- ---- PART I. FINANCIAL INFORMATION ITEM 1. - Financial Statements - Unaudited Consolidated Condensed Balance Sheets - September 26, 2004 and December 31, 2003 3 Consolidated Statements of Operations - Three Months and Nine Months Ended September 26, 2004 and September 28, 2003 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 26, 2004 and September 28, 2003 5 Notes to Consolidated Condensed Financial Statements 6-9 ITEM 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 ITEM 3. - Quantitative and Qualitative Disclosures About Market Risk 13 ITEM 4. - Controls and Procedures 13 PART II. OTHER INFORMATION ITEM 6. - Exhibits and Reports on Form 8-K 14 SIGNATURES 15
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Valpey-Fisher Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data)
9/26/04 12/31/03 ------- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $5,880 $4,209 Receivables, net 1,414 2,467 Inventories, net 1,809 1,571 Deferred income taxes and other current assets 762 675 - ------------------------------------------------------------------------------------------------------ Total current assets 9,865 8,922 Property, plant and equipment, at cost 10,760 10,752 Less accumulated depreciation 7,615 7,064 - ------------------------------------------------------------------------------------------------------ 3,145 3,688 Other assets 143 134 - ------------------------------------------------------------------------------------------------------ $13,153 $12,744 - ------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $512 $540 Accrued liabilities 1,470 900 - ------------------------------------------------------------------------------------------------------ Total current liabilities 1,982 1,440 Deferred income taxes 611 646 Stockholders' equity: Preferred stock, $1.00 par value- Authorized 1,000,000 shares; issued none - - Common stock, $.05 par value- Authorized 10,000,000 shares; Issued and outstanding: 4,220,315 and 4,184,815 shares 211 209 Capital surplus 5,078 4,999 Retained earnings 5,443 5,667 Less unearned compensation (172) (217) - ------------------------------------------------------------------------------------------------------ Total stockholders' equity 10,560 10,658 - ------------------------------------------------------------------------------------------------------ $13,153 $12,744 - ------------------------------------------------------------------------------------------------------
See notes to consolidated condensed financial statements. 3 Valpey-Fisher Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended 9/26/04 9/28/03 9/26/04 9/28/03 ---------------------------- ------------------------ Net sales $3,043 $2,190 $8,961 $6,081 Cost of sales 2,107 1,916 6,316 5,440 - --------------------------------------------------------------------------------------------------------- Gross profit 936 274 2,645 641 Operating expenses: Selling and advertising 379 287 1,176 1,033 General and administrative 467 565 1,455 1,460 Research and development 53 17 164 92 - --------------------------------------------------------------------------------------------------------- 899 869 2,795 2,585 Operating profit (loss) 37 (595) (150) (1,944) Other income (loss): Interest income 8 8 22 40 Interest (expense) - - - (12) Gain on sale of assets - - 13 - - --------------------------------------------------------------------------------------------------------- 8 8 35 28 Earnings (loss) from continuing operations before income taxes 45 (587) (115) (1,916) Income tax benefit - 191 - 634 - --------------------------------------------------------------------------------------------------------- Earnings (loss) from continuing operations 45 (396) (115) (1,282) (Loss) from discontinued operations, net of taxes - - (110) - - --------------------------------------------------------------------------------------------------------- Net earnings (loss) $45 $(396) $(225) $(1,282) - --------------------------------------------------------------------------------------------------------- Basic earnings (loss) per share: Continuing operations $.01 $(.09) $(.03) $(.31) Discontinued operations - - (.02) - - --------------------------------------------------------------------------------------------------------- $.01 $(.09) $(.05) $(.31) - --------------------------------------------------------------------------------------------------------- Diluted earnings (loss) per share: Continuing operations $.01 $(.09) $(.03) $(.31) Discontinued operations - - (.02) - - --------------------------------------------------------------------------------------------------------- $.01 $(.09) $(.05) $(.31) - --------------------------------------------------------------------------------------------------------- Weighted average shares: Basic 4,217 4,185 4,209 4,189 Diluted 4,263 4,185 4,209 4,189
See notes to consolidated condensed financial statements. 4 Valpey-Fisher Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited)
Nine Months Ended -------------------- 9/26/04 9/28/03 -------------------- Cash flows from operating activities: Net (loss) from continuing operations $(115) $(1,282) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization 626 625 Deferred income taxes - 63 Net non-cash stock compensation 29 27 Gain on sale of assets (13) - Changes in operating assets and liabilities, excluding the effects of the purchase of MF Electronics 1,190 1,557 - ------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 1,717 990 - ------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Purchase of MF Electronics - (799) Capital expenditures (95) (117) Collection of note receivables 19 18 Proceeds from sale of assets 25 65 Other, net (8) (8) - ------------------------------------------------------------------------------------------------------ Net cash (used) by investing activities (59) (841) - ------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Stock options exercised 13 - Payments on long-term debt - (1,277) Purchases of common stock - (60) - ------------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities 13 (1,337) - ------------------------------------------------------------------------------------------------------ Net cash (used) by discontinued operations - - - ------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 1,671 (1,188) Cash and cash equivalents: Beginning of period 4,209 5,758 -------------------- End of period $5,880 $4,570 --------------------
Noncash Investing and Financing Activities: In 2004, the Company issued 29,500 shares of stock valued at $85,500 to four employees in payment for a bonus accrued in 2003. See notes to consolidated condensed financial statements. 5 Valpey-Fisher Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. Financial Presentation: The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 2003 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Stock Compensation Plans: The Company applies the intrinsic value method, Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plans. The Company provides the disclosure requirements of Statement of Financial Accounting Standards Nos. 123 and 148, "Accounting for Stock-Based Compensation," and related interpretations and amendments. The Company adopted the disclosure-only option under SFAS No. 123 "Accounting for Stock-Based Compensation." The following table illustrates the effect on net earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation.
Three Months Ended (in thousands, except per share amounts) 9/26/04 9/28/03 - ------------------------------------------------------------------------------------------------------ -------------- (unaudited) Net earnings (loss), as reported $ 45 $ (396) Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax benefit (9) (32) ------------------------------ Pro forma net earnings (loss) $ 36 $ (428) ============================== Basic and diluted earnings (loss) per share, as reported $ .01 $ (.09) ============================== Basic and diluted earnings (loss) per share, pro forma $ .01 $ (.10) ==============================
6
Nine Months Ended (in thousands, except per share amounts) 9/26/04 9/28/03 - --------------------------------------------------------------------------------------------------------------------- (unaudited) Net (loss), as reported $ (225) $ (1,282) Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax benefit (41) (95) ------------------------------ Pro forma net (loss) $ (266) $ (1,377) ============================== Basic and diluted (loss) per share, as reported $ (.05) $ (.31) ============================== Basic and diluted (loss) per share, pro forma $ (.06) $ (.33) ==============================
3. Acquisition: On May 28, 2003, pursuant to an Asset Purchase Agreement dated April 30, 2003, the Company purchased certain assets consisting primarily of inventories, machinery and equipment and the customer order backlog from MF Electronics Corp. ("MF"), a privately held company located in New Rochelle, NY. MF designs and manufactures a wide range of frequency control products. The results of MF's operations have been included in the consolidated financial statements since the date of acquisition. During the week of June 30, 2003, the purchased assets and operations of MF were moved to the Company's facility located in Hopkinton, MA. The following unaudited pro forma financial information presents the results of the Company as if the acquisition of MF was completed January 1, 2003 (in thousands, except for per share amounts):
Three Months Ended Nine Months Ended 9/28/03 9/28/03 - --------------------------------------------------------------------------------------------------------------------------------- Net sales $ 2,190 $ 7,972 Net (loss) (396) (1,694) Basic and diluted (loss) per share (.09) (.40)
This pro forma financial information is presented for informational purposes and is not necessarily indicative of the Company's operating results if the acquisition had been in effect for the period presented. In addition, this is not intended to be a projection of future results and do not reflect any anticipated cost savings or operating efficiencies that the Company believes are achievable. 4. Comprehensive Income (Loss): During the three months and nine months ended September 26, 2004 and September 28, 2003, there were no differences between comprehensive income (loss) and net income (loss). 7 5. Receivables, net: Receivables, net of allowances, consist of the following:
(in thousands) 9/26/04 12/31/03 - ------------------------------------------------------------------------------------------------- (unaudited) Accounts receivable, less allowance for doubtful accounts of $98 and $80 $1,414 $1,161 Refundable income taxes - 1,287 Other - 19 ----------------------- $1,414 $2,467 =======================
6. Inventories, net: Inventories, net of reserves, consist of the following:
(in thousands) 9/26/04 12/31/03 - ------------------------------------------------------------------------------------------------- (unaudited) Raw materials $1,245 $1,110 Work in process 313 275 Finished goods 251 186 ----------------------- $1,809 $1,571 =======================
7. Discontinued Operations: During 1998, the Company sold the assets of its Bergen Cable Technologies, Inc. subsidiary. As a result of the sale, the Company was required to perform environmental cleanup at the site. During the second quarter of 2004, the Company expensed $110,000 to increase the environmental expense accrual to reflect the revised estimate to complete the next phase of the remediation. This after-tax expense of $110,000 is presented in the Consolidated Statements of Operations under the caption "(Loss) from discontinued operations". As of September 26, 2004, $1,060,000 has been expensed for the cleanup and accrued liabilities include approximately $145,000 for future payments. These costs represent the Company's best estimate, but the ultimate costs will not be known until the remediation is complete. 8. Earnings (Loss) Per Share: The computation of basic earnings (loss) per share is computed using the weighted average number of common shares outstanding during the three months and nine months ended September 26, 2004 and September 28, 2003. The computation of diluted earnings (loss) per share is computed using the weighted average number of common shares outstanding and the weighted average number of common shares that would have been outstanding if potentially dilutive common shares relating to stock options had been issued using the treasury stock method during these same periods. 8 During the three months ended September 26, 2004, 163,750 of common shares issuable under stock options have not been included in the computation of "Diluted earnings (loss) per share" because the options' exercise price was greater than the average market price. The following table shows the common shares issuable under stock options which have not been included in the computation of "Diluted earnings (loss) per share" because of the anti-dilutive effect of the options since the Company reported a loss from operations in these periods: Period Number of common shares - -------------------------------------------------------------------------------- Nine months ended September 26, 2004 534,438 Three months ended September 28, 2003 578,438 Nine months ended September 28, 2003 578,438 9. Reclassifications: Certain reclassifications have been made to the 2003 financial statements to conform to the current year presentation. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Management believes that judgments and estimates related to the following critical accounting estimates could materially affect its consolidated financial statements. Accounts receivable - The Company performs on-going credit evaluations of its customers and assesses the collectibility of its accounts receivable based on a number of factors including the customer's financial condition and collection history, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Inventory - The Company estimates the carrying value of its inventory based upon historic usage and management's assumptions relating to projected customer purchases, product design changes and product obsolescence. The changing technology markets that we supply also affect these estimates. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Income Taxes - The Company has recorded deferred tax assets and liabilities resulting from differing treatment of items for tax and financial statement reporting purposes. The Company must estimate its income tax valuation allowance by assessing which deferred tax assets are more likely than not to be recovered in the future. Based on our assessment of the realization of these assets, the Company has recorded a valuation allowance of $704,000 at September 26, 2004. In reaching our conclusion, we evaluated the existence of deferred tax liabilities that can be used to absorb deferred tax assets, the deductibility of the disposal of scrap and worthless inventory, taxable income in prior carryback years and taxable income by jurisdiction in which we operate and the period over which the deferred tax assets would be recoverable. In the event that actual results differ from these estimates in future periods, the Company may need to establish an additional valuation allowance or reduce the valuation allowance, which could materially impact our financial position and results of operations. Liquidity and Capital Resources Cash and cash equivalents increased $1,671,000 during the nine months ended September 26, 2004. During this period, the Company's continuing operations generated cash of $1,717,000, investing activities used cash of $59,000 and financing activities generated $13,000 in cash. Cash generated from continuing operations of $1,717,000 resulted mainly from the net loss of $115,000 adjusted for the non-cash effect of depreciation of $626,000 and the $1,190,000 reduction in working capital. The net reduction in working capital was mainly due to the receipt of a $1,255,000 tax refund. The $271,000 increase in accounts receivable is mainly due to the increased sales level. Days sales outstanding were 45 days at September 26, 2004 compared to 47 days at December 31, 2003. The inventory increase of $238,000 is mainly to support the increased level of sales and backlog. The increase in accrued liabilities was mainly attributable to increases in commissions payable, employee compensation, environmental costs and professional fees. 10 During the nine months ended September 26, 2004, the Company sold certain pieces of machinery and equipment, received $25,000 in cash and recorded a $13,000 gain on the sale. Capital expenditures amounted to $95,000 during the nine months ended September 26, 2004. While the Company is projecting a loss in 2004 based on the current conditions in the telecom market, management believes that based on its current working capital and the expected cash flows from operations, the Company's resources are sufficient to meet its financial needs in 2004 including a remaining capital expenditures budget of approximately $150,000. Off-Balance Sheet Arrangements The Company does not maintain any off-balance sheet financing arrangements. Contractual Obligations During the normal course of business, we incur certain commitments to make future payments for the purchase of inventory and production supplies based on projected requirements. At September 26, 2004, the Company has outstanding purchase commitments totaling approximately $481,000, all of which are expected to be fulfilled in less than 1 year. Results of Operations For the quarter and nine months ended September 26, 2004, net sales increased $853,000 or 39% and $2,880,000 or 47%, respectively, over the comparable periods in 2003. Sales from the MF Electronics product line acquired at the end of May 2003 accounted for approximately 40% of the sales increase during the quarter ended September 26, 2004. The remaining sales increase resulted primarily from overall higher average selling prices based on the sales mix. During the nine months ended September 26, 2004, sales from the MF Electronics product line accounted for about 50% of the sales increase. Increased unit sales accounted for the majority of the remaining sales increase during this period. The book-to-bill ratio during the nine months ended September 26, 2004 was slightly better than 1, comparable to that in the same period in 2003. The Company's backlog amounted to $2.0 million at September 26, 2004 compared to $1.8 million at December 31, 2003 and $1.7 million at September 28, 2003. While the Company saw increased activity in the IT markets (servers, switches and storage) and some slight increase in the telecom market during the 1st quarter of 2004, the Company did see some softness in new orders during the 3rd quarter of 2004. Based on input from our customers and outside sales representatives, we feel we will continue to see this market softness in the short-term. Management continues to be unsure of the potential impact on its future operations from the current continuing telecom market uncertainties and our industries over capacity issues. The Company reported a $936,000 gross profit (31% of net sales) in the quarter ended September 26, 2004 versus a $274,000 gross profit (13% of net sales) in the 2003 quarter. For the nine months ended September 26, 2004, the gross profit was $2,645,000 (30% of net sales) compared to $641,000 (11% of net sales) in the 2003 period. About 50% of the dollar increase during both of these periods was due to the gross profit provided by the MF Electronics product line sales. During these periods, the remaining increases were generated from the higher margins from the existing product lines resulting mainly from the favorable effect of spreading the fixed overhead costs over the higher sales level. As a percentage of sales, direct labor and raw material costs remained fairly constant during these periods. During the quarter ended September 26, 2004, selling and advertising expenses increased $92,000 (32%) over the comparable period in 2003. As a result of the sales increase during 2004, sales commission expense to outside manufacturers' representatives increased $39,000 over 2003 quarter. Increases in bad debt, personnel and advertising expenses mainly accounted for the remaining expense increase. During the nine months ended September 26, 2004, selling and advertising expenses increased $143,000 (14%) over the same period in 2003. An increase of $130,000 in sales commission expense to outside manufacturers' representatives accounted for the majority of the increase. 11 During the quarter ended September 26, 2004, general and administrative expenses decreased $98,000 from the comparable 2003 period. A $107,000 reduction in personnel expenses, offset in part by a $25,000 increase in professional fees, was the main reason for the expense reduction. During the nine months ended September 26, 2004, general and administrative expenses decreased $5,000 from the same period in 2003. An $113,000 reduction in personnel expenses, offset in part by a $96,000 increase in professional fees, was the main reason for the expense reduction. The reductions in personnel expenses were mainly attributable to the integration of the MF Electronics acquisition. The increases in professional fees resulted primarily from the costs relating to the new financial reporting and corporate governance requirements. For the quarter and nine months ended September 26, 2004, research and development expenses increased $36,000 and $72,000 over the comparable 2003 periods. These increases were primarily due to increased personnel expenses. The decrease in interest income during the nine months ended September 26, 2004 from the 2003 period was mainly due to the lower average cash balances in 2004 and, to a lesser extent, lower interest rates during the current year. The decrease in interest expense from the 2003 amount is due to the Company paying-off the balance of its outstanding term-debt in the first quarter of 2003. During the nine months ended September 26, 2004, the Company sold equipment and realized a $13,000 gain. During the quarter and nine months ended September 26, 2004, the Company did not provide for income taxes based on the estimated taxable loss this year due to the uncertainty surrounding the realization of these future tax benefits. The estimated effective federal and state income tax rate for 2003 is 33%. The Company is providing a valuation allowance for the full amount of the state income tax benefit in 2003 due to the uncertainty of realization. For the quarter ended September 26, 2004, the Company reported an operating profit of $37,000 compared to an operating loss of $595,000 in comparable quarter of 2003. The improvement in operating profit was mainly due to the increases in sales and gross margin in 2004, offset in part by slightly higher operating expenses. During the quarter ended September 26, 2004 the Company reported a $45,000 net profit from continuing operations compared to a net loss of $396,000 from continuing operations in comparable 2003 period. For the nine months ended September 26, 2004, the Company reported an operating loss of $150,000 compared to an operating loss of $1,944,000 in comparable period of 2003. The reduction in operating loss was mainly due to the increases in sales and gross margin in 2004, offset in part by higher operating expenses. During the nine months ended September 26, 2004 the Company reported an $115,000 net loss from continuing operations compared to a net loss of $1,282,000 from continuing operations in comparable 2003 period. During the nine months ended September 26, 2004, the Company reported an $110,000 loss from discontinued operations. As a result, for the nine months ended September 26, 2004, the Company reported a net loss of $225,000 versus a net loss of $1,282,000 in 2003. 12 Forward-Looking Statements Certain statements made herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, but not limited to: the Company's ability to achieve profitability, the current production over-capacity within the suppliers of frequency control devices, the ability to develop, market and manufacture new innovative products competitively, the fluctuations in product demand of the telecommunications industry, the ability of the Company and its suppliers to produce and deliver materials and products competitively, and the ability to limit the amount of the negative effect on operating results caused by pricing pressure. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company's cash balances in excess of operating requirements are currently invested in money market accounts. These money market accounts are subject to interest rate risk and interest income will fluctuate in relation to general money market rates. Based on the cash and cash equivalent balance at September 26, 2004, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% point change in interest rates would result in an approximate $58,800 increase or decrease in interest income. The Company purchases certain inventory from and sells product in foreign countries. As these activities are currently transacted in U.S. dollars, they are not subject to foreign currency exchange risk. However, significant fluctuation in the currencies where the Company purchases inventory or sells product could make the U.S. dollar equivalent of such transactions more or less favorable to the Company and the other involved parties. Item 4. Controls and Procedures Evaluation of disclosure controls and procedures. At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. Changes in internal control. During the third quarter of 2004, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 13 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32.1 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. (b) Reports on Form 8-K On July 30, 2004, the Registrant filed a report on Form 8-K dated July 30, 2004 reporting under Item 7.(c) Exhibits and Item 12. Results of Operations and Financial Condition. 14 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. Valpey-Fisher Corporation Date: November 5, 2004 By /s/ Michael J. Ferrantino ---------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: November 5, 2004 By /s/ Michael J. Kroll ----------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer 15 EX-31.1 2 a4757398ex311.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael J. Ferrantino, certify that: 1. I have reviewed this report on Form 10-Q of Valpey-Fisher Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) (Intentionally omitted) c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 5, 2004 By /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino President and Chief Executive Officer 16 EX-31.2 3 a4757398ex312.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael J. Kroll, certify that: 1. I have reviewed this report on Form 10-Q of Valpey-Fisher Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) (Intentionally omitted) c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 5, 2004 By /s Michael J. Kroll ---------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer 17 EX-32.1 4 a4757398ex321.txt EXHIBIT 32.1 Exhibit 32.1 Certification Pursuant to 18 U.S.C Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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 Valpey-Fisher Corporation (the "Company"), does hereby certify, to such officer's knowledge, that: 1. The Company's Quarterly Report on Form 10-Q for the quarter ended September 26, 2004 ("Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 5, 2004 By /s/ Michael J. Ferrantino ----------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: November 5, 2004 By Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer The foregoing certification is being furnished solely 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) and is not being filed as part of the Form 10-Q or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 18 -----END PRIVACY-ENHANCED MESSAGE-----