-----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, GLGYnniQ1lRXu7PMvBBkcvPZQ8KDignjWYE6fnogCBPUyKq5+3cp1/kuDnKG5nA5 PZatAdM+mvTGTSbyJV6Xng== 0001157523-08-004184.txt : 20080512 0001157523-08-004184.hdr.sgml : 20080512 20080512170324 ACCESSION NUMBER: 0001157523-08-004184 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080330 FILED AS OF DATE: 20080512 DATE AS OF CHANGE: 20080512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALPEY FISHER CORP CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] 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: 08824483 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 a5680249.txt VALPEY-FISHER CORPORATION 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 March 30, 2008 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 large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act: (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] As of May 9, 2008, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 4,282,883. -1-
Valpey-Fisher Corporation INDEX PAGE ----- ---- PART I. FINANCIAL INFORMATION ITEM 1. - Financial Statements - Consolidated Condensed Balance Sheets - March 30, 2008 (Unaudited) and December 31, 2007 (Audited) 3 Consolidated Statements of Operations - (Unaudited) Three Months Ended March 30, 2008 and April 1, 2007 4 Consolidated Statements of Cash Flows - (Unaudited) Three Months Ended March 30, 2008 and April 1, 2007 5 Notes to Consolidated Condensed Financial Statements - (Unaudited) 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 12 ITEM 4. - Controls and Procedures 12 PART II. OTHER INFORMATION ITEM 1A. - Risk Factors 13 ITEM 2. - Unregistered Sales of Equity Securities and Use of Proceeds 13 ITEM 6. - Exhibits 13 SIGNATURES 14
-2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Valpey-Fisher Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data)
3/30/08 12/31/07 ------------------------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 9,606 $ 10,001 Accounts receivable, net of allowance of $105 in 2008 and 2007 2,283 1,938 Inventories, net 1,334 1,096 Deferred income taxes 915 959 Other current assets 58 62 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 14,196 14,056 Property, plant and equipment, at cost 11,056 11,042 Less accumulated depreciation 9,435 9,326 - ------------------------------------------------------------------------------------------------------------------------ 1,621 1,716 Other assets 186 178 - ------------------------------------------------------------------------------------------------------------------------ Total assets $ 16,003 $ 15,950 - ------------------------------------------------------------------------------------------------------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 921 $ 620 Accrued liabilities 1,304 1,758 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 2,225 2,378 Deferred income taxes 233 249 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: 4,280,383 and 4,282,503 shares 214 214 Capital surplus 5,516 5,503 Retained earnings 7,815 7,606 - ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 13,545 13,323 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 16,003 $ 15,950 - ------------------------------------------------------------------------------------------------------------------------
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 3/30/08 4/1/07 -------------------------- Net sales $ 3,455 $ 3,242 Cost of sales 2,042 1,921 - ------------------------------------------------------------------------------------------------------------------------ Gross profit 1,413 1,321 Operating expenses: Selling and advertising 482 462 General and administrative 457 468 Research and development 164 115 - ------------------------------------------------------------------------------------------------------------------------ Total operating expenses 1,103 1,045 Operating profit 310 276 Interest income 63 97 - ------------------------------------------------------------------------------------------------------------------------ Earnings before income taxes 373 373 Income tax (expense) (164) (93) - ------------------------------------------------------------------------------------------------------------------------ Net earnings $ 209 $ 280 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Basic and diluted earnings per share $ .05 $ .07 - ------------------------------------------------------------------------------------------------------------------------ Basic weighted average shares 4,281 4,257 Diluted weighted average shares 4,395 4,273
See notes to consolidated condensed financial statements. -4- Valpey-Fisher Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Three Months Ended ----------------------------- 3/30/08 4/1/07 ----------------------------- Cash flows from operating activities: Net earnings $ 209 $ 280 Adjustments to reconcile net earnings to net cash provided (used) by operating activities of continuing operations: Depreciation 108 134 Deferred income taxes 28 (63) Stock-based compensation 23 42 Non-cash restricted stock compensation, net of taxes - 11 Changes in operating assets and liabilities: Accounts receivable, net (345) (73) Inventories, net (238) (303) Other current assets 4 (84) Accounts payable and accrued expenses (147) 61 - ------------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by operating activities of continuing operations (358) 5 Cash flows from operating activities: - Discontinued Operations Change in accrued expenses (6) (6) - ------------------------------------------------------------------------------------------------------------------------ Net cash (used) by operating activities of discontinued operations (6) (6) - ------------------------------------------------------------------------------------------------------------------------ Net cash (used) by operating activities (364) (1) - ------------------------------------------------------------------------------------------------------------------------ Cash flows from investing activities: Capital expenditures (14) (44) Other, net (8) (10) - ------------------------------------------------------------------------------------------------------------------------ Net cash (used) by investing activities (22) (54) - ------------------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: - ------------------------------------------------------------------------------------------------------------------------ Purchase of common stock (9) - - ------------------------------------------------------------------------------------------------------------------------ Net cash (used) by financing activities (9) - - ------------------------------------------------------------------------------------------------------------------------ Net (decrease) in cash and cash equivalents (395) (55) Cash and cash equivalents: Beginning of period 10,001 9,184 ----------------------------- End of period $ 9,606 $ 9,129 -----------------------------
See notes to consolidated condensed financial statements. -5- Valpey-Fisher Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements (Unaudited) 1. Financial Presentation: The unaudited interim financial statements, 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 unaudited interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 2007 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Stock Compensation Plans: At March 30, 2008, options for 172,666 shares are available for future grants to officers, key employees, and other individuals under the Company's four Stock Option Plans. The option price and terms are recommended by the Company's Compensation Committee to the Company's Board of Directors for approval. The maximum contractual term of an option is ten years. The options granted may qualify as incentive stock options ("ISO's"). Compensation expense related to stock options granted is recognized ratably over the vesting period of the option. The Company issues new shares upon the exercise of stock options. There were no stock option grants in the quarters ended March 30, 2008 and April 1, 2007. The Company recorded the following stock-based compensation expense in the Consolidated Statement of Operations (in thousands):
3 Months Ended ----------------------------------------- 3/30/08 4/1/07 ----------------------------------------- Cost of sales $ 7 $ 7 Selling and advertising 6 7 General and administrative 7 25 Research and development 3 3 ----------------------------------------- Pre-tax stock-based compensation expense 23 42 Income tax (benefit) (1) (1) ----------------------------------------- Net stock-based compensation expense $ 22 $ 41 -----------------------------------------
-6- A summary of the activity under all the Company's stock option plans as of March 30, 2008 and the changes during the three month period then ended are as follows:
Weighted- Average Weighted- Remaining Average Contractual Aggregate Number of Exercise Price Life Intrinsic Shares Per Share In Years Value -------------- ------------------- ----------------- ----------------- Outstanding at December 31, 2007 460,250 $ 3.43 Options granted 0 -------------- Outstanding at March 30, 2008 460,250 $ 3.43 5.3 $ 659,445 -------------- ----------------- ----------------- Exercisable at March 30, 2008 345,683 $ 3.58 4.9 $ 473,059 -------------- ----------------- -----------------
A summary of the status of the Company's nonvested stock options as of March 30, 2008 and the changes during the three month period then ended are as follows:
Weighted-Average Grant-Date Shares Fair Value ---------------- ------------------------- Nonvested at December 31, 2007 116,567 $ 1.77 Granted 0 0 Vested (2,000) 1.68 ---------------- ------------------------- Nonvested at March 30, 2008 114,567 $ 1.77 ---------------- -------------------------
At March 30, 2008, there was approximately $126,000 of total unrecognized compensation cost related to nonvested stock options granted. That cost is expected to be recognized over a weighted-average period of 1.4 years. The total grant-date fair value of stock options that vested during the three months ended March 30, 2008 was approximately $3,400. 3. Comprehensive Income (Loss): During the three months ended March 30, 2008 and April 1, 2007, there were no differences between comprehensive income (loss) and net income (loss). 4. Inventories, net:
Inventories, net of reserves, consist of the following: (in thousands) 3/30/08 12/31/07 ---------------------------------------------------------------------------------------- (unaudited) Raw materials $ 841 $ 758 Work in process 210 101 Finished goods 283 237 -------------------------- $ 1,334 $ 1,096 --------------------------
-7- 5. Earnings Per Share: Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the net incremental shares that would be issued if dilutive outstanding stock options were exercised using the treasury stock method. The assumed proceeds under the treasury stock method include: o the amount paid to the Company upon exercise of the option; o compensation expense for future services that the Company has not yet recognized; and o the amount of excess tax benefits, if any, that would be credited to additional paid-in capital upon exercise of the options. The computation of diluted earnings per share excludes stock options with an exercise price in excess of the average market price as they are antidilutive. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period. The following table shows a reconciliation of weighted average shares (in thousands):
Three Months Ended ----------------------------- 3/30/08 4/1/07 ----------------------------- Weighted average shares outstanding 4,281 4,257 Dilutive effect of stock options outstanding, using the treasury stock method 114 16 ----------------------------- Diluted weighted average shares outstanding 4,395 4,273 -----------------------------
The following table shows the potentially dilutive securities which have been excluded from the dilutive earnings per share calculation (in thousands):
Three Months Ended ----------------------------- 3/30/08 4/1/07 ----------------------------- Stock options where the exercise price was greater than the average market price 19 29 Stock options where the assumed proceeds exceed the average market price during the period - 180
6. Income Taxes: Effective January 1, 2007, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 prescribes how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. Adoption of FIN 48 on January 1, 2007 did not result in a cumulative effect adjustment to retained earnings. At March 30, 2008 and April 1, 2007, the Company had no reserves for unrecognized tax benefits on the balance sheet. -8- The Company's federal income tax return for 2004 has been examined by the IRS and the state of Massachusetts tax returns for 2004 through 2006 are open tax years. The Company's policy is to include interest expense on underpayments of income taxes in our income tax provision whereas penalties are included in general and administrative expense. 7. Recent Accounting Pronouncements: In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 was effective for the Company on January 1, 2008 and had no impact on our consolidated financial statements. In February 2008, FASB issued FASB Staff Position ("FSP") No. 157-2, which delayed the effective date of SFAS 157 for certain non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008. The Company is in the process of evaluating the effect, if any, the adoption of FSP No. 157-2 will have on its results of operations or financial position. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 ("SFAS No. 159") which permits an entity to elect to measure certain assets and liabilities at fair value at specified election dates. SFAS No. 159 was effective for the Company on January 1, 2008 and had no impact on our consolidated financial statements as we did not elect to use the fair value option. In December 2007, the FASB issued SFAS 141 (revised 2007), "Business Combinations", (SFAS 141R). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, including goodwill, the liabilities assumed and any non-controlling interest in the acquiree. The Statement also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of adopting SFAS 141R will be dependent on the future business combinations that the Company may pursue after its effective date. In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 110, extending under certain circumstances the provisions of SAB 107 relating to the use of the "simplified method" in developing estimates of the expected term of "plain vanilla" share options in accordance with SFAS No. 123R, Share-Based Payment. Through December 31, 2007, we used the "simplified method" to determine the expected life of option grants. SAB 110 is effective for stock option grants after December 31, 2007. We do not believe the change in determining the expected life of option grants will have a material effect on our results of operations or financial position. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies 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. The preparation of our 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. -9- Management believes that judgments and estimates related to our critical accounting policies could materially affect its consolidated financial statements. Our most critical accounting policies, which were discussed in our Annual Report on Form 10-K for the year ended December 31, 2007, pertain to accounts receivable, inventories and income taxes. These policies continue to be our most critical accounting policies for the period covered by this report and there were no significant changes in the application of those policies during this reporting period. Liquidity and Capital Resources Cash and cash equivalents amounted to $9,606,000 at March 30, 2008, a decrease of $395,000 from the December 31, 2007 balance. During this period, our operations used cash of $364,000, investing activities used cash of $22,000 and financing activities used cash of $9,000. Cash used in continuing operations of $358,000 resulted mainly from the net earnings of $209,000, net adjustments of $159,000 for the non-cash effects of depreciation, deferred income taxes and stock compensation expense offset by a $726,000 increase in working capital. Discontinued operations used cash of $6,000. The $345,000 increase in accounts receivable is mainly due to an increase in the day's sales outstanding from 54 days at December 31, 2007 to 62 days at March 30, 2008. The inventory increase of $238,000 is mainly due to the increase in raw material and work-in-process inventory to support the current level of shipments and backlog and to meet customer delivery requirements. The $454,000 decrease in accrued liabilities is mainly due to a payment of $500,000 under the 2007 key employee bonus plan and an $83,000 payment for the Company's 2007 401K match. The increase of $301,000 in accounts payable is mainly due to the increase in inventory. Capital expenditures during the quarter ended March 30, 2008 amounted to $14,000. We believe that based on our current working capital and the expected cash flow from operations, our resources are sufficient to meet our financial needs and to fund our capital expenditures for the projected levels of business in 2008. Off-Balance Sheet Arrangements We do 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, equipment, and production supplies based on projected requirements. At March 30, 2008, we had outstanding purchase commitments totaling approximately $996,000, all of which are expected to be fulfilled in 2008. -10- Results of Operations During the quarter ended March 30, 2008, net sales increased $213,000 (7%) over the comparable quarter in 2007 as sales of our high precision and high reliability product lines increased $317,000 (34%) and $203,000 (64%), respectively. We continue to pursue sales of these more value-added, higher performance and higher average selling price products. These sales increases were offset by sales decreases in our standard product line of $289,000 (16%) and our transducer product line of $18,000 (9%). Bookings during the current quarter amounted to $3,453,000 versus $3,423,000 in the 2007 quarter. Our backlog amounted to $2,166,000 at March 30, 2008 compared to $2,253,000 at April 1, 2007. During both periods our gross profit as a percentage of sales was 41%. Raw material cost as a percentage of sales was about 9% higher in 2008 versus 2007 mainly as a result of increased raw material percentage costs in the standard product line mainly due to compression in the average selling prices. The higher raw material costs were offset by a decrease in overhead costs as a percentage of sales resulting from a slight decrease in actual expenses and the favorable effect of spreading the fixed overhead costs over the increased sales volume. Direct labor as a percentage of overall sales in 2008 remained consistent with that in the 2007 period. Selling and advertising expenses increased $20,000 or 4% over the comparable quarter in 2007 mainly due to an increase of $27,000 in commission expense to outside sales representatives partially offset by a $7,000 net decrease in the remaining expenses. General and administrative expenses decreased $11,000 or 2% from the 2007 period. The expense decrease was primarily the result of decreases of $17,000 in stock based compensation expense and $15,000 in restricted stock expense partially offset by a $27,000 increase in professional fees related to our decision to consider possible strategic alternatives to increase shareholder value. Research and development expenses in 2008 increased $49,000 or 43% from the 2007 amount primarily as a result of a $54,000 increase in personnel expenses partially offset by a $5,000 decrease in operating supplies. While the average invested cash balance was approximately $1.1 million higher in 2008 period compared to the 2007 period, interest income decreased $34,000 primarily as a result of interest rates being approximately 2 percentage points lower during 2008. The estimated annual combined federal and state income tax rate for 2008 is 44% compared to 25% in 2007. The 2007 estimated rate includes a reduction in the valuation allowance for deferred income taxes which amounts to approximately an 11% point reduction in the 2007 rate. The effect of this valuation adjustment was to reduce income tax expense by $42,500 or $.01 per share in the 2007 quarter. The 2008 tax rate includes a provision for state income taxes, whereas, there is no estimated state income tax provision for 2007 as we had state income tax NOL carryforwards available. The 2008 and 2007 projected rates were increased by approximately 2% points and 3% points, respectively, as a result of the effect of nondeductible stock option expense resulting from the adoption of SFAS No. 123R. The majority of the stock option expense results from incentive stock options and under SFAS No. 123R, the expense does not generate a tax deduction and related tax benefit. For the quarter ended March 30, 2008, we reported an operating profit of $310,000 compared to an operating profit of $276,000 in comparable quarter of 2007. Interest income amounted to $63,000 in 2008, compared to $97,000 in 2007. As a result, we reported a pre-tax profit of $373,000 during the quarter ended March 30, 2008 compared to a pre-tax profit $373,000 in comparable 2007 period. For the quarter ended March 30, 2008, we reported net earnings of $209,000 versus net earnings of $280,000 in 2007. -11- 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 our current views and assumptions and involve risks and uncertainties that include, but not limited to: our ability to continue 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 us and our suppliers to produce and deliver materials and products competitively, the ability to limit the amount of the negative effect on operating results caused by pricing pressure and our ability to comply with Section 404 of the Sarbanes-Oxley Act. Item 3. Quantitative and Qualitative Disclosures About Market Risk Our 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 March 30, 2008, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% point increase or decrease in interest rates would result in an approximate $96,100 increase or decrease in interest income. We purchase certain inventory from and sell 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 we purchase inventory or sell product could make the U.S. dollar equivalent of such transactions more or less favorable to us and the other involved parties. Item 4. Controls and Procedures Evaluation of disclosure controls and procedures. We carried out an evaluation, under the supervision and with our management, including our President and Chief Executive Officer and our Company's Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of March 30, 2008 in timely alerting them to material information relating to us required to be included in our periodic SEC filings. Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Changes in internal control. Our evaluation did not identify any change in our internal controls over financial reporting that occurred during the quarter ended March 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. -12- PART II - OTHER INFORMATION Item 1A. Risk Factors Information regarding risk factors are set forth under the caption "Forward-Looking Statements" in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A. of the Company's Annual Report on Form 10-K for the Year Ended December 31, 2007. There have been no material changes from the risk factors previously disclosed in the Company's 2007 Annual Report on Form 10-K. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (c) The following table summarizes the Company's purchases of Valpey-Fisher Corporation common stock during the quarter ended March 30, 2008:
Maximum Number Total Number of Of Shares that can Shares Purchased As Part Be Purchased Total Number of Average Price of Publicly Announced Under the Plans or Period Shares Purchased Paid per Share Plans or Programs Programs - ----------------------------------------------------------------------------------------------------------------------------------- 1/1/08 - 1/27/08 227,500 1/28/08 - 2/24/08 2,120 $4.21 2,120 225,380 2/25/08 - 3/30/08 225,380
The above purchases were made in open-market transactions. In February 2003, the Board authorized the purchase of up to 200,000 shares of the Company's common stock. In May 1999, the Board authorized the purchase of up to 150,000 shares of the Company's common stock. The authorizations have no expiration dates. Item 6. Exhibits 10.1 Key Employee Bonus Plan for 2008. Filed herewith. 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. -13- 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: May 12, 2008 /s/ Michael J. Ferrantino -------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: May 12, 2008 /s/ Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -14- EX-10.1 2 a5680249ex10_1.txt EXHIBIT 10.1 Exhibit 10.1 Valpey-Fisher Corporation Key Employee Bonus Plan For fiscal year 2008 Purpose of Plan To provide an incentive to those employees who have a major impact on the profitability of the company. Eligibility Must be a fulltime employee and be in continued employment of the Company for the entire fiscal year, unless a waiver of this provision is approved in advance of hiring by the Compensation Committee. In the event the Company is sold before the end of the year, the bonuses earned through the sale date would be prorated. Participants The plan participants will include the CEO and the Management Staff. Bonus Pool - ---------- The 2008 bonus pool is based on achieving certain pre-tax operating profit amounts before the bonus amount, other income/expense, extraordinary income/expense, and the effects of SFAS 123R ("adjusted operating profit") listed below: Adjusted Operating Cumulative Profit Bonus Amount --------------------------- --------------------- $ 250,000 $ 25,000 500,000 75,000 1,000,000 175,000 1,250,000 225,000 1,500,000 275,000 1,750,000 325,000 2,000,000 400,000 2,250,000 475,000 For adjusted operating profit amounts between the listed amounts, the bonus amount will be prorated. For adjusted operating profit in excess of $2,250,000, the Board of Directors will determine the bonus amount. The Compensation Committee will recommend the bonus payout amount for the CEO to the Board of Directors for their approval. The CEO will decide the payout amount for the remaining participants. The distribution of the bonus and % of individual participation will range from 0% to 100% of salary. The bonus amount includes the profit sharing contribution for the year ended December 31, 2008 as determined by the Board of Directors and shall be limited to a maximum of 10% of the total bonus payout. -15- EX-31.1 3 a5680249ex31_1.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 quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 annual report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles; 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 annual 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: May 12, 2008 By /s/ Michael J. Ferrantino ---------------------------- Michael J. Ferrantino President and Chief Executive Officer -16- EX-31.2 4 a5680249ex31_2.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 quarterly 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 annual report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles; 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 annual 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: May 12, 2008 By /s/ Michael J. Kroll ----------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -17- EX-32.1 5 a5680249ex32_1.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 March 30, 2008 ("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: May 12, 2008 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: May 12, 2008 /s/ 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-----