-----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, Nwf3orIIzXSW5K62GHYBsQjhYYeb3TbmzO7G1pwwWE7zY5MME9m06+1FkOQy+9AR 8pL/a+WbC6OGNSaX6xxy0Q== 0001157523-08-006771.txt : 20080812 0001157523-08-006771.hdr.sgml : 20080812 20080812161643 ACCESSION NUMBER: 0001157523-08-006771 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080629 FILED AS OF DATE: 20080812 DATE AS OF CHANGE: 20080812 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: 081009946 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 a5752906.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 June 29, 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 August 11, 2008, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 4,277,998. -1- Valpey-Fisher Corporation
INDEX PAGE ----- ---- PART I. FINANCIAL INFORMATION - ------------------------------------------------------------------------------------------------------------- ITEM 1. Financial Statements Consolidated Condensed Balance Sheets - June 29, 2008 (Unaudited) and December 31, 2007 (Audited) 3 Consolidated Statements of Operations - (Unaudited) Three Months and Six Months Ended June 29, 2008 and July 1, 2007 4 Consolidated Statements of Cash Flows - (Unaudited) Six Months Ended June 29, 2008 and July 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 4T. Controls and Procedures 13 PART II. OTHER INFORMATION - ------------------------------------------------------------------------------------------------------------- ITEM 1A. Risk Factors 13 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 13 ITEM 4. Submission of Matters to a Vote of Security Holders 14 ITEM 6. Exhibits 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)
6/29/08 12/31/07 ------------------------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 9,975 $ 10,001 Accounts receivable, net of allowance of $105 in 2008 and 2007 1,953 1,938 Inventories, net 1,481 1,096 Deferred income taxes 853 959 Other current assets 47 62 - ---------------------------------------------------------------------------------------------------------- Total current assets 14,309 14,056 Property, plant and equipment, at cost 11,158 11,042 Less accumulated depreciation 9,548 9,326 - ---------------------------------------------------------------------------------------------------------- 1,610 1,716 Other assets 188 178 - ---------------------------------------------------------------------------------------------------------- Total assets $ 16,107 $ 15,950 ========================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 813 $ 620 Accrued liabilities 1,323 1,758 - ---------------------------------------------------------------------------------------------------------- Total current liabilities 2,136 2,378 Deferred income taxes 203 249 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: 4,279,648 and 4,282,503 shares 214 214 Capital surplus 5,531 5,503 Retained earnings 8,023 7,606 - ---------------------------------------------------------------------------------------------------------- Total stockholders' equity 13,768 13,323 - ---------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 16,107 $ 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 Six Months Ended ---------------------------- ----------------------------- 6/29/08 7/1/07 6/29/08 7/1/07 ---------------------------- ----------------------------- Net sales $ 3,262 $ 3,425 $ 6,717 $ 6,667 Cost of sales 1,946 2,054 3,988 3,974 - ------------------------------------------------------------------------------------------------------------ Gross profit 1,316 1,371 2,729 2,693 Operating expenses: Selling and advertising 435 462 917 924 General and administrative 404 449 860 918 Research and development 152 119 317 234 - ------------------------------------------------------------------------------------------------------------ 991 1,030 2,094 2,076 Operating profit 325 341 635 617 Interest income 55 101 118 198 - ------------------------------------------------------------------------------------------------------------ Earnings before income taxes 380 442 753 815 Income tax (expense) (173) (106) (337) (199) - ------------------------------------------------------------------------------------------------------------ Net earnings $ 207 $ 336 $ 416 $ 616 ============================================================================================================ - ------------------------------------------------------------------------------------------------------------ Basic earnings per share $ .05 $ .08 $ .10 $ .14 ============================================================================================================ Diluted earnings per share $ .05 $ .08 $ .09 $ .14 ============================================================================================================ Basic weighted average shares 4,281 4,266 4,281 4,261 Diluted weighted average shares 4,380 4,460 4,389 4,374
See notes to consolidated condensed financial statements. -4- Valpey-Fisher Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended ---------------------------- 6/29/08 7/1/07 ---------------------------- Cash flows from operating activities: Net earnings $ 416 $ 616 Adjustments to reconcile net earnings to net cash provided (used) by operating activities of continuing operations: Depreciation 222 253 Deferred income taxes 60 (100) Stock-based compensation 45 83 Non-cash restricted stock compensation, net of taxes - 22 Changes in operating assets and liabilities: Accounts receivable, net (15) (214) Inventories, net (385) (494) Other current assets 14 (100) Accounts payable and accrued expenses (186) 144 - -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities of continuing operations 171 210 Cash flows from operating activities: - Discontinued Operations Change in accrued expenses (56) (10) - -------------------------------------------------------------------------------------------------------------- Net cash (used) by operating activities of discontinued operations (56) (10) - -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 115 200 - -------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (116) (187) Other, net (9) (11) - -------------------------------------------------------------------------------------------------------------- Net cash (used) by investing activities (125) (198) - -------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Purchase of common stock (24) - Stock options exercised 8 32 - -------------------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities (16) 32 - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (26) 34 Cash and cash equivalents: Beginning of period 10,001 9,184 ---------------------------- End of period $ 9,975 $ 9,218 ---------------------------- Supplemental Cash Flow Information Cash paid during the period by continuing operations for income taxes $ 200 $ 325
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 June 29, 2008, options for 177,666 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 during the three months and six months ended June 29, 2008 and July 1, 2007. The Company recorded the following stock-based compensation expense in the Consolidated Statement of Operations (in thousands):
3 Months Ended 6 Months Ended ------------------------------------------------------- 6/29/08 7/1/07 6/29/08 7/1/07 ------------------------------------------------------- Cost of sales $ 6 $ 6 $ 13 $ 13 Selling and advertising 6 7 12 14 General and administrative 7 25 14 50 Research and development 3 3 6 6 ------------------------------------------------------- Pre-tax stock-based compensation expense 22 41 45 83 Income tax (benefit) (1) (1) (2) (2) ------------------------------------------------------- Net stock-based compensation expense $ 21 $ 40 $ 43 $ 81 =======================================================
-6- A summary of the activity under all the Company's stock option plans as of June 29, 2008 and the changes during the six month period then ended are as follows:
Weighted- Weighted- Average Average Remaining Exercise Contractual Aggregate Number of Price Life Intrinsic Shares Per Share In Years Value ---------------- ------------ ----------- ----------- Outstanding at December 31, 2007 460,250 $ 3.43 Options granted 0 Options exercised (3,000) 2.69 Options forfeited (5,000) 3.02 ---------------- Outstanding at June 29, 2008 452,250 $ 3.44 4.9 $ 430,335 ================ ============ =========== =========== Exercisable at June 29, 2008 387,017 $ 3.51 4.8 $ 360,531 ================ ============ =========== ===========
A summary of the status of the Company's nonvested stock options as of June 29, 2008 and the changes during the six 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 (46,334) 1.70 Forfeited (5,000) 1.86 -------------------- Nonvested at June 29, 2008 65,233 $ 1.82 ==================== ====================
At June 29, 2008, there was approximately $103,500 of total unrecognized compensation cost related to nonvested stock options granted. That cost is expected to be recognized over a weighted-average period of 1.5 years. The total grant-date fair value of stock options that vested during the six months ended June 29, 2008 was approximately $78,700. 3. Comprehensive Income (Loss): During the three months and six months ended June 29, 2008 and July 1, 2007, there were no differences between comprehensive income (loss) and net income (loss). 4. Inventories, net:
(in thousands) 6/29/08 12/31/07 - --------------------------------------------------------------------------------------------- (unaudited) Raw materials $ 972 $ 758 Work in process 166 101 Finished goods 343 237 ---------------------------------- $ 1,481 $ 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 Six Months Ended --------------------------------------------- 6/29/08 7/1/07 6/29/08 7/1/07 --------------------------------------------- Weighted average shares outstanding 4,281 4,266 4,281 4,261 Dilutive effect of stock options outstanding, using the treasury stock method 99 194 108 113 --------------------------------------------- Diluted weighted average shares outstanding 4,380 4,460 4,389 4,374 =============================================
The following table shows the potentially dilutive securities which have been excluded from the dilutive earnings per share calculation (in thousands):
Three Months Ended Six Months Ended ----------------------------------------------- 6/29/08 7/1/07 6/29/08 7/1/07 ----------------------------------------------- Stock options where the exercise price was greater than the average market price 19 19 19 19
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 June 29, 2008 and December 31, 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. Our 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. 8. Subsequent Event: On August 7, 2008, the Company's Board of Directors approved a special one-time cash dividend in the amount of $1.50 per share payable October 17, 2008 to shareholders of record on October 6, 2008. The dividend is subject to shareholders approving at a Special Meeting to be held on September 30, 2008, amendments to the Company's Stock Option Plans (i) clarifying that the anti-dilution adjustment provisions with respect to outstanding stock options contained in the Company's stock option plans apply to permit an offset to the impact of the large special dividend and (ii) increasing the numeric grant limitations and the number of shares covered by the Plans by the number of shares necessary to adjust the outstanding options. If the proposed amendments to the Valpey-Fisher Stock Option Plans are not approved by shareholders, the special dividend would not be paid. -9- 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. 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 $9,975,000 at June 29, 2008, a decrease of $26,000 from the December 31, 2007 balance. During this period, our operations provided cash of $115,000, investing activities used cash of $125,000 and financing activities used cash of $16,000. Cash provided by continuing operations amounted to $171,000 and resulted mainly from net earnings of $416,000, increased by net adjustments of $327,000 for the non-cash effects of depreciation, deferred income taxes and stock compensation expense and offset by a $572,000 net increase in working capital. Discontinued operations used cash of $56,000. The primary reasons for the net increase in working capital were an increase in inventory and a decrease in accrued expenses partially offset by an increase in accounts payable. The inventory increase of $385,000 is mainly necessary to support the current level of shipments and backlog and to meet customer delivery requirements. The $435,000 decrease in accrued liabilities is mainly due to a net reduction of $363,000 in the key employee bonus plan resulting from a $500,000 payment of the 2007 bonus accrual. The increase of $193,000 in accounts payable is mainly due to the timing of inventory and equipment purchases. Capital expenditures during the six months ended June 29, 2008 amounted to $116,000. During the six months ended June 29, 2008, we purchased 5,855 shares of our common stock in the open market at an average price of $4.19. 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 during the next twelve months. Off-Balance Sheet Arrangements We do not maintain any off-balance sheet financing arrangements. -10- 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 June 29, 2008, we had outstanding purchase commitments totaling approximately $779,000, all of which are expected to be fulfilled in 2008. Results of Operations for the Three and Six Months Ended June 29, 2008 Compared to the Three and Six Months Ended July 1, 2007 During the quarter ended June 29, 2008, net sales decreased $163,000 (5%) from the comparable quarter in 2007. This sales decrease was mainly due to sales reductions in our standard product line of $91,000 (6%) and our transducer product line of $94,000 (36%). During the six months ended June 29, 2008, net sales increased $50,000 (1%) from the comparable period in 2007. Sales increases in our high precision and high reliability product lines of $491,000 (25%) and $51,000 (6%), respectively, were offset by sales decreases in our standard product line of $380,000 (11%) and our transducer product line of $112,000 (24%). We continue to pursue sales of our more value-added, higher performance and higher average selling price products included in our high precision product line. Bookings for the three months ended June 29, 2008 amounted to $3,423,000 versus $3,439,000 in the 2007 quarter. During the six months ended June 29, 2008, bookings totaled $6,876,000 compared to $6,862,000 in the same period of 2007. Our backlog amounted to $2,330,000 at June 29, 2008 versus $2,281,000 at July 1, 2007. During the quarter ended June 29, 2008 and July 1, 2007, gross profit as a percentage of sales was 40% as raw material, direct labor and overhead costs as a percentage of sales remained equal during both periods. Year-to-date gross profit as a percentage of sales was 41% versus 40% in the 2007 period. The slight increase in gross profit is mainly due to a 5% reduction in overall overhead costs partially offset by a 4% increase in total raw material costs. Selling and advertising expenses decreased $27,000 or 6% during the quarter ended June 28, 2008 as compared to the 2007 quarter mainly due to a decrease of $23,000 in commission expense to outside sales representatives. Year-to-date selling and advertising expenses in 2008 were mainly equal to the 2007 amount. General and administrative expenses decreased $45,000 or 10% during the quarter ended June 28, 2008 as compared to the 2007 quarter. This expense decrease was primarily the result of decreases of $22,000 in employee compensation and benefits, $18,000 in stock based compensation expense and $15,000 in restricted stock expense partially offset by a $7,000 increase in professional fees related to our decision to consider possible strategic alternatives to increase shareholder value. Year-to-date general and administrative expenses decreased $58,000 or 6% from the 2007 period. The expense decrease was primarily the result of decreases of $41,000 in employee compensation and benefits, $36,000 in stock based compensation expense and $29,000 in restricted stock expense partially offset by a $34,000 increase in professional fees related to our decision to consider possible strategic alternatives to increase shareholder value. During the quarter and six months ended June 28, 2008, research and development expenses increased $33,000 or 28% and $83,000 or 35%, respectively, over the 2007 periods primarily as a result of increased personnel expenses to support new product development. While the average invested cash balance was approximately $1.1 million higher in both the 2008 periods compared to the 2007 periods, interest income decreased in the 2008 periods as a result of interest rates being approximately 2 percentage points lower during 2008. -11- The estimated annual combined federal and state income tax rate for 2008 is 45% compared to 24% in 2007. The 2007 estimated rate includes a reduction in the valuation allowance for deferred income taxes which amounts to approximately a 13% point reduction in the 2007 rate. The effect of this valuation adjustment was to reduce income tax expense by $60,500 and $103,000 during the quarter and six months ended July 1, 2007, respectively. 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 June 29, 2008, we reported an operating profit of $325,000 compared to an operating profit of $341,000 in comparable quarter of 2007. Interest income amounted to $55,000 in 2008, compared to $101,000 in 2007. As a result, we reported a pre-tax profit of $380,000 during the quarter ended June 29, 2008 compared to a pre-tax profit $442,000 in comparable 2007 quarter. For the quarter ended June 29, 2008, we reported net earnings of $207,000 versus net earnings of $336,000 in 2007. We reported an operating profit of $635,000 during the six months ended June 29, 2008, compared to an operating profit of $617,000 in comparable period of 2007. Interest income amounted to $118,000 in 2008, compared to $198,000 in 2007. As a result, we reported a pre-tax profit of $753,000 during the six ended June 29, 2008 compared to a pre-tax profit $815,000 in comparable 2007 period. For the six months ended June 29, 2008, we reported net earnings of $416,000 versus net earnings of $616,000 in 2007. 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 June 29, 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 $99,700 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. -12- Item 4T. 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 June 29, 2008. Changes in internal control. Our evaluation did not identify any change in our internal controls over financial reporting that occurred during the quarter ended June 29, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item1A. 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 June 29, 2008:
Total Number of Maximum Number Shares Purchased Of Shares that can As Part of Publicly Be Purchased Announced Plans or Under the Plans or Period Total Number of Shares Purchased Average Price Paid per Share Programs Programs - ------------------------------------------------------------------------------------------------------------------------------------ 3/31/08 - 4/27/08 225,380 4/28/08 - 5/25/08 1,000 $ 4.32 1,000 224,380 5/26/08 - 6/29/08 2,735 4.13 2,735 221,645 ---------------------------------------------------------------------------------------------- 3,735 $ 4.18 3,735 221,645 ==============================================================================================
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. -13- Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on June 5, 2008. Listed below is the matter submitted to stockholders and the results of the stockholder votes. (1) Election of seven directors - ------------------------------------------ Nominee "For" "Withheld" - -------------------------------------------------------------------------- Mario Alosco 3,607,639 11,931 Richard W. Anderson 3,600,615 18,955 Michael J. Ferrantino 3,606,115 13,455 Eli Fleisher 3,468,946 150,624 Lawrence Holsborg 3,462,378 157,192 John J. McArdle III 3,606,171 13,399 Ted Valpey, Jr 3,606,140 13,430 Item 6. 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. -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: August 12, 2008 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: August 12, 2008 /s/ Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -15- EX-31.1 2 a5752906ex31_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 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: August 12, 2008 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino President and Chief Executive Officer -16- EX-31.2 3 a5752906ex31_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 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: August 12, 2008 /s/ Michael J. Kroll -------------------- Michael J. Kroll Vice President, Treasurer and Chief Financial Officer -17- EX-32.1 4 a5752906ex32_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 June 29, 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: August 12, 2008 /s/ Michael J. Ferrantino ------------------------- Michael J. Ferrantino, President and Chief Executive Officer Date: August 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-----