Item 1. Business
General
Valpey-Fisher Corporation is incorporated under the laws of Maryland.
Financial Information about Industry Segments
We operate in one business segment. Information about our export sales is set forth in Note 11 of the Notes to Consolidated Financial Statements in Item 8 of this Report, which Note is incorporated by reference.
Description of Business
Products
We are involved in the design, production, import, and sale of frequency control devices and ultrasonic transducer devices.
Our frequency control devices include quartz crystals and oscillators incorporating these crystals and are used as integral components in electronic circuitry to assure precise timing and frequency reference. Except for more costly atomic standards, quartz crystals and oscillators continue to be one of the most stable references for accurately controlling electronic frequencies and time.
We provide a wide-frequency range of frequency control devices including standard and custom-designed product. Our capabilities include:
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high-reliability, precision crystals and oscillators used in sophisticated industrial, military and aerospace applications.
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ultra-high frequency crystals used in crystal filters and oscillators for original equipment manufacturers (“OEMs”) telecommunications and microwave applications.
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highly-customized timing modules including jitter attenuators and frequency translators for microwave and wireless markets.
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high-volume, low cost crystals and oscillators for consumer and commercial applications.
Our frequency control products are used by the telecommunications, computer and computer peripheral equipment, scientific, instrumentation, industrial, and aerospace markets. The majority of our revenue is generated by the telecommunications markets including the wireless, networking and optical networking segments. Our frequency control products are used in telecommunications infrastructure equipment such as bandwidth multipliers, networking switches and routers, cellular base stations, transceivers and multiplexers.
Our ultrasonic transducer devices are sold to the NDT (nondestructive testing), industrial, research and bio-medical markets. Applications include weld testing, flaw detection, thickness gauging, and corrosion inspection.
Raw Materials
Quartz crystal bases, ceramic packages and integrated circuits (“ICs”) are the principal raw materials and are available from a number of domestic and foreign suppliers.
We import sub-assemblies and completed products from various Far East (including China, Japan, South Korea, Philippines, and Taiwan) and Russian suppliers for use in our domestically manufactured products and for resale to our customers. Approximately 14% of our 2009 sales (10% in 2008) were attributable to products manufactured by one supplier.
In order to eliminate the effects of currency fluctuations, we currently and historically have purchased products from our foreign suppliers in U.S. dollars. As exchange rates fluctuate, our cost for these materials may become more expensive than our competitors that have taken measures to protect against exchange rate fluctuations. In addition, we are subject to the inherent risks involved in international trade such as political instability and restrictive trade policies.
Marketing and Customers
Our direct sales personnel, independent manufacturers’ representatives and distributors sell the frequency control products. Our ultrasonic transducer devices are sold primarily by our direct sales personnel.
We sell our frequency control products primarily to original equipment manufacturers (OEMs), electronics manufacturing services (EMS) companies, and distributors. Our distributors also sell to both the OEMs and EMS companies. Ultrasonic transducer devices are sold primarily to OEMs, colleges and universities and research facilities.
In recent years, OEMs have outsourced a significant amount of their manufacturing capability to EMS companies. As a result, this has tended to increase the concentration of sales to the EMS companies. Sales to Flextronics Corporation, an EMS company, accounted for approximately 12 % and 17% of our net sales in 2009 and 2008, respectively.
Sales to our five largest customers accounted for approximately 32% of our sales in 2009 compared to 39% of our sales in 2008. Sales to EMS companies accounted for approximately 35% of our sales in 2009 compared to 39% in 2008.
Export sales amounted to approximately 34% of our sales in 2009 and 2008. Information about export sales is set forth in Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report, which Note is incorporated by reference. Our international sales are transacted in U. S. dollars.
Seasonal Fluctuations
During the last few years, we have noticed that some of our customers, most notably the EMS companies and the larger OEMs, have closed their manufacturing facilities during the last two or three weeks in December. These facility closures reduce the number of available days to ship these customers in the 4th quarter.
Research and Development
Research and development expenses amounted to $627,100 in 2009 and $611,300 in 2008. During 2010, we intend to continue our efforts to develop new products which would leverage off our expertise in the timing area and to invest in the creation of a new microwave component product line.
Backlog
Our backlog of firm orders was approximately $2,023,000 at December 31, 2009 compared to $1,666,000 at December 31, 2008. We expect to ship the entire December 31, 2009 backlog during 2010.
Competition
There are many domestic and foreign suppliers of quartz crystals and oscillators. A number of the competitors are larger and have greater resources than we have including Vectron International (a division of Dover Corporation) and CTS Corporation. In addition, foreign competitors, particularly from the Far East, continue to dominate the U.S. markets. However, we believe we can maintain a competitive position in our business based on our quality, strong design and application engineering, responsive customer service and a willingness to provide specialty small quantity orders.
Manufacturing
Our manufacturing facility is located in Hopkinton, Massachusetts. We have been ISO-9001 certified for the design and manufacture of crystals and crystal oscillators since 1997.
Environmental Regulations
To the best of our knowledge compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, has not had, nor will have a material effect upon capital expenditures, earnings from continuing operations or competitive position.
As a result of the sale of our Bergen Cable subsidiary in 1998, we are performing environmental clean up at that site. See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Report, which Note is incorporated by reference.
Employees
At December 31, 2009, we employed 53 people. Our future success depends in large part on the continued service of our key technical and senior management personnel and on our ability to continue to attract and retain highly qualified technical and managerial personnel. Competition for qualified employees in our industry is at times intense. None of our employees are represented by a collective bargaining unit. We consider our relations with our employees to be satisfactory.
Available Information
Our Internet website address is www.valpeyfisher.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15 (d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information on our website is not incorporated by reference into this report.
Foreign and Domestic Operations and Export Sales
Financial information about our export sales is set forth in Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Report, which Note is incorporated by reference.
Item 1A.
Item 1A. Risk Factors
Our business, financial condition and results of operations can be affected by a number of factors, including but not limited to those set forth below and elsewhere in this Annual Report on Form 10-K, any one of which could cause our actual results to vary materially from past results or from our anticipated future results.
Our results for 2010 may be negatively impacted by the current global economic conditions and uncertainties.
In 2009 our business was adversely impacted by the world-wide economic downturn. The uncertainty concerning the potential duration and depth of this downturn persists as we enter 2010. These conditions make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities. In addition, our customers and suppliers also may face credit and debt issues, which could have an adverse effect on their operations. A continued global economic downturn will likely have an adverse effect on our revenue, operating results and cash flow. In addition we could experience decreased demand for our products, increased risk of excess inventories, and increased risk in the collectability of accounts receivable from our customers.
If we are unable to introduce new products, including more-value added products, our future operating results may decrease.
Our future operating results are dependent on the timely development, customer acceptance, production, introduction and marketing of new products, including more-value added products. The time lag between our customer’s acceptance of our product (a design win) and the receipt of production orders affects the timing of our sales growth and operating results. We have continuing sales of older/mature products that tend to decline in average selling prices over the product life cycle. By developing these new products, we can replace and/or offset the impact of the lower average selling prices of the older/mature products.
The future demand for our products depends in a large part to growth of the markets that incorporate our frequency control products. These markets are cyclical and have experienced a modest increase in product demand in recent years.
The future demand for our products depends in a large part to growth of the markets that incorporate our frequency control products. These markets include telecommunications equipment, computers and computer peripheral and scientific instrumentation. A decline in the demand for products in these markets could negatively affect our operating results and financial condition.
A significant portion of our revenues is derived from sales to a few customers. The loss of one or more of our significant customers could have an adverse impact on our operating results and financial condition.
In 2009, sales to our top five customers accounted for approximately 32% of our sales compared to 39% in 2008. The loss of one or more of our significant customers or a reduction in sales to any one of them could have an adverse impact on our operating results and financial condition. All our sales are made on a purchase order basis and we do not have long-term purchase contracts with our customers. As a result, our customers may cancel or change delivery dates within a specific period of time without penalty.
A significant portion of our revenues are to Electronics Manufacturing Services (EMS) companies. If we fail to successfully obtain orders from the EMS companies, our operating results and financial condition could be negatively affected.
Approximately 34% of the Company’s sales in 2009 were to EMS companies. There is a continuing trend among original equipment manufacturers (OEMs) to outsource the manufacture of their product to EMS companies. We first work with and receive design wins from OEMs. We then have to negotiate pricing, quantities and delivery with the EMS companies. If we fail to successfully obtain orders from the EMS companies, our operating results and financial condition could be negatively affected.
We rely upon one supplier for a significant portion of our revenue.
Approximately 14% of our 2009 revenue was attributable to products manufactured by one supplier and expect this supplier to account for a similar percentage of our 2010 revenue. We do not have a written, long-term supply contract with this supplier. If this supplier is not able or not willing to manufacture and deliver products on time and at quantities and prices acceptable we may be forced to manufacture the products internally or find other replacement suppliers. We could encounter difficulties in finding another source for these products based on the current supplier’s product knowledge and process capability. As a result, a significant change in the supplier’s manufacturing capability or in our relationship with this supplier our operating results and financial condition could be negatively affected.
There is a limited market and limited trading activity for our common shares. The purchase or sale of a relatively small number of shares could result in significant share price fluctuations.
There is a limited public market and limited trading activity for our common shares. Directors and executive officers currently beneficially own 39% of the outstanding shares on a fully diluted basis. 5% holders, other than our directors and executive officers, and institutional holders own approximately 25% of the outstanding shares. During 2009, the average trading volume of our common stock was approximately 2,800 shares per day. As a result of the low trading volume and the limited outstanding float, the purchase or sale of a relatively small number of shares could result in significant share price fluctuations.
We may make an acquisition that is not successful.
As part of our business strategy, we continue to evaluate acquisition opportunities that could complement, enhance or expand our current business or provide additional product offerings or technologies. We may have difficulty finding these opportunities or, if we do find an opportunity, we may not be able to complete the transaction for reasons including a failure to secure financing, if necessary. Any transaction we are able to complete may involve a number of risks including, but not limited to:
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the diversion of our management’s attention from our existing business to integrate the operations and personnel of the acquired business,
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the possible adverse effects on the Company’s operating results during the integration period,
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the loss of key employees, customers and vendors as a result of the change in management, and
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our possible inability to achieve the intended objectives of the transaction.
In addition, future acquisitions may result in dilutive issuances of equity securities or the incurrence of debt.
Our success depends on our ability to retain our existing management and technical team and to recruit and retain qualified technical, sales and marketing and management personnel.
Our future growth and success will depend in a large part on our ability to retain our existing management and technical team and to recruit and retain qualified technical, sales and marketing and management personnel. Competition for qualified employees in our industry is at times intense. The loss of any of these key personnel or our inability to attract and retain these key employees to operate and expand our business could adversely affect our operations.
We face global business, political and economic risks which may adversely affect us.
We sell our products to customers and purchase inventory from vendors located outside of the United States. As a result, we face global business, political and economic risks which may adversely affect us. These risks include, but are not limited to:
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political and economic instability in countries where our products are sold or manufactured,
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expropriation or the imposition of government controls,
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export license requirements,
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trade restrictions,
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high levels of inflation or deflation,
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greater difficulty in collecting our accounts receivable and longer payment terms,
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less favorable intellectual property laws, and
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increases in duties.
In addition, these same factors may also place us at a competitive disadvantage to some of our foreign competitors.
To date, very few of our international transactions have been denominated in foreign currency. As a result, a change in the value of the US dollar relative to the foreign currencies could make our products more expensive, and thus less competitive. We may find it necessary in the future from a competitive position to complete transactions denominated in foreign currency. This will subject us with the risks associated with fluctuations in these foreign currencies.
Our markets are highly competitive, and we may lose business to larger and better financed competitors.
Our markets are highly competitive worldwide with few import barriers. Foreign competitors, particularly from the Far East, continue to dominate the U.S. and world markets. We compete primarily on our quality, strong design and application engineering, responsive customer service and a willingness to provide specialty small quantity orders. Our major competitors, most of which are larger than we are, have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities than we have.
Certain Directors and Executive Officers Beneficially Own a Substantial Portion of Our Common Stock and May Be in a Position to Determine the Outcome of Our Corporate Elections
Members of the Board of Directors and Executive Officers, beneficially own 39% of the currently outstanding shares of Common Stock on a fully diluted basis. By virtue of such ownership, such members of the Board and Management including Ted Valpey, Jr. may have the practical ability to determine the election of all directors and control the outcome of substantially all matters submitted to our stockholders. Such concentration of ownership could have the effect of making it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of us.
Compliance with changing corporate governance and public disclosure regulations may result in additional expenses.
Compliance with the changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 (SOX), new Securities and Exchange Commission regulations and the NASDAQ Stock Market rules, requires significant management attention and has increased our professional fee expense. We will incur additional general and administrative expenses as we continue the ongoing evaluation and testing of our internal control over financial reporting as we comply with Section 404 of SOX.
Item 1B.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2.
Item 2. Properties
We own our 32,000 square foot facility located in Hopkinton, Massachusetts that contains office and manufacturing space and serves as our corporate headquarters.
We believe our facility is suitable for our current use and is adequate to satisfy our current production capacity needs.
We lease approximately 1,000 square feet of engineering space in Nashua, NH.
Item 3.
Item 3. Legal Proceedings
Not applicable.
Item 4.
Item 4. Reserved
PART II
Item 5.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Since October 28, 2008, our common stock has been listed and traded on the NASDAQ Capital Market under the symbol VPF. Prior to October 28, 2008, our common stock had been listed and traded on the American Stock Exchange under the symbol VPF. The range of high and low prices each quarter for the past two years is shown below:
No dividend was paid in 2009. On October 17, 2008, we paid a special one-time cash dividend in the amount of $1.50 per share to shareholders of record on October 6, 2008.
The number of stockholders of record on March 10, 2010 was 591. This number does not include stockholders for whom shares are held in a “nominee” or “street” name.
Equity Compensation Plan Information
The following table presents information as of December 31, 2009 regarding the number of shares of our common stock that may be issued under our equity compensation plans.
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the
first column)
Equity compensation plans approved by security holders (1)
887,891
$ 1.45
95,040
Equity compensation plans not approved by security holders (2)
(1)
Includes the 2003, 2001, 1999 and 1992 Stock Option Plans.
(2)
Does not include 100,000 shares of Restricted Stock awarded pursuant to the Restricted Stock Agreement dated December 19, 2002 between Mr. Ferrantino and us.
Material Feature of Restricted Stock Agreement between Us and Mr. Ferrantino Not Approved by Shareholders
As an inducement to becoming our employee, we entered into a Restricted Stock Agreement dated December 19, 2002 with Michael J. Ferrantino, a director and our Chief Executive Officer (“CEO”) until October 31, 2009. Pursuant to the agreement, on December 24, 2002 we issued Mr. Ferrantino 100,000 shares of Common Stock for a purchase price of $.05 per share or an aggregate purchase price of $5,000. All restrictions on transferring the shares pursuant to the Agreement terminated on October 23, 2007. The Restricted Stock Agreement was not submitted to shareholders for approval. Mr. Ferrantino resigned as CEO and a Director of the Company on October 31, 2009.
Sale of Unregistered Securities
The 100,000 shares of Common Stock issued to Mr. Ferrantino pursuant to the Restricted Stock Agreement described above in this Item 5 have not been registered under the Securities Act of 1933 (the “Act”). Transfer of the shares is subject to the restrictions and limitations under the Act. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Act as a transaction not involving any public offering.
Stock Repurchases
At December 31, 2009, under prior authorizations from the Board of Directors, we are authorized to purchase up to 219,700 shares of common stock through the open market or negotiated transactions.
We made no repurchases of ours common stock in the fourth quarter of 2009.
Item 6.
Item 6. Selected Financial Data
Five Year Financial Summary
(1)
Effective January 1, 2006, we changed our method of accounting for stock-based compensation to conform to Financial Accounting Standards Board Accounting Standards Codification 717-10, formerly Statement of Financial Accounting Standards No. 123R “Share-Based Payment”.
Item 7.
Item 7. 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 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 policies could materially affect its consolidated financial statements.
Accounts receivable - We perform on-going credit evaluations of our customers and assess the collectability of our 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 - We estimate the carrying value of our 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 - We have recorded deferred tax assets and liabilities resulting from differing treatment of items for tax and financial statement reporting purposes. We must estimate our 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, we do not have a valuation allowance at December 31, 2009. In reaching our conclusion, we evaluated the existence of deferred tax liabilities that can be used to absorb deferred tax assets, 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, we may need to establish an additional valuation allowance or reduce the valuation allowance, which could materially impact our financial position and results of operations.
Financial Condition and Liquidity
Cash and cash equivalents amounted to $4,053,000 at December 31, 2009, a decrease of $462,300 from the December 31, 2008 level as our operations used cash of $93,600 and our investing activities used cash of $368,700.
Cash used in operations of $93,600 resulted from the net loss of $213,500 and a net cash outflow of $461,400 from changes in our operating assets and liabilities partially offset by the net positive adjustments of $581,300 for the non-cash effects of depreciation and provisions for inventory, deferred income taxes and stock compensation. The net cash outflow from changes in our operating assets and liabilities were mainly due to a $749,700 reduction in accrued liabilities offset in part by an $82,200 decrease in net inventory and a $342,900 increase in accounts payable. The main items accounting for the net decrease in accrued liabilities were payments of $280,000 under the 2008 key employee bonus plan, $148,100 for environmental liabilities of our discontinued operation, $87,000 for federal income taxes and a reduction in accrued compensation of $157,100. The inventory decrease results from orders being filled from existing inventory and continued control over inventory purchases and levels required to support the current level of shipments and backlog to meet customer delivery requirements. The increase in accounts payable is primarily due to the timing of inventory and equipment purchases.
Capital expenditures amounted to $356,300 in 2009. Our budget for 2010 capital expenditures is approximately $940,000 and is geared toward new production and test equipment capabilities in connection with the introduction of new products and enhancements to existing products.
We believe that based on our current working capital and the expected cash flows from operations, our resources are sufficient to meet our financial needs and to fund our capital expenditures for the projected levels of business in 2010.
Results of Operations - 2009 versus 2008
Our net sales decreased $2,643,000 (20%) from 2008. Most product lines experienced sales decreases resulting primarily from a reduction in the overall number of units sold. The sales reduction was mainly caused by both lower backlog levels at the beginning of 2009 compared to 2008 and lower bookings in 2009 compared to 2008. The order backlog at the beginning of the 2009 was $468,000 (22%) lower than at the beginning of 2008 and bookings for 2009 were $1,809,000 (14%) lower than in 2008. Our backlog at December 31, 2009 amounted to $2,023,000 versus $1,666,000 at December 31, 2008. The decreases in bookings and the corresponding sales amounts are mainly due to the continuing general economic slowdown that began in the 4th quarter of 2008 and has negatively impacted the demand for our products.
Our gross profit in 2009 decreased $1,608,000 from the 2008 amount and as a percentage of sales was 33% compared to 39% in 2008. The main factors contributing equally to the gross profit percentage decrease were the unfavorable effect of spreading the fixed overhead costs over the lower sales volume and increased raw material costs that were mainly due to changes in the product mix of sales.
Selling and advertising expenses decreased $41,000 (3%) from 2008 primarily as a result of reductions of $88,000 in commission expense to outside sales representatives and $23,000 in advertising expense partially offset by increases of $41,000 in travel expenses and $25,000 in employee compensation and benefits.
General and administrative expenses decreased $380,000 (23%) from 2008 mainly as a result of reductions of $238,000 in employee compensation and benefits and $128,000 in professional fees. Professional fees in 2008 included expenses incurred as the company considered possible strategic alternatives to increase shareholder value.
In the third quarter of 2009, the Company and Michael Ferrantino, Sr., the Chief Executive Officer (“CEO”) and a Director of the Company at that time, entered into a Retirement Agreement and General Release. Effective October 31, 2009, Mr. Ferrantino resigned as CEO and a Director of the Company. Pursuant to the Retirement Agreement, the Company paid Mr. Ferrantino a lump sum retirement payment of $265,225 on November 9, 2009 and Mr. Ferrantino agreed to a one year non-compete provision, an eighteen month non-solicitation provision and a general release of claims.
Research and development expenses increased $16,000 (3%) over the 2008 amount primarily as a result of an increase in depreciation expense of $9,000 and operating supplies of $4,000.
During 2009 interest income decreased $160,000 (83%) from 2008 as a result of the average invested cash balance being approximately $4.6 million lower in 2009 compared to 2008 and the effect of interest rates being approximately 1.5 percentage points lower during 2009. In the 4th quarter of 2008, the Company paid a special one-time cash dividend totaling $6,447,000.
The combined federal and state income tax rate for 2009 is 29% compared to 45% in 2008. The 2009 rate differs from the expected combined rate of 40% mainly due to the effects of non-deductible stock option and meals and entertainment expenses. The 2008 rate differs from the expected combined rate of 40% mainly due to the effects of non-deductible stock option and meals and entertainment expenses and the federal tax effects of state tax operating losses utilized.
We reported an operating loss of $332,000 in 2009 compared to an operating profit of $1,136,000 in 2008. The decrease in operating profit of $1,467,000 results from a $1,608,000 reduction in gross profit partially offset by a $141,000 reduction in operating expenses. The lower gross profit was primarily due to the 20% decrease in sales. The reduction in 2009 operating expenses is net of an increase in non-recurring retirement expense of $265,000 expense related to the retirement agreement with the former CEO. Interest income amounted to $32,000 in 2009, compared to $192,000 in 2008. We reported a pre-tax loss of $300,000 during 2009 compared to a pre-tax profit of $1,328,000 in 2008. For 2009, we reported a net loss of $213,000 versus net earnings of $736,000 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, machinery and equipment and production supplies based on our projected requirements. At December 31, 2009, we had outstanding purchase commitments approximating $1,574,000, all of which we expect to be fulfilled in 2010. At December 31, 2009, we had no contractual obligations for capital leases, no material contractual obligation for operating leases and no long-term debt.
Recent accounting pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC 105-10, “Generally Accepted Accounting Principles - Overall” (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. generally accepted accounting principles. The Company adopted this standard effective June 29, 2009 and such adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.
Effective January 1, 2008, the Company adopted FASB ASC 820-10, “Fair Value Measurements and Disclosures - Overall” (“ASC 820-10”) with respect to its financial assets and liabilities. In February 2008, the FASB issued updated guidance related to fair value measurements, which is included in the Codification in ASC 820-10-55, “Fair Value Measurements and Disclosures - Overall - Implementation Guidance and Illustrations”. The updated guidance provided a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. The Company adopted the provisions of ASC 820-10 for non-financial assets and non-financial liabilities effective January 1, 2009, and such adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.
During the second quarter of 2009, the Company adopted ASC 855, “Subsequent Events” (“ASC 855”). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. The adoption of ASC Topic 855 did not have a material impact on the Company’s consolidated results of operations or financial condition.
Item 7A.
Item 7A. 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 December 31, 2009, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% point increase or decline in interest rates would result in an approximate $40,500 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 8.
Item 8. Financial Statements and Supplementary Data
Valpey-Fisher Corporation
Consolidated Balance Sheets
See notes to consolidated financial statements.
Valpey-Fisher Corporation
Consolidated Statements of Operations
See notes to consolidated financial statements.
Valpey-Fisher Corporation
Consolidated Statements of Cash Flows
See notes to consolidated financial statements.
Valpey-Fisher Corporation
Consolidated Statements of Stockholders’ Equity
See notes to consolidated financial statements.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements
(1) Description of Business - Valpey-Fisher Corporation (the Company), a Maryland corporation, is involved in the design, production, import, and sale of quartz crystals and oscillators marketed primarily to customers operating in the telecommunications industry and the design, production and sale of ultrasonic transducer devices.
(2) Summary of Significant Accounting Policies:
Principles of consolidation - The accompanying consolidated financial statements include the accounts of Valpey-Fisher Corporation and its wholly owned subsidiary, Matec International, Inc. Significant intercompany balances and transactions have been eliminated in consolidation
Use of estimates - The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates. Estimates include reserves for accounts receivable and inventory, useful lives of property, plant and equipment, accrued liabilities, deferred income taxes and assumptions used to calculate stock compensation expense. Actual results could differ from those estimates.
Fair value of financial instruments - The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of their short-term nature.
Cash equivalents - The Company considers all highly liquid money market investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value.
Accounts receivable - Trade accounts receivable are recorded at the invoiced amount and do not bear interest. An allowance for doubtful accounts is maintained for potential credit losses based upon the Company’s expected collectability of all accounts receivable. The Company determines the allowance based on numerous factors including the customer’s financial condition and collection history, and current economic trends. Account balances are charged-off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Concentration of credit risk - Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents primarily in money market accounts and reduces its exposure to credit risk by maintaining such accounts with high quality financial institutions. At December 31, 2009, approximately $1,460,000 of the Company’s cash and cash equivalents balance were in excess of the applicable insurance limits. Concentrations of credit risk with respect to accounts receivable are primarily due to customers with large outstanding balances. At December 31, 2009, one customer represented about 17% of the Company’s accounts receivable. At December 31, 2008, two customers represented about 17% and 11%, respectively, of the Company’s accounts receivable. To reduce credit risk, the Company performs ongoing credit evaluations of its customers, but generally does not require advance payments or collateral. The Company maintains an allowance for doubtful accounts based upon the expected collectability of such receivables.
Inventories - Inventories are stated at the lower of cost or market and are determined by the first-in, first out method (FIFO).
Property, plant and equipment - The Company uses the straight-line method of providing for depreciation of property, plant and equipment for financial reporting purposes and accelerated methods for tax purposes. The estimated lives used to compute depreciation are as follows: land improvements - 10 years, building and improvements - 15 to 40 years and machinery and equipment - 3 to 10 years.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
Expenditures for additions, renewals and betterments of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. As assets are retired or sold, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations.
Revenue recognition - Revenue is recognized when an agreement of sale exists, product delivery has occurred, title has passed, pricing is fixed or determinable, and collection is reasonably assured.
Research and development - Research and development costs are expensed as incurred.
Advertising - Advertising costs are expensed as incurred. Advertising expenses were $83,200 in 2009 and $106,400 in 2008.
Income taxes - The Company computes deferred income taxes based on the differences between the financial statement and tax basis of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The tax effect of the differences between stock compensation expense for financial statement and income tax purposes is charged or credited to capital surplus.
Earnings (loss) per share - Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) 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 using the treasury stock method assuming dilutive outstanding stock options were exercised, except when anti-dilutive. The computation of diluted earnings per share excludes stock options with an exercise price in excess of the average market price as they are anti-dilutive. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period.
Stock-based compensation - The Company measures stock based compensation cost at the grant date based on the fair value of the award. The cost is recognized as an expense, net of estimated forfeitures, on a straight line basis, over the vesting period. The Company calculates the grant-date fair value using the Black-Scholes valuation model. The valuation model requires the Company to make estimates of assumptions for expected volatility, expected term, risk-free interest rate, and expected dividend.
The Company recorded the following stock-based compensation expense in the Consolidated Statement of Operations (in thousands):
See Note 9 for additional information relating to stock-based compensation.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
Comprehensive income (loss) - Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. For the years ended December 31, 2009 and 2008 the Company had no items of other comprehensive income (loss).
Reclassifications - In the Consolidated Statements of Cash Flows, certain amounts for 2008 have been reclassified to conform to the current year presentation.
Recent accounting pronouncements -
In June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC 105-10, “Generally Accepted Accounting Principles - Overall” (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. generally accepted accounting principles. The Company adopted this standard effective June 29, 2009 and such adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.
Effective January 1, 2008, the Company adopted FASB ASC 820-10, “Fair Value Measurements and Disclosures - Overall” (“ASC 820-10”) with respect to its financial assets and liabilities. In February 2008, the FASB issued updated guidance related to fair value measurements, which is included in the Codification in ASC 820-10-55, “Fair Value Measurements and Disclosures - Overall - Implementation Guidance and Illustrations”. The updated guidance provided a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. The Company adopted the provisions of ASC 820-10 for non-financial assets and non-financial liabilities effective January 1, 2009, and such adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.
During the second quarter of 2009, the Company adopted ASC 855, “Subsequent Events” (“ASC 855”). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. The adoption of ASC Topic 855 did not have a material impact on the Company’s consolidated results of operations or financial condition.
(3) Receivables, net: Receivables, net of allowances, consist of the following:
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
(4) Inventories, net: Inventories, net of reserves, consist of the following:
At December 31, 2009 and 2008, inventories are presented net of inventory reserves of $1,200,000 and $1,050,000, respectively.
(5) Income Taxes: The provision (benefit) for income taxes for continuing operations consisted of the following:
The total income tax provision for continuing operations differs from that computed by applying the federal income tax rate to income before income taxes. The reasons for the difference are as follows:
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
The tax effects of significant items comprising the Company’s deferred tax assets and liabilities as of December 31, 2009 and 2008 are as follows:
At December 31, 2009 and 2008, the Company had no reserves for unrecognized tax benefits on the balance sheet. During 2009 the Company’s tax return for 2007 was examined by the Internal Revenue Service which resulted in no changes to the tax return. The federal income tax return for 2008 and the Massachusetts tax returns for 2006 through 2008 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.
(6) Profit Sharing and Savings Plan: The Company has a profit sharing 401(k) plan that covers all qualified employees. Under the profit sharing section of the plan, the Company may make contributions to the plan at the discretion of the Board of Directors. Profit sharing expense amounted to $ 0 in 2009 and $29,900 in 2008. Under the 401(k) section of the plan, the Company matched 50% of employee contributions up to 6% of compensation. Total Company contributions charged to operations were approximately $80,200 in 2009 and $84,000 in 2008.
(7) Accrued Liabilities: Accrued liabilities consist of the following items:
In 1998, the Company sold all the assets of a subsidiary located in New Jersey which is reported as a Discontinued Operation in the financial statements. As a result of this sale, the Company was required to perform environmental cleanup at this site. As of December 31, 2009, a total of $1,560,000 has been expensed for the cleanup and $166,300 is accrued for expenses relating to the cleanup.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
(8) Debt: At December 31, 2009, the Company had no outstanding credit arrangements with banks or any other financial institution.
(9) Stockholders’ Equity: The Company has 4,297,898 shares of its $.05 par value Common Stock outstanding at December 31, 2009 and 2008, respectively.
At December 31, 2009, under prior authorizations from the Board of Directors, the Company is authorized to purchase up to an additional 219,700 shares of stock through the open market or negotiated transactions.
The Company has four Stock Option Plans that originally allowed for the granting of options to officers, key employees, and other individuals to purchase a maximum of 1,000,000 shares of the Company’s common stock. On September 30, 2008, shareholders approved amendments to the four stock option plans to adjust the number of options allowed by these plans by an aggregate of 387,215 to offset the expected decline in market value of the Company’s common stock as a result of a special cash dividend of $1.50 per share approved by the Board of Directors on August 7, 2008 and payable on October 17, 2008. Stock-based compensation expense was not affected by this adjustment.
The option price and terms are recommended by the Company’s Compensation Committee to the Company’s Board of Directors for approval. The options granted may qualify as incentive stock options (“ISO’s”). Options granted prior to December 31, 2005 generally vested 20% on each of the first, second, third, fourth, and fifth anniversaries of the date of grant with a contractual life of ten years. Options granted after December 31, 2005 have vested 33% on each of the first, second and third anniversaries of the date of grant and have a contractual life of five years. The Company issues new shares upon the exercise of stock options. At December 31, 2009, options for 95,040 shares remain available for future grants under the Plans and 887,891 common shares are reserved for issuance upon exercise of the outstanding stock options.
The estimated fair value of each option granted in 2009 and 2008 was determined on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions for stock option grants:
The risk-free interest rate is based on the yield on zero-coupon U.S. treasury securities at the time of grant for a period commensurate with the expected term. The expected volatility is calculated using the Black-Scholes model based on weighted-average historic prices for a period commensurate with the expected term. The expected term of the option is determined by using historical data.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
A summary of the status of the Company’s stock option plans as of December 31, 2009 and 2008, and changes during the years then ended is presented below:
The weighted average grant date fair value of options granted in 2009 and 2008 was $0.58 and $1.20, respectively. As of December 31, 2009, the intrinsic value (the difference between the exercise price and the market price) for all outstanding options was $154,956 and the intrinsic value for all options exercisable was $138,693. The total intrinsic value of all options exercised during the year ended December 31, 2008 was $27,776.
The following table summarizes information about fixed stock options outstanding and exercisable at December 31, 2009:
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
A summary of the status of the Company’s nonvested stock options as of December 31, 2009 and the changes during the year then ended is as follows:
At December 31, 2009, there was approximately $63,900 of total unrecognized compensation cost related to nonvested stock options granted. That cost is expected to be recognized as follows: $33,800 in 2010, $19,400 in 2011 and $10,700 in 2012.
(10) Earnings (Loss) Per Share: The computation of basic and diluted earnings (loss) per share is as follows:
In 2009 stock options to purchase 887,891 common shares were not included in the computation of "Diluted Earnings (Loss) per Share" because of the anti-dilutive effect of the options since the Company reported a net loss. In 2008 stock options to purchase 53,415 common shares were not included in the computation of "Diluted Earnings (Loss) per Share" because the exercise price was greater than the average market price.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
(11) Industry Segment: The Company operates in one segment: the design, production, import, and sale of quartz crystals and oscillators and ultrasonic transducer devices.
Export sales to foreign markets, based on the location of the customer, are as follows:
(12) Concentration Risks: One customer accounted for approximately 12% and 17% of net sales in 2009 and 2008, respectively.
Products manufactured by one supplier accounted for approximately 14% and 10% of our revenue in 2009 and 2008, respectively.
(13) Quarterly Financial Data (unaudited): Selected unaudited quarterly financial data for 2009 and 2008 is set forth below:
The third quarter of 2009 includes $265,255 of expense relating to a retirement agreement and general release with the former Chief Executive Officer of the Company.
Valpey-Fisher Corporation
Notes to Consolidated Financial Statements (continued)
Earnings (loss) per share calculations for each of the quarters is based on the weighted average number of shares outstanding for each period and the sum of the quarters may not necessarily be equal to the full year’s earnings (loss) per share amounts.
(14) Commitments and Contingencies: During the normal course of business, the Company incurs certain commitments to make future payments for the purchase of inventory, machinery and equipment and production supplies based on its projected requirements. At December 31, 2009, the Company has outstanding purchase commitments approximating $1,574,000, all of which are expected to be fulfilled in 2010.
In connection with the sale of its Bergen Cable Technologies, Inc. subsidiary in 1998, the Company was required to perform environmental cleanup at this site (see Note 7).
(15) Subsequent Events: The Company has evaluated all subsequent events through the date these financial statements are being filed with the Securities & Exchange Commission, and has determined there were no events or transactions deemed to be reportable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Valpey-Fisher Corporation
We have audited the accompanying consolidated balance sheets of Valpey-Fisher Corporation (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2009. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 15(a) (2) (not presented separately herein). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Valpey-Fisher Corporation and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Stowe & Degon, LLC
Westborough, Massachusetts
February 22, 2010
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A(T).
Item 9A(T). 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 December 31, 2009.
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Company’s Chief Financial Officer we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2009.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in internal control.
Our evaluation did not identify any change in our internal controls over financial reporting that occurred during the quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None
PART III
We have adopted a Code of Business Conduct and Ethics that applies to our board of directors, officers, employees and consultants. In addition, we have adopted a Code of Ethics for our chief executive officer and our chief financial and accounting officer. These codes are posted in the Corporate Governance section of our website (www.valpeyfisher.com). If we make any substantive changes or grant any waivers to these codes, we will disclose the nature of such change or waiver on our website and in a report on Form 8-K.
The remaining information called for by Part III is hereby incorporated by reference from the information set forth and under the headings “Common Stock Ownership of Certain Beneficial Owners and Management”, “Election of Directors”, “Corporate Governance”, “Executive Compensation” and “Principal Accountant Fees and Services” in Registrant’s definitive proxy statement for the 2010 Annual Meeting of Stockholders, which meeting involves the election of directors, such definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a) The following are filed as part of this Annual Report on Form 10-K:
1. The following Consolidated Financial Statements are included in Item 8:
Consolidated Balance Sheets, December 31, 2009 and 2008
Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009 and 2008
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
2. The following schedule to the Consolidated Financial Statements is filed as part of this report.
Schedule II - Valuation Reserves
All other schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or notes thereto.
3. The exhibits filed in this report or incorporated by reference, listed on the Exhibit Index are as follows:
* Management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 15(c) of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Valpey-Fisher Corporation
Date: March 24, 2010
By:
/s/ Michael J. Ferrantino, Jr.
Michael J. Ferrantino, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Ted Valpey, Jr.
Chairman of the Board
March 24, 2010
Ted Valpey, Jr.
and Director
/s/ Michael J. Ferrantino, Jr.
President, Chief Executive Officer
March 24, 2010
Michael J. Ferrantino, Jr.
and Director (Principal Executive Officer)
/s/ Michael J. Kroll
Vice President, Treasurer and
March 24, 2010
Michael J. Kroll
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Mario Alosco
Director
March 24, 2010
Mario Alosco
/s/Gary Ambrosino
Director
March 24, 2010
Gary Ambrosino
/s/Richard W. Anderson
Director
March 24, 2010
Richard W. Anderson
/s/Eli Fleisher
Director
March 24, 2010
Eli Fleisher
/s/Lawrence Holsborg
Director
March 24, 2010
Lawrence Holsborg
/s/Steven Schaefer
Director
March 24, 2010
Steven Schaefer
Valpey-Fisher Corporation and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
(1) Amounts written-off, less recoveries.
(2) Inventory disposed of.
EXHIBIT INDEX
Exhibit No.
(inapplicable items are omitted)
2.
Agreement of Merger and Recapitalization between MATEC Corporation a Delaware corporation and MATEC Corporation a Maryland corporation. (incorporated by reference to Exhibit 2 on Registrant’s Form 10-K for the year ended December 31, 2004).
3.1
Restated and Amended Articles of Incorporation as of June 3, 2002. (incorporated by reference to Exhibit 3.1 on Registrant’s Form 10-K for the year ended December 31, 2007).
3.2
By-Laws effective July 23, 2009. (incorporated by reference to Exhibit 3.3 on Registrant’s Form 8-K dated July 23, 2009).
10.1
1992 Stock Option Plan, as amended. (incorporated by reference to Exhibit 10.1 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.2
1999 Stock Option Plan, as amended. (incorporated by reference to Exhibit 10.2 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.3
2001 Stock Option Plan, as amended. (incorporated by reference to Exhibit 10.3 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.4
Restricted Stock Agreement. (incorporated by reference to Exhibit 10.4 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.5
2003 Stock Option Plan, as amended. (incorporated by reference to Exhibit 10.5 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.6
Key Employee Bonus Plan for 2009. (incorporated by reference to Exhibit 10.1 on Registrant’s Form 10-Q for the quarterly period ended March 29, 2009).
10.7
Change in Control Severance Agreement, dated April 4, 2007, between the Company and Michael J. Kroll. (incorporated by reference to Exhibit 10.3 on Registrant’s Form 10-Q for the quarterly period ended April 1, 2007).
10.8
Amendment effective August 7, 2008 to Change in Control Severance Agreement, dated April 4, 2007, between the Company and Michael J. Kroll. (incorporated by reference to Exhibit 10.11 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.9
Change in Control Severance Agreement, dated October 21, 2009, between the Company and Michael J. Ferrantino, Jr. (incorporated by reference to Exhibit 10.1 on Registrant’s Form 8-K dated October 27, 2009).
10.10
Change in Control Retention Agreement, dated April 4, 2007, between the Company and Walt Oliwa. (incorporated by reference to Exhibit 10.5 on Registrant’s Form 10-Q for the quarterly period ended April 1, 2007).
10.11
Amendment effective August 7, 2008 to Change in Control Retention Agreement, dated April 4, 2007, between the Company and Walt Oliwa. (incorporated by reference to Exhibit 10.15 on Registrant’s Form 10-K for the year ended December 31, 2008).
10.12
Retirement Agreement and General Release dated September 3, 2009 between the Company and Michael J. Ferrantino, Sr. (incorporated by reference to Exhibit 10.1 on Registrant’s Form 8-K dated September 10, 2009).
Code of Ethics of the Chief Executive Officer and the Chief Financial and Accounting Officer. Filed herewith.
14.1
Code of Business Conduct and Ethics. (incorporated by reference to Exhibit 14.1 on Registrant’s Form 10-K for the year ended December 31, 2004).
Subsidiaries of the Registrant. Filed herewith.
Consent of Independent Registered Public Accounting Firm. Filed herewith.
31.1
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2
Certification of the 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.