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Key Technology Inc. Reports Operating Results (10-Q)

August 07, 2009 | About:

Key Technology Inc. (KTEC) filed Quarterly Report for the period ended 2009-06-30.

KEY TECHNOLOGY INC. designs manufactures sells and services process automation systems integrating electro-optical automated inspection and sorting systems specialized conveying systems and product preparation systems. Key Technology Inc. has a market cap of $57.5 million; its shares were traded at around $11.51 with a P/E ratio of 13.3 and P/S ratio of 0.4.

Highlight of Business Operations:

In the third quarter of fiscal 2009, the Company s order volume, net sales, backlog, and net earnings all decreased compared to the corresponding period in the prior fiscal year. Net sales of $26.2 million in the third fiscal quarter of 2009 were $9.6 million, or 27%, lower than net sales of $35.8 million in the corresponding quarter a year ago. International sales were 48% of net sales for the third fiscal quarter of 2009, compared to 45% in the corresponding prior year period. Backlog of $26.2 million at the end of the third fiscal quarter of 2009 represented a $16.0 million, or 38%, decrease from the ending backlog of $42.2 million in the corresponding quarter a year ago. Net earnings for the third quarter of fiscal 2009 were $455,000, or $0.09 per diluted share. Net earnings for the corresponding period last year were $3.0 million, or $0.53 per diluted share. Customer orders in the third quarter of fiscal 2009 of $20.7 million were down $10.0 million, or 33%, compared to orders of $30.7 million in the third quarter of fiscal 2008. Orders decreased across all major geographic areas, product lines and markets. During the third quarter of fiscal 2009, the Company continued to focus on strengthening market share and revenues in its established markets and geographies, developing its presence in the pharmaceutical and nutraceutical market, increasing upgrade system sales, and continuing to expand its global market presence.

Customer orders in the first nine months of fiscal 2009 of $69.5 million were down $35.6 million, or 34%, compared to the orders of $105.1 million in the first nine months of fiscal 2008. The net loss for the first nine months of fiscal 2009 was $446,000, or $0.09 per diluted share. Net earnings for the corresponding nine-month period last year were $5.2 million, or $0.95 per diluted share. The net loss in the first nine months of fiscal 2009 included pre-tax charges of $890,000 related to a workforce reduction and a $343,000 write-off of previously incurred costs associated with a potential facility expansion. The results for the first nine months of fiscal 2009 also included the effects of certain cost reduction initiatives implemented during fiscal 2009.

Orders decreased by $10 million, or 33%, to $20.7 million in the third quarter of fiscal 2009 compared to the third quarter new orders of $30.7 million a year ago. Process systems orders decreased $1.6 million, or 17%, during the third quarter of fiscal 2009 to $7.6 million compared to $9.2 million in the third quarter of fiscal 2008. Orders for automated inspection systems during the third quarter of fiscal 2009 decreased $7.6 million, or 50%, to $7.5 million from $15.1 million in the comparable quarter of fiscal 2008. Orders for parts and service decreased $799,000, or 13%, during the third quarter of fiscal 2009 to $5.6 million compared to $6.4 million in the third quarter of fiscal 2008. The decrease in orders for process systems, automated inspection systems, and parts and service related to all major geographic regions, customer markets and product lines.

New orders for the first nine months of fiscal 2009 decreased $35.6 million, or 34%, to $69.5 million compared to orders of $105.1 million for the first nine months of fiscal 2008. Orders for process systems decreased $18.0 million, or 43%, to $24.3 million compared to $42.3 million in fiscal 2008. Orders for automated inspection systems decreased approximately $16.2 million, or 35%, to $30.5 million compared to $46.7 million in fiscal 2008. Orders for parts and service were $14.7 million, down $1.4 million, or 9%, from $16.1 million in the prior year. The decrease in orders from the prior year for process systems, automated inspection systems, and parts and service related to all major geographic regions, customer markets, and product lines.

In the first nine months of fiscal 2009, net cash decreased by $25.3 million to $11.0 million on June 30, 2009 from $36.3 million on September 30, 2008. Cash used in operating activities was $9.7 million during the nine-month period ended June 30, 2009. Investing activities consumed $12.3 million of cash, including $6.5 million associated with the purchase of the Company s headquarters facility in Walla Walla, Washington. Financing activities used $3.3 million of cash, including $10.0 million for stock repurchases offset by the $6.4 million of proceeds associated with the new mortgage on the Walla Walla headquarters facility and $300,000 of net cash provided by other financing activities. The effect of foreign exchange rate changes on cash was a negative $105,000 during the first nine months of fiscal 2009.

Cash used in operating activities during the nine-month period ended June 30, 2009 was $9.7 million compared to $6.7 million of cash provided by operating activities for the comparable period in fiscal 2008. The primary contributors were the changes in net earnings (loss) and non-cash working capital. For the first nine months of fiscal 2009, there was a net loss of $446,000 compared to net earnings of $5.2 million for the first nine months of fiscal 2008. During the first nine months of fiscal 2009, changes in non-cash working capital used $12.4 million of cash from operating activities. In the first nine months of fiscal 2008, changes in non-cash working capital used $380,000 of cash from operating activities. The major changes in current assets and current liabilities during the first nine months of fiscal 2009 were decreased accounts payable of $3.8 million, accrued payroll liabilities and commissions of $2.5 million, customer deposits of $2.0 million, other accrued liabilities of $934,000, offset by decreased trade receivables of $1.7 million, mostly related to decreased sales and order volumes. In addition, there were increases in inventories of $3.7 million and income tax receivable of $1.0 million. The increase in inventories was primarily attributable to strategic product placements at customer locations and increased parts stock and subassemblies for quick response to customer orders.

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