VPF Valpey Fisher Corp. (MM)

Valpey Fisher Corporation (NASDAQ: VPF), a leader in low-noise timing solutions, today reported results for the fourth quarter and year ended December 31, 2010.

For the fourth quarter of 2010, the Company reported an operating profit of $239,000 and net earnings of $218,000 or $.05 per share on sales of $3,547,000, compared to an operating profit of $54,000 and net earnings of $23,000 on sales of $2,798,000 for the same period last year.

For 2010, the Company reported an operating profit of $885,000 and net earnings of $623,000 or $.14 per share on sales of $14,716,000. In 2009, the Company reported an operating loss of $332,000 and a net loss of $213,000 on sales of $10,378,000 for 2009.

Michael Ferrantino Jr., the Company’s President and Chief Executive Officer, commented,” We are pleased to report your management team successfully executed its plan to increase revenue in 2010. We also continued to execute our strategic plan in the area of new product development during 2010. In the past year we brought to market a series of new products in both our precision products and microwave products areas. New product development has been focused on high-growth markets including synchronous Ethernet, IEEE 1588, and wireless infrastructure.”

Mr. Ferrantino added, “We saw improvement in virtually all of our financial metrics compared to 2009. For 2010, our sales increased 42% over 2009. All product lines reported sales increases over 2009, with our precision products seeing the largest increase at 74%. The increased sales had a positive effect on our gross margin which increased to 38% from 33% in 2009. During 2010 we did a great job of managing our expenses while at the same time continuing to invest in our business, increasing our investment in research and development by 99% compared to 2009 levels. We continue to be committed to developing the cutting-edge products required by our customers’ future products. Our operating profit for 2010 was $885,000 compared to an operating loss of $332,000 in 2009.”

“Our precision products group continued to gain print position as reference designs at several major semiconductor companies. These reference designs have lead to some significant opportunities at major OEM’s whom we have had difficulty penetrating in the past. In addition, several of our timing modules have been modified for use in harsh environments allowing us to bring these products to the military markets, Mr. Ferrantino stated.”

Mr. Ferrantino said, “2010 marked the first full year of our microwave products group. The group’s primary focus has been to design, develop and bring to market a new line of microwave components and multichip modules utilizing semiconductor manufacturing techniques. This capability, a first for Valpey Fisher, enables the improvement of electrical performance while maintaining a competitive cost advantage. The addition of the microwave products will also allow us to provide our customers with a broader portfolio of high-performing solutions to address their existing and next generation needs.”

About Valpey Fisher:

Valpey Fisher is a pioneer in the design of high-accuracy subsystems used in digital and optical telecommunications systems in use throughout the world for digital, voice, data and military communications. The Company’s products enable communications systems vendors to increase network data capacity and improve voice and video quality. Valpey Fisher manufactures precision low-noise timing modules used in Point-to-Point Radio, Satellite, Base Station, Test & Measurement, Microwave Communications and Synthesizers.

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 results for 2011 may be negatively impacted by the current global economic conditions and uncertainties, a significant portion of our revenues is derived from sales to a few customers and the loss of one or more of our significant customers could have an adverse impact on our operating results and financial condition, a significant portion of our revenue is derived from products manufactured by one supplier and a significant change in the supplier’s manufacturing capability or in our relationship with this supplier could have an adverse impact on our operating results and financial condition, our operating results and financial condition could be negatively affected if after receiving design wins from OEMs, which in turn outsource the manufacture of their products to electronics manufacturing services ("EMS") companies, we fail to negotiate terms and successfully obtain orders from the EMS companies directly, 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 products may become more expensive, thus we are less competitive, than our competitors that have taken measures to protect against exchange rate fluctuations, our ability to develop, market and manufacture new innovative products competitively, the fluctuations in product demand of the telecommunications industry, and our ability, including that of our suppliers to produce and deliver materials and products competitively.

Valpey-Fisher Corporation Condensed Consolidated Statements of Operations ( in thousands, except per share data)       Unaudited     Audited Quarter Ended Year Ended 12/31/10   12/31/09 12/31/10   12/31/09     Net sales $ 3,547 $ 2,798 $ 14,716 $ 10,378 Cost of sales   2,186       1,890     9,065       6,926   Gross profit 1,361 908 5,651 3,452   Selling and advertising expenses 475 375 2,076 1,613 General and administrative expenses 361 275 1,440 1,279 Research and development expenses 286 204 1,250 627 Retirement agreement   -       -     -       265     1,122       854     4,766       3,784   Operating profit (loss) 239 54 885 (332 )   Interest income   3       5     16       32   Earnings (loss) before income taxes 242 59 901 (300 ) Income tax (expense) benefit (1)   (24 )     (36 )   (278 )     87   Net earnings (loss) $ 218     $ 23   $ 623     $ (213 )     Basic and diluted earnings (loss) per share $ 0.05     $ (0.02 ) $ 0.14     $ (0.05 )   Basic weighted average shares 4,323 4,298 4,307 4,298 Diluted weighted average shares 4,588 4,298 4,495 4,298  

(1) The 2010 quarter includes the full year 2010 net tax benefit of $65,000 for the extension of the U.S. Research and Development tax credit, which became law in December 2010.

    Valpey-Fisher Corporation Condensed Consolidated Balance Sheets

(in thousands)

      (Audited) 12/31/10   12/31/09 ASSETS   Current assets: Cash and cash equivalents $ 4,451 $ 4,053 Receivables, net 2,413 1,744 Inventories, net 1,458 1,105 Deferred income taxes and other current assets   866     959 Total current assets   9,188     7,861 Property, plant and equipment, at cost 12,201 11,613 Less accumulated depreciation   10,530     10,127   1,671     1,486 Other assets   216     202 Total assets $ 11,075   $ 9,549   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 2,558 $ 1,810 Deferred income taxes 253 175 Stockholders' equity   8,264     7,564 Total liabilities and stockholders' equity $ 11,075   $ 9,549