-----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, JV7wSgvP5uT2soadoH4QeP+gHInIhMY3rfsCvbdblu8ySebp4+9HIjKqIg9BwbIS HkZYdIqzIPwSggfq7vISBg== 0000950124-00-000544.txt : 20000214 0000950124-00-000544.hdr.sgml : 20000214 ACCESSION NUMBER: 0000950124-00-000544 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERCEPTRON INC/MI CENTRAL INDEX KEY: 0000887226 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 382381442 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20206 FILM NUMBER: 533174 BUSINESS ADDRESS: STREET 1: PERCEPTRON INC STREET 2: 47827 HALYARD DR CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 BUSINESS PHONE: 3134144816 MAIL ADDRESS: STREET 1: PERCEPTRON INC STREET 2: 47827 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 1999. Commission file number: 0-20206 PERCEPTRON, INC. (Exact name of registrant as specified in its charter) Michigan 38-2381442 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 47827 Halyard Drive, Plymouth, Michigan 48170-2461 (Address of principal executive offices) (734) 414-6100 (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 proceeding 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 -------- -------- The number of shares outstanding of each of the issuer's classes of common stock as of February 3, 2000, was: Common Stock, $0.01 par value 8,170,208 ----------------------------- -------------------------- Class Number of shares 2 PERCEPTRON, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1999
PAGE NUMBER ------ COVER 1 INDEX 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19
2 3 PERCEPTRON, INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, (IN THOUSANDS) 1999 1999 --------------------- ---------------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,990 $ 4,205 Receivables: Billed receivables, net of allowance for doubtful accounts 26,851 21,128 of $310,000 and $218,000, respectively Unbilled and other receivables 4,555 4,611 Inventories, net of reserves of $946,000 and $600,000, respectively 12,471 12,323 Deferred taxes and other current assets 1,194 1,307 --------------------- ---------------------- Total current assets 51,061 43,574 --------------------- ---------------------- PROPERTY AND EQUIPMENT Building and land 5,990 5,990 Machinery and equipment 9,518 9,774 Furniture and fixtures 1,469 1,469 --------------------- ---------------------- 16,977 17,233 Less - Accumulated depreciation and amortization (6,309) (6,121) --------------------- ---------------------- Net property and equipment 10,668 11,112 --------------------- ---------------------- OTHER ASSETS Intangible assets, net of accumulated amortization 1,496 1,692 of $471,000 and $279,000, respectively Deferred tax asset 2,732 4,956 --------------------- ---------------------- Total other assets 4,228 6,648 --------------------- ---------------------- TOTAL ASSETS $ 65,957 $ 61,334 ===================== ====================== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,336 $ 3,550 Accrued liabilities and expenses 4,749 4,619 Income taxes payable 776 633 Accrued compensation 1,748 203 --------------------- ---------------------- Total current liabilities 10,609 9,005 --------------------- ---------------------- LONG-TERM LIABILITIES Notes payable 5,425 4,265 --------------------- ---------------------- Total long-term liabilities 5,425 4,265 --------------------- ---------------------- Total liabilities 16,034 13,270 --------------------- ---------------------- SHAREHOLDERS' EQUITY Preferred stock - no par value, authorized 1,000,000 shares, issued none - - Common stock, $0.01 par value, authorized 19,000,000 shares, issued and outstanding 8,169,000 at December 31, 1999 and June 30, 1999, respectively 82 82 Accumulated other comprehensive income (loss) (3,568) (3,340) Additonal paid-in capital 40,979 40,979 Retained earnings 12,430 10,343 --------------------- ---------------------- Total shareholders' equity 49,923 48,064 --------------------- ---------------------- TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 65,957 $ 61,334 ===================== ======================
The notes to the consolidated financial statements are an integral part of these statements. 3 4 PERCEPTRON, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31, (In Thousands, Except Per Share Amounts) 1999 1998 1999 1998 ---------- ----------- ----------- ----------- NET SALES $ 18,533 $ 16,843 $ 37,004 $ 31,325 COST OF SALES 8,263 7,151 16,352 13,590 -------- -------- -------- -------- GROSS PROFIT 10,270 9,692 20,652 17,735 -------- -------- -------- -------- OPERATING EXPENSES Selling, general and administrative 5,078 5,809 10,423 10,831 Engineering, research and development 3,482 3,509 6,469 6,051 Non-cash intangible asset write-off -- 1,472 -- 1,472 -------- -------- -------- -------- Total operating expenses 8,560 10,790 16,892 18,354 -------- -------- -------- -------- OPERATING INCOME (LOSS) 1,710 (1,098) 3,760 (619) -------- -------- -------- -------- OTHER INCOME AND (DEDUCTIONS) Interest income (expense), net (96) 147 (178) 238 Foreign currency and other 12 (8) (69) 6 -------- -------- -------- -------- Total other income and (deductions) (84) 139 (247) 244 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 1,626 (959) 3,513 (375) INCOME TAX EXPENSE (BENEFIT) 667 (402) 1,426 (207) -------- -------- -------- -------- NET INCOME (LOSS) $ 959 $ (557) $ 2,087 $ (168) ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE BASIC $ 0.12 ($ 0.07) $ 0.26 ($ 0.02) DILUTED $ 0.12 ($ 0.07) $ 0.26 ($ 0.02) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 8,169 8,219 8,169 8,234 DILUTED 8,174 8,219 8,183 8,234
The notes to the consolidated financial statements are an integral part of these statements. 4 5 PERCEPTRON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, (In Thousands) 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 2,087 $ (168) Adjustments to reconcile net income to net cash provided from (used for) operating activities: Depreciation and amortization 1,232 1,359 Deferred income taxes 1,778 (1,120) Other 202 1,472 Changes in assets and liabilities, exclusive of changes shown separately (3,704) (4,657) -------- -------- Net cash provided from (used for) operating activities 1,595 (3,114) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit borrowings 11,025 -- Revolving credit repayments (9,865) -- Repurchase of company stock -- (202) Proceeds from the exercise of stock options -- 266 -------- -------- Net cash provided from financing activities 1,160 64 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (703) (1,005) Purchase of Sonic assets -- (1,114) -------- -------- Net cash used for investing activities (703) (2,119) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (267) 223 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,785 (4,946) CASH AND CASH EQUIVALENTS, JULY 1 4,205 10,699 -------- -------- CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 5,990 $ 5,753 ======== ======== CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Billed, unbilled and other receivables, net $ (5,759) $ (6,549) Inventories (109) (628) Accounts payable (214) 436 Other current assets and liabilities 2,378 2,084 -------- -------- $ (3,704) $ (4,657) ======== ========
The notes to the consolidated financial statements are an integral part of these statements. 5 6 PERCEPTRON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying consolidated financial statements should be read in conjunction with Perceptron's 1999 Transition Report on Form 10-K. As a result of the fiscal year change, any references herein to the six-month period ended June 30, 1999, represent audited amounts. Certain reclassifications may have been made to the prior year's financial statements to conform with the fiscal year 2000 presentation. In the opinion of management, the unaudited information furnished herein reflects all adjustments necessary, consisting of normal recurring adjustments, for a fair presentation of the financial statements for the periods presented. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year. 2. INVENTORY Inventory is stated at the lower of cost or market. The cost of inventory is determined by the first in, first out (FIFO) method. Inventory, net of reserves, is comprised of the following (in thousands):
DECEMBER 31, JUNE 30, 1999 1999 ---------------- ---------------- Component Parts $ 7,506 $ 6,553 Work In Process 1,453 1,683 Finished Goods 3,512 4,087 ---------------- ---------------- Total $ 12,471 $ 12,323 ================ ================
3. CREDIT FACILITIES The Company's principal bank has agreed to provide short-term unsecured credit facilities of 1.0 million Deutsche marks and $1.0 million Canadian dollars. The facilities may be used to finance working capital needs and equipment purchases or capital leases. Any borrowings will bear interest at the bank's prime rate (8.75% as of February 3, 2000). The credit facilities expire on May 31, 2000, unless canceled earlier by the Company or the bank. The Company had no borrowings outstanding under these credit facilities at December 31, 1999. The Company has a long-term $15.0 million unsecured Revolving Credit Agreement (Revolver) that expires on May 31, 2001. Proceeds under the Revolver may be used for general corporate purposes and can be designated as a Floating Rate Loan or as a Eurodollar Rate Loan. Interest on Floating Rate borrowings is calculated daily at 1/2% below the bank's prime rate (8.75% as of February 3, 2000) and is payable on the last day of each month. Interest on Eurodollar Rate borrowings is calculated at a Eurodollar Rate for the period chosen (approximately 7.5% as of February 3, 2000) and is payable on the last day of the applicable period. Quarterly, the Company pays a commitment fee of 1/4% per annum on the daily unused portion of the Revolver. The Revolver prohibits the Company from paying dividends. 6 7 In addition, the Revolver contains various financial covenants that, among other things, restrict dividend payments by requiring the Company to maintain a Fixed Charge Coverage Ratio and a Total Liabilities to Tangible Net Worth Ratio and require the Company to maintain certain levels of earnings before interest, depreciation and amortization, and taxes. The Company had $4.4 million outstanding under the Revolver at December 31, 1999. 4. FOREIGN EXCHANGE CONTRACTS The Company may use, from time to time, a limited hedging program to minimize the impact of foreign currency fluctuations. As the Company exports products, it may enter into limited hedging transactions relating to the accounts receivable arising as a result of such shipments. These transactions involve the use of forward contracts. At December 31, 1999 and 1998, the Company had no forward contracts outstanding. 5. COMPREHENSIVE INCOME Comprehensive income is defined as the change in common shareholder's equity during a period from transactions and events from non-owner sources, including net income. Other items of comprehensive income include revenues, expenses, gains and losses that are excluded from net income. Total comprehensive income for the applicable periods is as follows (in thousands):
THREE MONTHS ENDED DECEMBER 31, 1999 1998 --------------- --------------- Net Income $ 959 $ (557) Other Comprehensive Income: Foreign currency translation adjustments (682) (169) --------------- --------------- Total Comprehensive Income $ 277 $ (726) =============== =============== SIX MONTHS ENDED DECEMBER 31, 1999 1998 --------------- --------------- Net Income $ 2,087 $ (168) Other Comprehensive Income: Foreign currency translation adjustments (228) 833 --------------- --------------- Total Comprehensive Income $ 1,859 $ 665 =============== ===============
7 8 6. EARNINGS PER SHARE Basic earnings per share ("EPS") is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Other obligations, such as stock options and warrants, are considered to be potentially dilutive common shares. Diluted EPS assumes the issuance of potential dilutive common shares outstanding during the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance. A reconciliation of both calculations is shown below (in thousands, except per share amounts):
WEIGHTED AVG. EARNINGS NET INCOME COMMON SHARES PER SHARE THREE MONTHS ENDED DEC. 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ Basic EPS $ 959 $ (557) 8,169 8,219 $ .12 $ (.07) Effect of Dilutive Securities: Stock options and warrants - - 5 - ------------ ------------ ------------ ------------ Diluted EPS $ 959 $ (557) 8,174 8,219 $ .12 $ (.07) ============ ============ ============ ============ WEIGHTED AVG. EARNINGS NET INCOME COMMON SHARES PER SHARE SIX MONTHS ENDED DEC. 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ Basic EPS $ 2,087 $ (168) 8,169 8,234 $ .26 $ (.02) Effect of Dilutive Securities: Stock options and warrants - - 14 - ------------ ------------ ------------ ------------ Diluted EPS $ 2,087 $ (168) 8,183 8,234 $ .26 $ (.02) ============ ============ ============ ============
During the three and six month periods ended December 31, 1999, options to purchase 1,502,000 and 1,218,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. For the comparable three and six month periods ended December 31, 1998, options to purchase 1,237,000 and 1,059,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. 7. COMMITMENTS AND CONTINGENCIES The Company may, from time to time, be subject to legal proceedings and claims. Litigation involves many uncertainties. Management is currently unaware of any significant pending litigation affecting the Company, other than the matters discussed in the Company's 1999 Transition Report on Form 10-K. 8 9 8. SEGMENT INFORMATION The Company has two reportable segments: Automotive and Industrial Businesses. The Automotive segment designs, manufactures, and markets information-based process measurement and guidance systems within the automotive industry. The Industrial Businesses segment employs the same technology, providing products and services primarily to the forest and wood products industry and, to a lesser extent, the aerospace and steel industries. The Company evaluates performance based on operating income. Segment detail is summarized as follows (in thousands):
THREE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED ------------------------ -------------------- ---------------------- ---------------------- DECEMBER 31, 1999 Revenues $ 13,413 $ 5,120 $ 18,533 Operating Income (Loss) 1,187 523 1,710 Total Assets 56,773 9,184 65,957 DECEMBER 31, 1998 Revenues $ 13,217 $ 3,626 $ 16,843 Operating Income (Loss) (1,124) 26 (1,098) Total Assets 58,654 7,754 66,408 SIX MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED ------------------------ -------------------- ---------------------- ---------------------- DECEMBER 31, 1999 Revenues $ 29,596 $ 7,408 $ 37,004 Operating Income (Loss) 4,704 (944) 3,760 Total Assets 56,773 9,184 65,957 DECEMBER 31, 1998 Revenues $ 24,800 $ 6,525 $ 31,325 Operating Income (Loss) (699) 80 (619) Total Assets 58,654 7,754 66,408
9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended December 31, 1999, Compared to Three Months Ended December 31, 1998 Overview - The Company reported net income of $959,000, or $0.12 per share, for the second quarter of fiscal 2000, compared to a net loss of $557,000, or $0.07 per share, in the quarter ended December 31, 1998. Net sales of $18.5 million for the three months ended December 31, 1999, were up $1.7 million, or 10%, over the prior year's sales of $16.8 million. Automotive sales accounted for 72% of total sales during the second quarter of fiscal 2000 compared to 79% in the quarter ended December 31, 1998. Industrial Businesses sales represented 28% of total sales for the quarter ended December 31, 1999, compared to 21% in the same quarter of 1998. Gross profit for the second quarter of fiscal 2000 was 55.4% compared to 57.5% in the quarter ended December 31, 1998. The decrease in gross profit was primarily due to product mix and lower margins earned on the Company's P-1000 product that related to the configuration of systems sold. Operating expenses were down $2.2 million in the second quarter of fiscal 2000 compared to the quarter ended December 31, 1998. The favorable comparison in operating expenses was due to higher expenses for a $1.5 million non-cash write-off of an intangible asset in the quarter ended December 31, 1998, and the benefit derived from cost reduction programs initiated during 1999. Automotive - Sales in the second quarter of fiscal 2000 of $13.4 million were up slightly over sales of $13.2 million in the quarter ended December 31, 1998. P-1000 sales accounted for approximately 50% of net automotive sales in the second quarter of fiscal 2000 compared to approximately 76% in the same period a year ago. The percentage sales decrease reflected our customers migration to the Company's IPNet(TM) product and the mature nature of the P-1000 product. Sales of the Company's new IPNet(TM) product totaled approximately 16% of net automotive sales in the second quarter of fiscal 2000. RGS and NCA systems sales accounted for 30% of net sales in the quarter ended December 31, 1999, compared to 10% one year ago. The variance in RGS and NCA sales was a function of the timing of orders by the Company's customers. Other product sales and training and service accounted for the remainder of net sales in both years. Industrial Businesses - At the present time, the Industrial Businesses segment's principal market is the Forest Products industry. Sales in the second quarter of fiscal 2000 were $5.1 million, of which $4.6 million was delivered by the Forest Products business unit. Sales in the quarter ended December 31, 1998, of $3.6 million were all delivered by the Forest Products business unit. The increase in sales of $1.5 million from the same period last year was primarily due to a strengthening in the forest products marketplace and new sales in the steel and aerospace industries. Bookings & Backlog - New order bookings for the three months ended December 31, 1999, were $14.0 million compared to $12.3 million in 1998. Automotive bookings totaled $10.3 million in the fiscal 2000 quarter compared to $9.4 million a year ago. During the quarter ended December 31, 1999, automotive bookings were for: 37% P-1000, 37% IPNet(TM) and 18% RGS and NCA, as compared with 77% P-1000, 12% paint inspection products and 7% service and training for the quarter ended December 31, 1998. Industrial Businesses bookings were $3.7 million in the quarter ended December 31, 1999, compared to $2.9 million a year ago, of which Forest Product bookings represented 78% and 100%, respectively. Backlog at December 31, 1999, was $21.9 million compared to $23.5 million at December 10 11 31, 1998. The Company expects to be able to fill substantially all of the orders in backlog by the end of calendar year 2000. During January 2000, the Company received new order bookings in excess of $4.0 million. The amount of new order bookings and the level of backlog during any particular period are not necessarily indicative of the future operating performance of the Company. Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased $731,000 from $5.8 million in the quarter ended December 31, 1998, to $5.1 million in the comparable 1999 quarter. The decrease was primarily due to cost reductions in personnel and other operating expenses that reflected the benefit derived from cost reduction programs initiated during 1999. Engineering, Research and Development Expenses (R&D) - Engineering and R&D expenses remained constant at $3.5 million in both 1999 and 1998 quarters ending December 31. The Company continues to invest in new product development. In the Automotive segment, the first phase of the Wet Film Thickness Measurement System has been installed and is undergoing testing at an alpha site. The second phase of this system is currently being installed at the same customer site. The Company's enhanced PaintScan(TM) system is being evaluated by a customer in its paint line on a real-time full production basis. PaintScan(TM) is a paint defect inspection system that was formerly known as Industrial Dirt Counter. The Company's first installation of its new DriScan(TM) product at an alpha site is currently undergoing testing. DriScan(TM) detects imperfections on bare metal prior to the paint process. DriScan(TM) was formerly known as the Bare Metal product. In the Forest Products division, the ultrasound cant grading system completed beta testing and will be a released product. The grade sawing, carriage optimizer system was installed successfully at a customer site and was released as a new product in the quarter ended December 31, 1999. Interest Income (Expense), net - The decrease in interest income (expense), net reflected a reduction in interest income from lower average cash balances in the current quarter as compared to the quarter ended December 31, 1998. The decrease was also attributable to higher interest expense from borrowings under the Company's revolving credit line in the quarter ended December 31, 1999. Outlook - Based on customer shipment schedules, the Company expects sales in the second half of the fiscal year to be seasonally lower than the first half of the fiscal year. The Company continues to expect its overall operating results for the balance of fiscal 2000 to compare favorably with the same period one year ago. The foregoing statement is a "forward looking statement" within the meaning of the Securities Exchange Act of 1934, as amended. See Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations Safe Harbor Statement" for a discussion of a number of uncertainties which could cause actual results to differ materially from those set forth in the forward looking statement. Six Months Ended December 31, 1999, Compared to Six Months Ended December 31, 1998 Overview - The Company reported net income of $2.1 million, or $0.26 per share, for the first six months of fiscal 2000, compared to a net loss of $168,000, or $0.02 per share, in the six months ended December 31, 1998. Net sales of $37.0 million for the six months ended December 31, 1999, were up $5.7 million, or 18%, over the prior year's sales of $31.3 million. Automotive sales accounted for approximately 80% of total sales during both six-month periods ended December 31, 1999 and 1998. Industrial Businesses sales represented the balance of approximately 20% in both periods. Gross profit for the first six months of fiscal 2000 was 55.8% compared to 56.6% in the six months ended December 31, 1998. The decrease in gross profit was primarily due to product mix and lower margins earned on the Company's P-1000 product that related to the configuration of systems sold. Operating expenses were down $1.5 million in the first six months of fiscal 2000 compared to the six months ended December 31, 1998. The favorable 11 12 comparison in operating expenses was primarily due to a $1.5 million non-cash write-off of an intangible asset in the six months ended December 31, 1998. Lower selling, general and administrative expenses of $408,000 were offset by higher engineering, research and development expenses in the comparable six-month periods. Automotive - Sales in the first six months of fiscal 2000 increased $4.8 million to $29.6 million compared to $24.8 million in the six months ended December 31, 1998. P-1000 sales accounted for approximately 49% of net automotive sales in the first six months of fiscal 2000 compared to approximately 79% in the same period a year ago. The percentage sales decrease reflected our customers' migration to the Company's IPNet(TM) product and the mature nature of the P-1000 product. Sales of the Company's new IPNet(TM) product totaled approximately 22% of net automotive sales in the first six months of fiscal 2000. RGS and NCA systems sales accounted for 23% of net sales in the six months ended December 31, 1999, compared to 10% one year ago. The variance in RGS and NCA sales was a function of the timing of orders by the Company's customers. Other product sales and training and service accounted for the remainder of net sales in both years. Industrial Businesses - At the present time, the Industrial Businesses segment's principal market is the Forest Products industry. Sales in the first six months of fiscal 2000 were $7.4 million, of which $6.7 million was delivered by the Forest Products business unit. Sales for the same period last year of $6.5 million were all delivered by the Forest Products business unit. Sales were up $900,000 from the same period last year primarily due to new sales in the steel and aerospace industries. Bookings & Backlog - New order bookings for the six months ended December 31, 1999, were $31.0 million compared to $30.2 million for the same period one year ago. Automotive bookings totaled $24.9 million in the fiscal 2000 six months compared to $24.5 million a year ago. During the six months ended December 31, 1999, automotive bookings were primarily for: 52% P-1000, 24% IPNet(TM) and 17% RGS and NCA as compared with 78% P-1000, 10% paint inspection products and 6% RGS and NCA in the six months ended December 31, 1998. Industrial Businesses bookings were $6.1 million in the six months ended December 31, 1999, compared to $5.7 million a year ago. Forest Product bookings represented 87% and 100% of the Industrial Businesses bookings in the six months ended December 31, 1999 and 1998, respectively. Backlog at December 31, 1999, was $21.9 million compared to $23.5 million at December 31, 1998. The Company expects to be able to fill substantially all of the orders in backlog by the end of calendar year 2000. During January 2000, the Company received new order bookings in excess of $4.0 million. The amount of new order bookings and the level of backlog during any particular period are not necessarily indicative of the future operating performance of the Company. Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased $408,000 from $10.8 million in the six months ended December 31, 1998, to $10.4 million in the comparable 1999 six-month period. The decrease was primarily due to cost reductions in personnel and other operating expenses that reflected the benefit derived from cost reduction programs initiated during 1999. Mitigating the favorable decrease in expenses was six months of Sonic related expenses in the current period compared to only three months in the period ended December 31, 1998. Engineering, Research and Development Expenses (R&D) - Engineering and R&D expenses increased from $6.1 million in the six months ended December 31, 1998, to $6.5 million in the first six months of fiscal 2000. The increase in expenses was primarily due to six months of expenses related to Sonic in the current period as compared to only three months of expenses in the period a year ago. During the six months ended December 31, 1999, the Company started to realize returns on its past investments in new product development, principally from sales of the Company's new IPNet(TM) product. In the Automotive segment, 12 13 the first phase of the Wet Film Thickness Measurement System has been installed and is undergoing testing at an alpha site. The second phase of this system is currently being installed at the same customer site. The Company's enhanced PaintScan(TM) system is being evaluated by a customer in its paint line on a real-time full production basis. PaintScan(TM) is a paint defect inspection system that was formerly known as Industrial Dirt Counter. The Company's first installation of its new DriScan(TM) product at an alpha site is currently undergoing testing. DriScan(TM) detects imperfections on bare metal prior to the paint process. DriScan(TM) was formerly known as the Bare Metal product. In the Forest Products division, the ultrasound cant grading system completed beta testing and will be a released product. The grade sawing, carriage optimizer system was installed successfully at a customer site and was released as a new product during the six months ended December 31, 1999. Interest Income (Expense), net - The decrease in interest income (expense), net reflected a reduction in interest income from lower average cash balances in the six months ended December 31, 1999, as compared to December 31, 1998. The decrease was also attributable to higher interest expense from borrowings under the Company's revolving credit line in the six months ended December 31, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $6.0 million at December 31, 1999, compared to $4.2 million at June 30, 1999. The increase of $1.8 million in cash for the six months resulted from $1.6 million of cash provided from operations and $1.2 million of cash provided from financing activities that were partially offset by $703,000 of cash used for capital spending. The $1.6 million of cash provided from operations reflected the Company's net income for the period and $1.8 million of cash received for the carry-back of tax losses, which offset other uses in working capital of $3.7 million. Receivables, net of foreign translation adjustments, increased $5.8 million primarily as a result of the high level of sales during the six months. Inventory increased $109,000 to support near-term delivery requirements. Offsetting these increases in working capital was a $2.0 million increase in current liabilities, primarily representing an increase in payroll and tax liabilities. Financing activities during the six months reflected $1.2 million in net borrowings of the Company's revolving line of credit. The Company believes that available cash on hand and existing credit facilities will be sufficient to fund its currently anticipated fiscal 2000 cash flow requirements. The Company does not believe that inflation has significantly impacted historical operations and does not expect any significant near-term inflationary impact. EURO CONVERSION A single currency called the "euro" was introduced in Europe on January 1, 1999. Eleven of the fifteen member countries of the European Union agreed to adopt the euro as their common legal currency on that date. Fixed conversion rates between these participating countries' existing currencies (the "legacy currencies") and the euro were established as of that date. The legacy currencies are scheduled to remain legal tender as denominations of the euro until at least January 1, 2002 (but not later than July 1, 2002). During this transition period, parties may settle transactions using either the euro or a participating country's legacy currency. Conversion to the euro may reduce the amount of the Company's exposure to changes in foreign exchange rates, due to the netting effect of having assets and liabilities denominated in a single currency 13 14 as opposed to the various legacy currencies. Conversely, because there will be less diversity in the Company's exposure to foreign currencies, movements in the euro's value in U.S. dollars could have a more pronounced effect, whether positive or negative, on the Company. YEAR 2000 READINESS DISCLOSURE YEAR 2000 OVERVIEW An issue affecting the Company is the potential inability of many computer systems and applications to process information in the Year 2000 and beyond. This could result in system failures or miscalculations leading to disruptions in the Company's activities and operations (the "Year 2000" capability issue). Programs that will operate in the Year 2000 unaffected by the change in year from 1999 to 2000 are referred to herein as "Year 2000 compliant". It is possible some Year 2000 issues may not be discovered until well after January 1, 2000. The disclosure below is intended to summarize the Company's actions to minimize the risks. Certain portions of the discussion set forth below contain "forward looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, including, but not limited to, those relating to the compliance of the Company's products and systems to operate under the Year 2000 issue, future costs to remediate Year 2000 issues, the Company's requirements and the impact on the Company of an inability of it or its key suppliers and customers to fully address Year 2000 issues. Actual results could differ materially from those in the forward looking statement due to a number of uncertainties set forth below. YEAR 2000 STATE OF READINESS The Company tested the current version of its principal products and believes that the current versions, and all versions currently under warranty, are capable of operating in the Year 2000. The Company's products operate on computers and operating systems supplied by third party vendors. The Company's customers have been advised to conduct their own forward-date tests on such systems and to contact the third party vendors regarding available upgrades or other remediation efforts. To date, the Company is not aware of any significant Year 2000 issues directly affecting the current version of its products. The Company's principal customers are automotive companies and forest and wood product processors and system integrators who sell to such customers. To date, the Company is not aware of any significant Year 2000 issues affecting its principal customers. Prior to Year 2000, the Company contacted its principal suppliers and utilities (all of which are referred to as "Third Party Suppliers") to determine if they were Year 2000 capable. The failure of one or more critical Third Party Suppliers (including utility and similar providers) to be Year 2000 capable such that its supply of needed products or services is interrupted could result in the Company not being able to produce one or more of its systems for a period of time, which in turn could result in lost sales and profits. To date, the Company is not aware of any significant Year 2000 issues affecting its Third Party Suppliers. The Company established a project team to identify internal systems, which are not Year 2000 capable and complete the work required to mitigate the Year 2000 issue. Remediation of the Company's and its subsidiaries principal information technology ("IT") systems and personal computer networks was completed prior to Year 2000. These systems tested compliant and are believed to be Year 2000 capable. A failure because of an undiscovered problem of one or more of the Company's internal systems to be 14 15 Year 2000 capable, particularly the Company's principal IT systems, could require the Company to manually process information or could prevent or limit access to mission critical information. To date, the Company has not experienced any significant Year 2000 issues associated with its IT and personal computer networks. The Company's non-IT systems consist principally of security, climate control, telephone and data communication systems. The Company has contacted the vendors that support these systems at the Company's headquarter, each of which believes its system to be Year 2000 compliant. To date, the Company has not experienced any significant Year 2000 issues associated with its non-IT systems. YEAR 2000 COSTS Most of the costs incurred by the Company to date on Year 2000 compliance issues have been internal staff costs and costs relating to normal product upgrades, which the Company has not separately tracked. As a result, the Company is not able to reasonably estimate the amount of such expenditures, although the Company believes it has spent less than $100,000 on such expenditures. The Company does not believe that it will incur future costs relating to Year 2000 compliance issues. These cost estimates are subject to a number of uncertainties, which could result in actual costs exceeding the estimated amounts described above. Costs related to the Year 2000 issue are funded through operating cash flow. The Year 2000 costs have not caused the Company to defer any other significant information technology programs. YEAR 2000 RISKS The Company's Year 2000 project team has evaluated business disruption scenarios, principally related to the Company's internal systems for processing information and the purchase of goods and services to maintain timely production. The team has developed and implemented the plans disclosed previously under "Year 2000 State of Readiness". Estimates of time, costs and risks associated with the Year 2000 issue are based on currently available information. Developments that could affect estimates include, but are not limited to, the ability to locate and correct all relevant computer code and systems; cooperation and remediation success of the Company's suppliers and customers (and their suppliers and customers); the ability to correctly anticipate risks and implement suitable contingency plans in the event of system failures at the Company or its suppliers or customers (and their suppliers and customers); unanticipated difficulties with the assessment or remediation process resulting in the need to replace more systems or hire more personnel or third party firms to assist in the process than expected and the Company being required to assist any of its Third Party Suppliers to become Year 2000 compliant. Some commentators have stated that a significant amount of litigation will arise out of Year 2000 compliance issues. In addition, it is possible that there will be undetected errors or defects associated with Year 2000 date functions in the Company's current products or internal systems or those of its Third Party Suppliers (and their suppliers and customers). Because of the unprecedented nature of litigation in this area, it is uncertain how the Company may be affected by it. In the event of such litigation or the occurrence of production disruptions related to Third Party Suppliers, internal issues or customers, it is possible the Company's revenues, net income or financial condition could be materially adversely affected. 15 16 MARKET RISK INFORMATION Perceptron's primary market risk is related to foreign exchange rates. This risk is derived from sales by its international operations, which are primarily located in Germany and The Netherlands and for which products are produced in the U.S. The Company is also subject to interest rate risk in connection with its borrowings. At December 31, 1999, the Company did not have any market risk instruments for trading purposes. FOREIGN CURRENCY RISK The Company has limited foreign currency exchange risk in its international operations due to the percentage of contracts entered into in U.S. dollars and the short time period between sales commitment and delivery for contracts in the non-U.S. currencies. The Company's percentage of sales commitments in U.S. dollars at December 31, 1999, was 76%. For sales commitments entered into in the non-U.S. currencies, the currency rate risk exposure is predominantly less than one year with the majority in the 120 to 150 day range. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations - Euro Conversion". The Company may use, from time to time, a limited hedging program to minimize the impact of foreign currency fluctuations. As the Company exports products, it may enter into limited hedging transactions relating to the accounts receivable arising as a result of such shipment. These transactions involve the use of forward contracts. At December 31, 1999, the Company had no forward contracts outstanding. INTEREST RATE RISK The Company is subject to interest rate risk in connection with borrowings under its variable rate revolving line of credit and from fixed rate debt assumed in conjunction with the purchase of ultrasound intellectual property in October 1998. However, this risk is limited due to the limited level of debt the Company has outstanding. The Company's exposure to interest rate risk arises primarily from changes in the prime rate and changes in Eurodollar rates in the London interbank market. See Note 3 of "Notes to Consolidated Statements" for a description of the Company's outstanding debt. SAFE HARBOR STATEMENT Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operation may be "forward looking statements" within the meaning of the Securities Exchange Act of 1934, including the Company's expectation as to fiscal 2000 and future revenue and earnings levels, the timing of new product releases and the expansion of the Company into new markets. Actual results could differ materially from those in the forward looking statements due to a number of uncertainties, including, but not limited to, the dependence of the Company's revenue on a number of sizable orders from a small number of customers, the timing of orders and shipments which can cause the Company to experience significant fluctuations in its quarterly and annual revenue and operating results, timely receipt of required supplies and components which could result in delays in anticipated shipments, general product demand and market acceptance risks, the ability of the Company to successfully compete with alternative and similar technologies, the timing and continuation of the automotive industry's retooling programs, the ability of the Company to resolve technical issues inherent in the development of new products and technologies, the ability of the Company to identify and satisfy market needs, general product development and commercialization difficulties, the quality and cost of competitive products already in existence or developed in the future, the level of interest existing and potential new customers 16 17 may have in new products and technologies generally, rapid or unexpected technological changes, the impact of undetected errors or defects associated with the Year 2000 date functions on the Company and its suppliers, and the effect of economic conditions, particularly economic conditions in the domestic and worldwide Automotive and Forest Products industries, both of which have from time to time been subject to cyclical downturns due to the level of demand for, or supply of, the products produced by companies in these industries. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required pursuant to this item is incorporated by reference herein from Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk Information". 17 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party to a suit filed by Analog Technologies, Inc. ("Analog") on October 8, 1999 in the Circuit Court for the County of Oakland, Michigan. The suit alleges that the Company breached a non-disclosure agreement and misappropriated Analog's confidential information and trade secrets in connection with the Company's development of a potential new product. The potential new product involved is one of a number of new products under development by the Company, which have not been discussed in the Company's filings with the Securities and Exchange Commission. Analog seeks equitable relief and unspecified compensatory damages in excess of $25,000. The Company believes that Analog's claims are without merit and intends to vigorously defend Analog's claims. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 10.32 Forms of Non-Qualified Stock Option Agreements under the Director Stock Option Plan after September 1, 1999. 27. Financial Data Schedule (B) Reports on Form 8-K None 18 19 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. PERCEPTRON, INC. (Registrant) Date: February 9, 2000 By: /S/ Alfred A. Pease ------------------------------------------- Alfred A. Pease President and Chief Executive Officer Date: February 9, 2000 By: /S/ John J. Garber ------------------------------------------- John J. Garber Vice President and Chief Financial Officer (Principal Financial Officer) Date: February 9, 2000 By: /S/ Sylvia M. Smith ------------------------------------------- Sylvia M. Smith Controller and Chief Accounting Officer (Principal Accounting Officer) 19 20 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 10.32 Forms of Non-Qualified Stock Option Agreements under the Director Stock Option Plan after September 1, 1999. 27. Financial Data Schedule EX-10.32 2 FORMS OF NON-QUALIFIED STOCK OPTION AGREEMENT 1 USAGE: 9/1/99 EXHIBIT 10.32 NON-QUALIFIED STOCK OPTION AGREEMENT UNDER THE PERCEPTRON, INC. DIRECTORS STOCK OPTION PLAN THIS STOCK OPTION AGREEMENT is made this ____ day of _____, ___, by and between Perceptron, Inc., a Michigan corporation (the "Company"), and __________, (the "Optionee"). The Optionee is now serving as an Eligible Director of the Company, and the Company desires to provide additional incentive to the Optionee to encourage the Optionee to remain as an Eligible Director of the Company, and as an inducement thereto, the Company has determined to grant to the Optionee a non-qualified stock option pursuant to the Company's Directors Stock Option Plan (the "Plan"). NOW, THEREFORE, it is agreed between the parties as follows: 1. Grant of Option. Subject to the terms and conditions hereof, the Company hereby grants to the Optionee the right and option to purchase from the Company up to, but not exceeding in the aggregate, _____ shares of the Company's Common Stock, at a price of $___ per share. This option is not intended to meet the requirements of an incentive stock option under Section 422 of the Internal Revenue Code (the "Code"). Certain capitalized terms used in this Agreement shall have the same meaning as defined in the Plan. 2. Accrual or Right to Exercise Option. The option hereby granted may not be exercised prior to ______. The Optionee may purchase from the Company on and after _________, the first anniversary of the date of grant, 33 1/3% of the shares covered by this option, and on each succeeding one year anniversary thereof may exercise an additional 33 1/3% of the shares covered by the option, so that on the third anniversary of the date of grant this option shall be fully exercisable. To the extent not exercised, installments shall accumulate and the Optionee may exercise them in whole or in part in any subsequent period. Any provision of this Agreement notwithstanding, this option shall not be exercisable on or after the date ten years from the date of grant of this option (the "Expiration Date"). Notwithstanding the foregoing, (i) in the event of a termination by the Company of the Optionee's membership on the Board or failure to renominate the Participant for election to the Board, or voluntary resignation by the Optionee from the Board at the request of the Board, following a Change in Control of the Company, or (ii), in the event of a Change in Control, if one of the corporations surviving the Change in Control or the person purchasing the Company's assets in the Change in Control does not assume this option, any portion of this option that is then not exercisable shall become immediately exercisable. For purposes hereof, a "Change in Control" shall be deemed to have occurred in the event of (i) a merger involving the Company in which the Company is not the surviving corporation (other than a merger with a wholly-owned subsidiary of the Company formed for the purpose of changing the Company's corporate domicile); (ii) a share exchange in which the shareholders of the Company exchange their stock in the Company for stock of another corporation (other than a share exchange in which all or substantially all of the holders of the voting stock of the Company, immediately prior to the transaction, exchange, on a pro rata basis, their voting stock of the Company for more than 50% of the voting stock of such other corporation); (iii) the sale of all or substantially all of the assets of the Company; or (iv) any person or group of persons (as defined by Section 13(d) of the Exchange Act) (other than any employee benefit plan or employee benefit trust benefitting the employees of the Company) becoming a beneficial owner, directly or indirectly, of securities of the Company representing more than fifty (50%) percent of either the then outstanding Common Stock, or the combined voting power of the Company's then outstanding voting securities. 2 3. Termination. Subject to certain change in control provisions set forth in Section 2 above, if the Optionee's term of office as an Eligible Director is terminated for any reason (including the Optionee becoming an Employee), other than the Optionee's election or appointment as Chairman, prior to the date that this option or a portion thereof first becomes exercisable, such option or portion thereof which is not then exercisable shall terminate and all rights thereunder shall cease. If the Optionee's term of office as an Eligible Director terminates due to the Optionee's election or appointment as Chairman (and the Optionee is not an Employee or does not become an Employee as a result of such election or appointment), this Option shall not terminate and shall continue to become exercisable as provided in Section 2 above. If thereafter such Chairman becomes an Employee, or ceases to be a Director, prior to the date this option or a portion thereof first becomes exercisable, such option or portion thereof which is then not exercisable shall terminate and all rights hereunder relating thereto shall cease. To the extent this option or any portion thereof is exercisable and unexercised on the date the Optionee's term of office as an Eligible Director is terminated for any reason (including the Optionee becoming an Employee), other than the Optionee's election or appointment as Chairman, this option shall terminate on the earlier of (i) the Expiration Date of this option, and (ii) three months after such termination; provided, however, that the exercise period in clause (ii) shall be extended to one year after termination if the termination is due to the Optionee's death or Disability. To the extent an Option or any portion thereof is exercisable and unexercised on the date of the Optionee's term of office as an Eligible Director is terminated due to the Optionee's election or appointment as the Chairman (and the Optionee is not an Employee or does not become an Employee as a result of such election or appointment), this option shall terminate on the earlier of (i) the Expiration Date of this option, and (ii) three months after the Optionee becomes an Employee or ceases to be a Director; provided, however, that the exercise period in clause (ii) shall be extended to one year after the Optionee ceases to be a Director if such termination is due to the Optionee's death or Disability. Notwithstanding the foregoing two sentences, in the event this option would otherwise expire during any period during which affiliates of the Company are prohibited from disposing of Common Stock in order to comply with applicable accounting and Securities and Exchange Commission rules, regulations, policies, guidelines or other similar requirements so as to permit the Company to account for a then completed or contemplated business combination under pooling of interest, the exercise period in clause (ii) of the foregoing two sentences shall be extended to the tenth business day following the expiration of any such period in which such dispositions are prohibited. 4. EXERCISE OF OPTION. (a) At any time that this option may be exercised as provided in this Agreement, the Optionee may exercise any portion of this option which is then exercisable, in whole or in part, by delivery to the Company of a written notice, in the form attached hereto, signed by the Optionee. (b) In addition, the Optionee shall deliver, on the date of exercise: (i) cash equal to the purchase price of the shares being purchased, (ii) such documents as are or may be required under the terms of Section 2.6 of the Plan to effect a cashless exercise; or (iii) Permitted Shares with a value (determined as of the date of exercise of the option) equal to the purchase price of the shares being purchased (the "Delivered Shares Method"). 2 3 After receipt of the foregoing, and subject to Section 5 below, the Company shall issue the shares in the name of the Optionee and deliver the certificates therefor to the Optionee. (c) "Permitted Shares" are shares of Company Common Stock to be delivered to pay the exercise price of the option (the "Delivered Shares): (i) which have been owned by the Optionee for at least six months prior to the date of delivery, or (ii) if they have not been owned by the Optionee for at least six months prior to the date of delivery, the Optionee then owns, and has owned for at least six months prior thereto, a number of shares of Company Common Stock at least equal in number to the Delivered Shares. (d) Shares which have been counted during the prior six months as owned by the Optionee for purposes of determining whether the Optionee may exercise options to purchase Common Stock pursuant to the Delivered Shares Method: (i) may not be used as Delivered Shares and (ii) may not be counted as owned by the Optionee for purposes of making calculations under the Delivered Shares Method. 5. Compliance With Securities Laws. Anything to the contrary herein notwithstanding, the Company's obligation to sell and deliver stock under this Option is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Company deems necessary or advisable. The Company shall not be required to sell and deliver stock pursuant hereto unless and until it receives satisfactory proof that the issuance or transfer of such shares will not violate any of the provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934 or the rules and regulations of the Securities Exchange Commission promulgated thereunder or the provisions of any state law governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and state laws. If the Optionee fails to accept delivery and pay for all or any part of the number of shares specified by such notice upon tender of delivery thereof the Optionee's right to exercise this option with respect to such undelivered shares may be terminated by the Company. 6. Non-Assignability. The option hereby granted shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the option may be exercised during the Optionee's lifetime only by the Optionee. Any transferee of the option shall take the same subject to the terms and conditions of this Agreement. No such transfer of the Option shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the will and/or such other evidence as the Company may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of this Agreement. No assignment or transfer of this Option, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, except a transfer by the Optionee by will or by the laws of descent and distribution, shall vest in the purported assignee or transferee any interest or right herein whatsoever. 7. Disputes. As a condition to the granting of the option granted hereby, the Optionee and the Optionee's successors and assigns agree that any dispute or disagreement which shall arise under or as a result of this Agreement shall be determined by the Board in its sole discretion and judgment and that any such 3 4 determination and any interpretation by the Board of the terms of this Agreement shall be final and shall be binding and conclusive for all purposes. 8. Adjustments. In the event of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, combination, exchange or other relevant change in the capital structure of the Company affecting the shares covered by this option, the rights of the Optionee shall be as provided in Section 4.1 of the Plan. 9. Rights as Shareholder. The Optionee shall have no rights as a shareholder of the Company with respect to any of the shares covered by this option until the issuance of a stock certificate or certificates upon the exercise of the option in full or in part, and then only with respect to the shares represented by such certificate or certificates. 10. Notices. Every notice relating to this Agreement shall be in writing and if given by mail shall be given by registered or certified mail with return receipt requested. All notices to the Company shall be delivered to the Company's Chief Executive Officer, at the principal office of the Company. All notices by the Company to the Optionee shall be delivered to the Optionee personally or addressed to the Optionee at the Optionee's last residence address as then contained in the records of the Company or such other address as the Optionee may designate. Either party by notice to the other may designate a different address to which notices shall be addressed. Any notice given by the Company to the Optionee at the Optionee's last designated address shall be effective to bind any other person who shall acquire rights hereunder. 11. "Optionee" to Include Certain Transferees. Whenever the word "Optionee" is used in any provision of this Agreement under circumstances where the provision should logically apply to any other person or persons to whom the option, in accordance with the provisions of Section 6 hereof, may be transferred, the word "Optionee" shall be deemed to include such person or persons. 12. Governing Law. This Agreement has been made in and shall be construed in accordance with the laws of the State of Michigan. 13. Provisions of Plan Controlling. The provisions hereof are subject to the terms and provisions of the Plan. In the event of any conflict between the provisions of this option and the provisions of the Plan, the provisions of the Plan shall control, except to the extent that the provisions of this option limit or restrict the rights of the Optionee to a greater extent than set forth in the Plan. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PERCEPTRON, INC. By: -------------------------------- --------------------- Its: ------------------------------- ----------------------------------- --------------, Optionee 4 5 NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION UNDER THE PERCEPTRON, INC. DIRECTORS STOCK OPTION PLAN Perceptron, Inc. 47827 Halyard Drive Plymouth, MI 48170 Dear Sir: A non-qualified stock option was granted to me on , , to purchase shares of Perceptron, Inc. Common Stock at a price of $ per share. I hereby elect to exercise my non-qualified stock option with respect to shares for an aggregate purchase price of $ . I hereby elect to pay for such shares as follows: $ Personal Check -------- $ Cash -------- $ Bank Draft -------- $ Money Order -------- $ Cashless Exercise -------- $ Perceptron Common Stock -------- $ Total ========
[A personal check [or cash, bank draft or money order] for the purchase price is enclosed herewith]. [Documents as are required to effect a cashless exercise are enclosed.] [I hereby elect to exercise my stock option with respect to shares through a combination of cash payments and shares of Perceptron, Inc. Common Stock, as described on the attached Exhibit A. A personal check for the purchase price to be paid in cash is enclosed herewith. Certificates for shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a duly executed stock power in proper form for transfer, with all signatures properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I represent that the shares of Perceptron, Inc. Common Stock enclosed herewith have been owned by me for more than six months.] or [I currently own more than shares of Perceptron, Inc. Common Stock which have been owned by me for more than six months.] Such shares have not been counted during the prior six months as owned by me for purposes of determining whether I may exercise options to purchase Common Stock pursuant to the Delivered Shares Method.] Dated: ------------ ----------------------------------- ------------- Optionee 1 6 USAGE: 9/1/99 NON-QUALIFIED STOCK OPTION AGREEMENT UNDER THE PERCEPTRON, INC. DIRECTORS STOCK OPTION PLAN THIS STOCK OPTION AGREEMENT is made this ___ day of ____, ____ by and between Perceptron, Inc., a Michigan corporation (the "Company"), and _________, (the "Optionee"). The Optionee is now serving as an Eligible Director of the Company, and the Company desires to provide additional incentive to the Optionee to encourage the Optionee to remain as an Eligible Director of the Company, and as an inducement thereto, the Company has determined to grant to the Optionee a non-qualified stock option pursuant to the Company's Directors Stock Option Plan (the "Plan"). NOW, THEREFORE, it is agreed between the parties as follows: 1. Grant of Option. Subject to the terms and conditions hereof, the Company hereby grants to the Optionee the right and option to purchase from the Company up to, but not exceeding in the aggregate, 15,000 shares of the Company's Common Stock, at a price of $____ per share. This option is not intended to meet the requirements of an incentive stock option under Section 422 of the Internal Revenue Code (the "Code"). Certain capitalized terms used in this Agreement shall have the same meaning as defined in the Plan. 2. Accrual or Right to Exercise Option. The option hereby granted may not be exercised prior to ___________. On [one year from date of grant], this option shall be fully exercisable. Any provision of this Agreement notwithstanding, this option shall not be exercisable on or after the date ten years from the date of grant of this option (the "Expiration Date"). Notwithstanding the foregoing, (i) in the event of a termination by the Company of the Optionee's membership on the Board or failure to renominate the Participant for election to the Board, or voluntary resignation by the Optionee from the Board at the request of the Board, following a Change in Control of the Company, or (ii), in the event of a Change in Control, if one of the corporations surviving the Change in Control or the person purchasing the Company's assets in the Change in Control does not assume this option, any portion of this option that is then not exercisable shall become immediately exercisable. For purposes hereof, a "Change in Control" shall be deemed to have occurred in the event of (i) a merger involving the Company in which the Company is not the surviving corporation (other than a merger with a wholly-owned subsidiary of the Company formed for the purpose of changing the Company's corporate domicile); (ii) a share exchange in which the shareholders of the Company exchange their stock in the Company for stock of another corporation (other than a share exchange in which all or substantially all of the holders of the voting stock of the Company, immediately prior to the transaction, exchange, on a pro rata basis, their voting stock of the Company for more than 50% of the voting stock of such other corporation); (iii) the sale of all or substantially all of the assets of the Company; or (iv) any person or group of persons (as defined by Section 13(d) of the Exchange Act) (other than any employee benefit plan or employee benefit trust benefitting the employees of the Company) becoming a beneficial owner, directly or indirectly, of securities of the Company representing more than fifty (50%) percent of either the then outstanding Common Stock, or the combined voting power of the Company's then outstanding voting securities. 3. Termination. Subject to certain change in control provisions set forth in Section 2 above, if the Optionee's term of office as an Eligible Director is terminated for any reason (including the Optionee 1 7 becoming an Employee), other than the Optionee's election or appointment as Chairman, prior to the date that this option or a portion thereof first becomes exercisable, such option or portion thereof which is not then exercisable shall terminate and all rights thereunder shall cease. If the Optionee's term of office as an Eligible Director terminates due to the Optionee's election or appointment as Chairman (and the Optionee is not an Employee or does not become an Employee as a result of such election or appointment), this Option shall not terminate and shall continue to become exercisable as provided in Section 2 above. If thereafter such Chairman becomes an Employee, or ceases to be a Director, prior to the date this option or a portion thereof first becomes exercisable, such option or portion thereof which is then not exercisable shall terminate and all rights hereunder relating thereto shall cease. To the extent this option or any portion thereof is exercisable and unexercised on the date the Optionee's term of office as an Eligible Director is terminated for any reason (including the Optionee becoming an Employee), other than the Optionee's election or appointment as Chairman, this option shall terminate on the earlier of (i) the Expiration Date of this option, and (ii) three months after such termination; provided, however, that the exercise period in clause (ii) shall be extended to one year after termination if the termination is due to the Optionee's death or Disability. To the extent an Option or any portion thereof is exercisable and unexercised on the date of the Optionee's term of office as an Eligible Director is terminated due to the Optionee's election or appointment as the Chairman (and the Optionee is not an Employee or does not become an Employee as a result of such election or appointment), this option shall terminate on the earlier of (i) the Expiration Date of this option, and (ii) three months after the Optionee becomes an Employee or ceases to be a Director; provided, however, that the exercise period in clause (ii) shall be extended to one year after the Optionee ceases to be a Director if such termination is due to the Optionee's death or Disability. Notwithstanding the foregoing two sentences, in the event this option would otherwise expire during any period during which affiliates of the Company are prohibited from disposing of Common Stock in order to comply with applicable accounting and Securities and Exchange Commission rules, regulations, policies, guidelines or other similar requirements so as to permit the Company to account for a then completed or contemplated business combination under pooling of interest, the exercise period in clause (ii) of the foregoing two sentences shall be extended to the tenth business day following the expiration of any such period in which such dispositions are prohibited. 4. EXERCISE OF OPTION. (a) At any time that this option may be exercised as provided in this Agreement, the Optionee may exercise any portion of this option which is then exercisable, in whole or in part, by delivery to the Company of a written notice, in the form attached hereto, signed by the Optionee. (b) In addition, the Optionee shall deliver, on the date of exercise: (i) cash equal to the purchase price of the shares being purchased, (ii) such documents as are or may be required under the terms of Section 2.6 of the Plan to effect a cashless exercise; or (iii) Permitted Shares with a value (determined as of the date of exercise of the option) equal to the purchase price of the shares being purchased (the "Delivered Shares Method"). After receipt of the foregoing, and subject to Section 5 below, the Company shall issue the shares in 2 8 the name of the Optionee and deliver the certificates therefor to the Optionee. (c) "Permitted Shares" are shares of Company Common Stock to be delivered to pay the exercise price of the option (the "Delivered Shares): (i) which have been owned by the Optionee for at least six months prior to the date of delivery, or (ii) if they have not been owned by the Optionee for at least six months prior to the date of delivery, the Optionee then owns, and has owned for at least six months prior thereto, a number of shares of Company Common Stock at least equal in number to the Delivered Shares. (d) Shares which have been counted during the prior six months as owned by the Optionee for purposes of determining whether the Optionee may exercise options to purchase Common Stock pursuant to the Delivered Shares Method: (i) may not be used as Delivered Shares, and (ii) may not be counted as owned by the Optionee for purposes of making calculations under the Delivered Shares Method. 5. Compliance With Securities Laws. Anything to the contrary herein notwithstanding, the Company's obligation to sell and deliver stock under this Option is subject to such compliance with federal and state laws, rules and regulations applying to the authorization, issuance or sale of securities as the Company deems necessary or advisable. The Company shall not be required to sell and deliver stock pursuant hereto unless and until it receives satisfactory proof that the issuance or transfer of such shares will not violate any of the provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934 or the rules and regulations of the Securities Exchange Commission promulgated thereunder or the provisions of any state law governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and state laws. If the Optionee fails to accept delivery and pay for all or any part of the number of shares specified by such notice upon tender of delivery thereof the Optionee's right to exercise this option with respect to such undelivered shares may be terminated by the Company. 6. Non-Assignability. The option hereby granted shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the option may be exercised during the Optionee's lifetime only by the Optionee. Any transferee of the option shall take the same subject to the terms and conditions of this Agreement. No such transfer of the Option shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the will and/or such other evidence as the Company may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of this Agreement. No assignment or transfer of this Option, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, except a transfer by the Optionee by will or by the laws of descent and distribution, shall vest in the purported assignee or transferee any interest or right herein whatsoever. 7. Disputes. As a condition to the granting of the option granted hereby, the Optionee and the Optionee's successors and assigns agree that any dispute or disagreement which shall arise under or as a result of this Agreement shall be determined by the Board in its sole discretion and judgment and that any such 3 9 determination and any interpretation by the Board of the terms of this Agreement shall be final and shall be binding and conclusive for all purposes. 8. Adjustments. In the event of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, combination, exchange or other relevant change in the capital structure of the Company affecting the shares covered by this option, the rights of the Optionee shall be as provided in Section 4.1 of the Plan. 9. Rights as Shareholder. The Optionee shall have no rights as a shareholder of the Company with respect to any of the shares covered by this option until the issuance of a stock certificate or certificates upon the exercise of the option in full or in part, and then only with respect to the shares represented by such certificate or certificates. 10. Notices. Every notice relating to this Agreement shall be in writing and if given by mail shall be given by registered or certified mail with return receipt requested. All notices to the Company shall be delivered to the Company's Chief Executive Officer at the principal office of the Company. All notices by the Company to the Optionee shall be delivered to the Optionee personally or addressed to the Optionee at the Optionee's last residence address as then contained in the records of the Company or such other address as the Optionee may designate. Either party by notice to the other may designate a different address to which notices shall be addressed. Any notice given by the Company to the Optionee at the Optionee's last designated address shall be effective to bind any other person who shall acquire rights hereunder. 11. "Optionee" to Include Certain Transferees. Whenever the word "Optionee" is used in any provision of this Agreement under circumstances where the provision should logically apply to any other person or persons to whom the option, in accordance with the provisions of Section 6 hereof, may be transferred, the word "Optionee" shall be deemed to include such person or persons. 12. Governing Law. This Agreement has been made in and shall be construed in accordance with the laws of the State of Michigan. 13. Provisions of Plan Controlling. The provisions hereof are subject to the terms and provisions of the Plan. In the event of any conflict between the provisions of this option and the provisions of the Plan, the provisions of the Plan shall control, except to the extent that the provisions of this option limit or restrict the rights of the Optionee to a greater extent than set forth in the Plan. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PERCEPTRON, INC. By: --------------------------------------- ------------------------------- Its: ------------------------------ ------------------------------------------ ------------------------,Optionee 4 10 NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION UNDER THE PERCEPTRON, INC. DIRECTORS STOCK OPTION PLAN Perceptron, Inc. 47827 Halyard Drive Plymouth, MI 48170 Dear Sir: A non-qualified stock option was granted to me on , to purchase 15,000 shares of Perceptron, Inc. Common Stock at a price of $ per share. I hereby elect to exercise my non-qualified stock option with respect to shares for an aggregate purchase price of $ . I hereby elect to pay for such shares as follows: $ Personal Check --------- $ Cash --------- $ Bank Draft --------- $ Money Order --------- $ Cashless Exercise --------- $ Perceptron Common Stock --------- $ Total =========
[A personal check [or cash, bank draft or money order] for the purchase price is enclosed herewith]. [Documents as are required to effect a cashless exercise are enclosed.] [I hereby elect to exercise my stock option with respect to shares through a combination of cash payments and shares of Perceptron, Inc. Common Stock, as described on the attached Exhibit A. A personal check for the purchase price to be paid in cash is enclosed herewith. Certificates for shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a duly executed stock power in proper form for transfer, with all signatures properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I represent that the shares of Perceptron, Inc. Common Stock enclosed herewith have been owned by me for more than six months.] or [I currently own more than shares of Perceptron, Inc. Common Stock which have been owned by me for more than six months.] Such shares have not been counted during the prior six months as owned by me for purposes of determining whether I may exercise options to purchase Common Stock pursuant to the Delivered Shares Method.] Dated: ----------------- ---------------------------------- ---------------------, Optionee 1 EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-2000 JUL-01-1999 DEC-31-1999 5,990,000 0 31,716,000 (310,000) 12,471,000 51,061,000 16,997,000 (6,309,000) 65,957,000 10,609,000 5,425,000 0 0 82,000 49,841,000 65,957,000 37,004,000 37,004,000 16,352,000 16,352,000 16,892,000 0 178,000 3,513,000 1,426,000 2,087,000 0 0 0 2,087,000 .26 .26
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