-----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, UvC8ERYHntygYDBKSs8Fa29HkTFfVmbuYNHX9aLG7VeL8/8LFUYFhu7Sd6N9tEnF zoRU6q9lwPplSMCArJOFkA== 0000950124-00-003224.txt : 20000516 0000950124-00-003224.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950124-00-003224 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 632733 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 March 31, 2000. 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 May 10, 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 MARCH 31, 2000
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 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 3 PERCEPTRON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30, (In Thousands) 2000 1999 ------------ ------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,684 $ 4,205 Receivables: Billed receivables, net of allowance for doubtful accounts of $276,000 and $218,000, respectively 19,503 21,128 Unbilled and other receivables 6,105 4,611 Inventory, net of reserves of $945,000 and $600,000, respectively 12,996 12,323 Deferred taxes and other current assets 1,035 1,307 ------------ ------------- Total current assets 45,323 43,574 ------------ ------------- PROPERTY AND EQUIPMENT Building and land 5,990 5,990 Machinery and equipment 9,141 9,774 Furniture and fixtures 1,427 1,469 ------------ ------------- 16,558 17,233 Less - Accumulated depreciation and amortization (5,766) (6,121) ------------ ------------- Net property and equipment 10,792 11,112 ------------ ------------- OTHER ASSETS Intangible assets, net of accumulated amortization of $566,000 and $279,000, respectively 1,407 1,692 Deferred tax asset 2,553 4,956 ------------ ------------- Total other assets 3,960 6,648 ------------ ------------- TOTAL ASSETS $ 60,075 $ 61,334 ============ ============= LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,728 $ 3,550 Accrued liabilities and expenses 3,276 4,619 Income taxes payable 1,610 633 Accrued compensation 1,706 203 ------------ ------------- Total current liabilities 10,320 9,005 ------------ ------------- LONG-TERM LIABILITIES Notes payable 1,040 4,265 ------------ ------------- Total long-term liabilities 1,040 4,265 ------------ ------------- Total liabilities 11,360 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 8,170,000 at March 31, 2000 and 8,169,000 at June 30, 1999, respectively 82 82 Accumulated other comprehensive income (loss) (4,360) (3,340) Additional paid-in capital 41,010 40,979 Retained earnings 11,983 10,343 ------------ ------------- Total shareholders' equity 48,715 48,064 ------------ ------------- TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 60,075 $ 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 MARCH 31 NINE MONTHS ENDED MARCH 31, (In Thousands, Except Per Share Amounts) 2000 1999 2000 1999 -------- -------- -------- -------- NET SALES $ 13,721 $ 8,934 $ 50,725 $ 40,259 COST OF SALES 6,218 4,697 22,570 18,287 -------- -------- -------- -------- GROSS PROFIT 7,503 4,237 28,155 21,972 -------- -------- -------- -------- OPERATING EXPENSES Selling, general and administrative 4,981 5,064 15,404 15,895 Engineering, research and development 2,896 3,233 9,365 9,284 Non-cash intangible asset write-off -- -- -- 1,472 -------- -------- -------- -------- Total operating expenses 7,877 8,297 24,769 26,651 -------- -------- -------- -------- OPERATING INCOME (LOSS) (374) (4,060) 3,386 (4,679) -------- -------- -------- -------- OTHER INCOME AND (DEDUCTIONS) Interest income (expense), net (63) (8) (241) 230 Foreign currency and other (25) 82 (94) 88 -------- -------- -------- -------- Total other income and (deductions) (88) 74 (335) 318 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (462) (3,986) 3,051 (4,361) INCOME TAX EXPENSE (BENEFIT) (15) (1,355) 1,411 (1,562) -------- -------- -------- -------- NET INCOME (LOSS) $ (447) $ (2,631) $ 1,640 $ (2,799) ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE BASIC ($0.05) ($0.32) $ 0.20 ($0.34) DILUTED ($0.05) ($0.32) $ 0.20 ($0.34) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 8,170 8,200 8,170 8,228 DILUTED 8,170 8,200 8,201 8,228
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)
NINE MONTHS ENDED MARCH 31, (In Thousands) 2000 1999 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,640 $ (2,799) Adjustments to reconcile net income to net cash provided from (used for) operating activities: Depreciation and amortization 1,748 2,019 Deferred income taxes 1,906 (2,818) Other 169 1,459 Changes in assets and liabilities, exclusive of changes shown separately 713 (1,515) -------------- ------------- Net cash provided from (used for) operating activities 6,176 (3,654) -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit borrowings 12,790 1,972 Revolving credit repayments (16,015) (1,573) Repurchase of company stock - (459) Proceeds from stock plans 30 266 -------------- ------------- Net cash provided from (used for) financing activities (3,195) 206 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,255) (1,636) Purchase of Sonic assets - (1,114) ------------- ------------- Net cash used for investing activities (1,255) (2,750) -------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (247) (99) -------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,479 (6,297) CASH AND CASH EQUIVALENTS, JULY 1 4,205 10,699 -------------- ------------- CASH AND CASH EQUIVALENTS, MARCH 31 $ 5,684 $ 4,402 ============== ============= CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Billed, unbilled and other receivables, net $ (737) $ (291) Inventories (634) (1,212) Accounts payable 178 (312) Other current assets and liabilities 1,906 300 -------------- ------------- $ 713 $ (1,515) ============== =============
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 amounts derived from audited financial statements. 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, including 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):
MARCH 31, JUNE 30, 2000 1999 ---------------- ---------------- Component Parts $ 8,083 $ 6,553 Work In Process 1,483 1,683 Finished Goods 3,430 4,087 ---------------- ---------------- Total $ 12,996 $ 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 (9% as of May 1, 2000). The credit facilities expire on May 31, 2000, unless canceled earlier by the Company or the bank. The Company expects to renew these credit facilities prior to May 31, 2000. The Company had no borrowings outstanding under these credit facilities at March 31, 2000. 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 (9% as of May 1, 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 8.1% as of May 1, 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 no borrowings outstanding under the Revolver at March 31, 2000. 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 March 31, 2000 and 1999, 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 MARCH 31, 2000 1999 --------------- --------------- Net Income $ (447) $ (2,631) Other Comprehensive Income: Foreign currency translation adjustments (792) (1,191) --------------- --------------- Total Comprehensive Income $ (1,239) $ (3,822) =============== =============== NINE MONTHS ENDED MARCH 31, 2000 1999 --------------- --------------- Net Income $ 1,640 $ (2,799) Other Comprehensive Income: Foreign currency translation adjustments (1,020) (358) --------------- --------------- Total Comprehensive Income $ 620 $ (3,157) =============== ===============
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 MAR. 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ Basic EPS $ (447) $ (2,631) 8,170 8,200 $ (.05) $ (.32) Effect of Dilutive Securities: Stock options and warrants - - - - ------------ ------------ ------------ ------------ Diluted EPS $ (447) $ (2,631) 8,170 8,200 $ (.05) $ (.32) ============ ============ ============ ============ WEIGHTED AVG. EARNINGS NET INCOME COMMON SHARES PER SHARE NINE MONTHS ENDED MAR. 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ------------ ------------ ------------ ------------ Basic EPS $ 1,640 $ (2,799) 8,170 8,228 $ .20 $ (.34) Effect of Dilutive Securities: Stock options and warrants - - 31 - ------------ ------------ ------------ ------------ Diluted EPS $ 1,640 $ (2,799) 8,201 8,228 $ .20 $ (.34) ============ ============ ============ ============
During the three and nine month periods ended March 31, 2000, options to purchase 1,165,000 and 1,194,000 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 nine month periods ended March 31, 1999, options to purchase 1,209,000 and 1,044,000 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 and this Form 10-Q. 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 - ------------------------ -------------------- ---------------------- ---------------------- MARCH 31, 2000 Revenues $ 9,986 $ 3,735 $ 13,721 Operating Income (Loss) 347 (721) (374) Total Assets 51,610 8,465 60,075 MARCH 31, 1999 Revenues $ 8,136 $ 798 $ 8,934 Operating (Loss) (1,899) (2,161) (4,060) Total Assets 52,739 7,506 60,245 NINE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED - ------------------------ -------------------- ---------------------- ---------------------- MARCH 31, 2000 Revenues $ 39,582 $ 11,143 $ 50,725 Operating Income (Loss) 5,051 (1,665) 3,386 Total Assets 51,610 8,465 60,075 MARCH 31, 1999 Revenues $ 32,936 $ 7,323 $ 40,259 Operating (Loss) (2,598) (2,081) (4,679) Total Assets 52,739 7,506 60,245
9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended March 31, 2000, Compared to Three Months Ended March 31, 1999 Overview - The Company reported a net loss of $447,000, or $0.05 per share, for the third quarter of fiscal 2000, compared to a net loss of $2.6 million, or $0.32 per share, in the quarter ended March 31, 1999. Net sales of $13.7 million for the three months ended March 31, 2000, were up $4.8 million, or 53.6%, over the prior year's sales of $8.9 million. Automotive sales accounted for 73% of total sales during the third quarter of fiscal 2000 compared to 91% in the quarter ended March 31, 1999. Industrial Businesses sales represented 27% of total sales for the quarter ended March 31, 2000, compared to 9% in the same quarter of 1999. Gross profit for the third quarter of fiscal 2000 was 54.7% compared to 47.4% in the quarter ended March 31, 1999. The increase in gross profit was primarily due to the higher level of sales in the current quarter versus the level one year ago and product mix. Operating expenses were down $420,000 in the third quarter of fiscal 2000 compared to the quarter ended March 31, 1999. The favorable comparison in operating expenses was due to the benefit derived from cost reduction programs initiated during 1999. Automotive - Sales in the third quarter of fiscal 2000 of $10.0 million were up $1.9 million over sales of $8.1 million in the quarter ended March 31, 1999. P-1000 sales accounted for approximately 44% of net automotive sales in the third quarter of fiscal 2000 compared to approximately 66% 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 20% of net automotive sales in the third quarter of fiscal 2000. RGS and NCA systems sales accounted for 22% of net sales in the quarter ended March 31, 2000, compared to 17% 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 third quarter of fiscal 2000 were $3.7 million, of which $2.8 million was delivered by the Forest Products business unit. Sales of $798,000 in the quarter ended March 31, 1999, were all delivered by the Forest Products business unit. The increase in sales of $2.9 million from the same period last year was primarily due to a strengthening in the forest products marketplace coupled with sales of newly introduced products to the forest products industry and new sales in the steel and aerospace industries. Bookings & Backlog - New order bookings for the three months ended March 31, 2000, were $16.2 million compared to $16.4 million in the same quarter of 1999. Automotive bookings totaled $11.8 million in the fiscal 2000 quarter compared to $14.7 million a year ago. During the quarter ended March 31, 2000, automotive bookings represented: 55% P-1000, 27% IPNet(TM) and 12% RGS and NCA, as compared with 28% P-1000, 36% IPNet(TM) and 36% RGS and NCA for the quarter ended March 31, 1999. Industrial Businesses bookings were $4.4 million in the quarter ended March 31, 2000, compared to $1.7 million a year ago, of which Forest Product bookings represented 86% and 71%, respectively. Backlog at March 31, 2000, was $24.4 million compared to $30.9 million at March 31, 1999. The Company expects to be able to fill substantially all of the orders in backlog during the next twelve 10 11 months. 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 $83,000 from $5.1 million in the quarter ended March 31, 1999, to $5.0 million in the comparable current quarter. The decrease was primarily due to cost reduction programs initiated during 1999 that more than offset the impact of annual inflation. Engineering, Research and Development Expenses (R&D) - Engineering and R&D expenses decreased $337,000 from $3.2 million in the quarter ended March 31, 1999, to $2.9 million in the quarter ended March 31, 2000. The decrease was primarily due to lower expenditures for engineering materials and contract services during the comparable periods. The Company continues to invest in new product development. In the Automotive segment, the first phase of the Wet Film Thickness Measurement System which is for inspecting the primer in line at a production plant, continues in testing mode at an alpha site. The installation of the second phase of the Wet Film Thickness Measurement System which is for measuring the wet paint base coat, is nearing completion. The Company's enhanced PaintScan(TM) system continues to be 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 also continues to undergo 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 was installed successfully at a customer site and was released as a new product during the quarter ended March 31, 2000. Interest Income (Expense), net - The increase in interest income (expense), net reflected higher average borrowings on the Company's revolving line of credit during the quarter ended March 31, 2000 compared to the quarter a year ago. Outlook - The Company continues to expect its overall operating results for the fourth quarter 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. Nine Months Ended March 31, 2000, Compared to Nine Months Ended March 31, 1999 Overview - The Company reported net income of $1.6 million, or $0.20 per share, for the first nine months of fiscal 2000, compared to a net loss of $2.8 million or $0.34 per share, in the nine months ended March 31, 1999. Net sales of $50.7 million for the nine months ended March 31, 2000, were up $10.5 million, or 26%, over the prior year's sales of $40.3 million. Automotive sales accounted for approximately 78% and 82% of total sales during the nine-month periods ended March 31, 2000 and 1999, respectively. Industrial Businesses sales represented the balance of approximately 22% and 18% in both periods, respectively. Gross profit for the first nine months of fiscal 2000 was 55.5% compared to 54.6% in the nine months ended March 31, 1999. The increase in gross profit was primarily due to product mix and the higher level of sales in the current period when compared to the same nine-month period ended March 31, 1999. Operating expenses were down $1.9 million in the first nine months of fiscal 2000 compared to the nine months ended March 31, 1999. The favorable comparison in operating expenses was primarily due to a $1.5 million non-cash write-off of an intangible asset in the nine months 11 12 ended March 31, 1999. Lower selling, general and administrative expenses of $491,000 were partially offset by higher engineering, research and development expenses in the comparable nine-month periods. Automotive - Sales in the first nine months of fiscal 2000 increased $6.6 million to $39.6 million compared to $33.0 million in the nine months ended March 31, 1999. P-1000 sales accounted for approximately 48% of net automotive sales in the first nine months of fiscal 2000 compared to approximately 75% 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 nine months of fiscal 2000. RGS and NCA systems sales accounted for 23% of net sales in the nine months ended March 31, 2000, compared to 12% 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 nine months of fiscal 2000 were $11.1 million, of which $9.5 million was delivered by the Forest Products business unit. Sales of $7.3 million for the same period last year were all delivered by the Forest Products business unit. Sales were up $3.8 million from the same period last year primarily due to a strengthening in the forest products marketplace coupled with sales of newly introduced products to the forest products industry and new sales in the steel and aerospace industries. Bookings & Backlog - New order bookings for the nine months ended March 31, 2000, were $47.2 million compared to $46.6 million for the same period one year ago. Automotive bookings totaled $36.7 million in the fiscal 2000 nine-month period compared to $39.2 million a year ago. During the nine months ended March 31, 2000, automotive bookings were primarily for: 53% P-1000, 25% IPNet(TM) and 16% RGS and NCA as compared with 59% P-1000, 17% RGS and NCA, 14% IPNet(TM) and 7% paint inspection products in the nine months ended March 31, 1999. Industrial Businesses bookings were $10.5 million in the nine months ended March 31, 2000, compared to $7.4 million a year ago. Forest Product bookings represented 87% and 93% of the Industrial Businesses bookings in the nine months ended March 31, 2000 and 1999, respectively. Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased $491,000 from $15.9 million in the nine months ended March 31, 1999, to $15.4 million in the comparable fiscal 2000 nine-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 nine months of Sonic related expenses in the current period compared to only six months in the period ended March 31, 1999. Engineering, Research and Development Expenses (R&D) - Engineering and R&D expenses increased slightly from $9.3 million in the nine months ended March 31, 1999, to $9.4 million in the first nine months of fiscal 2000. The increase in expenses was primarily due to nine months of expenses related to Sonic in the current period as compared to only six months of expenses in the period a year ago, offset partially by lower expenditures for engineering materials and contract services. During the nine months ended March 31, 2000, 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. 12 13 Interest Income (Expense), net - The decrease in interest income (expense), net reflected a reduction in interest income from lower average cash balances in the nine months ended March 31, 2000, as compared to the same period ended March 31, 1999. The decrease was also attributable to higher interest expense from higher borrowings under the Company's revolving credit line in the nine months ended March 31, 2000, as compared to the same period ended March 31, 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $5.7 million at March 31, 2000, compared to $4.2 million at June 30, 1999. The increase of $1.5 million in cash resulted from $6.2 million of cash provided from operations that were partially offset by $3.2 million of cash used to repay net revolving credit borrowings and $1.3 million of cash used for capital spending. The $6.2 million of cash provided from operations principally reflected the Company's net income for the period and $1.8 million of cash received for the carry-back of tax losses. Receivables, net of foreign translation adjustments, increased $737,000, which reflected collections from previous period sales, almost offsetting current period sales. Inventory increased $634,000 to support near-term delivery requirements. Offsetting these increases in working capital was a $1.9 million increase in other current assets and liabilities, primarily representing an increase in accrued incentive compensation and tax liabilities. Financing activities during the nine-month period reflected $3.2 million in net repayments on the Company's revolving line of credit. At March 31, 2000, the Company did not have any borrowings outstanding on its revolving line of credit. The Company believes that available cash on hand and existing credit facilities will be sufficient to fund its currently anticipated requirements over the next twelve months. 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 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 As of December 31, 1999, the current version of the Company's principal products and critical business systems had been remediated and tested to determine their ability to process the year 2000 date change. 13 14 The remediation and testing included contacting principal suppliers and utilities and non-IT system vendors. To date, the Company is not aware of any significant Year 2000 issues directly affecting the current version of its products. The Company is also not aware of any significant Year 2000 issues affecting its principal customers or suppliers. Based on operations since the date change, the Company does not expect any significant impact to its business as a result of the year 2000 date change. Most of the costs incurred by the Company 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. 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 March 31, 2000, the Company did not have any market risk instruments for trading purposes. FOREIGN CURRENCY RISK The Company has limited foreign currency exchange risk 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 March 31, 2000, was 88%. 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 March 31, 2000, 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, order booking levels and earnings levels, the timing of new product releases and the expansion of the Company into new markets. 14 15 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 may have in new products and technologies generally, rapid or unexpected technological changes 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". 15 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously disclosed in the Company's Form 10-Q for the quarter ended December 31, 1999, 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. On February 15, 2000, the Oakland County Circuit Court denied Analog's motion for preliminary injunction against the Company. Analog also seeks 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 10.33 Second Amendment to the Perceptron, Inc. Directors Stock Option Plan (Amended and Restated October 31, 1996). 27. Financial Data Schedule (B) Reports on Form 8-K None 16 17 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: May 10, 2000 By: /S/ Alfred A. Pease ------------------------------------- Alfred A. Pease President and Chief Executive Officer Date: May 10, 2000 By: /S/ John J. Garber ------------------------------------------ John J. Garber Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 10, 2000 By: /S/ Sylvia M. Smith ----------------------------------------- Sylvia M. Smith Controller and Chief Accounting Officer (Principal Accounting Officer) 17 18 Exhibit Index -------------
Exhibit No. Description - ----------- ----------- 10.33 Second Amendment to the Perceptron, Inc. Directors Stock Option Plan (Amended and Restated October 31, 1996). 27 Financial Data Schedule
EX-10.33 2 SECOND AMENDMENT TO DIRECTORS STOCK OPTION PLAN 1 EXHIBIT 10.33 SECOND AMENDMENT TO THE PERCEPTRON, INC. DIRECTORS STOCK OPTION PLAN (AMENDED AND RESTATED OCTOBER 31, 1996) Pursuant to the Amendment provisions in Section 5.6 of the Perceptron, Inc. Directors Stock Option Plan, as amended and restated October 31, 1996 (the "Plan"), and subject to the approval of the shareholders at the Company's next Annual Meeting, effective as of December 1, 1999, the Plan is hereby amended as set forth below. 1. Section 1.1 of the Plan entitled "Purpose" shall be amended with the addition of a new sentence at the end of the Section to read as follows: Effective as of December 1, 1999, Directors of the Company may purchase Common Stock under the Plan in lieu of receiving all or a portion of their directors fees paid in cash. Stock purchases by Directors shall not constitute purchases under Code Section 423. 2. Section 1.2(s) of the Plan entitled "Participant" shall be amended by the addition of a new sentence at the end of the Section to read as follows: Directors of the Company also may participate in the Plan for purposes of purchasing Common Stock in accordance with Article VI; provided, however, that such purchases shall not constitute purchases under Code Section 423. 3. Section 1.4 of the Plan entitled "Stock" shall be amended to read as follows: 1.4 Stock. The total number of shares of Common Stock available for grants under the Plan shall not, in the aggregate, exceed 325,500 shares of Common Stock, after taking into account the Company's stock split effective November 30, 1995, as adjusted from time to time in accordance with Article IV. Shares subject to any unexercised portion of a terminated, forfeited, cancelled or expired Option granted hereunder shall be available for subsequent grants or purchases under the Plan. In the event that an option granted under the Plan is exercised by the delivery of shares of Common Stock previously acquired upon the exercise of Options issued under the Plan or through the retention of options procedure as described in Section 2.6 below, the shares of Common Stock so 2 delivered to the Company or underlying such retained options shall be available for subsequent grants or purchases under this Plan. 4. Section 4.1 of the Plan entitled "Adjustments and Change in Control" shall be amended to read as follows: 4.1 Adjustments and Change in Control. In the event of changes in the outstanding Common Stock by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in the capital structure of the Company, an appropriate adjustment shall be made by the Board in the number of shares and kind of stock or other securities for which Options may be or may have been granted under the Plan, and the Option price related thereto, and for which purchases may be made or may have been elected to be made, but for which share certificates have not been delivered, under Article VI, to the end that the proportionate interests shall be maintained as before the occurrence of such an event. Any of the foregoing adjustments may provide for the elimination of any fractional share which might otherwise become subject to any Option or purchase right and no adjustment shall be made to the extent such adjustment would cause the Director to no longer be deemed "disinterested" for purposes of Rule 16b-3. 5. Sections 5.6(a) and 5.6(c) entitled "Termination and Amendment" shall be amended to read as follows: (a) The Board may terminate the Plan, the granting of Options under the Plan, or purchases under Article VI of the Plan at any time. No new grants of Options under the Plan or purchases of Common Stock under Article VI of the Plan shall be made after February 9, 2005. (c) No amendment, modification or termination of the Plan shall adversely affect any Option granted under the Plan or purchase rights under Article VI relating to a Director Fee Payment Date occurring prior to such amendment, modification or termination without the consent of the Participant holding the Option or purchase right. -2- 3 6. A new Article VI, entitled "Director Stock Purchases" shall be added to the Plan as set forth below. VI. DIRECTOR STOCK PURCHASES 6.1 Eligibility. A Director of the Company may elect to purchase shares of Common Stock under the Plan using all or a portion of his or her cash fees received for services as a director of the Company for which the Director has not yet received payment (including but not limited to, quarterly retainer and Board/Committee meeting fees). 6.2 Elections. Elections to purchase Common Stock under the Plan in lieu of cash compensation may be submitted to the Company annually, prior to the end of December of each calendar year or such other period established by the Committee. An election shall cover director cash compensation payable in the next calendar year. Notwithstanding the foregoing, elections to purchase Common Stock under the Plan for the 1999 and 2000 calendar years must be made by March 17, 2000. 6.3 Purchase Price. Common Stock purchased by a Director hereunder shall have a purchase price equal to 100% of the fair market value of the Company's Common Stock on the first day of the month in which the quarterly Director Fee Payment Date falls. For purposes of this Article VI, "Director Fee Payment Date" shall mean each March 1, June 1, September 1 and December 1. For purposes of the Director Fee Payment Date occurring in December 1999, the Director Fee Payment Date shall be March 1, 2000. 6.4 Termination of Services. If a Director ceases to remain on the Board for any reason, including but not limited to, voluntary or forced resignation, removal, failure to be re-elected as a director, death, Disability or retirement, the Director (or executor, administrator or legal representative, if applicable) shall receive share certificates for all cash director fees earned prior to the Director's departure from the Board for which the Director elected to receive Common Stock pursuant to this Article VI, but for which the Director has not yet received a share certificate. Such share certificates shall be issued following the next quarterly Director Fee Payment Date. 6.5 Non-Assignability. Any Common Stock purchase right granted hereunder shall be exercised by the Director only and is nontransferable. Upon the death of a Director, any earned, but unpaid cash director fees for which the Director elected to receive Common Stock pursuant to this Article VI, shall be paid in the form of share certificates to the Director's executor, administrator or legal representative in accordance with Section 6.4 above. -3- 4 6.6 Adjustments. The total amount of Common Stock to be received by a Director at the time of any issuance of a share certificate shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Common Stock resulting from stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in the capital structure of the Company occurring from the Director Fee Payment Date on which such shares of Common Stock were earned to the date of issuance of the share certificate for such shares. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. 6.7 Rule 16b-3 Requirements. Notwithstanding any provision of the Plan, the Committee may impose such conditions on the purchase of shares of Common Stock hereunder as may be required to satisfy the requirements of Rule 16b-3 of the Exchange Act, as amended from time to time (or any successor rule). Notwithstanding any provision in the Plan to the contrary, the Committee shall have no discretion with respect to the terms of purchase made pursuant to this Article VI, except to the extent such discretion would not result in the purchase or the Plan failing to qualify for the exemption provided under Rule 16b-3. 6.8 Delivery of Shares; Rights Prior to Delivery of Shares. By December 15th of each year, Directors electing to receive Common Stock will receive share certificates for shares earned during the year. A Director may request to receive Common Stock at any or each quarterly Director Fee Payment Date. No Participant shall have any rights as a shareholder with respect to shares of Common Stock covered by a purchase right until the issuance of a stock certificate. No adjustment shall be made for dividends or other rights with respect to such shares for which the record date is prior to the date the certificate is issued. 6.9 Securities Laws. (a) Anything to the contrary herein notwithstanding, the Company's obligation to sell and deliver stock pursuant to a purchase right hereunder 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 unless and until it receives satisfactory assurance that the issuance or transfer of such shares shall not violate any of the provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934, the rules and regulations of the Securities Exchange Commission promulgated thereunder or those of any stock exchange on which the stock may be listed or the provisions of any state laws governing the sale of securities, or that there has been compliance with the provisions of such acts, rules, regulations and laws. (b) The Committee may impose such restrictions on any shares of Common Stock acquired pursuant to this Article VI as it may deem advisable, including, without limitation, restrictions (i) under applicable federal securities -4- 5 laws, (ii) required by The Nasdaq Stock Market, Inc. ("NASDAQ Stock Market") (including, without limitation, with respect to securities traded on the NASDAQ Stock Market National Market or the NASDAQ Stock Market Small Cap Market) or any stock exchange or other recognized trading market upon which such shares of Common Stock are then listed or traded, and (iii) under any blue sky or state securities laws applicable to such shares. No shares shall be issued until counsel for the Company has determined that the Company has complied with all requirements under appropriate securities laws. 6.10 Approval. Article VI shall be subject to the approval of the holders of at least a majority of the shares of Common Stock present and entitled to vote at a meeting of Stockholders of the Company held before January 10, 2001. Any election to purchase Common Stock under Article VI prior to such stockholder approval, shall be conditioned upon receipt of such approval, and shall not be effective in whole or in part unless this Article VI has been approved by the stockholders as provided herein. If not approved by stockholders before January 10, 2001, this Article VI shall be rescinded, elections to purchase Common Stock under this Article VI shall be void and the Director shall be paid in cash at the next Director Fee Payment Date an amount equal to the cash directors fees the Director elected to use to purchase Common Stock under this Article VI which were otherwise payable prior to such Director Fee Payment Date. THIS SECOND AMENDMENT to the Perceptron, Inc. Directors Stock Option Plan, as amended and restated October 31, 1996, is hereby executed effective as of December 1, 1999. PERCEPTRON, INC. By:/s/ Alfred A. Pease -------------------------- Alfred A. Pease Chairman, President and Chief Executive Officer -5- 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. 9-MOS JUN-30-2000 JUL-01-1999 MAR-31-2000 5,684,000 0 25,884,000 (276,000) 12,996,000 45,323,000 16,558,000 (5,766,000) 60,075,000 10,320,000 1,040,000 0 0 82,000 48,633,000 60,075,000 50,725,000 50,725,000 22,570,000 22,570,000 24,769,000 0 241,000 3,051,000 1,411,000 1,640,000 0 0 0 1,640,000 .20 .20
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