-----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, VQUb8dbd2V2PRLPuEuJF3shCfZCpvbR08MJ/E9bCTE/IDvVJLh4d53rjHKKqD3kr zn2HCYjODWXqdyIhGUsfZQ== /in/edgar/work/0000950124-00-006807/0000950124-00-006807.txt : 20001114 0000950124-00-006807.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950124-00-006807 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERCEPTRON INC/MI CENTRAL INDEX KEY: 0000887226 STANDARD INDUSTRIAL CLASSIFICATION: [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: 761263 BUSINESS ADDRESS: STREET 1: 47827 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 BUSINESS PHONE: 3134144816 MAIL ADDRESS: STREET 1: 47827 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 10-Q 1 k58428e10-q.txt QUARTERLY REPORT ENDED 9/30/00 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 September 30, 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 November 6, 2000, was: Common Stock, $0.01 par value 8,173,001 ----------------------------- ----------------------- Class Number of shares 2 PERCEPTRON, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 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 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15
2 3 PERCEPTRON, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, (In Thousands, Except Per Share Amounts) 2000 1999 -------- -------- NET SALES $ 8,011 $ 18,471 COST OF SALES 4,494 8,089 -------- -------- GROSS PROFIT 3,517 10,382 -------- -------- OPERATING EXPENSES Selling, general and administrative 4,761 5,345 Engineering, research and development 3,078 2,987 -------- -------- Total operating expenses 7,839 8,332 -------- -------- OPERATING INCOME (LOSS) (4,322) 2,050 -------- -------- OTHER INCOME AND (DEDUCTIONS) Interest expense (116) (118) Interest income 46 36 Foreign currency and other (43) (81) -------- -------- Total other income and (deductions) (113) (163) -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (4,435) 1,887 INCOME TAX EXPENSE (BENEFIT) (1,722) 759 -------- -------- NET INCOME (LOSS) $ (2,713) $ 1,128 ======== ======== EARNINGS (LOSS) PER SHARE BASIC ($0.33) $0.14 DILUTED ($0.33) $0.14 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 8,173 8,169 DILUTED 8,173 8,181
The notes to the consolidated financial statements are an integral part of these statements. 3 4 PERCEPTRON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30, (In Thousands) 2000 2000 ------------ ---------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,441 $ 5,947 Receivables: Billed receivables, net of allowance for doubtful accounts 19,568 26,507 of $355 and $268, respectively Unbilled and other receivables 4,574 6,126 Inventories, net of reserves of $1,200 and $1,200, respectively 14,469 12,582 Deferred taxes and other current assets 1,501 1,564 -------- -------- Total current assets 46,553 52,726 -------- -------- PROPERTY AND EQUIPMENT Building and land 6,035 6,004 Machinery and equipment 9,717 9,598 Furniture and fixtures 1,199 1,195 -------- -------- 16,951 16,797 Less - Accumulated depreciation and amortization (6,507) (6,125) -------- -------- Net property and equipment 10,444 10,672 -------- -------- OTHER ASSETS Intangible assets, net of accumulated amortization 1,237 1,313 of $758 and $660, respectively Deferred tax asset 3,198 1,516 -------- -------- Total other assets 4,435 2,829 -------- -------- TOTAL ASSETS $ 61,432 $ 66,227 ======== ======== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,595 $ 4,549 Accrued liabilities and expenses 3,821 4,642 Notes payable (Note 3) 5,915 -- Income taxes payable 406 87 Accrued compensation 809 2,785 -------- -------- Total current liabilities 14,546 12,063 -------- -------- LONG-TERM LIABILITIES Notes payable (Note 3) 1,040 4,595 -------- -------- Total long-term liabilities 1,040 4,595 -------- -------- Total liabilities 15,586 16,658 -------- -------- SHAREHOLDERS' EQUITY Preferred stock - no par value, authorized 1,000 shares, issued none -- -- Common stock, $0.01 par value, authorized 19,000 shares, issued and outstanding 8,173 and 8,170 at September 30, 2000 and June 30, 2000, respectively 82 82 Accumulated other comprehensive income (loss) (Note 5) (4,742) (3,723) Additional paid-in capital 41,019 41,010 Retained earnings 9,487 12,200 -------- -------- Total shareholders' equity 45,846 49,569 -------- -------- TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 61,432 $ 66,227 ======== ========
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)
THREE MONTHS ENDED SEPTEMBER 30, (In Thousands) 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(2,713) $ 1,128 Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities: Depreciation and amortization 526 595 Deferred income taxes (1,540) (83) Other 55 168 Changes in assets and liabilities, exclusive of changes shown separately 2,392 (3,218) ------- ------- Net cash used for operating activities (1,280) (1,410) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit borrowings 8,520 7,535 Revolving credit repayments (6,160) (4,460) Proceeds from stock plans 10 -- ------- ------- Net cash provided from financing activities 2,370 3,075 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (190) (317) ------- ------- Net cash used for investing activities (190) (317) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (406) (9) ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 494 1,329 CASH AND CASH EQUIVALENTS, JULY 1 5,947 4,205 ------- ------- CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ 6,441 $ 5,534 ======= ======= CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Receivables, net $ 7,789 $(4,003) Inventories (1,886) (959) Accounts payable (954) 461 Other current assets and liabilities (2,557) 1,283 ------- ------- $ 2,392 $(3,218) ======= =======
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 2000 Annual Report on Form 10-K. Certain reclassifications may have been made to the prior year's financial statements to conform with the fiscal year 2001 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):
SEPTEMBER 30, JUNE 30, 2000 2000 ---------------- ---------------- Component Parts $ 7,196 $ 7,214 Work In Process 1,560 1,204 Finished Goods 5,713 4,164 ------- ------- Total $14,469 $12,582 ======= =======
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 (9.5% as of November 1, 2000). The credit facilities expire on July 31, 2001, unless canceled earlier by the Company or the bank. The Company had no borrowings outstanding under these credit facilities at September 30, 2000. The Company has a $15 million unsecured Revolving Credit Agreement (Revolver) that expires on July 31, 2002. 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 (9.5% as of November 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 7.88% as of November 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. 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 6 7 amortization, and taxes ("EBITDA"). Effective September 30, 2000, the Revolver was amended to revise the EBITDA covenant test for the first quarter of fiscal 2001. The Company and its principal bank have agreed that another amendment will be required to account for the effect of the first quarter's EBITDA result on the EBITDA covenant test for the remaining quarters of fiscal 2001. The Revolver has been classified as current until the amendment is completed. The Company had $5.9 million outstanding under the Revolver at September 30, 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 September 30, 2000 and 1999, the Company had no forward contracts outstanding. In the first quarter of fiscal 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires recognition of all derivative financial instruments as either assets or liabilities in the consolidated balance sheet, measured at fair value and sets forth conditions in which a derivative instrument may be designated as a hedge. The statement requires that changes in the fair value of derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to be recorded to other comprehensive income or to offset related results on the hedged item in earnings. Adoption of SFAS No. 133 did not have a material effect on the Company's consolidated financial statements. 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 SEPTEMBER 30, 2000 1999 --------- --------- Net Income (Loss) $(2,713) $ 1,128 Other Comprehensive Income (Loss): Foreign currency translation adjustments (1,019) 454 ------- ------- Total Comprehensive Income (Loss) $(3,732) $ 1,582 ======= =======
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 7 8 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 SEPT. 30, 2000 1999 2000 1999 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- Basic EPS $ (2,713) $ 1,128 8,173 8,169 $ (.33) $ .14 Effect of Dilutive Securities: Stock options and warrants - - - 12 - - ----------- ----------- ----------- ----------- ----------- ----------- Diluted EPS $ (2,713) $ 1,128 8,173 8,181 $ (.33) $ .14 =========== =========== =========== =========== =========== ===========
Options to purchase 1,317,000 and 1,244,000 shares of common stock were outstanding in the three months ended September 30, 2000 and 1999 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 2000 Annual Report on Form 10-K. 8. SEGMENT INFORMATION The Company has two reportable segments: Automotive and Industrial Businesses. The Automotive segment designs, manufactures, and markets information-based measurement and inspection focused solutions for process improvements within the automotive industry. The Industrial Businesses segment employs the same technology providing products and services to the markets served by the Forest Products business unit and the Emerging Markets business unit. The Company evaluates performance based on operating income. Company-wide costs are allocated between the segments based on revenues and/or labor as deemed appropriate. Segment detail is summarized as follows (in thousands):
THREE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED - ------------------------ ---------------- --------------------- ---------------------- SEPTEMBER 30, 2000 Revenues $ 6,210 $ 1,801 $ 8,011 Operating Income (Loss) (1,945) (2,377) (4,322) Total Assets 52,858 8,574 61,432 SEPTEMBER 30, 1999 Revenues $ 16,183 $ 2,288 $ 18,471 Operating Income (Loss) 3,517 (1,467) 2,050 Total Assets 60,770 6,828 67,598
8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview - The Company reported a net loss of $2.7 million, or $0.33 per share, for the first quarter of fiscal 2001, compared to net income of $1.1 million or $0.14 per share, in the quarter ended September 30, 1999. Net sales of $8.0 million for the three months ended September 30, 2000, were down $10.5 million, or 57%, compared to the prior year's sales of $18.5 million. Most of the sales decrease was attributable to the Automotive segment as explained below. Automotive sales accounted for 78% of total sales during the first quarter of fiscal 2001 compared to 88% in the quarter ended September 30, 1999. Industrial Businesses sales represented 22% of total sales for the quarter ended September 30, 2000, compared to 12% in the same quarter of 1999. Gross profit for the first quarter of fiscal 2001 was 43.9% compared to 56.2% in the quarter ended September 30, 1999. The reduction in the gross profit percentage primarily reflected unfavorable fixed overhead absorption due to the low sales level in fiscal 2001 and to a lesser extent foreign currency effects from the weak euro. Operating expenses were down $493,000 in the first quarter of fiscal 2001 compared to the quarter ended September 30, 1999, primarily as a result of lower personnel related expenses. Automotive - Sales in the first quarter of fiscal 2001 decreased $10.0 million to $6.2 million compared to $16.2 million for the quarter ended September 30, 1999. The sales decline in the first quarter of fiscal 2001 was primarily the result of the following factors; i) fewer domestic new tooling programs this year compared to last year at this time, ii) temporary delays in shipments caused by shortages in electronic parts, and iii) delays in committed orders not yet released by the European customer's assembly line builders. P-1000 sales accounted for approximately 23% of net automotive sales in the first quarter of fiscal 2001 compared to approximately 48% in the same period a year ago. The percentage sales decrease reflected customers' migration to the Company's web based IPNet(TM) product. Sales of the Company's IPNet(TM) product totaled approximately 32% of net automotive sales in the first quarter of fiscal 2001 compared to 27% in the first quarter of fiscal 2000. RGS and NCA systems sales accounted for 21% of net sales in the quarter ended September 30, 2000, compared to 17% one year ago. 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 quarter of fiscal 2001 were $1.8 million, of which $1.7 million was delivered by the Forest Products business unit. Sales were down $500,000 from the same period last year primarily due to the postponement of capital spending by some forest products customers that were affected by the continued decline in the price of softwood. Bookings & Backlog - New order bookings for the three months ended September 30, 2000, were $10.0 million compared to $17.0 million in 1999. Automotive bookings totaled $6.9 million in the fiscal 2001 quarter compared to $14.6 million a year ago. During the quarter ended September 30, 2000, automotive bookings primarily represented 36% P-1000, 22% RGS and NCA and 22% IPNet(TM). Automotive bookings for the comparable 1999 period primarily represented 62% P-1000 and 17% RGS and NCA and 15% IPNet(TM). Industrial Businesses bookings were $3.1 million in the quarter ended September 30, 2000, compared to $2.4 million a year ago, of which Forest Product bookings represented 100%. Backlog at September 30, 2000, was $25.1 million compared to $26.4 million at September 30, 1999. The Company expects to be able to fill substantially all of the orders in backlog during the following twelve 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. 9 10 Selling, General and Administrative (SG&A) Expenses - SG&A expenses decreased $584,000 to $4.8 million in the quarter ended September 30, 2000, from $5.3 million in the comparable 1999 quarter. The decrease was primarily due to reductions in personnel related costs. Engineering, Research and Development (R&D) Expenses - Engineering and R&D expenses increased slightly from $3.0 million in the quarter ended September 30, 1999, to $3.1 million in the first quarter of fiscal 2001. The increase in expenses reflected continued investments the Company made in new product development including increases in labor, contract design services and engineering supplies. Outlook - Based on customer shipment schedules, the Company expects reasonably strong sales in subsequent quarters of fiscal 2001, with sales approaching levels achieved in fiscal 2000. Total new orders for the second quarter of fiscal 2001 are expected to be $20.0 million based on new orders booked in October and the Company's expectations related to orders being actively pursued. The outlook for new orders for the second half of fiscal 2001 is also good; however, if lumber prices do not improve, Forest Products customers could continue to postpone capital spending plans. The foregoing statements are "forward looking statements" 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 statements. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $6.4 million at September 30, 2000, compared to $5.9 million at June 30, 2000. The increase of $500,000 in cash for the quarter resulted from $2.4 million of cash provided from financing activities mitigating $1.3 million of cash used in operations; and $190,000 used for capital spending. The foreign currency effects of the euro reduced cash $406,000 for the quarter. The use of cash for operations reflected the loss for the period adjusted for non-cash items, reduced by decreased working capital requirements of $2.4 million. Receivables, net of foreign translation adjustments, decreased $7.8 million primarily as a result of cash collections exceeding the low level of sales during the quarter. Offsetting the decrease in receivables was an increase of $1.9 million in inventory primarily related to delays in planned shipments caused by shortages in electronic parts and for support of near-term delivery requirements, a decrease of $2.6 million in other current assets and liabilities that primarily reflected payments for incentive compensation and liabilities accrued at June 30, 2000 and a decrease of $954,000 in accounts payable. Financing activities during the quarter reflected net working capital borrowings of $2.4 million. The Company has a $15 million unsecured Revolving Credit Agreement (Revolver) that expires on July 31, 2002. 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 ("EBITDA"). Effective September 30, 2000, the Revolver was amended to revise the EBITDA covenant test for the first quarter of fiscal 2001. The Company and its principal bank have agreed that another amendment will be required to account for the effect of the first quarter's EBITDA result on the EBITDA covenant test for the remaining quarters of fiscal 2001. This amendment is expected to be completed during the second quarter of fiscal 2001. The Revolver has been classified as current until the amendment is completed. The Company had $5.9 million outstanding under the Revolver at September 30, 2000. The foregoing statements are "forward looking statements" within the meaning of the Securities Exchange Act of 1934, as amended. See Item 2 10 11 "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 statements. The Company believes that available cash on hand and existing credit facilities will be sufficient to fund its currently anticipated fiscal 2001 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 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. MARKET RISK INFORMATION Perceptron's primary market risks are related to foreign exchange rates and interest rate risk in connection with its borrowings. The foreign exchange 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. At September 30, 2000, the Company did not have any market risk instruments for trading purposes. FOREIGN CURRENCY RISK The Company has foreign currency exchange risk in its international operations arising from the time period between sales commitment and delivery for contracts in non-U.S. currencies. 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. At September 30, 2000, the Company's percentage of sales commitments in non-U.S. currencies was 26.7% or $6.7 million. 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 September 30, 2000, the Company had no forward contracts outstanding. 11 12 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. NEW ACCOUNTING PRONOUNCEMENTS In the first quarter of fiscal 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires recognition of all derivative financial instruments as either assets or liabilities in the consolidated balance sheet, measured at fair value and sets forth conditions in which a derivative instrument may be designated as a hedge. The statement requires that changes in the fair value of derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to be recorded to other comprehensive income or to offset related results on the hedged item in earnings. Adoption of SFAS No. 133 did not have a material effect on the Company's consolidated financial statements. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements". SAB 101 summarizes certain of the SEC's views on applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 by the fourth quarter of fiscal 2001 (retroactive to July 1, 2000) and is currently reviewing interpretive guidance issued recently by the SEC to complete its assessment of the impact that SAB 101 may have on the Company's financial statements. 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 2001 and future revenue, order booking levels and earnings levels, the timing of new product releases, the expansion of the Company into new markets, and the execution of an amendment to the Company's revolving credit agreement. 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 ability of the Company to attract and retain key personnel, especially technical personnel, 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, a determination by the Company's bank not to execute the expected amendment to its revolving credit agreement as a 12 13 result of changes in economic conditions, the Company's financial position or other concerns 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. The Company's expectations regarding second quarter bookings are based upon oral discussions with customers and are subject to change based upon a wide variety of factors, including economic conditions and system implementation delays. Certain of these new orders have been delayed in the past and could be delayed in the future. Because the Company's products are typically integrated into larger systems or lines, the timing of new orders are dependent on the timing of completion of the overall system or line. In addition, because the Company's products have shorter lead times than other components and are required later in the process, orders for the Company's products tend to be given later in the integration process. 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". 13 14 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 4.7 Third Amendment to Credit Agreement, dated May 28, 1999, between Perceptron, Inc. and Bank One, Michigan dated November 9, 2000. 27. Financial Data Schedule. (B) Reports on Form 8-K: The Company's current report on Form 8-K, dated July 25, 2000, which disclosed information under Item 5 concerning the Company's selection of Monday, December 4, 2000, as the date for the Annual Meeting of Shareholders. The Company's current report on Form 8-K, dated October 10, 2000, which disclosed information under Item 5 concerning the Company's expected sales level for the quarter ended September 30, 2000 and the factors contributing to that sales level. 14 15 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: November 09, 2000 By: /S/ Alfred A. Pease ------------------------------------------ Alfred A. Pease President and Chief Executive Officer Date: November 09, 2000 By: /S/ John J. Garber ------------------------------------------ John J. Garber Vice President and Chief Financial Officer (Principal Financial Officer) Date: November 09, 2000 By: /S/ Sylvia M. Smith ------------------------------------------ Sylvia M. Smith Controller and Chief Accounting Officer (Principal Accounting Officer) 15 16 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 4.7 Third Amendment to Credit Agreement, dated May 28, 1999, between Perceptron, Inc. and Bank One, Michigan dated November 9, 2000. 27. Financial Data Schedule. EX-4.7 2 k58428ex4-7.txt AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.7 THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of November 9, 2000 (this "Amendment"), is by and between PERCEPTRON, INC., a Michigan corporation (the "Borrower"), and BANK ONE, MICHIGAN, a Michigan banking corporation (the "Bank"). RECITALS A. The Borrower and the Bank have entered into the Credit Agreement, dated May 28, 1999, as amended by the First Amendment to Credit Agreement dated as of August 24,1999 and the Second Amendment to Credit Agreement dated as of June 30, 2000 (the "Credit Agreement"), pursuant to which the Bank provides to the Borrower a revolving credit facility, including letters of credit, in the aggregate principal amount not to exceed $15,000,000. B. The Borrower now desires that the Credit Agreement be amended in order to modify certain financial covenants of the Borrower thereunder, and the Bank is willing to so amend the Credit Agreement on the terms and conditions herein set forth. NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein and in the Credit Agreement contained, the parties hereto agree as follows: ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT Upon the date that the conditions precedent set forth in Article 2 of this Amendment are satisfied, which date (the "Amendment Date") shall be determined by the Bank in its sole discretion, the Credit Agreement hereby is amended as follows, provided that such amendments pursuant to Section 1.1 below shall be deemed retroactively effective as of September 30, 2000: 1.1 Section 6.13 is amended and restated in full as follows: 6.13 EBITDA. The Borrower will not permit its EBITDA to be less than (i) ($4,300,000) for the period from January 1, 1999 through the end of its fiscal quarter ending on or about March 31, 1999, (ii) ($6,200,000) for the period from January 1, 1999 through the end of its fiscal quarter ending on or about June 30, 1999, (iii) $1,500,000 for the period from July 1, 1999 through the end of its fiscal quarter ending on or about September 30, 1999, (iv) $2,100,000 for the period from July 1, 1999 through the end of its fiscal quarter ending on or about December 31, 1999, (v) $3,000,000 for the period from July 1, 1999 through the end of its fiscal quarter ending on or about March 31, 2000, 2 (vi) $5,500,000 for the period from July 1, 1999 through the end of its fiscal quarter ending on or about June 30, 2000, (vii) ($4,000,000) for the period from July 1, 2000 through the end of its fiscal quarter ending on or about September 30, 2000, (viii) $1,200,000 from the period from July 1, 2000 through the end of its fiscal quarter ending on or about December 31, 2000, (ix) $675,000 for the period from July 1, 2000 through the end of its fiscal quarter ending on or about March 31, 2001, (x) $3,575,000 for the period from July 1, 2000 through the end of its fiscal quarter ending on or about June 30, 2001, (xi) $500,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about September 30, 2001, (xii) $1,200,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about December 31, 2001, (xiii) $675,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about March 31, 2002, and (xiv) $3,575,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about June 30, 2002. ARTICLE 2. CONDITIONS PRECEDENT TO AMENDMENTS As conditions precedent to the effectiveness of the amendments to the Credit Agreement set forth in Article 1 of this Amendment, the Bank shall receive this Amendment duly executed on behalf of the Borrower, and certified copies of such documents evidencing necessary corporate action of the Borrower with respect to this Amendment and the transactions contemplated hereby, as the Bank may reasonably request and in form and substance satisfactory to the Bank. ARTICLE 3. REPRESENTATIONS AND WARRANTIES In order to induce the Bank to enter into this Amendment, the Borrower represents and warrants that: 3.1 The execution, delivery and performance by the Borrower of this Amendment are within its corporate powers, have been duly authorized by all necessary corporate action and are not in contravention of any law, rule or regulation, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or governmental authority, or of the terms of the Borrower's charter or by-laws, or of any contract or under- taking to which the Borrower is a party or by which the Borrower or its property is or may be bound or affected. 3.2 This Amendment is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. -2- [THIRD AMENDMENT TO CREDIT AGREEMENT] 3 3.3 No consent, approval or authorization of or declaration, registration or filing with any governmental authority or any nongovernmental person or entity, including without limitation any creditor or stockholder of the Borrower, is required on the part of the Borrower in connection with the execution, delivery and performance of this Amendment or the transactions contemplated hereby or as a condition to the legality, validity or enforceability of this Amendment. 3.4 After giving effect to the amendment contained in Article 1 of this Amendment, the representations and warranties contained in Article 5 of the Credit Agreement are true on and as of the date hereof with the same force and effect as if made on and as of the date hereof. 3.5 No Default or Unmatured Default has occurred and is continuing. ARTICLE 4. MISCELLANEOUS 4.1 If the Borrower shall fail to perform or observe any term, covenant or agreement in this Amendment, or any representation or warranty made by the Borrower in this Amendment shall prove to have been incorrect in any material respect when made, such occurrence shall be deemed to constitute a Default. 4.2 All references to the Credit Agreement in any other document, instrument or certificate referred to in the Credit Agreement or delivered in connection therewith or pursuant thereto, hereafter shall be deemed references to the Credit Agreement, as amended hereby. 4.3 Subject to the amendments herein provided, the Credit Agree- ment shall in all respects continue in full force and effect. 4.4 Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Credit Agreement. 4.5 This Amendment shall be governed by and construed in accordance with the laws of the State of Michigan. 4.6 This Amendment may be executed upon any number of counterparts with the same effect as if the signatures thereto were upon the same instrument. [The rest of this page intentionally left blank.] -3- [THIRD AMENDMENT TO CREDIT AGREEMENT] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first-above written. PERCEPTRON, INC. By: John Garber Its: Vice President BANK ONE, MICHIGAN (formerly known as NBD Bank) By: Donna M. Boris Its: Vice President -4- [THIRD AMENDMENT TO CREDIT AGREEMENT] EX-27 3 k58428ex27.txt 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. 3-MOS JUN-30-2001 JUL-01-2000 SEP-30-2000 6,441,000 0 24,497,000 (355,000) 14,469,000 46,553,000 16,951,000 (6,507,000) 61,432,000 14,546,000 1,040,000 0 0 82,000 45,764,000 61,432,000 8,011,000 8,011,000 4,494,000 4,494,000 7,839,000 0 116,000 (4,435,000) (1,722,000) (2,713,000) 0 0 0 (2,713,000) (.33) (.33)
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