-----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, SLZvNxNh2a9gHY9POjriBDE9GVx15LZ3R4e1xJztygXae40os52hzYQDr0JficDD DcSdy3q9PRjRKF+r5kSfLg== 0000950124-01-000855.txt : 20010223 0000950124-01-000855.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950124-01-000855 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 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: 1543659 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 k60030e10-q.txt QUARTERLY REPORT ENDED 12/31/00 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 December 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 February 7, 2001, was: Common Stock, $0.01 par value 8,182,119 ----------------------------- ------------------------- Class Number of shares 2 PERCEPTRON, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 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 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18
2 3 PERCEPTRON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, (In Thousands, Except Per Share Amounts) 2000 1999 2000 1999 -------- -------- -------- -------- NET SALES $ 17,569 $ 18,533 $ 25,580 $ 37,004 COST OF SALES 8,966 8,263 13,460 16,352 -------- -------- -------- -------- GROSS PROFIT 8,603 10,270 12,120 20,652 -------- -------- -------- -------- OPERATING EXPENSES Selling, general and administrative 4,556 5,078 9,317 10,423 Engineering, research and development 3,210 3,482 6,288 6,469 -------- -------- -------- -------- Total operating expenses 7,766 8,560 15,605 16,892 -------- -------- -------- -------- OPERATING INCOME (LOSS) 837 1,710 (3,485) 3,760 -------- -------- -------- -------- OTHER INCOME AND (DEDUCTIONS) Interest expense (172) (129) (288) (247) Interest income 42 33 88 69 Gain (loss) on disposal of assets 226 (50) 226 (55) Foreign currency and other (7) 62 (50) (14) -------- -------- -------- -------- Total other income and (deductions) 89 (84) (24) (247) -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 926 1,626 (3,509) 3,513 INCOME TAX EXPENSE (BENEFIT) 44 667 (1,678) 1,426 -------- -------- -------- -------- NET INCOME (LOSS) $ 882 $ 959 $ (1,831) $ 2,087 ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE BASIC $ 0.11 $ 0.12 ($ 0.22) $ 0.26 DILUTED $ 0.11 $ 0.12 ($ 0.22) $ 0.26 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC 8,173 8,169 8,173 8,169 DILUTED 8,173 8,174 8,173 8,183
The notes to the consolidated financial statements are an integral part of these statements. 3 4 PERCEPTRON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, (In Thousands, Except Par Value) 2000 2000 ------------ --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,955 $ 5,947 Receivables: Billed receivables, net of allowance for doubtful accounts 23,701 26,507 of $366 and $268, respectively Unbilled and other receivables 6,493 6,126 Inventories, net of reserves of $1,350 and $1,200, respectively 13,110 12,582 Deferred taxes and other current assets 1,642 1,564 -------- -------- Total current assets 51,901 52,726 -------- -------- PROPERTY AND EQUIPMENT Building and land 6,032 6,004 Machinery and equipment 10,138 9,598 Furniture and fixtures 1,256 1,195 -------- -------- 17,426 16,797 Less - Accumulated depreciation and amortization (6,924) (6,125) -------- -------- Net property and equipment 10,502 10,672 -------- -------- OTHER ASSETS Intangible assets, net of accumulated amortization 1,118 1,313 of $824 and $660, respectively Deferred tax asset and other 3,585 1,516 -------- -------- Total other assets 4,703 2,829 -------- -------- TOTAL ASSETS $ 67,106 $ 66,227 ======== ======== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,847 $ 4,549 Accrued liabilities and expenses 3,914 4,642 Notes payable (Note 3) 9,300 -- Income taxes payable 897 87 Accrued compensation 666 2,785 -------- -------- Total current liabilities 18,624 12,063 -------- -------- LONG-TERM LIABILITIES Notes payable (Note 3) 1,040 4,595 -------- -------- Total long-term liabilities 1,040 4,595 -------- -------- Total liabilities 19,664 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 December 31, 2000 and June 30, 2000, respectively 82 82 Accumulated other comprehensive income (loss) (Note 5) (4,028) (3,723) Additional paid-in capital 41,019 41,010 Retained earnings 10,369 12,200 -------- -------- Total shareholders' equity 47,442 49,569 -------- -------- TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 67,106 $ 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)
SIX MONTHS ENDED DECEMBER 31, (In Thousands) 2000 1999 --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (1,831) $ 2,087 Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities: Depreciation and amortization 1,042 1,232 Deferred income taxes (1,878) 1,778 Other (92) 202 Changes in assets and liabilities, exclusive of changes shown separately (1,470) (3,704) -------- -------- Net cash provided from (used for) operating activities (4,229) 1,595 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit borrowings 16,360 11,025 Revolving credit repayments (10,615) (9,865) Proceeds from stock plans 10 -- -------- -------- Net cash provided from financing activities 5,755 1,160 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (657) (703) Sale of assets 270 -- -------- -------- Net cash used for investing activities (387) (703) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (131) (267) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,008 1,785 CASH AND CASH EQUIVALENTS, JULY 1 5,947 4,205 -------- -------- CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 6,955 $ 5,990 ======== ======== CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Receivables, net $ 2,167 $ (5,759) Inventories (677) (109) Accounts payable (703) (214) Other current assets and liabilities (2,257) 2,378 -------- -------- $ (1,470) $ (3,704) ======== ========
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. The Company provides a reserve for obsolescence to recognize the effects of engineering change orders and other matters that affect the value of the inventory. When inventory is disposed of, the obsolescence reserve is released. Inventory, net of reserves, is comprised of the following (in thousands):
DECEMBER 31, JUNE 30, 2000 2000 ---------------- ---------------- Component Parts $ 6,736 $ 7,214 Work In Process 1,511 1,204 Finished Goods 4,863 4,164 ---------------- ---------------- Total $ 13,110 $ 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 (8.5% as of February 1, 2001). 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 December 31, 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 (8.5% as of February 1, 2001) 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 7.12% as of February 1, 2001) 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 6 7 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, taxes, depreciation and amortization ("EBITDA"). Effective December 31, 2000, the Revolver was amended to revise certain of the covenants. The Company and its principal bank have agreed that another amendment may be required to revise a fixed charge coverage ratio, which may not be satisfied in the first quarter of fiscal year 2002. The Revolver has been classified as current in the December 31, 2000 period until that amendment is completed. The Company had $9.3 million outstanding under the Revolver at December 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. During the periods presented, the Company did not engage in any hedging activities. 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 DECEMBER 31, 2000 1999 --------------- --------------- Net Income $ 882 $ 959 Other Comprehensive Income (Loss): Foreign currency translation adjustments 714 (682) --------------- --------------- Total Comprehensive Income $ 1,596 $ 277 =============== =============== SIX MONTHS ENDED DECEMBER 31, 2000 1999 --------------- --------------- Net Income (Loss) $ (1,831) $ 2,087 Other Comprehensive Income (Loss): Foreign currency translation adjustments (305) (228) --------------- --------------- Total Comprehensive Income (Loss) $ (2,136) $ 1,859 =============== ===============
7 8 6. EARNINGS PER SHARE Basic earnings per share ("EPS") is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Other obligations, such as stock options and warrants, are considered to be potentially dilutive common shares. Diluted EPS assumes the issuance of potential dilutive common shares outstanding during the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance. A reconciliation of both calculations is shown below (in thousands, except per share amounts):
WEIGHTED AVG. EARNINGS NET INCOME COMMON SHARES PER SHARE THREE MONTHS ENDED DEC. 31, 2000 1999 2000 1999 2000 1999 ---------- --------- ---------- ----------- --------- --------- Basic EPS $882 $959 8,173 8,169 $0.11 $0.12 Effect of Dilutive Securities: Stock options and warrants - - - 5 - - ---------- --------- ---------- ----------- --------- --------- Diluted EPS $882 $959 8,173 8,174 $0.11 $0.12 ========== ========= ========== =========== ========= =========
WEIGHTED AVG. EARNINGS NET INCOME COMMON SHARES PER SHARE SIX MONTHS ENDED DEC. 31, 2000 1999 2000 1999 2000 1999 ---------- --------- ---------- ----------- --------- --------- Basic EPS $(1,831) $2,087 8,173 8,169 $(0.22) $0.26 Effect of Dilutive Securities: Stock options and warrants - - - 14 - - ---------- --------- ---------- ----------- --------- --------- Diluted EPS $(1,831) $2,087 8,173 8,183 $(0.22) $0.26 ========== ========= ========== =========== ========= =========
During the three and six month periods ended December 31, 2000, options to purchase 1,379,000 and 1,350,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. For the comparable three and six month periods ended December 31, 1999, options to purchase 1,502,000 and 1,218,000 shares of common stock, respectively, were outstanding and were not included in the computation of diluted EPS because the effect would have been anti-dilutive. 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 below. On September 25, 1998, the U.S. District Court for the Eastern District of Michigan dismissed, with prejudice, a suit filed against the Company by Speroni, S.p.A. ("Speroni"). Speroni has appealed the dismissal. The appeal has been stayed pending the arbitration decision discussed below. The suit alleged tortious interference in conjunction with exclusive distributorship contracts covering the sale of P-1000 products in Italy and France between Perceptron B.V., a wholly-owned subsidiary of the Company, and Speroni. Speroni sought unspecified compensatory damages and punitive damages. Perceptron B.V. terminated the exclusive distributorship contracts in 1997 for breach of contract by Speroni and has sought arbitration of this matter with the International Chamber of Commerce International Court of Arbitration ("ICC"), to confirm the terminations and to award damages. Speroni has filed counterclaims with the ICC alleging breach of the exclusive distributorship contracts and 8 9 seeking damages of $6.5 million. Arbitration hearings have been conducted and Perceptron B.V. is awaiting the decision of the arbitrator. The Company intends to vigorously pursue its claims and defend Speroni's claims. The Company is a party to a suit filed by Analog Technologies, Inc. ("Analog") on October 8, 1999 in the Circuit Court for the County of Oakland, Michigan. The suit alleges that the Company breached a non-disclosure agreement and misappropriated Analog's confidential information and trade secrets in connection with the Company's development of a potential new product. The potential new product involved is one of a number of new products under development by the Company, which have not been discussed in the Company's filings with the Securities and Exchange Commission. 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. The Company has been informed that certain of its customers have received allegations of possible patent infringement involving processes and methods used in the Company's products. Certain of these customers, including one customer who was a party to a patent infringement suit relating to this matter, have settled such claims. Management believes, however, that the processes used in the Company's products were independently developed without utilizing any previously patented process or technology. Because of the uncertainty surrounding the nature of any possible infringement and the validity of any such claim or any possible customer claim for indemnity relating to claims against these customers, it is not possible to estimate the ultimate effect, if any, of this matter on the Company's financial statements. 9 10 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 - ------------------ ---------- --------------------- ------------ DECEMBER 31, 2000 Revenues $ 12,510 $ 5,059 $ 17,569 Operating Income (Loss) 1,528 (691) 837 Total Assets 55,903 11,203 67,106 DECEMBER 31, 1999 Revenues $ 13,413 $ 5,120 $ 18,533 Operating Income (Loss) 1,187 523 1,710 Total Assets 56,773 9,184 65,957
SIX MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED - ------------------ ---------- --------------------- ------------ DECEMBER 31, 2000 Revenues $ 18,720 $ 6,860 $ 25,580 Operating Income (Loss) (417) (3,068) (3,485) Total Assets 55,903 11,203 67,106 DECEMBER 31, 1999 Revenues $ 29,596 $ 7,408 $ 37,004 Operating Income (Loss) 4,704 (944) 3,760 Total Assets 56,773 9,184 65,957
10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended December 31, 2000, Compared to Three Months Ended December 31, 1999 Overview - The Company reported net income of $882,000, or $0.11 per share, for the second quarter of fiscal 2001, compared to net income of $959,000 or $0.12 per share, in the quarter ended December 31, 1999. Net sales of $17.6 million for the three months ended December 31, 2000, were down slightly compared to the prior year's sales of $18.5 million. Automotive sales accounted for 71% of total sales during the second quarter of fiscal 2001 compared to 72% in the quarter ended December 31, 1999. Industrial Businesses sales represented 29% of total sales for the quarter ended December 31, 2000, compared to 28% in the same quarter of 1999. Gross profit for the second quarter of fiscal 2001 was 49.0% compared to 55.4% in the quarter ended December 31, 1999. In the fiscal 2001 quarter, the gross profit rate was reduced approximately two thirds as a result of the product mix sold by the Forest Products business unit that included high outside purchased material content with lower margins, approximately 20% as a result of unfavorable fixed overhead absorption due to the lower sales level in the fiscal 2001 period and approximately 10% from competitive pricing pressure in Europe and the foreign currency effect of the weak euro. Operating expenses were down $794,000 in the second quarter of fiscal 2001 compared to the quarter ended December 31, 1999. Approximately two thirds of the reduction in operating expenses came from reduced personnel related costs and one third from reduced engineering materials. Automotive - Sales of $12.5 million in the second quarter of fiscal 2001 were down slightly from $13.4 million for the quarter ended December 31, 1999. P-1000 sales accounted for approximately 23% of net automotive sales in the second quarter of fiscal 2001 compared to approximately 50% 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 53% of net automotive sales in the second quarter of fiscal 2001 compared to 16% in the second quarter of fiscal 2000. RGS and NCA systems sales accounted for 15% of net sales in the quarter ended December 31, 2000, compared to 30% one year ago. The decrease in RGS and NCA systems sales is 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. Second quarter sales were $5.1 million in both fiscal 2001 and fiscal 2000. Forest Products sales represented $4.5 million in the quarter ended December 31, 2000 and $4.6 million in the quarter ended December 31, 1999. Bookings & Backlog - New order bookings for the three months ended December 31, 2000, were $14.2 million compared to $14.0 million in 1999. Automotive bookings totaled $9.8 million in the fiscal 2001 quarter compared to $10.3 million a year ago. During the quarter ended December 31, 2000, automotive bookings primarily represented 48% IPNet(TM), 20% P-1000, 12% paint inspection products and 11% RGS and NCA. Automotive bookings for the comparable 1999 period primarily represented 37% IPNet(TM), 37% P-1000, 18% RGS and NCA and 4% paint inspection products. Industrial Businesses bookings were $4.4 million in the quarter ended December 31, 2000, compared to $3.7 million a year ago. Backlog at December 31, 2000, was $21.7 million compared to $21.9 million at December 31, 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. 11 12 Selling, General and Administrative (SG&A) Expenses - SG&A expenses decreased $522,000 to $4.6 million in the quarter ended December 31, 2000, from $5.1 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 decreased $272,000 from $3.5 million in the quarter ended December 31, 1999, to $3.2 million in the second quarter of fiscal 2001. The decrease in expenses primarily reflected lower engineering material costs mitigated by increases in labor and contract services. Gain on Sale of Assets - During the fiscal 2001 quarter, the Company recorded a gain on sale of assets of $226,000. This gain was primarily the result of the sale of intellectual property and equipment related to a medical lab that the Company had acquired in 1998 when it purchased the assets of the Sonic group. Income Taxes - Income tax expense for the quarter ended December 31, 2000, reflects the effect of the mix of operating profit and loss among the Company's various operating entities and was favorably impacted by a tax benefit of approximately $170,000 associated with a dividend distribution within the Company's European subsidiary. Outlook - Based on customer shipment schedules, the Company expects the second half of the year to be significantly better than the first half of the year although not profitable. The Company expects new orders for the second half of fiscal 2001 to exceed those for the first half of the year; however, recent declines in the state of the US economy could cause North American customers 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. Six Months Ended December 31, 2000, Compared to Six Months Ended December 31, 1999 Overview - The Company reported a net loss of $1.8 million, or $0.22 per share, for the first six months of fiscal 2001, compared to net income of $2.1 million, or $0.26 per share, in the six months ended December 31, 1999. Net sales of $25.6 million for the six months ended December 31, 2000, were down $11.4 million, or 31%, over the prior year's sales of $37.0 million. Most of the sales decrease was attributable to the Automotive segment as explained below. Automotive sales accounted for approximately 73% of total sales during the six-month period ended December 31, 2000 compared to 80% during the six months ended December 31, 1999. Industrial Businesses sales represented 27% and 20% of total sales for the six-month periods ended December 31, 2000 and 1999, respectively. Gross profit for the first six months of fiscal 2001 was 47.4% compared to 55.8% in the six months ended December 31, 1999. The gross profit rate decrease in the fiscal 2001 six-month period was approximately half as a result of unfavorable fixed overhead absorption due to the low sales level in the fiscal 2001 period, one third as a result of the product mix sold by the Forest Product business unit that included high outside purchased material content with lower margins and the balance was the result of competitive pricing pressure in Europe and the effect of the weak euro. Operating expenses were down $1.3 million in the first six months of fiscal 2001 compared to the six months ended December 31, 1999. Approximately three fourths of the reduction in operating expenses came from reduced personnel related costs and one fourth from reduced engineering materials. Automotive - Sales in the first six months of fiscal 2001 decreased $10.9 million to $18.7 million compared to $29.6 million in the six months ended December 31, 1999, primarily due to fewer major North American customer tooling programs this period compared with last year. P-1000 sales accounted 12 13 for approximately 23% of net automotive sales in the first six months of fiscal 2001 compared to approximately 49% in the same period a year ago. The percentage sales decrease reflected our customers' migration to the Company's IPNet(TM) product. Sales of the Company's new IPNet(TM) product totaled approximately 46% of net automotive sales in the first six months of fiscal 2001 compared to 22% in the six months ended December 31, 1999. RGS and NCA systems sales accounted for 17% of net sales in the six months ended December 31, 2000, compared to 23% in the comparable period 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 six months of fiscal 2001 were $6.9 million, of which $6.2 million was delivered by the Forest Products business unit. Sales for the same period last year were $7.4 million with $6.7 million delivered by the Forest Products business unit. Sales were down $548,000 from the same period last year primarily due to lower sales in the forest products industry as falling lumber prices caused customers to postpone capital spending. Bookings & Backlog - New order bookings for the six months ended December 31, 2000, were $24.2 million compared to $31.0 million for the same period one year ago. Automotive bookings totaled $16.7 million in the fiscal 2001 six months compared to $24.9 million in the six-month period ended December 31, 1999. During the six months ended December 31, 2000, automotive bookings were primarily for: 37% IPNet(TM), 27% P-1000, 16% RGS and NCA and 11% paint inspection products as compared with 24% IPNet(TM), 52% P-1000, 17% RGS and NCA and 4% paint inspection products in the six months ended December 31, 1999. Industrial Businesses bookings were $7.5 million in the six months ended December 31, 2000, compared to $6.1 million a year ago. Forest Product bookings represented 92% and 87% of the Industrial Businesses bookings in the six months ended December 31, 2000 and 1999, respectively. Backlog at December 31, 2000, was $21.7 million compared to $21.9 million at December 31, 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. Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased $1.1 million from $10.4 million in the six months ended December 31, 1999, to $9.3 million in the six months ended December 31, 2000. The decrease was primarily due to reductions in personnel related costs. Engineering, Research and Development Expenses (R&D) - Engineering and R&D expenses decreased slightly from $6.5 million in the six months ended December 31, 1999, to $6.3 million in the first six months of fiscal 2001. The decrease in expenses was primarily due to reductions in engineering materials mitigated by increases in labor and contract design services. Gain on Sale of Assets - During the six months ended December 31, 2000, the Company recorded a gain on sale of assets of $226,000. This gain was primarily the result of the sale of intellectual property and equipment related to a medical lab that the Company had acquired in 1998 when it purchased the assets of the Sonic group. Income Taxes - Income tax benefit for the six months ended December 31, 2000, reflects the effect of the mix of operating profit and loss among the Company's various operating entities and was favorably impacted by a tax benefit of approximately $340,000 associated with a dividend distribution within the Company's European subsidiary. 13 14 LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $6.9 million at December 31, 2000, compared to $5.9 million at June 30, 2000. The increase of $1.0 million in cash for the six months resulted from $5.8 million of cash provided from financing activities mitigating $4.2 million of cash used in operations and $387,000 used for net capital spending. The foreign currency effects of the euro reduced cash $131,000 for the six months. The use of cash for operations reflected the net loss for the period adjusted for non-cash items and increased working capital requirements of $1.5 million. Receivables, net of foreign currency translation adjustments, decreased $2.2 million primarily as a result of cash collections exceeding sales during the six months ended December 31, 2000. Offsetting the cash provided from receivables was a $2.3 million change in current assets and liabilities that primarily reflected the use of cash to pay incentive compensation and liabilities accrued at June 30, 2000, a $703,000 decrease in accounts payable and a $677,000 increase in inventory. Financing activities during the quarter reflected net working capital borrowings of $5.7 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, taxes, depreciation and amortization ("EBITDA"). Effective December 31, 2000, the Revolver was amended to revise certain of the covenants. The Company and its principal bank have agreed that another amendment may be required to revise a fixed charge coverage ratio, which may not be satisfied in the first quarter of fiscal year 2002. This amendment is expected to be completed by July 31, 2001 when renewal of the facility is planned. The Revolver has been classified as current until the amendment is completed. The Company had $9.3 million outstanding under the Revolver at December 31, 2000. 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. 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. 14 15 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. During the periods presented the Company did not use 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 December 31, 2000, the Company's percentage of sales commitments in non-U.S. currencies was 26.0% or $5.7 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. During the periods presented the Company did not engage in any hedging activities. 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 15 16 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. The Company assumes no obligation for updating any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. 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 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 half 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. 16 17 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". PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Shareholders on December 4, 2000 at which the following action was taken: 1. The Shareholders elected the following persons as the Company's Board of Directors, and the results of the vote on this matter were as follows:
Name For Withheld Broker Non-Votes - --------------------------- ----------------- -------- ---------------- David J. Beattie 5,668,926 766,929 - Kenneth R. Dabrowski 5,668,926 766,929 - Philip J. DeCocco 5,668,926 766,929 - W. Richard Marz 5,668,226 767,629 - Robert S. Oswald 5,668,926 766,929 - Alfred A. Pease 5,473,491 962,364 - Terryll R. Smith 5,668,926 766,929 -
2. The Shareholders approved an amendment to the Company's Directors Stock Option to permit non-employee Directors to purchase shares of Common Stock in exchange for all or a portion of the cash fees payable to them for serving as directors of the Company. As to this proposal, 5,615,295 shares voted "for", 797,421 shares voted "against", 23,139 shares "abstained" and 0 shares were "broker non-votes". 3. The Shareholders approved an amendment to the Company's Bylaws to remove the prohibition on the Board of Directors of the Company amending the Bylaws so as to affect the number of directors in order to give the Board of Directors the right to set the number of directors for the Company at less than seven or more than eleven. As to this proposal, 4,882,232 shares voted "for", 1,523,549 shares voted "against", 30,074 shares "abstained" and 0 shares were "broker non-votes". ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 3.2 Amended and Restated Bylaws, as amended to date, are incorporated by reference to Exhibit 3.2 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. 4.2 Articles I, II, III, VI, VII, X and XI of the Company's Bylaws are incorporated by reference to Exhibit 3.2 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. 17 18 4.8 Fourth Amendment to Credit Agreement, dated May 28, 1999, between Perceptron, Inc. and Bank One, Michigan dated February 8, 2001. 10.35 Third Amendment to the Perceptron, Inc. 1998 Global Team Member Stock Option Plan is incorporated by reference to Exhibit 99.6 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. (B) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PERCEPTRON, INC. (Registrant) Date: February 09, 2001 By: /S/ Alfred A. Pease -------------------------------------------- Alfred A. Pease President and Chief Executive Officer Date: February 09, 2001 By: /S/ John J. Garber -------------------------------------------- John J. Garber Vice President and Chief Financial Officer (Principal Financial Officer) Date: February 09, 2001 By: /S/ Sylvia M. Smith -------------------------------------------- Sylvia M. Smith Controller and Chief Accounting Officer (Principal Accounting Officer) 18 19 Exhibit Index Exhibit No. Description 3.2 Amended and Restated Bylaws, as amended to date, are incorporated by reference to Exhibit 3.2 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. 4.2 Articles I, II, III, VI, VII, X and XI of the Company's Bylaws are incorporated by reference to Exhibit 3.2 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. 4.8 Fourth Amendment to Credit Agreement, dated May 28, 1999, between Perceptron, Inc. and Bank One, Michigan dated February 8, 2001. 10.35 Third Amendment to the Perceptron, Inc. 1998 Global Team Member Stock Option Plan is incorporated by reference to Exhibit 99.6 of the Company's Report on Form S-8 Registration Statement No. 333-55164 filed February 7, 2001. 19 EX-4.8 2 k60030ex4-8.txt FOURTH AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.8 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of February 8, 2001 (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 First Amendment to Credit Agreement dated as of August 24, 1999, Second Amendment to Credit Agreement dated as of June 30, 2000, and Third Amendment to Credit Agreement dated as of November 9, 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 extend the termination date of the revolving credit facility and 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 Retroactively effective as of December 31, 2000, the Credit Agreement hereby is amended as follows: 1.1 Subparagraph "(vi)" of Section 6.1 (relabeled as such pursuant to the Second Amendment referenced above) is further relabeled as subparagraph ("vii)", and new subparagraph "(vi)" is added to Section 6.1, as follows: (vi) As soon as available and in any event within 15 calendar days after the end of each calendar month, a report of the Borrower's domestic accounts receivable, including without limitation the amount, age and account debtor for each domestic account receivable, and otherwise in form and detail satisfactory to the Bank. 2 1.2 Sections 6.12, 6.13, 6.14 and 6.19 (which was added pursuant to the First Amendment referenced above) are amended and restated in full as follows: 6.12 FUNDED DEBT TO EBITDA RATIO. The Borrower will not permit or suffer the ratio of (i) the Funded Debt of the Borrower as of the fiscal quarter end corresponding to the determination date to (ii) the EBITDA of the Borrower for the period of four consecutive fiscal quarters of the Borrower then ending to exceed (A) 6.75 to 1.00 as of September 30, 2001, December 31, 2001 and March 31, 2002, and (B) 4.75 to 1.00 as of June 30, 2002 and each subsequent fiscal quarter end of the Borrower. 6.13 EBITDA. The Borrower will not permit its EBITDA to be less than (i) ($2,600,000) for the period from July 1, 2000 through the end of its fiscal quarter ending on or about December 31, 2000, (ii) ($4,400,000) for the period from July 1, 2000 through the end of its fiscal quarter ending on or about March 31, 2001, (iii) ($1,900,000) for the period from July 1, 2000 through the end of its fiscal quarter ending on or about June 30, 2001, (iv) $300,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about September 30, 2001, (v) $1,000,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about December 31, 2001, (vi) $800,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about March 31, 2002, and (vii) $3,100,000 for the period from July 1, 2001 through the end of its fiscal quarter ending on or about June 30, 2002. 6.14 FIXED CHARGE COVERAGE RATIO. The Borrower will not permit its Fixed Charge Coverage Ratio to be less than 1.50 to 1.00 as of the fiscal quarter end of the Borrower corresponding to September 30, 2001 and as of each subsequent fiscal quarter end of the Borrower; such ratio to be determined as of each fiscal quarter end of the Borrower (commencing with the fiscal quarter end corresponding to September 30, 2001) for the period of four consecutive fiscal quarters of the Borrower then ending. * * * 6.19 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. The Borrower will not permit the ratio of Total Liabilities to Tangible Net Worth to exceed 0.75 to 1.00 at any time. -2- [FOURTH AMENDMENT TO CREDIT AGREEMENT] 3 ARTICLE 2. CONDITIONS PRECEDENT 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, along with a fee for this Amendment in the amount of $10,000 in immediately available funds. 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 undertaking 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. 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 amendments 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. -3- [FOURTH AMENDMENT TO CREDIT AGREEMENT] 4 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 All promissory notes, security documents and other agreements, instruments, certificates and other documents delivered in connection with the Credit Agreement, and, subject to the amendments herein provided, the Credit Agreement, are hereby ratified and confirmed, and shall in all respects continue in full force and effect, notwithstanding that any of such documents may have been executed by only one officer of the Borrower. 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 The Borrower agrees to pay the reasonable fees and expenses of Dickinson Wright PLLC, counsel for the Bank, in connection with the negotiation and preparation of this Amendment and the documents referred to herein and the consummation of the transactions contemplated hereby, and in connection with advising the Bank as to its rights and responsibilities with respect thereto. 4.7 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.] -4- [FOURTH AMENDMENT TO CREDIT AGREEMENT] 5 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: /S/ John J. Garber ----------------------------------- John Garber Its: Chief Financial Officer By: /S/ Sylvia M. Smith ----------------------------------- Sylvia M. Smith Its: Controller BANK ONE, MICHIGAN (formerly known as NBD Bank) By: /S/ Donna Boris ----------------------------------- Donna Boris Its: Vice President -5- [FOURTH AMENDMENT TO CREDIT AGREEMENT] -----END PRIVACY-ENHANCED MESSAGE-----