<PAGE>
As filed with the Securities and Exchange Commission on September 24, 1996
REGISTRATION NO. 333-09539
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
ROFIN-SINAR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3699 38-3306461
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of classification code number) identification
incorporation or number)
organization)
-------------------
ROFIN-SINAR TECHNOLOGIES INC.
45701 MAST STREET
PLYMOUTH, MI 48170
(313) 455-5400
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
DEREK HEINS
ROFIN-SINAR TECHNOLOGIES INC.
45701 MAST STREET
PLYMOUTH, MI 48170
(313) 455-5400
(Name, address, including zip code, and telephone number, including area code,
or agent for service for the registrant)
-------------------
Copies to:
FAITH D. GROSSNICKLE PATRICK KENADJIAN
SHEARMAN & STERLING DAVIS POLK & WARDWELL
599 LEXINGTON AVENUE MESSE TURM
NEW YORK, NEW YORK D-60308 FRANKFURT AM MAIN
10022 FEDERAL REPUBLIC OF GERMANY
(212) 848-4000 (49)(69)975-7030
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1996
[ROFIN-SINAR LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
10,000,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
Of the 10,000,000 shares of Common Stock, par value $0.01, offered hereby,
8,000,000 shares are being offered initially in the United States and Canada
(the "U.S. Offering") by the U.S. Underwriters (the "U.S. Underwriters") and
2,000,000 shares are being offered initially outside the United States and
Canada (the "International Offering" and together with the U.S. Offering, the
"Offerings") by the International Underwriters (together with the U.S.
Underwriters, the "Underwriters"). See "Underwriting." All of the shares
offered hereby are being sold by Rofin-Sinar Technologies Inc. ("Rofin-Sinar"
or the "Company").
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price will be
between $8.50 and $10.50 per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price.
The Company will use approximately $70.3 million of the net proceeds of the
Offerings to purchase its assets from Siemens Aktiengesellschaft ("Siemens")
and its indirect wholly owned U.S. subsidiary, Siemens Power Corporation
("SPC"). The Company will retain $19.0 million of the net proceeds of the
Offerings, together with any net proceeds received by the Company from the
sale of shares pursuant to the Underwriters' over-allotment option, to use
for general corporate purposes, including the repayment of $7 million of
indebtedness owed to Siemens and Siemens Corporation, a wholly owned
subsidiary of Siemens ("SC"), and future acquisitions, if any. Application
has been made to have the Common Stock approved for quotation on the Nasdaq
National Market under the symbol "RSTI."
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE
"RISK FACTORS" COMMENCING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) The Company and Siemens Corporation ("SC") have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company
estimated at $233,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to an additional 1,500,000 shares of Common Stock solely to cover over-
allotments. If all such shares are purchased, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
Global Coordinator
DEUTSCHE MORGAN GRENFELL
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to the approval of certain legal matters by counsel and certain other
conditions. It is expected that delivery of the shares of Common Stock will
be made in New York, New York against payment therefor on or about , 1996.
DEUTSCHE MORGAN GRENFELL
ALEX. BROWN & SONS
INCORPORATED
LEHMAN BROTHERS
The date of this Prospectus is , 1996.
<PAGE>
[PRODUCT PHOTOS]
1. Welding of torque converter in automotive factory using 6 kWatt CO2-Laser.
2. Cutting of steel plate in a job shop using 2 kWatt CO2-Laser.
3. Welding of steel tube using 6 kWatt CO2-Laser.
4. Cutting of car body option holes using 500 Watt Nd:YAG-laser.
5. Laser marked IC chip.
6. Laser marked identification label.
----------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
the terms "Company" or "Rofin-Sinar" mean Rofin-Sinar Technologies Inc. and its
combined subsidiaries after giving effect to the restructuring described below
under "Background of the Offerings" and "Certain Transactions -- Transfer
Agreements." Unless otherwise indicated, the information in this Prospectus
assumes that there will be no exercise of the Underwriters' over-allotment
option. All references to "$" or "dollars" are to United States dollars. All
financial information presented in this Prospectus has been prepared in
accordance with U.S. generally accepted accounting principles.
THE COMPANY
Rofin-Sinar is a leader in the design, development, engineering, manufacture
and marketing of laser products for cutting, welding and marking a wide range
of industrial materials (collectively, "material processing applications").
Lasers are a non-contact technology for material processing which have several
advantages that are desirable in industrial applications. The Company's lasers
all deliver a high-quality beam at guaranteed power outputs and feature compact
design, high processing speed, flexibility, low operating and maintenance costs
and easy integration into the customer's production process. As a technological
leader in both CO/2/ and Nd:YAG lasers, the Company is able to meet a broad
range of its customers' material processing requirements. The Company believes
it has a worldwide market share (based on sales volume) of approximately 20%
for laser products used for cutting and welding applications and that it is
among the largest suppliers of laser products used for marking applications in
Europe and the Asia/Pacific region (other than Japan). Over 80% of the
Company's sales in fiscal 1995 were made to existing customers. The Company has
sold more than 4,000 laser sources since 1975 and currently has over 1,500
active customers (including multinational companies with multiple facilities
purchasing from the Company). During the 1995 fiscal year and the first nine
months of fiscal 1996, respectively, approximately 75% and 69% of the Company's
revenues were from sales and servicing of laser products for cutting and
welding applications and approximately 25% and 31% were from sales and
servicing of laser products for marking applications.
Through its global manufacturing, distribution and service network, the
Company provides a comprehensive range of laser solutions to three principal
target markets for material processing lasers: the Machine Tool, Automotive and
Semiconductor & Electronics industries. The Company sells directly to
industrial end-users, to original equipment manufacturers ("OEMs"), principally
in the Machine Tool industry, who integrate Rofin-Sinar's laser sources with
other system components and to distributors. Many of Rofin-Sinar's customers
are among the largest global participants in their respective industries, and
include Aerospatiale, ASM, BMW, Boeing, Bosch, Chrysler, Ford, General Motors,
Mercedes-Benz, Philips, SGS Thomson, Siemens, Thyssen, TRW, Volkswagen and
Volvo. During fiscal 1995 and the first nine months of fiscal 1996, 37% and 33%
of the Company's sales were in North America, 50% and 46% were in Europe and
13% and 21% were in the Asia/Pacific region, respectively.
In developing its laser solutions, the Company offers customers its
expertise in: (i) product development and manufacturing (i.e., state-of-the-art
product development and manufacturing services based on over 20 years of laser
technology experience and applications know-how); (ii) application and process
development (i.e., developing new laser-based applications for manufacturing
customers and assisting them in successfully integrating lasers into their
production processes); (iii) system engineering (i.e., advising customers on
machine design, including tooling, automation and controls, for customers in
need of "turn-key" solutions); and (iv) extensive after-sales support for its
laser products (including technical support, field service, maintenance and
training programs and rapid spare parts delivery).
3
<PAGE>
COMPETITIVE ADVANTAGES
The Company attributes its strong market position and its long-standing
customer relationships to several competitive advantages: (i) its technological
leadership and product innovation; (ii) its sophisticated application
development; (iii) its broad product range; (iv) its product quality; (v) its
comprehensive customer service; (vi) and its global presence.
BUSINESS STRATEGY
The Company's business strategy is to maximize shareholder value by (i)
strengthening its position as a leading supplier to the global market for
cutting and welding applications and (ii) capitalizing on its leadership
position in cutting and welding, its strength in the European and Asian marking
markets and its other significant competitive advantages to build its share of
the U.S. market for marking applications. The Company believes that the major
sources of its growth over the next three years will be the following:
. Developing new laser products through technological innovation in
response to evolving customer needs for increased output power, greater
penetration and higher processing speeds.
. Focusing on cross-selling to existing customers in target markets, in
particular to the Machine Tool, Automotive and Semiconductor &
Electronics industries.
. Capitalizing on its global presence to attract new customers in the
three principal geographic markets in which its customers operate
(North America, Europe and the Asia/Pacific region).
. Offering customized solutions based on standard laser sources.
BACKGROUND OF THE OFFERINGS
Prior to the Offerings, the business of the Company was conducted by
subsidiaries of Siemens, a company organized under the laws of the Federal
Republic of Germany whose principal business is the design, development,
manufacture and marketing of a wide range of electrical and electronics
products and systems. Siemens originally acquired the laser businesses of
Rofin-Sinar in 1987 to obtain access to laser technologies for application in a
number of industrial areas. Since being acquired, however, the Company has
pursued and developed broader goals and capabilities independent of Siemens.
Siemens and the Company have concluded that Rofin-Sinar will have a better
opportunity to achieve its full potential as an independent entity rather than
as part of Siemens.
Siemens has conducted the laser business through its directly and indirectly
wholly owned subsidiaries Rofin-Sinar Inc. ("RSI") and Rofin-Sinar Laser GmbH
("RSL"), which in turn owns Rofin-Sinar France S.A., Rofin-Sinar Italiana
S.r.l. (90.65% owned) and 51% of Rofin-Marubeni Laser Corporation
(collectively, the "Rofin-Sinar Subsidiaries"). On July 19, 1996, Rofin-Sinar
Technologies Inc. was incorporated under the laws of Delaware to be a holding
company for RSI and RSL upon completion of the Offerings as described below.
The Company will use approximately $70.3 million of the net proceeds of the
Offerings (excluding any proceeds received from the exercise by the
Underwriters of their over-allotment option) to purchase the stock of RSL from
Siemens and the stock of RSI from SPC, a wholly owned subsidiary of SC. Because
the purchase price for RSL and RSI is derived from the offering price of the
shares of Common Stock of the Company being sold in the Offerings, it reflects
the factors considered in determining such offering price. Such offering price
was determined through discussions and negotiations among the Company, Siemens,
SPC and the Underwriters. See "Risk Factors -- Proceeds of Offerings Payable to
Siemens; Purchase Price and Terms of Transfer of RSL and RSI Stock," "Certain
Transactions -- Transfer Agreements" and "Underwriting."
4
<PAGE>
The Company maintains executive offices and manufacturing facilities at
45701 Mast Street, Plymouth, Michigan 48170, where its telephone number is
(313) 455-5400. The principal executive offices of RSL and its manufacturing
facilities for lasers for cutting and welding applications are located at
Berzeliusstrasse 83, D-22113 Hamburg in the Federal Republic of Germany, where
its telephone number is 49-40-733-630. RSL's manufacturing facilities for
lasers for marking applications are located at Neufeldstrasse 16/ Gunding, D-
85232 Bergkirchen in the Federal Republic of Germany, where its telephone
number is 49-8131-7040.
THE OFFERINGS
<TABLE>
<C> <S>
Common Stock Offered(1):
U.S. Offering.................................... 8,000,000 shares
International Offering........................... 2,000,000 shares
Total Offerings(1).................................. 10,000,000 shares
Common Stock Outstanding after the Offerings(1)(2).. 10,000,000 shares
Use of Proceeds..................................... Assuming the Underwriters
do not exercise their
over-allotment option,
approximately $70.3
million of the net
proceeds of the Offerings
will be paid by the
Company to Siemens and
SPC as consideration for
the Company's acquisition
of RSL and RSI. The
Company will retain $19.0
million of the net
proceeds, together with
any net proceeds received
by the Company from the
exercise of the
Underwriters' over-
allotment option, to use
for general corporate
purposes, including
repayment of $7.0 million
of indebtedness owed to
Siemens and SC and future
acquisitions, if any. See
"Use of Proceeds."
Proposed Nasdaq National Market Symbol.............. "RSTI"
Dividend Policy..................................... The Company intends to
retain its earnings to
fund development of its
business and does not
anticipate paying cash
dividends in the
foreseeable future. See
"Dividend Policy."
</TABLE>
- --------
(1) Assumes the Underwriters' over-allotment option for up to 1,500,000 shares
of Common Stock is not exercised. See "Underwriting."
(2) Excludes 400,000 shares issuable at the initial public offering price upon
exercise of options to be granted to certain officers and key employees of
the Company and 10,500 shares of stock (including 7,500 shares of
restricted stock) to be issued to non-employee directors of the Company
pursuant to employee benefit plans at the time of the Offerings. Such
options are exercisable, subject to vesting requirements, commencing on the
first anniversary of the closing of the Offerings and such 7,500 shares of
restricted stock are transferable, subject to vesting and forfeiture
requirements, commencing on the first anniversary of the closing of the
Offerings. See "Management--Equity Incentive Plan" and "--Director
Compensation."
5
<PAGE>
SUMMARY COMBINED FINANCIAL INFORMATION
The Statement of Operations Data for each of the years in the three-year
period ended September 30, 1995 and the nine-month period ended June 30, 1996
and the Balance Sheet Data as of September 30, 1994 and 1995 and June 30, 1996
set forth below have been derived from the Company's combined financial
statements included elsewhere in this Prospectus, which have been audited by
KPMG Peat Marwick LLP, the Company's independent auditors. Net sales for the
fiscal years ended September 30, 1991 and 1992 and Balance Sheet Data as of
September 30, 1993 are unaudited and have been derived from the Company's
historical financial records. The Statement of Operations Data for the nine-
month period ended June 30, 1995 and the Balance Sheet Data as of September 30,
1993 are unaudited but, in the opinion of management, such information reflects
all adjustments consisting of only normal recurring adjustments necessary for a
fair presentation of the financial data for the interim periods. The results
for the interim periods presented are not necessarily indicative of the results
for a full year. These data should be read in conjunction with "Management's
Discussion and Analysis of Financial Conditions and Results of Operations," the
Company's Combined Financial Statements and other financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- --------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(1)................ $60,034 $69,217 $ 92,466 $65,460 $ 83,372
Cost of goods sold.......... 47,745 46,993 57,162 40,475 51,466
Gross profit................ 12,289 22,224 35,304 24,985 31,906
Selling, general, and admin-
istrative expenses......... 21,951 17,059 20,673 14,534 15,221
Research and development ex-
penses..................... 10,276 6,834 6,719 5,903 5,850
Income (loss) from opera-
tions...................... (19,938) (1,669) 7,912 4,548 10,835
Net interest expense........ 1,654 1,308 1,272 947 790
Income (loss) before income
taxes...................... (21,386) (3,116) 6,265 3,489 10,092
Income tax expense (bene-
fit)....................... (1,565) (1,422) 3,052 1,725 4,354
Net income (loss)........... (19,821) (1,694) 3,213 1,764 5,738
Pro forma net income per
common share............... .37 .66
Shares used in computing pro
forma net income per common
share(2)................... 8,631,578 8,631,578
OPERATING DATA:
As percentage of sales:
Gross profit................ 20.5% 32.1% 38.2% 38.2% 38.3%
Selling, general and admin-
istrative expenses......... 36.6 24.6 22.4 22.2 18.3
Research and development ex-
penses..................... 17.1 9.9 7.3 9.0 7.0
Income (loss) from opera-
tions...................... (33.2) (2.4) 8.6 6.9 13.0
Income (loss) before income
taxes...................... (35.6) (4.5) 6.8 5.3 12.1
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------- AT JUNE 30,
1993 1994 1995 1996
------- ------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(3).................... $ 7,672 $ 4,927 $14,530 $ 18,981
Total assets.......................... 84,580 76,667 90,995 104,509
Line of credit and loans.............. 22,196 22,380 21,805 25,587
Stockholders' equity.................. 35,837 30,583 39,673 41,798
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------- ---------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization...... 2,803 2,527 2,364 1,773 1,830
Backlog............................ 12,500 17,000 26,500 26,900 35,900
Sales per employee................. 135 184 227 166 188
</TABLE>
- -------
(1) Net sales for the years ended September 30, 1991 and 1992 were $72,900 and
$73,300, respectively. Other financial data for fiscal years 1991 and 1992
have not been provided as comparable information during these periods is
not available due to changes in accounting software, overhead and expense
allocation policies of the Company's parent and lack of historical US GAAP
financial information for certain foreign locations.
(2) Pro forma net income per share has been calculated for the year ended
September 30, 1995 and the nine months ended June 30, 1996 assuming that
8,631,578 shares have been outstanding for such periods. Such shares
represent a portion of the number of shares to be issued pursuant to the
Offerings, the proceeds from which will be used to purchase the shares of
RSL and RSI and to repay $7 million of indebtedness owed to Siemens and SC.
(3) Working capital is defined as total current assets less total current
liabilities.
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective investors in evaluating
the Company and its business before purchasing shares of Common Stock offered
hereby.
NO PRIOR OPERATING HISTORY AS A STAND-ALONE COMPANY. Prior to the
Offerings, the business of the Company has been conducted by subsidiaries of
Siemens and SPC. Since the acquisition of Rofin-Sinar by Siemens in 1987,
Rofin-Sinar's management has operated the Company's business with a
substantial degree of autonomy from Siemens. Siemens has made available to the
Company working capital financing (which at June 30, 1996 was $25.9 million)
and certain other operational support such as participation in group insurance
coverage. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." Thus, there has been
no financial history of the Company as an independent entity available for a
potential investor to evaluate. In addition, following the Offerings, the
Company will no longer benefit from such working capital financing that has in
the past been made available by Siemens. As a result of certain administrative
costs that it will have as an independent publicly held company, the Company
expects initially to reflect approximately $700,000 per year of additional
operating expenses in the aggregate. See "Certain Transactions." The Company's
ability to operate successfully as a stand-alone publicly held company will
require the Company to continue to improve and integrate the operational,
management and financial systems and controls of its U.S. and European
operations and to train, motivate and manage its employees effectively.
PROCEEDS OF OFFERINGS PAYABLE TO SIEMENS; PURCHASE PRICE AND TERMS OF
TRANSFER OF RSL AND RSI STOCK. The Company will use approximately $70.3
million of the net proceeds of the Offerings (other than proceeds received by
the Company from the sale of shares of Common Stock pursuant to the
Underwriters' over-allotment option) to pay the purchase price for the
purchase of the capital stock of RSL and RSI from Siemens and SPC,
respectively. See "Use of Proceeds."
Immediately prior to the closing of the Offerings, Siemens will, and will
cause certain of its subsidiaries to, sell to the Company all of the
outstanding capital stock of RSL and RSI for a purchase price of $ million.
Because the purchase price for RSL and RSI is based on the offering price of
the shares of Common Stock of the Company being sold in the Offerings, it
reflects the factors considered in determining such offering price. Among the
factors considered in determining the offering price of the Common Stock were
the market values and price/earnings multiples of publicly traded common stock
of certain other companies of comparable size in the material processing and
electro-optical laser industries and the machine tool industry, the experience
of the Company's management and the position of the Company in its industry
and its prospects, the general status of the securities markets, the market
conditions for new offerings of securities and the demand for common stock and
for similar securities of comparable companies. The offering price of the
Common Stock was not based upon the net tangible book value of the assets
being acquired by the Company from Siemens. Such offering price was determined
through discussions and negotiations among the Company, Siemens, SPC and the
Underwriters. In the sale and transfer agreements relating to the purchase by
the Company of RSL and RSI, while Siemens and SPC represent and warrant as to
the ownership of the stock of RSL and RSI, respectively, neither Siemens nor
SPC has made any representations, warranties or indemnities with respect to
the Company's business, its ownership of its assets or its financial condition
or results of operations. Accordingly, the Company will have no contractual
recourse against Siemens or SPC, except with respect to income and certain
other tax liabilities, for periods prior to the closing of the Offerings. See
"--Dilution," "Certain Transactions--Transfer Agreements," "--Tax Allocation
and Indemnification Agreement" and "Underwriting."
INDUSTRY CONCENTRATION AND CYCLICALITY; DEPENDENCE ON SALES BY THIRD
PARTIES. The Company's business is significantly dependent on capital
expenditures by manufacturers in the Machine Tool, Automotive and
Semiconductor & Electronics industries. These industries are cyclical
7
<PAGE>
and have historically experienced periods of oversupply, resulting in
significantly reduced demand for capital equipment, including the products
manufactured and marketed by the Company. For the foreseeable future, the
Company's operations will continue to be dependent on capital expenditures in
these industries which, in turn, are largely dependent on the market demand
for their products. The Company's net sales and results of operations may be
materially adversely affected if downturns or slowdowns in the Machine Tool,
Automotive and Semiconductor & Electronics industries occur in the future.
The Company's net sales are dependent in part upon the ability of its OEM
customers to develop and sell systems that incorporate the Company's laser
products. Adverse economic conditions, large inventory positions, limited
marketing resources and other factors affecting these OEM customers could have
a substantial impact upon the Company's financial results. No assurances can
be given that the Company's OEM customers will not experience financial or
other difficulties that could adversely affect their operations and, in turn,
the financial condition or results of operations of the Company.
VARIABILITY AND UNCERTAINTY OF QUARTERLY OPERATING RESULTS. The Company has
experienced and expects to continue to experience some fluctuations in its
quarterly results. The Company believes that fluctuations in quarterly results
may cause the market price of its Common Stock to fluctuate, perhaps
substantially. Factors which may have an influence on the Company's operating
results in a particular quarter include the timing of the receipt of orders
from major customers, product mix, competitive pricing pressures, the relative
proportions of domestic and international sales, the Company's ability to
design, manufacture and introduce new products on a cost-effective and timely
basis, the delay between incurrence of expenses to further develop marketing
and service capabilities and realization of benefits from such improved
capabilities, and the introduction of new products by the Company and its
competitors. In addition, the Company's backlog at any given time is not
necessarily indicative of actual sales for any succeeding period. The
Company's sales will often reflect orders shipped in the same quarter that
they are received. Moreover, customers may cancel or reschedule shipments, and
production difficulties could delay shipments. Accordingly, the Company's
results of operations are subject to significant variability from quarter to
quarter. See "Business--Order Backlog." The Company's sales of its laser
marking systems may also result in substantial fluctuations in quarterly
results. The Company typically builds its laser marking systems to customer
order and, with respect to special order systems, can incur significant costs
in advance of sales of such special order systems due to the long sales cycle
associated with these systems. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results of
Operations" and "Business--The Company's Laser Products."
CURRENCY RISK. Although the Company reports its results in U.S. dollars,
approximately two-thirds of its sales are denominated in other currencies,
including primarily German marks, as well as French francs, Italian lire and
Japanese yen. Although a predominant portion of the Company's cost of goods
sold, selling, general and administrative expenses and research development
expenses are incurred in German marks, net sales and costs and related assets
and liabilities are generally denominated in the functional currencies of the
operations, thereby serving to reduce the Company's exposure to exchange gains
and losses. Exchange differences upon translation from each operation's
functional currency to U.S. dollars are accumulated as a separate component of
equity. The currency translation adjustment component of shareholders' equity
changed from a $169,000 debit at September 30, 1993 to a $1.5 million credit
at September 30, 1994, from the $1.5 million credit at September 30, 1994 to a
$5.4 million credit at September 30, 1995 and from the $5.4 million credit at
September 30, 1995 to a $2.8 million credit at June 30, 1996. These changes
arose primarily from the strengthening of the German mark against the U.S.
dollar during the fiscal 1994-1995 period and the strengthening of the U.S.
dollar against such foreign currencies in the first nine months of fiscal
1996, and reflect the fact that a high proportion of the Company's capital is
invested in its German operations, whose functional currency is the German
mark. The strengthening and weakening of the
8
<PAGE>
German mark and certain other functional currencies against the U.S. dollar
has had the effect of increasing and decreasing (as applicable) reported net
sales as well as cost of goods sold and selling, general and administrative
expenses denominated in such foreign currencies when translated into U.S.
dollars as compared to prior periods. See "Risk Factors--Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview--Currency Exchange Rates." Although historically the Company's
subsidiaries have not paid dividends, a further area of currency exposure may
in the future be represented by the payment of dividends, if any, by the
Company's operating subsidiaries in their respective functional currencies.
While the Company has not in the past engaged in hedging transactions,
following the closing of the Offerings, it intends to implement a policy to
hedge up to 50% of its net foreign currency exposure utilizing forward
exchange contracts, forward exchange options and currency swap contracts. The
Company also intends to continue to borrow in each operating subsidiary's
functional currency to reduce exposure to exchange gains and losses. While the
German mark has increased in value against the U.S. dollar in the period
September 30, 1994 to September 30, 1995, this trend has in part reversed
itself during the nine-month period ended June 30, 1996, and there can be no
assurance that changes in currency exchange rates will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION. The laser industry is characterized by significant price
competition. The Company's current and proposed laser products and laser
marking products compete with those of several well-established companies,
some of which are larger and have substantially greater financial, managerial
and technical resources, more extensive distribution and service networks and
larger installed customer bases than the Company. The Company believes that
this competition will be particularly intense in the Nd:YAG solid state laser
markets, as many companies have committed significant research and development
resources to pursue opportunities in these markets. There can be no assurance
that the Company will successfully differentiate its current and proposed
products from the products of its competitors or that the marketplace will
consider the Company's products to be superior to competing products. With
respect to the Company's laser marking products, because many of the
components required to develop and produce a laser-based marking system are
commercially available, barriers to entry into this market are relatively low,
and the Company expects new competitive product entry in this market. To
maintain its competitive position in this market, the Company believes that it
will be required to continue a high level of investment in engineering,
research and development, marketing and customer service and support. There
can be no assurance that the Company will have sufficient resources to
continue to make such investments, that the Company will be able to make the
technological advances necessary to maintain its competitive position, or that
its products will receive market acceptance. See "Business--Competition."
RISKS RELATING TO SALES GROWTH IN CO\2\ AND ND:YAG LASERS. In recent years,
the Company has experienced a period of rapid growth, attributable in large
part to the demand for its laser marking products. If the Company is to
maintain or increase the rate of growth of its laser sales in the near term,
such sales will have to come through increases in market share for the
Company's existing products, through the development of new products or
through the Company's acquisition of its competitors or their products. To
date, a substantial portion of the Company's revenue has been derived from
sales of high-powered CO\2\ laser sources and, more recently, solid state
flash lamp-pumped laser sources. The Company intends to devote substantial
resources to increasing the output power of its diffusion-cooled CO\2\ Slab
laser sources and to developing diode-pumped Nd:YAG solid state laser products
in accordance with market demand. The Company is currently focused on reducing
the manufacturing costs of its diffusion-cooled CO\2\ Slab lasers to achieve
more attractive pricing. The Company's diode-pumped lasers, however, are in an
early stage of development and are not expected to result in marketable
products prior to 1998. A large part of the Company's growth strategy depends
upon being able to increase substantially its market share for laser marking
products, particularly in the United States. If the Company is unable to
implement its strategy of increasing its
9
<PAGE>
market share for laser marking products and of expanding its product range to
include higher output power diffusion-cooled CO\2\ Slab lasers and diode-
pumped Nd:YAG solid state lasers at attractive prices, it may not be able to
achieve its anticipated rate of growth, as a result of which its business,
operating results and financial condition could be adversely affected. No
assurance can be given that the Company will successfully expand its marking
products' market share, increase the output power of its diffusion-cooled
CO\2\ Slab laser sources or develop diode-pumped Nd:YAG solid state laser
products, or that any such products will achieve market acceptance or not be
rendered obsolete or uncompetitive by products of other companies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Company Strategy" and "--The Company's Laser
Products."
While there are currently no commitments with respect to any future
acquisitions, the Company's business strategy includes the expansion of its
products and services, which may be effected through acquisitions. The Company
from time to time reviews various opportunities to acquire businesses,
technologies or products complementary to the Company's present business.
Although management expects to analyze any such opportunity carefully before
committing the Company's resources, there can be no assurance that the Company
will be able to integrate any acquired business effectively or that any
acquisition will result in long-term benefits to the Company. See "Business--
Business Strategy."
DEPENDENCE ON KEY EMPLOYEES. The future success of the Company is
dependent, in part, on its ability to attract and retain certain key
personnel. In particular, the Company's investment in high-power CO\2\ and
Nd:YAG solid state laser products is dependent on a limited number of advanced
research and development engineers, many of whom have several years of service
with the Company. The Company may need to hire additional skilled personnel to
commercialize these products and expand all areas of its business to continue
to grow. While the Company believes that its salary and incentive compensation
is competitive, there can be no assurance that the Company will be able to
retain its existing personnel or attract additional qualified employees in the
future. See "Business--Research and Development."
FORWARD-LOOKING STATEMENTS. This Prospectus contains certain forward-
looking statements concerning the Company's operations, economic performance
and financial condition, including, among other things, the Company's growth
strategies for its cutting and welding laser business and laser marking
business. These statements are based on the Company's expectations and are
currently subject to various risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors,
including those identified under this "Risk Factors" section and elsewhere in
this Prospectus.
CONFLICTING PATENTS AND OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES; POTENTIAL INFRINGEMENT CLAIMS. The Company from time to time receives
notices from third parties alleging infringement of such parties' patent or
other intellectual property rights by the Company's products. While such
notices are common in the Company's industry and the Company has in the past
been able to develop non-infringing technology or license necessary patents or
technology on commercially reasonable terms, there can be no assurance that
the Company would in the future prevail in any litigation seeking damages or
expenses from the Company or to enjoin the Company from selling its products
on the basis of such alleged infringement, or that the Company would be able
to develop any non-infringing technology or license any valid and infringed
patents on commercially reasonable terms. In the event any third party made a
valid claim against the Company or its customers and a license were not made
available to the Company on commercially reasonable terms, the Company would
be adversely affected.
In July 1996, the Company received notice of an opposition filed by a
competitor in the European Patent Office ("EPO") which challenges on a number
of grounds one of the two third-party patents licensed by the Company covering
certain aspects of its diffusion-cooled CO\2\ Slab laser. The
10
<PAGE>
U.S.-issued counterpart of this patent was previously the subject of a
reexamination proceeding in the U.S. Patent and Trademark Office ("PTO") at
the conclusion of which the patent was upheld. While the decision of the PTO
is not binding on the EPO, based on the outcome of the U.S. reexamination
proceeding and management's review of the arguments made in the notice of
opposition, the Company believes that such notice of opposition is without
substantial merit. The Company intends to defend the EPO opposition proceeding
vigorously.
In July 1996, the Company received a letter from a manufacturer of sealed-
off, RF-excited CO\2\ lasers for military and commercial avionics applications
offering a license of its U.S. patents covering such technology in exchange
for a cross-license of the Company's CO\2\ Slab laser technology. Based on its
review of the patents held by such manufacturer, the Company does not believe
that its products infringe such patents, and it intends to defend vigorously
any infringement action which such party may commence against the Company.
From time to time, the Company files notices of opposition to certain
patents on laser technologies held by others, including academic institutions
and competitors of the Company, which the Company believes could inhibit its
ability to develop products in this area. In particular, the Company has a
pending notice of opposition against a patent held by a competitor which it
believes conflicts with a third-party patent licensed by the Company covering
certain aspects of its diffusion-cooled CO\2\ Slab laser. No assurance can be
given that the Company will be able to avoid an action by such competitor or
others or not be forced to initiate its own actions to protect its proprietary
position.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY. The Company's future success
depends in part upon its intellectual property, including trade secrets, know-
how and continuing technological innovation. There can be no assurance that
the steps taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation or that others will not develop
competitive technologies or products. The Company currently holds 32 United
States and foreign patents on its laser sources. There can be no assurance
that other companies are not investigating or developing other technologies
that are similar to the Company's, that any patents will issue from any
application filed by the Company or that, if patents do issue, the claims
allowed will be sufficiently broad to deter or prohibit others from marketing
similar products. In addition, there can be no assurance that any patents
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights thereunder will provide a competitive advantage to the
Company. See "Business--Intellectual Property."
FUTURE CAPITAL REQUIREMENTS. The Company is devoting substantial resources
to the development of new products for the high-power CO\2\ and solid state
laser markets and the semiconductor equipment market. Although the Company
believes that the existing cash balances, cash flow from operations, available
lines of credit, proceeds retained from the Offerings and any proceeds
received by the Company from the exercise of the U.S. Underwriters' over-
allotment option will be sufficient to meet its capital requirements at least
through fiscal 1997, the Company may be required to seek additional equity or
debt financing to compete in these markets. The timing and amount of such
capital requirements cannot be precisely determined at this time and will
depend on several factors, including demand for the Company's products and
products under development and changes in the Company's three principal
markets. There can be no assurance that such additional financing will be
available when needed, or, if available, will be on satisfactory terms. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
LIMITATION ON UTILIZATION OF U.S. NET OPERATING LOSS CARRYFORWARDS
At June 30, 1996, the Company had U.S. federal net operating loss
carryforwards available of $9.8 million, which expire in 2008. Upon the
consummation of the Offerings, the utilization by the
11
<PAGE>
Company of its U.S. net operating loss carryforwards will be subject to
limitation under Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), as a result of the occurrence of a change of ownership within
the meaning of Section 382. Based upon the level of the Company's historical
taxable income and projections for future taxable income over the periods in
which such U.S. net operating loss carryforwards are utilizable, the Company
believes that it is more likely than not the Company will realize the benefits
of such U.S. net operating loss carryforwards.
HOLDING COMPANY STRUCTURE RISKS. The Company conducts all of its operations
through subsidiaries. Accordingly, the primary internal source of the
Company's cash is dividends and other distributions from its subsidiaries, as
well as intercompany advances. Each of these subsidiaries (other than RSI) was
formed under the laws of, and has its operations in, a country other than the
United States, the jurisdiction of the Company's organization. The
subsidiaries' ability to make distributions to the Company are subject to
their having sufficient funds from their operations legally available for the
payment thereof which are not needed to fund their operations, obligations or
other business plans. The laws under which the Company's subsidiaries in
France, Italy and Japan are organized provide generally that dividends may be
declared out of yearly profits subject to the maintenance of registered
capital and required reserves and after the recovery of accumulated losses. If
the Company's subsidiaries are unable to make distributions to the Company,
the Company's growth may be inhibited unless the Company is able to obtain
additional debt or equity financing. The Company may not be able to obtain
debt financing if it cannot compel its subsidiaries to make distributions to
service the debt financing or obtain upstream guarantees from its subsidiaries
with respect to such debt financing. Because the Company is a stockholder of
each of its subsidiaries, the Company's claims as such will generally rank
junior to all other creditors of and claimants against its subsidiaries. In
the event of a subsidiary's liquidation, there may not be assets sufficient
for the Company to recoup its investment therein.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company's products are
currently marketed in approximately 25 countries, with Germany, the rest of
Europe, the United States and the Asia/Pacific region being the Company's
principal markets. Sales in the Company's principal markets are subject to
risks inherent in international business activities, including, in particular,
general economic conditions in each such country, overlap of differing tax
structures, management of an organization spread over various jurisdictions,
unexpected changes in regulatory requirements and compliance with a variety of
foreign laws and regulations. Other general risks associated with
international operations include import and export licensing requirements,
trade restrictions and changes in tariff and freight rates. The business and
operations of the Company's principal subsidiary, RSL, are primarily subject
to the changing economic and political conditions prevailing from time to time
in Germany. Although productivity in Germany is generally high, labor costs,
corporate taxes and employee benefit expenses are high and weekly working
hours are shorter in Germany compared to the rest of the European Union, the
United States and Japan.
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF COMMON STOCK PRICE. Prior
to this offering, there has been no public market for the Company's Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price of the Common Stock
was negotiated between the Company and the Representatives of the
Underwriters, and may not be indicative of the market price for the Common
Stock after the offering. See "Underwriting" for information relating to the
several factors used in determining the initial public offering price of the
Common Stock. The Company believes that factors such as quarterly fluctuations
in results of operations, announcements of new products, technologies or
customers by the Company or its competitors and developments with respect to
intellectual property, shortfalls in the Company's operations relative to
analysts' expectations, and other matters may cause the market price of its
Common Stock to fluctuate, perhaps substantially. In addition, in recent
years, the stock market in
12
<PAGE>
general, and the shares of technology companies in particular, have
experienced wide price fluctuations. These broad market and industry
fluctuations, particularly in the Semiconductor & Electronics industry, may
adversely affect the market price of the Company's Common Stock.
DILUTION. Purchasers of the shares of Common Stock offered hereby will
experience immediate dilution in the net tangible book value per share from
the initial offering price. See "Dilution."
POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW; POSSIBLE ISSUANCES OF
PREFERRED STOCK. The Company is subject to the provisions of Section 203 of
the Delaware General Corporation Law ("DGCL") prohibiting publicly held
Delaware corporations from engaging in business combinations with certain
stockholders for a specified period of time without the approval of
substantially all of its outstanding voting stock. Such provisions could delay
or impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such
events could be beneficial, in the short term, to the interests of the
stockholders. The Company's Certificate of Incorporation (as defined herein)
and By-laws contain provisions relating to the limitations of liability and
indemnification of its directors and officers, dividing its Board of Directors
into three classes of directors serving three-year terms and providing that
its stockholders can take action only at a duly called annual or special
meeting of stockholders. These provisions also may have the effect of
deterring hostile takeovers or delaying changes in control or management of
the Company. Additionally, the Company's Board of Directors intends to adopt a
stockholder rights plan prior to the closing of the Offerings and to issue
rights under such plan to all purchasers of the Common Stock of the Company.
In certain circumstances, the fact that certain corporate devices are in place
which inhibit or discourage takeover attempts could reduce the market value of
the Company's Common Stock. See "Description of Capital Stock--Certain
Provisions of the Company's Certificate of Incorporation and By-Laws"; "--
Section 203 of the Delaware General Corporation Law"; and "--Rights
Agreement."
The Board of Directors may issue shares of preferred stock without
stockholder approval on such terms as the Board may determine. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. Moreover, although the ability to issue preferred stock may provide
flexibility in connection with possible acquisitions and other corporate
purposes, such issuance may make it more difficult for a third party to
acquire, or may discourage a third party from acquiring, a majority of the
voting stock of the Company. The Company has no current plans to issue any
shares of preferred stock. See "Description of Capital Stock--Preferred
Stock."
USE OF PROCEEDS
The net proceeds to the Company (before deducting expenses of the Offerings
payable by the Company estimated at $233,000) from the sale of the Common
Stock offered hereby are estimated to be approximately $89.3 million ($102.7
million if the Underwriters' overallotment option is exercised in full). Of
such net proceeds received by the Company, approximately $70.3 million will be
paid to Siemens and SPC as consideration for the acquisition of all the
outstanding stock of RSL and RSI. Assuming such acquisition occurred at June
30, 1996, the excess of the $70.3 million over the net assets of the Company
would represent a distribution in the amount of $28.5 million to Parent for
accounting purposes. The cost of the assets to be acquired from Siemens and
SPC was determined based on the offering price of the Common Stock. The
offering price was determined through discussions and negotiations among the
Company, Siemens, SPC and the Underwriters. Among the factors considered in
determining the offering price of the Common Stock were the market values and
price/earnings multiples of publicly traded common stock of certain other
companies of comparable size in the material processing and electro-optical
laser industries and the machine tool industry, the experience of the
Company's management and the position of the Company in its industry and its
prospects, the general status of the securities markets, the market conditions
for new offerings of securities and the demand for common stock and for
similar securities of comparable companies. See "Prospectus Summary--The
Company--Background of the Offerings" and "Certain Transactions."
13
<PAGE>
The remainder of the net proceeds of the Offerings ($19.0 million, together
with any net proceeds received by the Company from the exercise of the
Underwriters' over-allotment option) will be used for general corporate
purposes, including repayment of $7.0 million of indebtedness owed to Siemens
and SC and future acquisitions, if any. Pending such use, such proceeds will
be used to reduce short-term indebtedness or invested in short-term
investments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation--Liquidity and Capital Resources" and "Certain
Transactions."
DIVIDEND POLICY
The Company currently intends to retain all of its net earnings after
consummation of the Offerings to fund the development of its business and does
not anticipate paying dividends in the foreseeable future. The declaration and
payment of future dividends by the Company, if any, will be at the sole
discretion of its Board of Directors, and will depend upon, among other
things, the Company's profitability, financial condition, cash requirements,
future prospects, general business conditions, the terms of any of the
Company's debt agreements and other factors the Company's Board of Directors
may in the future consider to be relevant.
DILUTION
Dilution per share represents the difference between the amount per share
paid by new investors purchasing shares of Common Stock in the Offerings and
the net tangible book value per share of Common Stock immediately after
completion of the Offerings. "Net tangible book value per share" represents
total tangible assets minus total liabilities divided by the total number of
shares outstanding on the relevant date. The following table illustrates such
per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share(1)......................... $9.50
Net tangible book value per share at June 30, 1996(2)............ $5.29
Net increase in net tangible book value per share attributable
to the Offerings................................................ .79
-----
Pro forma net tangible book value per share after the Offer-
ings(3)......................................................... 6.08
-----
Dilution per share to new investors in the Offerings(4).......... $3.42
=====
</TABLE>
- --------
(1) Before deduction of underwriting discounts.
(2) Represents net tangible book value per share at June 30, 1996 based on
7,894,736 shares, representing the assumed number of shares to be issued,
the proceeds from which will be used to purchase the shares of RSL and
RSI.
(3) Represents the pro forma net tangible book value per share at June 30,
1996 based on net tangible book value of $60.8 million and 10 million
shares outstanding after the Offerings. See "Capitalization."
(4) Dilution is determined by subtracting pro forma net tangible book value
per share after the Offerings from the amount of cash paid by an investor
for one share of Common Stock.
14
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company, assuming an initial public offering price of $9.50 per share, (i)
as of June 30, 1996, and (ii) as adjusted to reflect the Offerings and the use
of the net proceeds to repay $7 million of indebtedness owed to Siemens and
SPC. See "Use of Proceeds." As more fully described in Note 1(a) of the Notes
to Combined Financial Statements, the acquisition of all of the outstanding
stock of RSL and RSI by the Company immediately prior to the closing of the
Offerings will be accounted for as a combination of entities under common
control in a manner similar to pooling-of-interests accounting. The
information in the table below is qualified in its entirety by, and should be
read in conjunction with, the Company's Combined Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Advances from Parent...................................... $ 7,000 $ 0
Short-term debt (including lines of credit and bank
loans)................................................... 25,587 25,587
======= =======
Long-term debt............................................ $ 0 $ 0
Stockholders' equity:
Parent's capital........................................ 39,021 0
Preferred Stock, par value $0.01 per share, 5 million
shares authorized; no shares issued or outstanding..... -- --
Common Stock, par value $0.01 per share, 50 million
shares authorized; no shares issued and outstanding as
of June 30, 1996; and 10 million shares issued and out-
standing, as adjusted.................................. -- 100
Paid-in capital......................................... 0 57,908(1)
Cumulative foreign currency translation adjustment...... 2,777 2,777
------- -------
Total stockholders' equity............................ 41,798 60,785
------- -------
Total capitalization................................ $74,385 $86,372
======= =======
</TABLE>
- --------
(1) Represents the sum of parent's capital of $39 million plus the remainder
of the net proceeds of the Offerings, after expenses, of $19 million less
$0.1 million allocated to the par value of Common Stock issued. See "Use of
Proceeds."
15
<PAGE>
SELECTED COMBINED FINANCIAL INFORMATION AND OPERATING DATA
The Statement of Operations Data for each of the years in the three-year
period ended September 30, 1995 and the nine-month period ended June 30, 1996
and the Balance Sheet Data as of September 30, 1994 and 1995 and June 30, 1996
set forth below have been derived from the Company's combined financial
statements included elsewhere in this Prospectus which have been audited by
KPMG Peat Marwick LLP, the Company's independent auditors. Net sales for the
fiscal years ended September 30, 1991 and 1992 and Balance Sheet Data as of
September 30, 1993 are unaudited and have been derived from the Company's
historical financial records. The Statement of Operations Data for the nine-
month periods ended June 30, 1995 and the Balance Sheet Data as of September
30, 1993 are unaudited but, in the opinion of management, such information
reflects all adjustments, consisting of only normal recurring adjustments
necessary for a fair presentation of the financial data for the interim
periods. The results for the interim periods presented are not necessarily
indicative of the results for the full year. These data should be read in
conjunction with "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's Combined
Financial Statements and other financial information appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- --------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales(1)................ $60,034 $69,217 $ 92,466 $65,460 $ 83,372
Cost of goods sold.......... 47,745 46,993 57,162 40,475 51,466
Gross profit................ 12,289 22,224 35,304 24,985 31,906
Selling, general, and admin-
istrative expenses......... 21,951 17,059 20,673 14,534 15,221
Research and development ex-
penses..................... 10,276 6,834 6,719 5,903 5,850
Income (loss) from opera-
tions...................... (19,938) (1,669) 7,912 4,548 10,835
Net interest expense........ 1,654 1,308 1,272 947 790
Income (loss) before income
taxes...................... (21,386) (3,116) 6,265 3,489 10,092
Income tax expense (bene-
fit)....................... (1,565) (1,422) 3,052 1,725 4,354
Net income (loss)........... (19,821) (1,694) 3,213 1,764 5,738
Pro forma net income per
common share............... .37 .66
Shares used in computing pro
forma net income per
shares(2).................. 8,631,578 8,631,578
OPERATING DATA:
As percentage of sales:
Gross profit................ 20.5% 32.1% 38.2% 38.2% 38.3%
Selling, general and admin-
istrative expenses......... 36.6 24.6 22.4 22.2 18.3
Research and development ex-
penses..................... 17.1 9.9 7.3 9.0 7.0
Income (loss) from opera-
tions...................... (33.2) (2.4) 8.6 6.9 13.0
Income (loss) before income
taxes...................... (35.6) (4.5) 6.8 5.3 12.1
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------
AT JUNE 30,
1993 1994 1995 1996
------- ------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(3)........................ $ 7,672 $ 4,927 $14,530 $ 18,981
Total assets.............................. 84,580 76,667 90,995 104,509
Line of credit and loans.................. 22,196 22,380 21,805 25,587
Stockholders' equity...................... 35,837 30,583 39,673 41,798
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------- ---------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization...... 2,803 2,527 2,364 1,773 1,830
Backlog............................ 12,500 17,000 26,500 26,900 35,900
Sales per employee................. 135 184 227 166 188
</TABLE>
- -------
(1) Net sales for the years ended September 30, 1991 and 1992 were $72,900 and
$73,300, respectively. Other financial data for fiscal years 1991 and 1992
have not been provided as comparable information during these periods is
not available due to changes in accounting software, overhead and expense
allocation policies of the Company's parent and lack of historical US GAAP
financial information for certain foreign locations.
(2) Pro forma net income per share has been calculated for the year ended
September 30, 1995 and the nine months ended June 30, 1996 assuming that
8,631,578 shares have been outstanding for such periods. Such shares
represent a portion of the number of shares to be issued pursuant to the
Offerings, the proceeds from which will be used to purchase the shares of
RSL and RSI and to repay $7 million of indebtedness owed to Siemens and
SC.
(3) Working capital is defined as total current assets less total current
liabilities.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Combined Financial Statements thereto included elsewhere in this Prospectus.
OVERVIEW
Rofin-Sinar is a leader in the design, development, engineering,
manufacture and marketing of laser-based products used for cutting, welding
and marking a wide range of industrial materials. During the 1995 fiscal year
and the first nine months of fiscal 1996, respectively, approximately 75% and
69% of the Company's revenues were from sales and servicing of laser products
for cutting and welding applications and approximately 25% and 31% were from
sales and servicing of laser products for marking applications.
Restructuring
Through the late 1980's, in anticipation of continued growth in the Machine
Tool industry, the Company added capacity and pursued a strategy of vertical
integration to support projected growth in its business. The Machine Tool
industry experienced a significant downturn during the global recession in the
early 1990's as end-users, particularly in the heavy manufacturing industries,
reduced their investment in new technologies and postponed modernizing their
production facilities in the face of adverse business conditions. In Germany,
for example, the downturn in the Machine Tool industry resulted in an almost
40% drop in demand. Purchases of lasers by machine tool manufacturers began to
drop significantly and, in 1992, laser manufacturers, including the Company,
reduced their prices in response to reduced market demand. In light of this
change in market conditions, in 1993 the Company undertook a major
restructuring program to reduce its manufacturing costs, fixed costs and
overhead and better position the Company to benefit from improving business
conditions.
The Restructuring occurred over a three-year period. In 1993, the Company
reduced its workforce in both the United States and Germany by approximately
125 employees, closed operations in San Jose, California, consolidated its
U.S. research and development, manufacturing and marketing activities,
reengineered its manufacturing processes and streamlined its product offering.
In addition, the Company refocused its research and development activities on
marketable new products, commenced a program to outsource non-strategic
components, subleased office space to third parties in Hamburg and broadened
the range of laser applications offered by the Company. In 1994, the Company
continued to outsource non-strategic components and increased use of sub-
assembled systems. In 1995, the Company disposed of its in-house machine shop.
With the improvement of economic conditions in the United States in 1994
and in Europe in 1995, manufacturers of lasers for material processing have
experienced rapid growth, driven primarily by pent-up demand as industrial
end-users worldwide modernize their manufacturing facilities to reduce
production costs and increase efficiency. The Company experienced significant
financial improvement during the 1994 and 1995 fiscal years and the first nine
months of fiscal 1996, primarily reflecting improving economic conditions, the
benefits of the Restructuring undertaken in 1993 and 1994 and the
implementation of the Company's current business strategy. Rofin-Sinar's
worldwide sales increased from $60 million for the fiscal year ended September
30, 1993 to $92.5 million for the fiscal year ended September 30, 1995,
representing a compounded annual growth rate of approximately 24.1% per annum.
This increase was due principally to growth in sales across the Company's
entire product range and in all three principal geographic markets, with the
strongest growth in sales of the Company's laser marking products, which
increased from $10.1 million to $22.8 million over such three-year period.
Total net sales increased to $83.4 million in the first nine months of fiscal
1996 (compared to $65.5 million in the comparable prior period), representing
an increase of 27.4% over the prior period. The growth in the Company's net
sales since fiscal 1993 has allowed the
17
<PAGE>
Company to realize improved operating leverage by producing larger unit
volumes over relatively lower costs and by negotiating more favorable terms
for purchases of components and subassemblies. While the Company expects to
continue to see growth in fiscal 1997 and 1998, with the strongest long-term
gains in the Asia/Pacific region principally in laser cutting and marking
applications, there can be no assurance that the Company's recent rate of
growth will be maintained.
The laser industry continues to be characterized by significant price
competition. As part of its ongoing strategy, the Company is continuing its
efforts to contain costs in order to improve its cost structure.
Currency Exchange Rates
The Company's Combined Financial Statements are prepared in U.S. dollars.
Although the Company reports its results in U.S. dollars, approximately two-
thirds of its sales are denominated in other currencies, including primarily
German marks, as well as French francs, Italian lire and Japanese yen. Net
sales and costs and related assets and liabilities are generally denominated
in the functional currencies of the operations, thereby serving to reduce the
Company's exposure to exchange gains and losses. Exchange differences upon
translation from each operation's functional currency to United States dollars
are accumulated as a separate component of equity. The currency translation
adjustment component of shareholders' equity changed from a $169,000 debit at
September 30, 1993 to a $1.5 million credit at September 30, 1994, from the
$1.5 million credit at September 30, 1994 to a $5.4 million credit at
September 30, 1995 and from the $5.4 million credit at September 30, 1995 to a
$2.8 million credit at June 30, 1996. These changes arose primarily from the
strengthening of the German mark and such other functional currencies against
the U.S. dollar during the fiscal 1994-1995 period and the strengthening of
the U.S. dollar against such foreign currencies during the first nine months
of fiscal 1996, and reflect the fact that a high proportion of the Company's
capital is invested in its German operations, whose functional currency is the
German mark.
The fluctuation of the German mark and the other relevant functional
currencies against the U.S. dollar has had the effect of increasing or
decreasing (as applicable) reported net sales, as well as cost of goods sold
and gross margin and selling, general and administrative expenses, denominated
in such foreign currencies when translated into U.S. dollars as compared to
prior periods. See "Risk Factors -- Currency Risk."
While the Company has not in the past engaged in hedging transactions,
following the closing of the Offerings, it intends to implement a policy to
hedge up to 50% of its net foreign currency exposure utilizing forward
exchange contracts, forward exchange options and currency swap contracts. The
Company also intends to continue to borrow in each operating subsidiary's
functional currency to reduce its exposure to foreign currency gains and
losses. There can be no assurance, however, that changes in currency exchange
rates will not have a material adverse effect on the Company's business,
financial condition and results of operations.
The following table illustrates the effect of the changes in exchange rates
on the Company's fiscal 1994 and 1995 net sales, gross profit and income from
operations, which have been recalculated to show what such amounts would have
been applying 1993 average exchange rates to 1994 amounts and 1994 average
exchange rates to 1995 amounts.
<TABLE>
<CAPTION>
FISCAL
1993 FISCAL 1994 FISCAL 1995
------ ---------------- ---------------
IN 1993 IN 1994
EXCHANGE EXCHANGE
ACTUAL ACTUAL RATES ACTUAL RATES
------ ------ -------- ------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 60.0 $69.2 $69.8 $92.5 $85.4
Gross profit........................... 12.3 22.2 22.5 35.3 32.2
Income (loss) from operations.......... (19.9) (1.7) (1.7) 7.9 7.2
</TABLE>
18
<PAGE>
Between fiscal 1993 and 1994, the German mark weakened against the U.S.
dollar by approximately 1.9%. The impact of this weakening of the German mark
was to decrease net sales and gross profit by $600,000 and $300,000,
respectively, with no impact on loss from operations. Between fiscal 1994 and
1995, the German mark strengthened against the U.S. dollar by approximately
14%. The impact of this strengthening of the German mark was to increase net
sales, gross profit and income from operations by $7.1 million, $3.1 million
and $700,000, respectively. The other factors affecting these results are
discussed below under "--Results of Operations."
Taxes
Although prior to the Offerings RSI and RSL have filed consolidated income
tax returns with SC and Siemens, respectively, the Company's subsidiaries pay
taxes in many jurisdictions and the provisions for income taxes in the
Company's Combined Financial Statements are based on separate local tax
computations. On a combined basis, this practice may result in the Company
incurring income tax expense even though it may not have combined pre-tax
income or in paying taxes in excess of pre-tax income if some of its
subsidiaries are not profitable while others are. See Note 9 of the Notes to
the Combined Financial Statements. In particular, because of the Company's
substantial operations in Germany, the Company historically has had a higher
effective tax rate than many of its competitors who do not have operations in
Germany.
The Company currently generates taxable income, principally in Germany and
the United States. German corporate tax law applies the imputation system with
regard to the taxation of the income of a corporation (such as RSL). In
general, retained corporate income is subject to a municipal trade tax (which
for Hamburg and Gunding on a combined basis is 16.7%), which is deductible for
federal corporate income tax purposes, a federal corporate income tax rate of
45% (50% prior to January 1, 1994) and, effective January 1, 1995, a surcharge
of 7.5% on the federal corporate income tax amount.
Profits which are distributed by a German corporate taxpayer (such as RSL)
in the form of a dividend are subject to a reduced federal corporate income
tax rate of 30% (36% prior to January 1, 1994) plus the 7.5% surcharge on the
federal corporate income tax amount calculated at the reduced rate. Dividends
paid by RSL to Rofin-Sinar Technologies Inc. will be subject to withholding
tax at a rate of 5% pursuant to the income tax treaty currently in effect
between the United States and Germany.
Although the Company intends to identify and implement strategies to reduce
its effective tax rate, the Company does not expect its effective tax rates in
the future to decrease significantly below its effective tax rate for the nine
months ended June 30, 1996.
ACQUISITIONS
Since its inception in 1975, Rofin-Sinar has made a series of significant
acquisitions and entered into strategic relationships in order to expand its
product offering, enter into new geographic markets and broaden the range of
industrial applications offered to its customer base.
The Company's first significant acquisition was in 1988 when it acquired
Spectra-Physics Corporation's Industrial Laser Division (which at that time
was the U.S. licensee of Rofin-Sinar's fast axial-flow CO/2/ laser
technology). This acquisition enabled Rofin-Sinar to gain a more rapid entry
into the U.S. market for industrial CO/2/ lasers. Later that year the Company
established a presence in the French market through its acquisition of Optilas
Laser Industriel.
The Company's second significant acquisition occurred in 1989 when the
Company acquired Laser-Optronic GmbH, a manufacturer of laser marking
products, from Coherent General Inc. Through this acquisition, the Company
expanded its product offering to include laser marking. In that same
19
<PAGE>
year, the Company took over responsibility for the manufacture and marketing
of Siemens' "Silamatik" line of laser marking products.
While there are currently no commitments with respect to any future
acquisitions, the Company's business strategy includes the expansion of its
products and services, which may be effected through acquisitions. The Company
from time to time reviews various opportunities to acquire businesses,
technologies or products complementary to the Company's present business.
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth the percentage of
net sales represented by the respective line items in the Company's combined
statements of operations and the percentage increase (decrease) from the
previous period's results.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------
NINE MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, JUNE 30,
------------------- ------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold......................... 79.5 67.9 61.8 61.8 61.7
Gross profit............................... 20.5 32.1 38.2 38.2 38.3
Selling, general and administrative ex-
penses.................................... 36.6 24.6 22.4 22.2 18.3
Research and development expenses.......... 17.1 9.9 7.3 9.0 7.0
Income (loss) from operations.............. (33.2) (2.4) 8.6 6.9 13.0
Income (loss) before income taxes.......... (35.6) (4.5) 6.8 5.3 12.1
Net income (loss).......................... (33.0) (2.4) 3.5 2.7 6.9
</TABLE>
NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO NINE MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales of $83.4 million for the first nine months of fiscal
1996 increased by $17.9 million, or 27.4%, over the comparable prior period.
The improvement resulted from net sales increases of $11.8 million, or 26.6%,
in Europe and the Asia/Pacific region and $6.1 million, or 28.9%, in the
United States. The growth in Europe and the Asia/Pacific region resulted from
continuing increases in sales volume of the Company's integrated circuit laser
marking application in the Asia/Pacific region, the introduction of the
Company's Slab-Series laser product and the recovery of the Machine Tool
market in Japan. The increase in net sales in the United States was due
principally to increased shipments to the Machine Tool and Automotive markets,
with the largest portion of growth attributable to increased sales volume of
CO/2/ lasers for cutting applications and spare parts and the introduction of
the Company's laser marking products in the United States. The effect of
currency translation on net sales was immaterial.
Cost of Goods Sold. Cost of goods sold of $51.5 million in the first nine
months of fiscal 1996 increased by $11 million, or 27.2%, over the comparable
prior period, and reflected the increase in net sales. As a percentage of
sales, cost of goods sold was unchanged, and reflected the Company's
continuing effort to control manufacturing costs.
Gross Profit. The Company's gross profit of $31.9 million for the first
nine months of fiscal 1996 increased by $6.9 million, or 27.7%, over the
comparable prior period as a result of the increase in net sales in the first
nine months of fiscal 1996 as compared to the comparable prior period. As a
percentage of net sales, gross profit was unchanged from the comparable prior
period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (which include the cost of application development) of
$15.2 million for the first nine months of fiscal
20
<PAGE>
1996 increased by 4.7% over the comparable prior period due to the increase in
net sales. However, as a percentage of net sales, selling, general and
administrative expenses declined from 22.2% in the first nine months of fiscal
1995 to 18.3% in the comparable period in fiscal 1996, reflecting the
Company's continuing control of these expenses, notwithstanding the opening of
a sales and marketing office in Phoenix, Arizona to develop the Company's
laser marking business in the U.S. market and the establishment of a service
office in Hong Kong to support all product lines in the Asia/Pacific region.
Research and Development Expenses. Research and development expenses of
$5.9 million (which are incurred primarily in German marks and are net of
government grants) remained virtually unchanged from the first nine months of
fiscal 1995 to the comparable period in fiscal 1996. Research and development
expenses declined as a percentage of sales from 9% in the first nine months of
fiscal 1995 to 7% in the comparable period in fiscal 1996 due to the increase
in sales between the two periods.
Income from Operations. The Company's income from operations of $10.8
million for the first nine months of fiscal 1996 increased by $6.3 million, or
138.2%, over the comparable prior period. As a percentage of sales, income
from operations was 13% in the first nine months of fiscal 1996 as compared to
6.9% in the prior period, as a result of continued reductions in selling,
general and administrative expenses and research and development expenses as a
percentage of net sales. The effect of currency translation on income from
operations was immaterial.
Income Before Income Taxes. The Company's income before income taxes of
$10.1 million in the first nine months of fiscal 1996 increased by $6.6
million over the prior period. As a percentage of net sales, income before
income taxes was 12.1% in the first nine months of fiscal 1996, as compared to
5.3% in the prior period, as a result of the increase in income from
operations and the decrease in interest expense accrued under the Company's
intercompany lines of credit with Siemens and SC and borrowing facilities
utilized by its joint venture subsidiary in Japan due to lower interest rates.
Income Tax Expense. Income tax expense was $4.4 million in the first nine
months of fiscal 1996 compared to an income tax expense of $1.7 million in the
prior period. The effective tax rates for the first nine months of fiscal 1996
and the comparable prior period were 43.1% and 49.4%, respectively. The
effective tax rates were higher than the U.S. statutory rate of 35%
principally as a result of earnings taxed at higher foreign statutory rates
and foreign operating losses for which no benefit was recognized in the first
nine months of fiscal 1995.
Net Income. As a result of the foregoing factors, the Company's net income
of $5.7 million in the first nine months of fiscal 1996 increased by $4.0
million over the comparable prior period.
As a result of certain administrative costs that it will incur as an
independent publicly held company, the Company expects initially to reflect
approximately $700,000 per year of additional operating expenses in the
aggregate. The Company believes such incremental costs should initially be
partially offset by reduced net interest costs resulting from the utilization
of the net proceeds as described in "Use of Proceeds".
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales of $92.5 million for fiscal 1994 increased by $23.2
million, or 33.6%, over the prior year. The improvement resulted from net
sales increases of $20.6 million, or 51.2%, in Europe and the Asia/Pacific
region and $2.6 million, or 9%, in the United States. The growth in Europe and
the Asia/Pacific region resulted primarily from the substantial increase in
the sales volume of the Company's laser marking products in the Asia/Pacific
region, as well as the strong recovery in Europe of the Machine Tool and
Automotive markets due to pent-up demand, which resulted in higher volume
21
<PAGE>
as well as a shift in product mix toward higher-margin high-power products. In
addition, approximately $7.5 million, or 36.4% of the increase in Europe and
the Asia/Pacific region resulted from currency translation as the German mark
strengthened against the U.S. dollar. The increase in the United States was
due principally to the increased volume of shipments to the improving Machine
Tool and Automotive markets, with the largest portion of growth in sales of
CO/2/ lasers for cutting applications and related service and spare parts.
Because the recovery in both these markets began in 1994, the percentage
increase in the United States was lower in 1995 compared to 1994.
Cost of Goods Sold. Cost of goods sold of $57.2 million for fiscal 1995
increased by $10.2 million, or 21.6%, over the prior year, but as a percentage
of net sales declined from 67.9% in fiscal 1994 to 61.8% in fiscal 1995. The
decrease in the cost of goods sold as a percentage of net sales reflected
higher capacity utilization in Germany during the period, as the Company
recognized the benefits of the Restructuring undertaken in Germany in fiscal
1993 and 1994, as well as the outsourcing of the German subsidiary's machine
shop operation. Net sales per employee increased from $184,000 in fiscal 1994
to $227,000 in fiscal 1995, a productivity increase of 23%.
Gross Profit. The Company's gross profit of $35.3 million for fiscal 1995
increased by $13.1 million, or 58.9%, over the prior year, as a result of the
increase in net sales in fiscal 1995 as compared to fiscal 1994 and the
decrease in cost of goods sold as a percentage of net sales. As a percentage
of net sales, gross profit increased from 32.1% in fiscal 1994 to 38.2% in
fiscal 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (which include the costs of application development)
of $20.7 million for fiscal 1995 increased by $3.6 million, or 21.2%, over
fiscal 1994. However, as a percentage of net sales, selling, general and
administrative expenses declined from 24.6% in fiscal 1994 to 22.4% in fiscal
1995 as the Company continued to control these expenses despite a significant
increase in marketing activity in the Asia/Pacific region related to the
Company's laser marking products and the launch of the Company's HF cross-flow
laser in the United States.
Research and Development Expenses. Research and development expenses of
$6.7 million (which are incurred principally in German marks and are net of
government grants) remained essentially unchanged from fiscal 1994 to fiscal
1995, decreasing by only $115,000, or 1.7%. Although research and development
expenses declined as a percentage of sales from 9.9% in fiscal 1994 to 7.3% in
fiscal 1995 due to the increase in sales in fiscal 1995, total research and
development spending rose due to an increase in government grants in fiscal
1995.
Income (Loss) from Operations. The Company's income from operations of $7.9
million for fiscal 1995 increased by $9.6 million over fiscal 1994. As a
percentage of net sales, income from operations was 8.6% in fiscal 1995 as
compared to (2.4%) in fiscal 1994, as a result of higher gross margins and the
continued reductions in selling, general and administrative expenses and
research and development expenses as a percentage of net sales. Approximately
$700,000, or 7.3%, of the increase in income from operations resulted from
currency translation as the German mark and other relevant functional
currencies strengthened against the U.S. dollar.
Income (Loss) Before Income Taxes. The Company's income before income taxes
of $6.3 million in fiscal 1995 increased by $9.4 million over fiscal 1994. As
a percentage of net sales, income before income taxes was 6.8% in fiscal 1995,
as compared to (4.5%) in fiscal 1994, as a result of the increase in income
from operations, which was offset by a slight increase in other expense of
$200,000 over fiscal 1994.
Income Tax Expense (Benefit). Income tax expense was $3 million in fiscal
1995 compared to an income tax benefit of ($1.4 million) in fiscal 1994. As a
percentage of income (loss) before income taxes, income tax expense was 48% in
fiscal 1995 and income tax benefit was (45%) in fiscal 1994,
22
<PAGE>
respectively, and reflected the fact that in fiscal 1995 all of the Company's
operations except its Japanese joint venture reported pre-tax income. The
effective tax rate in fiscal 1995 of 48% was higher than the U.S. statutory
rate of 35% principally as a result of earnings taxed at higher foreign
statutory rates and foreign operating losses for which no tax benefit was
recognized.
Net Income (Loss). As a result of the foregoing factors, the Company
recorded net income of $3.2 million in fiscal 1995 as compared to a net loss
of ($1.7 million) in fiscal 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
Net Sales. Net sales of $69.2 million for fiscal 1994 increased by $9.2
million, or 15.3%, over the prior year. The improvement resulted from net
sales increases of $3 million, or 8%, in Europe and the Asia/Pacific region
and $6.3 million, or 27.4%, in the United States. The growth in Europe and the
Asia/Pacific region resulted primarily from the introduction of the Company's
integrated circuit laser marker in the Asia/Pacific region and the shift in
product mix toward higher-margin high-power SM-Series lasers. The increase in
net sales in the United States was due principally to the recovery of the
Machine Tool and Automotive markets leading to greater shipments and a shift
in the product mix toward higher margin high-power CO\2\ lasers and spare
parts as compared to fiscal 1993 in which the Company received lower margins
on deliveries of lasers to a major OEM customer. The effect of currency
translation on net sales between fiscal 1993 and 1994 was immaterial.
Cost of Goods Sold. Cost of goods sold of $46.9 million for fiscal 1994
decreased slightly by $752,000, or 1.6%, from fiscal 1993 and declined
significantly as a percentage of net sales from 79.5% in fiscal 1993 to 67.9%
in fiscal 1994. The substantial decrease in cost of goods sold was the result
of the implementation of the Restructuring in Germany during the period, which
included the reduction of head count by 38 employees, the consolidation of the
Company's facilities in Hamburg, the reorganization of the Company's customer
support operation, the sublease of space in the Hamburg facility to others, as
well as the outsourcing of nonstrategic components and the realization of
discounts on volume purchases. As a result of the foregoing, productivity per
employee increased by 36% (net sales per employee increased from $135,000 in
fiscal 1993 to $184,000 in fiscal 1994).
Gross Profit. As a result of the increase in net sales in fiscal 1994
compared to fiscal 1993 and the decrease in cost of goods sold as a percentage
of net sales, gross profit of the Company of $22.2 million for fiscal 1994
increased by $9.9 million, or 80.8%, over fiscal 1993. As a percentage of net
sales, gross profit increased from 20.5% in fiscal 1993 to 32.1% in fiscal
1994. An increase of $5.5 million in the gross profit recorded in the United
States accounted for approximately 57.3% of the Company's gross profit
increase.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $17.1 million (which include the costs of
application development) in fiscal 1994 decreased by $4.9 million, or 22.3%,
from fiscal 1993 and as a percentage of net sales declined from 36.6% in
fiscal 1993 to 24.6% in fiscal 1994. The substantial decrease in selling,
general and administrative costs both in dollars and as a percentage of net
sales was primarily the result of the reduction in administrative personnel of
12 people in Germany pursuant to the Restructuring, as well as the
consolidation of the Company's facilities in Hamburg and ongoing cost-cutting
measures.
Research and Development Expenses. Research and development expenses of
$6.8 million (which are incurred primarily in German marks and are net of
government grants) for fiscal 1994 decreased by $3.4 million, or 33.5%, from
fiscal 1993. As a percentage of net sales, research and development expenses
declined from 17.1% in fiscal 1993 to 9.9% in fiscal 1994. The significant
decrease in research and development expenses was primarily attributable to
the reduction in research and development personnel of 16 people in Germany,
the slowing of development efforts with respect to higher-power CO\2\ lasers
and the receipt of German governmental research grants.
23
<PAGE>
Loss from Operations. The Company's loss from operations of ($1.7 million)
for fiscal 1994 decreased by $18.2 million from ($19.9 million) in fiscal
1993. The improvement resulted principally from the significant increase in
gross profit and the reductions in selling, general and administrative
expenses and research and development expenses. The Company's loss from
operations in fiscal 1993 was due to the oversized fixed cost structure
growing out of the Company's strategy of vertical integration in the late
1980's, which led to overcapacity in manufacturing and multiple research and
development projects, as well as the relocation of the Company's operations in
San Jose, California to Plymouth, Michigan.
Loss Before Income Taxes. The Company's loss before income taxes of ($3.1
million) in fiscal 1994 decreased by $18.3 million from a loss before income
taxes of ($21.4 million) in fiscal 1993. As a percentage of net sales, the
loss before income taxes decreased from (35.6%) to (4.5%).
Income Tax Benefit. Income tax benefit was ($1.4 million) in fiscal 1994
compared to an income tax benefit of ($1.6 million) in fiscal 1993. As a
percentage of loss before income taxes, income tax benefit for fiscal 1994 and
1993 was (45.6%) and (7.3%), respectively. The income tax benefit in fiscal
1994 was higher than it would have been applying the U.S. statutory rate of
35%, principally as a result of losses incurred in foreign tax jurisdictions
and a change in foreign tax rate. The income tax benefit in fiscal 1993 was
lower than it would have been applying the U.S. statutory rate, primarily as a
result of foreign operating losses for which no benefit was recognized.
Net Income (Loss). As a result of the foregoing factors, the Company's net
loss of ($1.7 million) in fiscal 1994 decreased by $18.1 million from a net
loss of ($19.8 million) in fiscal 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its cash requirements through cash flow
from operations, capital contributions and advances from Siemens and its
affiliates pursuant to intercompany lines of credit, as well as through
borrowings under credit facilities guaranteed by a Siemens affiliate. At June
30, 1996, the amount outstanding under such intercompany lines of credit from
Siemens and SC was $25.9 million. At such date, the Company also had
borrowings of $6.7 million under an intercompany loan from a Siemens affiliate
in Japan.
Net cash provided (used) by operating activities was ($1.1 million) and
$2.6 million in the nine months ended June 30, 1996 and 1995 and ($159,000)
and $5.9 million for fiscal 1995 and 1994, respectively. Cash flow from
operations in the nine months ended June 30, 1996 decreased by $3.7 million
compared to the comparable prior period despite increased net income,
primarily due to increased receivables and inventories and a reduction in
deferred income taxes, offset by increases in trade payables and accrued
liabilities and pension obligation. Cash flow from operations in fiscal 1995
decreased $6 million compared to the prior year despite the improvement in the
Company's results of operations, principally as a result of increased
receivables and inventories, offset by increases in trade payables, deferred
income taxes, accrued liabilities and pension obligation. Cash provided by
operations in fiscal 1994 increased $2.3 million in fiscal 1994 compared to
the prior year, primarily due to the reduction in the Company's net loss and
improved management of working capital.
Trade accounts receivable, net of allowances, increased $10.4 million to
$35.6 million at June 30, 1996 from September 30, 1995 and $7.3 million to
$25.1 million at September 30, 1995 from September 30, 1994. Inventories
increased $6 million to $34.1 million at June 30, 1996 from September 30, 1995
and $7.5 million to $28.2 million at September 30, 1995 from September 30,
1994. The increase in receivables was due primarily to growth in net sales. A
portion of the increase in receivables was attributable to the increased
proportion of sales to customers in Japan, where payment terms are normally
longer. Inventories increased primarily to support the growth in net sales,
and also included increases in inventory levels related to the introduction of
new products such as the
24
<PAGE>
Slab-Series laser (including units held by the Company in its applications
centers and for demonstration to customers), as well as rescheduling of
delivery dates on sales of laser markers.
Cash used in investing activities was $1.4 million in each of the nine-
month periods ended June 30, 1996 and 1995 and fiscal 1995 and $251,000 and
$806,000 in fiscal 1994 and 1993, respectively. The increase in cash used for
investing activities in periods subsequent to fiscal 1994 was primarily
attributable to increased capital expenditures, offset by sales of equipment.
Capital expenditures were $1.4 million in each of the nine-month periods ended
June 30, 1996 and 1995 and $1.9 million, $452,000 and $1.1 million in fiscal
1995, 1994 and 1993, respectively. These increases reflect the acquisition of
additional manufacturing and research and development equipment, as well as
investment in computers and telecommunications equipment.
Cash used in financing activities primarily reflects payments made to
Siemens by RSL and funds provided by Siemens to RSL under the Siemens
centralized cash management system. The Company will cease to participate in
such arrangement approximately one week after the completion of the Offerings.
As of June 30, 1996, the Company had borrowings of $6.7 million under an
intercompany loan from a Siemens affiliate in Japan. The Company intends to
refinance such borrowings utilizing the Credit Facility (as defined below)
approximately one week after the consummation of the Offerings.
The Company has obtained a commitment letter for a one-year $25 million
revolving loan facility with Deutsche Bank AG, an affiliate of Deutsche Morgan
Grenfell/C. J. Lawrence Inc. ("Deutsche Bank") to support its working capital
needs (the "Credit Facility"). Borrowings under such facility will be made at
market rates of interest at the time of each such borrowing. As is customary
for German banks in their commercial lending practices, the Credit Facility
will be governed by the General Business Conditions of Deutsche Bank (the
"General Business Conditions"). Although the terms of the commitment letter
relating to the Credit Facility do not require that any security be granted by
the Company to Deutsche Bank initially, the General Business Conditions
provide that Deutsche Bank may nonetheless make such a demand at a later time
in the event that the economic status of the Company has changed or threatens
to change in a negative manner. The Company intends to repay the amounts
outstanding under its intercompany lines of credit from Siemens and SC through
borrowings under the Credit Facility approximately one week after the
consummation of the Offerings.
The Company intends to use the net proceeds to it from the Offerings (after
repayment of $7 million of indebtedness owed to Siemens and SPC) and the
Credit Facility, together with cash from operations, to finance its future
operations. The Company believes that its existing cash flow from operations,
together with the Credit Facility, the proceeds realized from the sale of the
shares offered hereby by the Company, will be sufficient to meet its liquidity
and capital requirements at least through the end of fiscal 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation." Effective for
fiscal years beginning after December 15, 1995, Statement No. 123 encourages
companies to include the fair value of any stock awards issued as compensation
expense within their income statements. Companies that choose to remain with
Accounting Principles Board Opinion No. 25 (which uses the intrinsic value
method to account for stock awards) must disclose pro forma net income and
earnings per share as if the fair value of the award had been included as
compensation expense. The Company anticipates remaining with the intrinsic
value method.
On March 31, 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of."
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<PAGE>
This Statement provides guidance for recognition and measurement of impairment
of long-lived assets, certain identifiable intangibles and goodwill related
both to assets to be held and used and assets to be disposed of. The Company
intends to adopt this Statement as of the first quarter of its next fiscal
year and anticipates that the effect of such adoption will be immaterial.
PENSION PLAN LIABILITIES
The Company has defined benefit pension plans for substantially all of its
German and U.S. employees. As is the normal practice with German companies,
the German plan is unfunded. At June 30, 1996, the amount of the accrued
pension liability for both the German and U.S. plans was approximately $3.4
million. The German plan will, consistent with German practice, continue to be
unfunded after the consummation of the Offerings. See "Management--Executive
Compensation--Pension Plans--RSL Pension Plan" and "--Siemens Corporation
Retirement Plan."
26
<PAGE>
BUSINESS
COMPANY OVERVIEW
Rofin-Sinar is a leader in the design, development, engineering,
manufacture and marketing of laser products for cutting, welding and marking a
wide range of industrial materials. Lasers are a non-contact technology for
material processing which have several advantages that are desirable in
industrial applications. The Company's lasers all deliver a high-quality beam
at guaranteed power outputs and feature compact design, high processing speed,
flexibility, low operating and maintenance costs and easy integration into the
customer's production process. As a technological leader in both CO/2/ and
Nd:YAG lasers, the Company is able to meet a broad range of its customers'
material processing requirements. The Company believes it has a worldwide
market share (based on sales volume) of approximately 20% for laser products
used for cutting and welding applications and that it is among the largest
suppliers of laser products used for marking applications in Europe and the
Asia/Pacific region (other than Japan). Over 80% of the Company's sales in
fiscal 1995 were made to existing customers. The Company has sold more than
4,000 laser sources since 1975 and currently has over 1,500 active customers
(including multinational companies with multiple facilities purchasing from
the Company). During the 1995 fiscal year and the first nine months of fiscal
1996, respectively, approximately 75% and 69% of the Company's revenues were
from sales and servicing of laser products for cutting and welding
applications and approximately 25% and 31% were from sales and servicing of
laser products for marking applications.
Through its global manufacturing, distribution and service network, the
Company provides a comprehensive range of laser solutions to three principal
target markets for material processing lasers: the Machine Tool, Automotive
and Semiconductor & Electronics industries. The Company sells directly to
industrial end-users, to OEMs (principally in the Machine Tool industry) who
integrate Rofin-Sinar's laser sources with other system components and to
distributors. Many of Rofin-Sinar's customers are among the largest global
participants in their respective industries, and include Aerospatiale, ASM,
BMW, Boeing, Bosch, Chrysler, Ford, General Motors, Mercedes-Benz, Philips,
SGS Thomson, Siemens, Thyssen, TRW, Volkswagen and Volvo. During fiscal 1995
and the first nine months of fiscal 1996, 37% and 33% of the Company's sales
were in North America, 50% and 46% were in Europe and 13% and 21% were in the
Asia/Pacific region, respectively.
In developing its laser solutions, the Company offers customers its
expertise in: (i) product development and manufacturing (i.e., state-of-the-
art product development and manufacturing services based on over 20 years of
laser technology experience and applications know-how); (ii) application and
process development (i.e., developing new laser-based applications for
manufacturing customers and assisting them in successfully integrating lasers
into their production processes); (iii) system engineering (i.e., advising
customers on machine design, including tooling, automation and controls, for
customers in need of "turn-key" solutions); and (iv) extensive after-sales
support for its laser products (including technical support, field service,
maintenance and training programs and rapid spare parts delivery).
COMPETITIVE ADVANTAGES
The Company attributes its strong market position and its long-standing
customer relationships to several competitive advantages:
Technological Leadership and Product Innovation. Driven by its customers'
manufacturing needs, the Company has developed laser technology expertise
which keeps it at the leading edge of technological development and product
innovation. The Company's laser products feature compact design, high
processing speed, superior reliability and low maintenance requirements. In
the last three years, the Company has introduced five new CO/2/ and Nd:YAG
laser products, predominantly in the higher power range. The Company believes
that its advanced fiberoptic technology, including beam-switching and beam-
splitting techniques which permit the laser beam to be used alternately or
simultaneously at different workstations, is superior in the industry due to
its use of low power-loss fibers and adherence to safety standards.
27
<PAGE>
Sophisticated Application Development. Rofin-Sinar believes its long-
standing customer relationships are built upon the Company's sophisticated
application development. The Company has pioneered many important new laser
applications, including the welding of tailored blanks (a technique used in
car body welding), metal tubes and diamond-tipped saw blades. The Company has
approximately 40 engineers and technical personnel (including 25 Ph.D.'s)
specialized in the core competences of laser beam production, shaping,
delivery and application, as well as power supply, control interfaces,
software programming and systems integration, and it maintains a substantial
and continuously updated applications database. As a result, the Company is
able to offer customers a broad range of material processing applications
based on CO\2\ and Nd:YAG laser technology. During the initial sales process,
engineers and other technical experts from the Company's applications centers
work directly with the customer to develop and customize the optimal solution
for the customer's manufacturing requirements.
Broad Product Range. The Company distinguishes itself from the majority of
its competitors who are specialized in only one of the two principal laser
technologies for material processing by offering its customers both CO\2\ and
Nd:YAG laser sources and solutions in a variety of configurations and options.
As a technological leader in both CO\2\ lasers and Nd:YAG lasers, the Company
is able to meet a broad range of its customers' material processing
requirements, from cutting and welding of thick metal sheet to micro-cutting
and welding of electronic components to marking of integrated circuits.
Product Quality. Rofin Sinar has established itself as a quality supplier
to its customers. The Company offers "no nonsense" specifications,
guaranteeing such critical parameters as minimum output power at full power
settings under all circumstances. The Company also provides after-sale parts
and service for its products for a period of not less than 10 years. In
addition, the Company shares a common objective with its customers of pursuing
internationally recognized manufacturing and product quality standards.
Consistent with this commitment, the Company's facility in Hamburg, Germany
was certified as compliant with the quality management requirements of
International Standard ISO 9001 ("ISO 9001"), as promulgated by the
International Standards Organization ("ISO"). The Company anticipates that its
facilities in Gunding-Munich, Germany and Plymouth, Michigan will receive ISO
9001 certification during the 1997 fiscal year. The Company expects that its
U.S. operation will be qualified by Ford as a "Q-1" supplier under Ford's "Q-
1" quality management standards in fiscal 1997.
Comprehensive Customer Service. The Company is committed to a superior
level of customer service from initial discussions relating to applications,
through final system installation, to after-sale technical and product
support. Following installation, the Company frequently provides customized
training to its customers' personnel and supports its products with a
knowledgeable staff of over 70 field-based and in-house customer service
representatives worldwide. The Company believes that its customer service
support organization is one of the largest among manufacturers of lasers for
material processing applications.
Global Presence. Through its manufacturing capability in the United States,
Germany and Japan and its global distribution and service network, the Company
offers its laser sources and laser marking products in approximately 25
countries. The Company responds to the global nature of its customer base as
well as the important regional areas in which certain of its customers operate
by following its multinational customers into new geographic regions where it
provides local service and support.
BUSINESS STRATEGY
The Company's business strategy is to maximize shareholder value by (i)
strengthening its position as a leading supplier to the global market for
cutting and welding applications and (ii) capitalizing on its leadership
position in cutting and welding, its strength in the European and Asian
marking markets and its other significant competitive advantages to build its
share of the U.S. market for marking applications. The Company believes that
the major sources of its growth over the next three years will be the
following:
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<PAGE>
. Developing New Laser Products through Technological Innovation: Product
innovation in response to evolving customer needs for increased output
power, greater penetration and higher processing speeds is a key
component of the Company's strategy. The Company is currently focusing
its research and development activity on increasing the output power of
its CO\2\ diffusion-cooled Slab lasers and on developing diode-pumped
solid state lasers. The Company intends to enhance its position in its
existing high-power CO\2\ laser market primarily in the Machine Tool
segment by increasing sales of its new Slab lasers which offer customers
significantly greater operating efficiencies and reduced maintenance
costs. The Company's current focus with respect to this product is on
reducing manufacturing costs to achieve more attractive pricing. The
Company is also actively engaged in the development of diode- pumped
solid state lasers through a joint research program with the Fraunhofer
Institute for Laser Technology, a leading laser research institute in
Germany. The Company's objective is to develop diode-pumped lasers
capable of performing heavy industrial material processing applications,
as well as marking applications, more rapidly than previously possible
and at reduced operating and maintenance costs.
. Focusing on Cross-Selling to Existing Customers in Target Markets: The
Company intends to continue to focus its sales and marketing activities
on the Machine Tool, Automotive and Semiconductor & Electronics
industries. The Company has targeted and will continue to target these
industries because of their utilization of advanced manufacturing
processes and continuing investments to improve production efficiency
and because of the Company's significant market presence in these
sectors. In particular, the Company's objectives are (a) cross-selling
marking systems to existing customers for cutting and welding
applications, and (b) selling new applications of existing laser
technologies to existing customers. To exploit its opportunities for
cross-selling, the Company intends to leverage its installed base of
CO\2\ and Nd:YAG lasers for cutting and welding applications to cross-
sell its marking products to these same customers. To exploit its
opportunities to develop new applications for existing laser
technologies, the Company intends, for example, to explore the potential
for use of high-power CO\2\ lasers in car body framing in response to
the interest shown by car manufacturers in reducing their reliance on
spot-welding guns. In addition, building on the success of its laser
marking of small integrated circuits, the Company intends to develop new
applications for wafer processing, micro-welding and micro-soldering.
The Company is also developing a more standardized version of its laser
marker to capture additional market share in Europe through sales to the
low-end marking market.
. Capitalizing on Global Presence to Attract New Customers: The Company
intends to capitalize on its customer base and the presence of its
manufacturing, sales and service operations in the three principal
geographic markets in which its customers operate (North America, Europe
and the Asia/Pacific region) to increase market share in its existing
industrial and geographic markets. The Company believes its global
manufacturing, distribution and service network allows it to be more
responsive to customers' needs and positions it to expand into
additional promising markets which offer high long-term potential for
growth. The Company believes it can benefit from increasing capital
expenditures in the industrial sectors of such economies. In particular,
the Company has entered into a license and supply agreement with Nanjing
Electric Laser Center ("NELC") for the manufacture and sale in China of
conventional CO\2\ lasers.
. Offering Customized Solutions Based on Standard Platform. While the
Company offers a wide range of laser applications and develops
customized solutions for its customers, these applications and solutions
are built on a focused number of product families comprised of
standardized laser sources. For example, for its OEM customers in the
Machine Tool industry, the Company customizes packaging of the laser
source's power supply. For its marking customers, the Company combines
its standard laser marker with customized parts handling
29
<PAGE>
and software. The Company believes that this product strategy has
contributed to its return to profitability since fiscal 1993 and intends
to continue its initiatives to standardize its core products and lower
its production costs so as to continue to improve its profitability.
THE INDUSTRIAL LASER MARKET FOR MATERIAL PROCESSING
The industrial laser market is generally considered to be made up of laser
sources sold for industrial applications including material processing, medical
therapeutic, instrumentation, research, telecommunications, optical storage,
entertainment, image recording, inspection, measurement and control, bar-code
scanning and other end-uses. According to Laser Report, the global industrial
laser market had total revenues in 1995 of approximately $1.2 billion.
Based on Laser Report, in 1995 the material processing segment of the
industrial laser market, which is the single largest segment of that market,
had total revenues of approximately $450 million. Over the past 25 years,
lasers have revolutionized industrial manufacturing and have been used
increasingly to provide reliable, flexible, non-contact compact and high-speed
alternatives to conventional technologies for processing various kinds of metal
and non-metal materials in a broad range of advanced manufacturing
applications.
CURRENT INDUSTRY APPLICATIONS
The industrial laser market for material processing generally encompasses
the use of CO\2\ and Nd:YAG laser sources in highly automated manufacturing or
production processes. For further discussion of the principal laser
technologies used for material processing, see "-- Laser Technology." The laser
source is typically integrated into a laser system which includes a power
supply, fixed optic (in the case of a CO\2\ laser-based system) or flexible
fiberoptic (in the case of a Nd:YAG laser-based system) beam delivery system,
control software, robotics, machine vision, motion control and parts handling,
and typically comprises 20-50% of a total system's cost. To date, the three
principal categories of industrial users of lasers for material processing have
been the Machine Tool, Automotive (including both automobile manufacturers and
automotive suppliers) and Semiconductor & Electronics industries. Customers in
these markets typically demand high-speed, compact, highly durable laser
sources which have a reliable power output, can be easily and flexibly
integrated into the customer's production process, are easy to maintain, and
are able to withstand the rigors of industrial use, such as wide extremes of
temperature and humidity, dirt, dust, shock and vibration.
Currently, there are three main material processing applications for which
lasers are used: (i) cutting, (ii) welding and (iii) marking. Other
applications include surface treatment (cladding and alloying), drilling,
soldering, rapid prototyping and laser-assisted machining.
Cutting Applications. Industrial manufacturers have traditionally utilized
punch presses (nibbling), dye-cutting and stamping machines and other
conventional machine tools for cutting and shaping metal materials. Such
technologies tend to be economical only when large quantities of the same item
are produced, as their use involves lengthy set-up times. In addition, because
such machine tools come into contact with the material being worked on, the
material often requires additional machining after cutting has occurred to
achieve the desired finish to the cut edge or surface. Additionally, the
continuous contact of the machining head with the material subjects it to wear
and tear requiring ongoing maintenance and repair. Alternative cutting
technologies either result in a wide cut width and heat-affected zones or are
very slow processes despite achieving excellent edge quality.
By contrast, laser-based cutting technology has several advantages which are
desirable in industrial applications. Laser cutting is fast, flexible and high-
precision, as it can be used to cut complex contours on flat, tubular and
three-dimensional materials (which is difficult if not impossible to achieve
with alternative methods). The laser source can be easily programmed by a
computerized
30
<PAGE>
numerical controller ("CNC") and is able to process many different kinds of
materials (steel, aluminum, brass, copper, wood, glass, ceramics and plastics)
at various thicknesses. Additionally, laser cutting technology is a non-
contact, no-wear process which is easy to integrate into an automated
production line. The types of laser sources most suitable for cutting are
high-power CO\2\ lasers and Nd:YAG lasers in the power range from 150 W to 2
kW.
The adoption of just-in-time inventory and manufacturing techniques has
driven the growth of laser-based cutting among industrial manufacturers. Laser
cutting is the ideal tool for just-in-time production because parts can be cut
only when they are needed and then only in the desired quantities, thereby
reducing carrying costs and inventory obsolescence. Additionally, cutting
programs can be altered quickly with easy off-line programming. Principal
Rofin-Sinar customers for lasers used in cutting applications are OEM's in the
Machine Tool industry who integrate the laser source into their own cutting
systems for sale to industrial end-users. The continuing efforts of all
industrial manufacturers to streamline their production methods, decrease
inventory through the use of just-in-time manufacturing techniques and lower
overall costs are factors which lead the Company to believe that there will be
long-term future market growth for laser systems used for cutting
applications.
Welding Applications. Industrial manufacturers have traditionally utilized
plasma arc welding, resistance welding and other conventional joining
technologies for welding metal materials. Compared to laser welding, these
processes result in wider weld cross-sections with much more heat input into
the workpiece. Furthermore, arc welding is slower than laser welding, and
resistance welding requires access to each part from two sides, has limited
contouring capabilities and requires constant maintenance. Electron beam
welding has similar welding properties to lasers; however, the process
requires use of a vacuum environment.
Compared to conventional welding technologies, laser welding offers several
important advantages which are desirable in industrial applications. Laser
welding is non-contact, easy to automate, provides high process speed and
results in narrow-seamed, high quality welds which require little, if any,
post-processing machining. Because there is low heat input into the material
being processed and therefore minimal part damage or distortion, parts can be
accurately machined before welding. Additionally, because laser welding is
non-contact based, the process is not subject to tool wear. As with lasers
used for cutting applications, lasers can be used to weld a wide variety of
materials of different thicknesses. The types of laser sources most suitable
for welding are high-power CO\2\ lasers and Nd:YAG lasers (for welding of
steel and aluminum with relatively long weld seams) and low-power Nd:YAG
lasers (for spot-welding and short-seam welding).
To date, the principal applications for laser welding have been in the
Automotive industry. Automobile manufacturers and suppliers use lasers for
welding of transmissions, engine components (such as injection nozzles, valve
lifters and gasoline filters), airbags and other components. A laser welding
application which has significant potential for growth in the Automotive
market is the welding of tailored blanks (a technique pioneered by the Company
for welding dissimilar metals of different thicknesses into one sheet to
reduce material cost and car weight) and more generally car body framing and
production. The Company expects that the demand for improved fuel economy,
weight reduction, improved vehicle safety and increased production line
flexibility to permit rapid model changes will contribute to automotive
manufacturers' and suppliers' demand for lasers.
Marking Applications. With the increasing need for source traceability,
component identification and product tracking as a means to reduce product
liability and prevent falsification, industrial manufacturers increasingly are
demanding variable code marking systems capable of applying serialized
alphanumeric, graphic or bar code identifications directly onto their
manufactured components. Industrial manufacturers have traditionally utilized
acid-etching and ink-based technologies to mark manufactured parts. These
technologies require flat, clean surfaces, are maintenance-intensive and, most
importantly, are not appropriate for serialization. Moreover, their marking is
susceptible to damage by heat or light and is therefore not permanent.
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<PAGE>
By contrast, laser marking offers several important advantages which are
desirable in industrial applications. Lasers can mark a wide variety of metal
and non-metal (wood, glass, plastics) surfaces at high speed without contact
by changing the surface structure of the material or by engraving. Laser
marking systems are reliable, flexible, high speed, leave permanent marks and,
because they are computer-controlled, can be easily integrated into the
customer's production process. Because laser marking is contact-free, it does
not subject the item being marked to any mechanical stress. In addition, these
systems enable the user to avoid the mechanical problems associated with ink-
based technology (e.g., clogging, drying time delay, ink-bottle replacement,
etc.) and the waste disposal issues related to acid-etching.
To date, the principal applications for laser marking have been in the
Automotive and Semiconductor & Electronics industries. In the Automotive
industry, the increasing trends toward component identification and the
production of multiple car models on a single assembly line have driven the
growth of laser marking. A substantial number of automobile components and
subcomponents are currently, or have the potential to be, marked by lasers.
Windshield wiper blades, gears, starter housings, safety belt buckles, head
lights and control buttons are typical examples of laser marking applications.
The Company believes that the potential for laser marking has not yet been
fully realized in the Automotive industry.
In the Semiconductor & Electronics industry, lasers are used to mark
electrical components such as contactors and relays, and assembled components
such as integrated circuits, printed circuit boards and keyboards. With the
increase in marking speed in the last few years, laser marking of integrated
circuits has decreased in cost, improving the price/performance
characteristics of this technology and therefore increasingly displacing ink-
based and laser mask marking installations. VLSI Research, Inc. estimates that
the market for semiconductors will grow from $138 billion in 1995 to $254
billion in the year 2000. Other industry analysts are forecasting growth to
annual sales levels as high as $300 billion by the year 2000. This growth is
being fueled by the demand for products such as computers, cellular phones and
multimedia communications products. It is expected that demand for such
products will continue to fuel growth in capital investment by semiconductor
and electronics manufacturers.
Outlook. Rofin-Sinar expects that industrial end users in each of its
target markets will continue to make capital investments to streamline their
production methods, increase their production line flexibility and lower their
overall costs. The Company believes that the continuation of this trend,
together with its continued focus on developing new applications for its laser
sources and laser marking products, will provide it with significant
opportunities for long-term growth in each of the Machine Tool, Automotive and
Semiconductor & Electronics industries, despite a recent softening in the
Semiconductor & Electronics industry. For example, the Company anticipates
continued demand for higher-power CO\2\ lasers and Nd:YAG solid state lasers
for cutting and welding applications in the Machine Tool and Automotive
industries and believes that its introduction of CO\2\ Slab laser technology
will enhance its position in the high-power CO\2\ laser market. In laser
marking and related micro-processing applications, the Company believes that
there is significant potential for additional penetration of the Automotive
and Semiconductor & Electronics industries worldwide, with a particular focus
in the United States. In addition, the Company believes that there is
significant demand for a lower priced, more standardized version of its
marking products in Europe.
THE COMPANY'S LASER PRODUCTS
The Company currently offers a comprehensive range of state-of-the-art
laser products and related services for three principal material processing
applications: (1) cutting; (2) welding; and (3) marking. Rather than offering
standardized laser systems, the Company works directly with the customer to
develop and customize the optimal solution for the customer's manufacturing
requirements. In developing its laser solutions, the Company offers customers
its expertise in: (i) product development and manufacturing (i.e., state-of-
the-art product development and manufacturing
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<PAGE>
services based on over 20 years of laser technology experience and
applications know-how); (ii) application and process development (i.e.,
developing new laser-based applications for manufacturing customers and
assisting them in successfully integrating lasers into their production
processes); (iii) system engineering (i.e., advising customers on machine
design, including tooling, automation and controls, for customers in need of
"turn-key" solutions); and (iv) extensive after-sales support of its laser
products (including technical support, field service, maintenance and training
programs and rapid spare parts delivery). The Company has sold more than 4,000
laser sources since 1975 and currently has over 1,500 active customers
(including multinational companies with multiple facilities purchasing from
the Company).
The following table sets forth the Company's net sales of laser products
used for cutting and welding applications and of laser products used for
marking applications in fiscal year 1995 and the first nine months of fiscal
1996:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
PRODUCT CATEGORY* FISCAL 1995 JUNE 30, 1996
----------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C>
Lasers for cutting and welding................... $69,442 $57,527
Laser marking products........................... 23,024 25,845
------- -------
$92,466 $83,372
</TABLE>
--------
* For each product category, net sales includes sales of services
(including training, maintenance and repair) and spare parts.
Laser Products for Cutting and Welding
The Company believes that it has a worldwide 20% market share for laser
products used for cutting and welding applications. The Company's addressable
market represents approximately 75% of the total market for industrial
material processing. The Company distinguishes itself from the majority of its
competitors who specialize in only one of the two principal laser technologies
for material processing by offering its customers both CO\2\ and Nd:YAG laser
sources and solutions in a variety of configurations and options. As a
technological leader in both CO\2\ lasers and Nd:YAG lasers, the Company is
able to meet a broad range of its customers' cutting and welding requirements.
The laser sources sold by the Company consist of a laser head (containing the
lasing medium, resonator, source of excitation, resonator mirrors and cooling
mechanism), a power supply and microcontroller (for control and monitoring).
For a more detailed discussion of the components of a laser source, see "--
Laser Technology." The Company's lasers all deliver a high-quality beam at
guaranteed power outputs and feature compact design, high processing speed,
flexibility, low operating and maintenance costs and easy integration into the
customer's production process. Products are offered in different
configurations and utilizing different design principles according to the
desired application. The Company's engineers and other technical experts work
directly with the customer in the Company's applications centers to develop
and customize the optimal solution for the customer's manufacturing
requirements.
The Company's business strategy for its cutting and welding laser business
is to develop this business at a rate of growth greater than that of the
overall cutting and welding laser market. The Company intends to implement
this strategy by: (i) increasing its market share in its existing high-power
CO\2\ laser market through increased sales of its diffusion-cooled CO\2\ Slab
lasers and (ii) developing a multi-kilowatt diode-pumped Nd:YAG solid state
laser capable of performing heavy industrial material processing applications
(e.g. car body welding), as well as marking applications, more rapidly than
previously possible and at reduced operating and maintenance costs. The
Company believes that diffusion-cooled CO\2\ Slab lasers and diode-pumped
Nd:YAG solid state lasers will replace existing CO\2\ and flash-lamp pumped
solid state laser technologies, respectively, and it intends to remain at the
forefront of technological development and product innovation in order to
capture market share in the cutting and welding laser market.
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<PAGE>
The Company's family of CO\2\ laser products for cutting and welding and
their principal markets and representative applications are shown in the
following table and such products' competitive advantages are discussed below:
<TABLE>
<CAPTION>
MODE OF PRICE RANGE PRINCIPAL
LASER SERIES POWER RANGE EXCITATION (PER UNIT) MARKETS APPLICATIONS
- ------------ ------------- -------------- ----------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
RS DC 1.5 kW-2.5 kW High frequency $130,000- Machine Tool; Cutting; welding
Slab Series $200,000 Automotive
RS HF 4 kW-6 kW High frequency $280,000- Automotive Welding of transmissions,
Series $357,000 tailored blanks, car bodies;
surface treatment
RS SM 700 W-2 kW Direct current $100,000- Machine Tool Flat sheet and
Series $145,000 three-dimensional cutting
</TABLE>
Rofin-Sinar introduced its diffusion-cooled RS DC Slab Series laser in mid-
1995 and has shipped over 80 units since that date. The Company believes that
it is the only laser manufacturer of diffusion-cooled slab-based lasers in the
high-power range. In this laser design, a high frequency (HF) excited gas
discharge occurs between two water-cooled electrodes which have a large
surface area that permits maximum heat dissipation. The core diffusion-cooled
technology is protected by two patents and the Company has exclusive license
rights to this technology on a worldwide basis for the range above 500 W for
material processing applications. The RS DC Slab Series laser has several
competitive advantages. Among these advantages are its exceptional beam
quality and focusability which permit faster and narrower welds and higher
cutting speeds with minimal heat input in thin materials. Another significant
feature is the Slab Series laser's compact design and lightweight construction
(enabling the laser head to be mounted onto moving laser systems where flying
optic or moving table designs would not be practical). Finally, because the
Slab design eliminates the need for gas circulation (resulting in reduced
maintenance costs), its low gas consumption contributes to overall lower
running costs and allows the laser gas bottle to be integrated into the laser
head, eliminating the need to install an expensive laser gas supply. The
Company's current focus with respect to its Slab Series lasers is on
increasing their power output and reducing their manufacturing costs in order
to achieve more attractive pricing.
The Company's RS HF Series lasers have established Rofin-Sinar as a
worldwide leader in multi-kilowatt cross-flow CO\2\ lasers. These are CO\2\
lasers in which the laser gas flows perpendicularly to the resonator. The
Company believes that the HF Series laser is the smallest industrial laser in
the 4 kW to 6 kW power range. Combining proven cross-flow design principles
with modern high-frequency (HF) discharge excitation technology, the HF Series
laser's fast welding speeds and low operating costs make it an ideal tool for
all welding applications. The HF Series laser has several features which give
it a strong competitive edge over its competitors across the full range of
welding applications. Its compact design (the laser head and power supply are
integrated into one unit) allows easy integration into automated processing
systems on the factory floor. Because the HF excitation uses proprietary
dielectric coated electrodes, there is no corrosion of the electrodes or
contamination of the laser optics, resulting in significantly longer service
intervals and therefore reduced maintenance costs. Since its introduction in
fiscal 1995, the Company has shipped over 30 units, predominantly to customers
in the Automotive industry in the United States, where the HF Series laser has
set standards in a significant number of welding applications, including the
welding of transmissions, tailored blanks and many other car parts and
components.
The Company's SM-Series fast axial flow CO\2\ laser is used for both
cutting and welding applications. In the fast-axial flow principle, the gas
discharge occurs in a tube in the same direction as the resonator, through
which the laser gas mixture flows at a high speed. The SM-Series design
features a simple resonator structure and a limited number of optical
components which guarantee
34
<PAGE>
excellent consistent beam quality and output stability (which are important
for maintaining high cutting and welding speeds and uniformly high quality
cuts and welding seams). This laser family has a number of proprietary
features developed by Rofin-Sinar, including a highly efficient switch mode
power supply and a patented resonator fold for easy circular polarization,
eliminating the need for two additional external mirrors which would otherwise
be required. The SM laser's high pointing stability and low beam divergence
make it highly suited for integration into production systems having complex
beam delivery paths. Due to the potential to reduce the manufacturing cost of
the Slab lasers, the Company intends over the next three years to replace the
SM-Series product family with the Slab-Series laser.
The Company's family of Nd:YAG laser products for cutting and welding and
their principal markets and representative applications are shown in the
following table and such products' competitive advantages are discussed below:
<TABLE>
<CAPTION>
MODE OF PRICE RANGE PRINCIPAL
LASER SERIES POWER RANGE EXCITATION (PER UNIT) MARKETS APPLICATIONS
- ------------ -------------- ---------- ----------- -------------- ----------------------
<S> <C> <C> <C> <C> <C>
RSY P- 50 W -- 1 kW Flash Lamp $ 55,000- Automotive; Spot-and seam-welding;
Series $180,000 Medical device fine cutting
RSY 1 kW -- 2.5 kW Flash Lamp $140,000- Automotive Welding of car bodies
CW- $220,000
Series
</TABLE>
The Company's RSY P-Series of pulsed Nd:YAG lasers are designed to meet the
requirements of a wide range of welding and cutting applications. Their high
peak power, flexible fiberoptic beam delivery and the small focused spot size
of the laser beam allow these lasers to be successfully applied in many
cutting and welding applications. The RSY lasers' pulse shaping capability
(achieved through programming of the power supply) makes these lasers
particularly well suited to the processing of metallurgically difficult
materials such as aluminum and its different alloys. These lasers can be
integrated into a wide range of both fixed optic and fiberoptic beam delivery
systems.
Rofin-Sinar's RSY CW-Series of continuous wave Nd:YAG lasers represent the
Company's latest development in high-power industrial Nd:YAG lasers as they
are designed exclusively for use with flexible fiberoptic beam delivery
systems, making them particularly well suited for integration into complex
production systems. The key competitive advantages of the CW-Series lasers are
their pulse shaping capability and multiple power output configurations. These
configurations include continuous wave and pulsed power ramping modes
separately or in combination with each other, which allows the Company to
address a wide range of customer applications. (Power ramping is particularly
suited for achieving smooth welds and avoiding cracks during the welding
process.) In addition, several features of the CW-Series laser such as the
simple resonator design, easy to access power supply and highly durable
ceramic pumping chambers are designed with a view to long service intervals
and therefore low maintenance costs.
The Company is actively engaged in the development of diode-pumped solid-
state Nd:YAG lasers through a joint research program with the Fraunhofer
Institute for Laser Technology as well as through a second program sponsored
by the Bavarian Government. The Company's objective is to develop diode-pumped
lasers capable of performing heavy industrial material processing applications
(e.g. car body welding), as well as marking applications, more rapidly than
previously possible and at reduced operating and maintenance costs. Such
lasers also have potential for use in marking applications, where they could
be developed in much more compact systems. See "--Research and Development."
Laser Marking Products
The Company first entered the laser marking business in 1989 when it
acquired Laser Optronic GmbH from Coherent General Inc. and designed and
introduced the "PowerLine" laser marker. Since
35
<PAGE>
fiscal 1991, the Company's sales of laser markers have grown 700% (increasing
from 50 units in fiscal 1991 to 350 units in fiscal 1995). The Company
established itself as the laser marking market leader in Europe (principally
in the Automotive and Semiconductor & Electronics industries) in fiscal 1994
and in the Asia/Pacific region in fiscal 1995 (principally in the
Semiconductor & Electronics industry). The table below summarizes the
breakdown in sales of laser markers in the Company's three principal
geographic markets in fiscal 1995 and the first nine months of fiscal 1996 (by
dollar volume).
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL 1995 JUNE 30, 1996
----------- -------------
(IN THOUSANDS)
<S> <C> <C>
Europe:
Germany........................................ $7,828 $8,270
Rest of Europe................................. 8,289 7,237
North America.................................... 920 1,809
Asia/Pacific..................................... 5,986 8,529
</TABLE>
The Company's business strategy for its laser marking business is four-
fold: (i) to expand its position in the U.S. laser marking market, with a
particular focus on the Semiconductor & Electronics and Automotive industries;
(ii) to capitalize on its installed base of CO\2\ and Nd:YAG laser customers,
primarily in the Automotive industry, to cross-sell its marking products to
these same customers; (iii) to capitalize on the success of its laser marking
of small integrated circuits to develop new applications for wafer processing,
micro-welding and micro-soldering and (iv) to develop a stand-alone laser
marker targeted at the low-end portion of the laser marking market.
The Company attributes the success of its laser marking products and the
significant growth it has experienced in the laser marking business to a
number of competitive advantages:
. Since Rofin-Sinar builds its own Nd:YAG laser sources and utilizes its
own proprietary Laser Work Bench software, it is able to tailor its
laser marking solutions to the customer's requirements.
. The Company's know-how with respect to Nd:YAG laser beam power, mode
structure and high frequency switching capability enables it to ensure
optimal marking quality on a wide variety of different materials from
the standpoint of marking contrast and speed.
. The Company's expertise in the design and manufacture of fiberoptic beam
delivery systems allows it to optimize laser marking solutions for
complex production processes in which the writing head is located
several yards away from the laser head or the laser beam is multiplexed
through beam-switching and -splitting to multiple workstations, without
loss of marking quality, contrast or speed. Based on its extensive
experience using fiber optics for cutting and welding applications, the
Company has developed a special fiber system to be used for transferring
the beam to the galvo head without losing beam quality. This allows
flexible system solutions and easy laser integration.
. Rofin-Sinar's laser marking products incorporate high value-added
software consisting of the Company's Laser Work Bench software and a
number of network communications software protocols that enable its
laser marking products to interface with a customer's host computers.
The Laser Bench Software permits virtually any character (of any size or
font) or graphic to be marked on a variety of materials (including
metals, plastics, ceramics and wood) of different contours. The broad
range of network communications software supported by the Company,
combined with the resources of Rofin-Sinar's in-house software
engineering group, makes Rofin-Sinar an ideal partner for customers
(especially in the Automotive and Semiconductor & Electronics
industries) who have enterprise-wide computer networks linking
production facilities in disparate geographic locations and who desire
customized network interface solutions.
36
<PAGE>
The Company's family of laser marking products and their principal target
markets and representative applications are shown in the table below:
<TABLE>
<CAPTION>
MODE OF PRINCIPAL
PRODUCT POWER RANGE EXCITATION PRICE RANGE TARGET MARKETS APPLICATIONS
------- ----------- ---------- ----------- ----------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
PowerLine; 25-150 W Flash Lamp $ 80,000- Semiconductors & Marking of integrated circuits;
CombiLine $ 200,000 Electronics; Automotive component identification
</TABLE>
PowerLine. The Company's standard PowerLine laser marking product consists
of a Nd:YAG laser in the range of 25 to 150W, a galvo-head, a personal
computer with Pentium processor on board and Rofin-Sinar's proprietary Laser
Work Bench software. The modular design of the PowerLine marker enables
customers to order the most suitable configuration for their production
process or system (e.g. OEM customers may order the laser head and laser
supply and laser cooling assembly plates as subassemblies without the cabinet
for easier integration into the handling system specified by the end user).
The PowerLine marker's Nd:YAG laser incorporates a unique dual lamp ceramic
cavity design using "long-life" lamps (guaranteed to provide 1,200 hours
usage) which results in higher output power (and therefore higher marking
speeds), higher energy efficiency and therefore reduced operating costs, high
beam quality and therefore constant and reliable marking quality, and longer
service intervals. The Company's proprietary Laser Work Bench software
provides operators with a user-friendly desktop publishing environment that
allows them to manipulate fonts, import graphics, preview marking and control
all laser parameters and job programs. Special options and accessories
include, among other things, a double-marking head allowing marking speeds of
up to 600 characters per second in certain applications (marking of integrated
circuits), as well as beam-switching and -splitting options for marking of
products in different locations.
CombiLine. The CombiLine is a complete laser marking system that the
Company introduced in 1994. Built on a modular design, the CombiLine consists
of a PowerLine laser marker that can be combined with a variety of parts
handling systems developed by the Company. The parts handling options offered
by the Company include motor driven positioning tables, foil handling systems
for marking labels, conveyor belts and pick-and-place systems, allowing the
CombiLine to be customized as a turn-key system according to the customer's
specifications. Since its introduction, the Company has shipped over 60 units
of the CombiLine, principally in Europe.
Development of Stand-Alone Marker and Other New Applications. To date, the
Company has shipped the majority of its laser markers to large customers in
the Automotive and Semiconductor & Electronics industries. The Company has
also targeted the low-end laser marking market in Europe, which is currently
served by a number of smaller regional competitors. Based on recent market
tests in selected European markets, the Company believes there is demand for a
more standardized stand-alone laser marker. The Company is currently
developing a lower-cost, more standardized version of its PowerLine product
with the same basic software but fewer features and options, which it expects
to begin shipping in the second quarter of fiscal 1997. In addition, the
Company believes that there are several potential marking applications in the
Automotive market which have not yet been fully tapped (e.g. deep marking of
metal components).
APPLICATIONS DEVELOPMENT AND SYSTEM INTEGRATION
In addition to manufacturing and selling laser sources for cutting and
welding and laser marking products, the Company also develops in its
applications centers in Hamburg and Gunding-Munich, Germany and Plymouth,
Michigan laser-based solutions for customers seeking alternatives to
conventional manufacturing techniques. The Company believes that the more than
20 years' laser technology experience and know-how embodied in the Company's
applications groups, developed as a result of its participation in a broad
range of industrial markets, provide it with a competitive advantage over
other laser manufacturers. Many new applications such as welding of tailored
blanks, metal tubes and diamond-tipped saw blades were pioneered in the
Company's applications centers and have generated multiple laser orders for
the Company in later years.
37
<PAGE>
Consistent with its objective of being a flexible supplier able to adapt to
customers' needs, the Company from time to time acts as a system integrator at
the request of the customer and takes on responsibility to integrate its laser
sources with other machine components selected by the Company and deliver a
complete laser system to the end-user. Typically this occurs with a customer
that does not have its own in-house engineering resources and wishes to take
advantage of the Company's laser processing expertise and comprehensive range
of services. In such instances, the Company's laser systems include precision
or fiberoptics for beam delivery, robotics, or parts handling devices and
other optical components and control software.
MARKETS AND CUSTOMERS
Rofin-Sinar's laser products and systems are sold to three principal
industrial markets: the Machine Tool, Automotive and Semiconductor &
Electronics industries. The following table sets forth the distribution of the
Company's total sales in fiscal 1995 and the first nine months of fiscal 1996
among the Company's principal markets and each market's primary applications:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED PRIMARY
PRINCIPAL MARKET FISCAL 1995 JUNE 30, 1996 APPLICATIONS
---------------- ----------- ------------- ---------------------
<C> <C> <C> <S>
Machine Tool................. 36% 33% Cutting
Automotive................... 23 24 Welding and component
marking
Semiconductor & Electronics.. 13 17 Marking of integrated
circuits
--- ---
72% 74%
</TABLE>
The remaining 28% and 26%, respectively, of sales in fiscal 1995 and the
first nine months of fiscal 1996 were attributable to customers in a wide
variety of other industries (including the aerospace and consumer goods
industries, medical device manufacturers, job shops, universities and
institutes). The Company has sold more than 4,000 laser sources since 1975 and
currently has over 1,500 active customers (including multinational companies
with multiple facilities purchasing from the Company).
Many of Rofin-Sinar's customers are among the largest global participants
in their respective industries. Over 80% of Rofin-Sinar's sales in fiscal 1995
were made to existing customers. It is the Company's experience that once a
customer has successfully integrated a laser system into its production
process, significant opportunities are created for repeat sales and new
applications, from time to time to a different division or plant of the same
customer. The following is a representative list of OEM customers and end-
users of Rofin-Sinar's products, spare parts and services worldwide during
fiscal 1993, 1994 and 1995 (all of whom have purchased multiple laser sources
or laser marking products from the Company during such three-year period):
<TABLE>
<CAPTION>
AUTOMOTIVE AUTOMOTIVE SEMICONDUCTOR &
MACHINE TOOL MANUFACTURERS SUPPLIERS ELECTRONICS OTHER
- ------------ --------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Adige Sala Audi Autoliv Amkor Aerospatiale
Amada BMW Bosch ASM Allflex
Arnold Chrysler Hoesch Platinen Bosch Boeing
Balliu Ford Morton Cherry Braun
Behrens General Motors Stola Cypress Caisley
Cincinnati Mercedes-Benz Temic Mitsumi Norton
Daewoo
Heavy In-
dustries Peugeot/Citroen Thyssen Philips Osram
Lasercomb Renault TRW SGS Thomson Pratt & Whitney
Nisshinbo Volkswagen Utilase Siemens Quasar
Prima
Industrie Volvo Witzenmann Silicon System Rutting
Salvagnini ZF United Technologies Schmole
Strippit Scholler
</TABLE>
38
<PAGE>
The Company's ten largest customers accounted for 27%, 25.8% and 29.6% of
total sales in fiscal 1994 and 1995 and the first nine months of fiscal 1996,
respectively. Except for one customer which represented 7.3%, 7.6% and 6.0% of
total sales in fiscal 1994 and 1995 and the first nine months of fiscal 1996,
respectively, no one customer accounted for more than 5% of total sales in any
of such periods.
The following charts set forth the distribution of Rofin-Sinar's sales of
cutting and welding lasers and laser marking products among the Company's
principal markets in fiscal 1995 and the first nine months of fiscal 1996:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL 1995 JUNE 30, 1996
----------------------- -----------------------
PRINCIPAL MARKET CUTTING/WELDING MARKING CUTTING/WELDING MARKING
- ---------------- --------------- ------- --------------- -------
<S> <C> <C> <C> <C>
Machine Tool................... 50% -- 46% --
Automotive..................... 24 20 28 15
Semiconductor & Electronics.... -- 47 -- 58
Other.......................... 26 33 26 27
----- ----- ----- -----
Total........................ 100.0% 100.0% 100.0% 100.0%
</TABLE>
SALES, MARKETING AND DISTRIBUTION
Rofin-Sinar sells its products in approximately 25 countries through OEMs
and to major end-users who have in-house engineering resources capable of
integrating the Company's products into their own production systems. Laser
sources for cutting applications are marketed and sold principally to OEMs in
the Machine Tool industry who sell cutting machines incorporating the
Company's laser products without any substantial involvement by the Company.
Laser sources for welding applications are marketed and sold both to systems
integrators and to end-users. Laser marking products are marketed and sold
principally to OEMs for integration into their handling systems (mainly for
integrated circuit marking applications). In the case of both welding lasers
and laser marking products, since product samples are required to be run
through the OEM's system, the end-user is significantly involved in the
selection of the laser component and will typically specify that it desires a
Rofin-Sinar device. In such cases, the Company's application engineers work
directly with the end-user to optimize the application's performance and
demonstrate the superiority of the Company's products.
The Company has 27 direct sales engineers operating in 12 countries, of
whom 16 persons are dedicated to marketing of the Company's CO/2/ and Nd:YAG
lasers for cutting and welding and 11 persons are dedicated to marketing of
the Company's laser marking products. In addition, Rofin-Sinar has 12
independent distributors and agents who market the Company's welding and
cutting laser products and laser marking products in Australia, Brazil,
Denmark, Israel, the Philippines, the People's Republic of China, Portugal,
Singapore, South Korea, Spain, Sweden and Taiwan.
The following table sets forth the distribution of the Company's total
sales (including sales delivered through distributors) of cutting and welding
lasers and laser marking products among the three principal geographic regions
during fiscal 1995 and the first nine months of fiscal 1996:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL 1995 JUNE 30, 1996
----------------------- -----------------------
PRINCIPAL MARKET CUTTING/WELDING MARKING CUTTING/WELDING MARKING
- ---------------- --------------- ------- --------------- -------
<S> <C> <C> <C> <C>
Europe:
Germany....................... 18% 34% 23% 32%
Rest of Europe................ 25 36 17 28
North America................... 48 4 45 7
Asia/Pacific.................... 9 26 15 33
----- ----- ----- -----
Total......................... 100.0% 100.0% 100.0% 100.0%
</TABLE>
39
<PAGE>
Over the next five years, demand for industrial lasers is expected to
increase in the Asia/Pacific region. The Company believes that the market with
the greatest long-term potential over the next ten to fifteen years is China,
principally due to the expansion of domestic automobile production in that
country. Consistent with this belief, in 1994 the Company entered into a
technology license and supply agreement with NELC under which NELC
manufactures CO\2\ laser sources for sale in the Chinese market.
The Company directs its worldwide sales and marketing of cutting and
welding lasers from its offices in Hamburg, Germany. Worldwide sales and
marketing of laser marking products is directed from the Company's offices in
Gunding-Munich, Germany. U.S. sales of the Company's cutting and welding laser
products are managed out of its Plymouth, Michigan facility. In 1995, the
Company opened a sales office in Phoenix, Arizona in proximity to major
semiconductor manufacturers to support expansion of the Company's laser
marking business in the U.S. market. In Europe, Rofin-Sinar also maintains
sales and service offices in Italy, France, the United Kingdom and Belgium. A
sales office is maintained in California to cover the Asia/Pacific region
(other than Japan); the Company intends to open a sales office in that region
in fiscal 1997. In Japan, the Company's principal distributor is its joint
venture with Marubeni Corporation and Nippei Toyama Corporation.
CUSTOMER SERVICE AND REPLACEMENT PARTS
During fiscal 1995 and the first nine months of fiscal 1996, approximately
25% of the Company's revenues were generated from sales of after-sale services
and replacement parts for its laser products. The Company believes that a high
level of customer support is necessary to develop successfully and maintain
long-term relationships with its OEM and end-user customers in its laser
products and laser marking systems business. This close relationship is
maintained as customer needs change and evolve. Recognizing the importance of
its existing and growing installed base, the Company follows its customers
into new geographic regions by providing local service and support. Rofin-
Sinar has over 90 customer service personnel. The Company's field service and
in-house technical support personnel receive ongoing training with respect to
the Company's laser products, maintenance procedures, laser-operating
techniques and processing technology. Rofin-Sinar believes its worldwide
customer service support organization is one of the largest among industrial
laser and laser-based system manufacturers and provides it with a significant
competitive advantage over many of its competitors. Most of the Company's
distributors also provide customer service and support.
Many of Rofin-Sinar's laser products are operated 24 hours a day in high
speed, quality oriented manufacturing operations. Accordingly, in fiscal 1994
the Company successfully launched 24 hour, year-round service support to its
U.S. and German customers and 8 hour response time for its major customers.
This support includes field service personnel who reside in close proximity to
the Company's installed base. Rofin-Sinar plans to adopt similar service
support elsewhere. The Company provides customers with process diagnostic and
verification techniques, as well as specialized training in the operation and
maintenance of its systems. The Company also offers regularly scheduled and
intensive training programs and customized maintenance contracts for its
customers.
Of Rofin-Sinar's customer service personnel, approximately 70 employees
operate in the field in 40 countries. Field service personnel are also
involved in the installation of the Company's systems.
Rofin-Sinar's approach to the sale of replacement parts is closely linked
to the Company's strategic focus on rapid customer response. The Company has
round-the-clock order entry and provides same or next day delivery of parts
worldwide in order to minimize disruption to a customer's manufacturing
operations. Rofin-Sinar generally agrees to provide after sale parts and
service for 10 years if requested by the customer. The Company's growing base
of installed laser sources and laser marking products is expected to continue
to generate a stable source of parts and service sales.
40
<PAGE>
COMPETITION
Laser Products for Cutting and Welding
The market for laser products and systems is fragmented, and includes a
large number of competitors, many of which are small or privately owned or
which compete with Rofin-Sinar on a limited geographic, industry-specific or
application-specific basis. The Company also competes in certain target
markets with competitors which are part of large industrial groups and have
access to substantially greater financial and other resources than the
Company. Competition among laser manufacturers includes attracting and
retaining qualified engineering and technical personnel. The overall
competitive position of the Company will depend upon a number of factors,
including the performance and reliability of its products, the level of
customer support and manufacturing quality, the compatibility of its products
with existing laser systems and the Company's ability to develop successfully
for commercial distribution diode-pumped solid state lasers and participate in
the growth of these emerging technologies, as well as price.
Rofin-Sinar believes it is among the top three suppliers of laser sources
in the worldwide market for cutting and welding applications. Companies such
as Trumpf, Fanuc and PRC (for CO\2\ lasers) and Haas and Lumonics (for Nd:YAG
lasers) compete in certain of the markets in which Rofin-Sinar operates.
However, in the Company's opinion, none of these companies competes in all of
the industries, applications and geographic markets currently served by Rofin-
Sinar. Only Trumpf/Haas has a product range and worldwide presence similar to
those of the Company. The Company believes that it has a strong competitive
advantage over such companies due to its exclusive access (for material
applications) to the patented diffusion-cooling technology incorporated in its
CO\2\ slab lasers. In the Company's view, the technology protected by these
patents represents a significant step forward in industrial laser technology
for material processing and an important source of the Company's future growth
and profitability.
Laser Marking Products
Significant competitive factors in the laser marking market include system
performance and flexibility, cost, the size of each manufacturer's installed
base, capability for customer support, and breadth of product line. Because
many of the components required to develop and produce a laser marker are
commercially available, barriers to entry into this market are low, and the
Company expects new competitive product entries into this market. The Company
believes that its PowerLine and CombiLine laser markers will compete favorably
in this market primarily due to the performance and price characteristics of
such products.
The Company's PowerLine and CombiLine marking products compete in the laser
marking market with conventional ink-based and acid-etching technologies, as
well as with laser mask-marking. The Company believes that its principal
competitors in the laser marking market include Baasel, General Scanning and
Excel Technology.
Rofin-Sinar also competes with manufacturers of conventional non-laser
products in applications such as welding, drilling, cutting and marking. The
Company believes that as industries continue to modernize, seek to reduce
production costs and require more precise and flexible manufacturing, the
features of laser-based systems will become more desirable than systems
incorporating conventional manufacturing techniques and processes. Advances in
fiber-optic beam delivery systems, improvements in reliability and
introduction of higher-power CO\2\ lasers and diode-pumped lasers capable of
performing heavy industrial material processing applications, as well as
marking applications, more rapidly than previously possible are expected to
result in increased acceptance of laser applications by industrial users.
41
<PAGE>
MANUFACTURING AND ASSEMBLY
Rofin-Sinar manufactures and tests its CO\2\ and Nd:YAG laser products for
cutting and welding at its Hamburg, Germany and Plymouth, Michigan facilities.
The Company's laser marking products are manufactured and tested at its
facilities in Gunding-Munich, Germany. See "Properties." The Company's joint
venture in Japan performs assembly and testing of SM-Series CO\2\ lasers.
Given the competitive nature of the laser business, the Company focuses
substantial efforts on maintaining and enhancing the efficiency and quality of
its manufacturing operations. The Company believes that a principal reason for
its success in the industrial laser market for materials processing is the
high quality of its product engineering and manufacturing capabilities. The
Company utilizes just in time and cell-based manufacturing techniques to
reduce manufacturing cycle times and inventory levels thus enabling it to
offer on-time delivery and high quality products to its customers.
Rofin-Sinar's in-house manufacturing includes only those manufacturing
operations which are critical to achieve quality standards or protect
intellectual property. These manufacturing activities consist primarily of
product development, testing of components and subassemblies some of which are
supplied from within the Company and others of which are supplied by third
party vendors and then integrated into the Company's finished products,
assembly and final testing of the completed product, as well as proprietary
software design and hardware/software integration. The Company minimizes the
number of suppliers and component types but, wherever practicable, it has at
least two sources of supply for key items. The Company has a qualifying
program for its vendors and generally seeks to build long-term relationships
with such vendors. Roots(R) blowers (used to accelerate gas flow in its SM-
Series fast axial flow CO\2\ lasers) are the only component the Company
purchases from a single supplier. The Company has no reason to believe it
could not purchase such component from alternative sources of supply on
comparable terms. Rofin-Sinar is not dependent on any supplier and has not
experienced any difficulty in obtaining necessary materials and components.
Rofin-Sinar is committed to meeting internationally recognized
manufacturing standards. In 1995, the Company's Hamburg facility received ISO
9001 certification. The Company intends to apply for IS0 9001 certification of
all of its manufacturing sites and anticipates obtaining ISO 9001
certification of its Gunding-Munich facility during fiscal 1997. The Company
expects that its U.S. operation will be qualified by Ford as a "Q-1" supplier
under Ford's "Q-1" quality management standards in fiscal 1997.
The Company's production is controlled by production planning software. By
reducing the variety of products and options, designing new products on a
modular concept, reducing the number of vendors and the depth of production
through outsourcing, the Company has been able to reduce its manufacturing
costs significantly over the last three years and improved its production
efficiency.
RESEARCH AND DEVELOPMENT
During fiscal 1993, 1994 and 1995 and the first nine months of fiscal 1996,
Rofin-Sinar spent $10.3 million, $6.8 million, $6.7 million and $5.9 million,
respectively, on research and development. In addition, the Company received
funding under government grants totaling $448,000, $611,000, $1.4 million and
$476,000 in fiscal 1993, 1994 and 1995 and the first nine months of fiscal
1996, respectively. The decline in the Company's expenditures on research and
development from fiscal 1993 to fiscal 1994 is primarily attributable to the
refocusing of the Company's research and development activities on more
readily marketable new products.
Rofin-Sinar's research and development activities are directed at meeting
customers' manufacturing needs and application processes. Core competences
include CO\2\ gas lasers and Nd:YAG solid state lasers, precision optics,
electronic power supplies, fiber optics, beam delivery, control interfaces,
software programming and systems integration. The Company strives for
customer-driven development activities and promotes the use of alliances with
key customers and joint development programs in a wide range of its target
markets.
42
<PAGE>
Rofin-Sinar has approximately 56 employees engaged in product research and
development, of whom approximately 40 are professional engineers or have
master's or doctoral degrees (including 25 Ph.D.'s). The Company's research
and development activities are carried out in three centers in Hamburg and
Gunding-Munich, Germany and Plymouth, Michigan and are centrally coordinated
and managed. Interaction and communication among research and development
personnel throughout the Company promote a sharing of their cumulative
expertise. Rofin-Sinar maintains close working relationships with the leading
industrial, government and university research laboratories in Germany,
including the Fraunhofer Institute for Laser Technology in Aachen, the
Institute for "Technische Physik" of the German Space and Aerospace Research
Center in Stuttgart, the Fraunhofer Institute for Material Science in Dresden
and the Laser Center in Hanover, and elsewhere around the world, including the
University of Alberta in Canada. Such relationships include funding of
research, joint development programs, personnel exchange programs and
licensing of patents developed at such institutes. For a discussion of certain
technology transfer agreements between the Company and Siemens, see
"Intellectual Property" and "Related Transactions."
The Company recently agreed in principle on a research program with the
Fraunhofer Institute for Laser Technology to develop a modular 5 kW diode-
pumped Nd:YAG laser. Under this arrangement, the total project budget to be
spent by both parties is approximately $6.5 million. Under the terms of the
collaboration, the Company will be granted access to technology already
developed by the Fraunhofer Institute. The Company anticipates that the
project's development and manufacturing scale-up efforts will occur over a
five-year period. No assurance can be given that the collaboration with the
Fraunhofer Institute will be successful.
INTELLECTUAL PROPERTY
Rofin-Sinar has intellectual property which includes patents, proprietary
software, technical know-how and expertise, designs, process techniques and
inventions. While policies and procedures are in place to protect critical
intellectual properties, Rofin-Sinar believes that its success depends to a
larger extent on the innovative skills, know-how, technical competence and
abilities of the Company's personnel. The Company is also an exclusive
licensee on a worldwide basis of two patents, one of which expires in July
2007 (as to which the license is exclusive for five years from
commercialization of products) and one of which expires in January 2005 (as to
which the license is exclusive for the duration of the patent), covering the
diffusion-cooled technology used in its Slab-Series CO\2\ lasers for
industrial material processing applications. In the Company's view, the
technology protected by these two patents represents a significant step
forward in industrial laser technology for material processing and an
important source of the Company's future growth and profitability.
Rofin-Sinar protects its intellectual property in a number of ways
including, in certain circumstances, through patents. The Company has sought
patent protection primarily in Germany and the United States. Some patents
have also been registered in other jurisdictions including Great Britain,
France, Italy and Japan. The Company currently holds 32 separate patents for
inventions relating to lasers, processes and power supplies which expire from
1997 to 2014. In addition, Rofin-Sinar requires its employees and certain of
its customers, suppliers, distributors, agents and consultants to enter into
confidentiality agreements to further safeguard the Company's intellectual
property.
The Company from time to time receives notices from third parties alleging
infringement of such parties' patent or other intellectual property rights by
the Company's products. While such notices are common in the Company's
industry and the Company has in the past been able to develop non-infringing
technology or license necessary patents or technology on commercially
reasonable terms, there can be no assurance that the Company would in the
future prevail in any litigation seeking damages or expenses from the Company
or to enjoin the Company from selling its products on the basis of such
alleged infringement, or that the Company would be able to develop any non-
infringing technology or license any valid and infringed patents on
commercially reasonable terms. In the event any third party made a valid claim
against the Company or its customers and a license were not made
43
<PAGE>
available to the Company on commercially reasonable terms, the Company would
be adversely affected.
In July 1996, the Company received notice of an opposition filed by a
competitor in the EPO which challenges on a number of grounds one of the two
third-party patents licensed by the Company covering certain aspects of its
diffusion-cooled CO\2\ Slab laser. The U.S.-issued counterpart of this patent
was previously the subject of a reexamination proceeding in the PTO at the
conclusion of which the patent was upheld. While the decision of the PTO is
not binding on the EPO, based on the outcome of the U.S. reexamination
proceeding and management's review of the arguments made in the notice of
opposition, the Company believes that such notice of opposition is without
substantial merit. The Company intends to defend the EPO opposition proceeding
vigorously.
In July 1996, the Company received a letter from a manufacturer of sealed-
off, RF-excited CO\2\ lasers for military and commercial avionics applications
offering a license of its U.S. patents covering such technology in exchange
for a cross-license of the Company's CO\2\ Slab laser technology. Based on its
review of the patents held by such manufacturer, the Company does not believe
that its products infringe such patents, and it intends to defend vigorously
any infringement action which such party may commence against the Company.
From time to time, the Company files notices of opposition to certain
patents on laser technologies held by others, including academic institutions
and competitors of the Company, which the Company believes could inhibit its
ability to develop products in this area. In particular, the Company has a
pending notice of opposition against a patent held by a competitor which it
believes conflicts with a third-party patent licensed by the Company covering
certain aspects of its diffusion-cooled CO\2\ Slab laser. No assurance can be
given that the Company will be able to avoid an action by such competitor or
others or not be forced to initiate its own actions to protect its proprietary
position.
ORDER BACKLOG
The Company's order backlog at the end of fiscal 1993, 1994 and 1995 and
the first nine months of fiscal 1996 has increased significantly over the
comparable prior period. The Company's order backlog was $12.5 million at the
end of fiscal 1993, $17 million at the end of fiscal 1994 and $26.5 million at
the end of fiscal 1995 and $35.9 million at the end of the first nine months
of fiscal 1996.
An order is booked by Rofin-Sinar when an unconditional purchase order has
been received where a delivery date has been assigned. Delivery schedules
range from one week to six months, depending on the size, complexity and
availability of the product or system ordered, although typical delivery dates
for laser source products range 8-12 weeks from the date an order is placed.
During fiscal 1996, as the rate of order intake for laser marking products has
increased dramatically, average delivery dates for such products were for a
time extended by approximately four weeks, but have returned to normal
delivery times.
In addition to achieving record sales for the first nine months of 1996,
the Company's order backlog at June 30, 1996 of $35.9 million was the largest
quarter-end backlog in Rofin-Sinar's history. This backlog represents a 35.5%
increase over the order backlog at September 30, 1995 and a 111% increase over
the order backlog at September 30, 1994. To reduce its order backlog for laser
marking products and satisfy anticipated future growth in the marking segment
of its sales, the Company has recently expanded its production facility in
Gunding-Munich, Germany and added manufacturing employees which has enabled
the Company to increase its manufacturing capacity by 50%. Except for this
expansion in Gunding-Munich, the Company does not anticipate having to
increase materially the size of its manufacturing facilities to meet sales
expectations through the end of fiscal 1996.
44
<PAGE>
However, in the event that the Company's marketing activities in the United
States related to its laser marking systems result in additional demand for
such systems, the Company will need to add manufacturing in the United States
in fiscal 1997. In addition, in the event that the Company is able to
implement anticipated improvements in the product design and manufacturing of
its diffusion-cooled CO\2\ Slab lasers which would enable it to offer such
lasers at more attractive prices, the Company anticipates that it will need to
expand its manufacturing capacity in Europe and in the United States in fiscal
1997 or 1998 in order to satisfy the resulting increase in demand for such
products. The Company estimates that the total capital expenditures required
to add such manufacturing capacity in the United States and Europe would be in
the range of $500,000 to $750,000. Currently, Rofin-Sinar does not operate
full second shifts at any of its manufacturing facilities.
LASER TECHNOLOGY
General. The term "laser" is an acronym for "Light Amplification by
Stimulated Emission of Radiation." Lasers were first developed in the early
1960s in the United States. As illustrated in the diagram below, a laser
consists of an active lasing medium (1) that gives off its own light
(radiation) when excited, an optical resonator with a partially reflective
output mirror at one end (2) a fully reflective rear mirror at the other (3)
that permits the light to bounce back and forth between the mirrors through
the lasing medium, and an external energy source (4) used to excite the lasing
medium. The energy source can be light from special lamps, light from another
laser, an electric current or a chemical reaction. The lasing medium can be a
gas, a liquid, a semiconductor or a solid. A laser works by causing the energy
source to excite (pump) the lasing medium which converts the energy from the
source into an emission consisting of particles of light (photons) (5). These
photons stimulate the release of more photons, as they are reflected between
the two mirrors which form the resonator. The resulting build-up in the number
of photons is emitted in the form of a laser beam (6) through an output port
or "window." By changing the energy and the lasing medium, different
wavelengths and types of laser light can be produced. The laser produces light
from the lasing medium to achieve the desired intensity, uniformity and
wavelength through a series of reflective mirrors. The heat generated by the
excitation of the lasing medium is dissipated through a cooling mechanism,
which varies according to the type of laser technology.
The principal factors that distinguish different types of lasers and
determine the particular laser suitable for a specific application are pulse
duration, wavelength, output power, spatial coherence and cost per watt of
laser power. Lasers can be used for material processing because of their
excellent focusability. When focused by means of lenses or mirrors the energy
density in the focus spot is so high that metals and other materials can be
melted and vaporized.
The first type of industrial laser, the continuous wave CO\2\ laser, was
first commercialized in the mid-1970's. Successive laser technologies, such as
pulsed CO\2\, diffusion-cooled high-power CO\2\, solid-state and diode-pumped
technology, have required or will require (as the case may be) more than a
decade between initial development and industrial commercialization. Although
industrial applications for lasers were developed in the United States in the
1960's and 1970's, beginning in the late 1980's the focus of laser technology
development shifted to Germany, principally due to the significant level of
research and development activity at government-funded research institutes and
universities. The Company maintains close working relationships with a number
of these important research institutes and universities.
Principal Laser Technologies. The two principal types of laser technology used
for material processing are CO\2\ lasers and Nd:YAG flash-lamp pumped solid
state lasers. CO\2\ lasers and Nd:YAG flash-lamp pumped solid state lasers
accounted for 40% and 46%, respectively, of the total industrial laser market
for material processing in 1995, respectively, and are projected to account
for 37% and 41%, respectively, of the total market in 1996. Whereas CO\2\
lasers in general have the advantage of better mode structure (i.e., the shape
of the laser beam as it burns into the material being processed)
45
<PAGE>
and lower running costs, Nd:YAG lasers have the advantage of a shorter
wavelength, thereby enabling the use of more flexible fiberoptic beam delivery
systems, which does not exist for CO\2\ lasers (due to the longer wavelength
of the light they emit). Of the other laser types sold in the industrial laser
market for material processing, diode-pumped lasers accounted for 2% of the
total industrial laser market for material processing in 1995 and are
projected to account for 3% of the total market in 1996.
[ART]
CO\2\ lasers, which use CO\2\ gas as the lasing medium, are divided into
high-power (above 500 W) and low-power (below 500 W) applications. There are
two methods for CO\2\ excitation, radio frequency ("HF") and direct current
("DC") excitation. Most high power CO\2\ lasers are based on gas flow (i.e., a
continuous supply of fresh laser gas flows through the laser cavity to create
the energy necessary for excitation). Due to their ability to generate
comparatively high levels of continuous wave ("CW") power, CO\2\ lasers are a
particularly attractive laser medium for material processing applications.
Material processing applications for CO\2\ laser sources vary according to the
power output and configuration of the laser system. The primary applications
for high power CO\2\ lasers are cutting and welding of metal. Low power CO\2\
lasers are used principally for marking, cutting and engraving of non-metal
materials. While both low- and high-power CO\2\ lasers are used for cutting,
the materials they are used to process and their physical size can vary
significantly.
Nd:YAG lasers currently use flash lamps as the source of excitation (and
are therefore called "flash-lamp pumped"). The lasing medium is a solid state
Nd:YAG crystal rod. The Nd:YAG crystal rod and the flash lamps are positioned
in a cavity, which is either a gold or a ceramic reflector. The output power
is determined by the size of the rod and by the numbers of cavities within the
laser resonator. Typical output powers vary from 50 W to 4000 W. Nd:YAG lasers
can be run in either a pulsed or continuous wave manner. Marking applications
generally require higher pulsing frequencies than can be achieved with pulsed
flash lamps. Such frequencies are achieved by inserting a Q-switch (a fast
electro-optical shutter) into the laser resonator, enabling frequencies to be
switched up or down in multiples of 10 kHz at a time.
Recent development efforts in the area of Nd:YAG lasers have focused on the
use of laser diodes as the means of excitation instead of flash lamps.
Laboratory testing has shown that diode laser
46
<PAGE>
excitation can increase the electrical efficiency of a Nd:YAG laser from
approximately 4% to approximately 15%, making it comparable with the
electrical efficiency of CO\2\ laser technology. However, to date, the high
costs and short life of laser diodes have hindered widespread acceptance by
industrial customers of diode-pumped technology in high power lasers.
Currently, diode-pumped solid state lasers are commercially available only at
the 10 W level. It is Rofin-Sinar's intention to develop cost effective
solutions for diode-pumped Nd:YAG laser sources in the 100 W range (for
marking) and up to 5 kW range (for cutting and welding). See "--Business
Strategy"; "--Research and Development."
EMPLOYEES
At June 30, 1996, Rofin-Sinar had 443 full time employees, of which 300
were in Germany, 100 were in the United States, 12 in France, 16 in Italy and
15 in Japan. Of such 443 employees, 149 were engaged in manufacturing, 82 in
sales and marketing, 106 in customer service, 65 in research and development
and 41 in general management, administration and finance.
While the Company's employees are not covered by collective bargaining
agreements and the Company has never experienced a work stoppage, slowdown or
strike, the Company's employees at its Hamburg and Gunding-Munich facilities
are represented by a seven-person and five-person works council, respectively,
as well as by a four-person central works council. Matters relating to
compensation, benefits and work rules are negotiated and resolved between
management and the works council for the relevant location. The Company
considers its relations with its employees to be excellent.
PROPERTIES
The Company's manufacturing facilities include the following:
<TABLE>
<CAPTION>
LOCATION OF FACILITY OWNED OR LEASED SIZE (SQ. FT.) PRIMARY ACTIVITY
-------------------- --------------- -------------- -------------------------------------
<S> <C> <C> <C>
Hamburg, Germany........ Owned* 110,840 CO\2\ lasers, Nd:YAG lasers
Gunding-Munich, Germa-
ny..................... Leased 36,469 Nd:YAG lasers, laser marking products
Plymouth, Michigan...... Leased 58,075 CO\2\ lasers
Sakai Atsugi-shi, Ja-
pan.................... Leased 11,100 CO/2/ lasers
</TABLE>
- --------
*The facility is owned by RSL; the real property on which the facility is
located is leased by RSL under a 99-year lease.
The Company's leases of its facilities in Plymouth, Michigan and Gunding-
Munich, Germany expire in 1998 (with renewal options until 2001) and 2005,
respectively. The leases on its Japanese facilities in Atsugi-shi expire in
1997 (renewable for two years) and in 1998 (renewable for three years).
The Company maintains sales, administration and research and development
facilities at each of the Hamburg, Gunding-Munich and Plymouth locations. The
Company also maintains sales and service offices worldwide, all of which are
leased.
Except as noted above under "Order Backlog," the Company believes that its
existing facilities are adequate to meet its needs for the next 12 months and
that suitable additional or alternative space would be available, if
necessary, in the future on commercially reasonable terms. The Company expects
to make additional capital expenditures to support its diode-pumped solid
state laser development activities and add manufacturing and testing capacity
in North America for selected components and products, which may also require
certain leasehold improvements in the Company's Plymouth, Michigan facility.
47
<PAGE>
GOVERNMENT REGULATION
The majority of the Company's laser products sold in the United States are
classified as Class IV Laser Products under applicable rules and regulations
of the Center for Devices and Radiological Health ("CDRH") of the U.S. Food
and Drug Administration. The same classification system is applied in the
European markets. Safety rules are formulated with Deutsche Industrie Norm
(i.e., German Industrial Standards) or ISO standards which are internationally
harmonized. Such regulations generally require a self-certification procedure
pursuant to which a manufacturer must file with the CDRH with respect to each
product incorporating a laser device, periodic reporting of sales and
purchases and compliance with product labeling standards. The Company's laser
products for cutting and welding and laser marking products can result in
injury to human tissue if directed at an individual or otherwise misused. The
Company believes that its laser products for cutting and welding and laser
marking products are in substantial compliance with all applicable laws for
the manufacture of laser devices.
48
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS OF THE COMPANY
The following table sets forth certain information and ages as of August 1,
1996 regarding each of the Company's executive officers, key employees and
directors:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Peter Wirth............. 49 Chairman of the Board of Directors, Chief Executive
Officer and President
Hinrich Martinen........ 54 Executive Vice President, Research and Development/
Operations, Chief Technical Officer and Director
Gunther Braun........... 38 Executive Vice President, Finance and
Administration, Chief Financial Officer and
Director
Walter Volkmar.......... 53 Manager, RSL Marking Division
Joseph Ferrario......... 49 President, RSI
Richard Walker.......... 51 Vice President -- Sales and Marketing, RSI
Bernd Ladiges........... 54 European Sales Manager, RSL
Ulrich Hefter........... 43 Manager of Research and Development for the Marking
Division, RSL
</TABLE>
PETER WIRTH is Chairman of the Board of Directors, Chief Executive Officer
and President of the Company. He has also served as the General Manager of RSL
since October 1994. From 1991 until October 1994, Dr. Wirth was President of
Rofin-Sinar, Inc. He joined Rofin-Sinar in 1979 as Sales Manager for
Industrial Lasers, and became Director, Sales and Marketing in 1983. He holds
a Master's Degree and a Ph.D in Physics from the Technical University in
Munich, Germany.
HINRICH MARTINEN is Executive Vice President, Research and
Development/Operations and Chief Technical Officer, as well as a member of the
Board of Directors of the Company. He has held a number of senior R&D
management positions since joining RSL in 1981 and is currently the Technical
Director of RSL. Mr. Martinen holds a Master's Degree in Physics from the
University of Hamburg, Germany.
GUNTHER BRAUN is Executive Vice President, Finance and Administration, and
Chief Financial Officer of the Company, as well as a member of its Board of
Directors. Since 1994, he has also been the Financial Director for Rofin-Sinar
Laser GmbH. He joined RSL in 1989 when RSL acquired Laser Optronic's marking
division from Coherent General Inc. Mr. Braun holds a Business Administration
degree from the Fachhochschule in Regensburg, Germany.
WALTER VOLKMAR has been the Manager of the Marking Division of RSL since
1994. He joined RSL in 1989 when RSL acquired Laser Optronic's marking
division from Coherent General Inc. Dr. Volkmar holds Master's Degrees in
Mechanical Engineering and Business Administration from the Technical
University in Darmstadt, and a Ph.D. in Economics and Trade from the
University of Parma in Italy.
JOSEPH FERRARIO has been the President of RSI since August 1994, after
joining RSI as General Manager earlier that year. From 1992 to 1994, Mr.
Ferrario was an independent business consultant to industrial companies. From
1981 until 1992, Mr. Ferrario held senior positions in engineering, research
and product development, service, sales and marketing management with Sciaky
Brothers Limited, which produces electron beam equipment and laser welding
systems. Mr. Ferrario holds a B.S. in Physics from St. Louis University and a
Master's Degree in Business Administration from Northwestern University.
RICHARD WALKER has been the Vice President -- Sales and Marketing of RSI
since 1993. Prior to that, he was Vice President -- Marketing for Nd:YAG
products. Mr. Walker joined RSI in 1988. Mr. Walker holds a B.S. from the
University of London.
BERND LADIGES has been the European Sales Manager of RSL since 1987. He
joined RSL in 1982. Mr Ladiges holds an electrical engineering and economics
degree from the Fachhochschule in Wedel, Germany.
49
<PAGE>
ULRICH HEFTER has been the Research and Development Manager of the Marking
Division since 1984. He joined RSL in 1989 when RSL acquired Laser-Optronic's
marking division from Coherent General, Inc. Dr. Hefter holds a Master's
Degree and a Ph.D. in Physics from the University of Kaiserslautern, Germany.
Messrs. Wirth, Martinen, Braun, Volkmar, Ferrario and Walker are members of
the Company's Operating Committee, which is responsible for establishing and
implementing the Company's business strategy.
The Company's Board of Directors intends to appoint William R. Hoover,
Ralph E. Reins and Gary K. Willis to its Board of Directors shortly after the
consummation of the Offerings. Summarized below is certain information with
respect to each of Messrs. Hoover, Reins and Willis:
WILLIAM R. HOOVER has been Chairman of the Board of Computer Sciences
Corporation, a provider of information technology consulting, systems
integration and outsourcing to industry and government, since November
1972. He has been consultant to that company since March 1995; prior to
that, he was its President from November 1969 to March 1995 and its Chief
Executive Officer from November 1972 until March 1995. Mr. Hoover serves as
Director on the Boards of Merrill Lynch & Co. and Storage Technology Corp.
Mr. Hoover is 66 years of age.
RALPH E. REINS became President and Chief Executive Officer of AP Parts
International, Inc. in 1996. Previously, Mr. Reins served as President and
Chief Executive Officer of Envirotest Systems Corp. in 1995, as President
of Allied Signal Automotive from 1991 through 1994 and as President of
United Technologies Automotive from 1990 to 1991. Prior to that, he was
Chairman, Chief Executive Officer, President and Chief Operating Officer of
Mack Truck from 1989 to 1990 and President and Chief Executive Officer of
ITT Automotive from 1985 to 1989. Mr. Reins is a member of the University
of Michigan's National Advisory Council and the Society of Automotive
Engineers. Mr. Reins is 55 years of age.
GARY K. WILLIS has been President, Chief Executive Officer and Director
of Zygo Corporation since 1992. He was an independent consultant between
1990 and 1992. Before 1990, Mr. Willis was President, Chief Executive
Officer and a director of the Foxboro Company. Mr. Willis served as a
director of Neworld Bank from 1991 through June 1994. Mr. Willis is 50
years of age.
Each of Messrs. Hoover, Reins and Willis has indicated an intention to
purchase a portion of the shares of Common Stock to be reserved for sale to
employees and certain other persons. See "Underwriting."
Upon the appointment of such outside directors, the Company's Board of
Directors will be divided into three classes of directors serving staggered
three-year terms. See "Description of Capital Stock--Certain Provisions of the
Company's Certificate of Incorporation and By-laws."
It is expected that the Company's Board of Directors will establish an
Audit Committee and a Compensation Committee, each consisting of two or more
directors, none of whom will be an officer or employee of the Company. The
Company intends to appoint Messrs. Reins and Willis to the Audit Committee and
Messrs. Hoover and Reins to the Compensation Committee.
The responsibilities of the Audit Committee will be to recommend to the
Board of Directors the independent public accountants to be selected to
conduct the annual audit of the books and records of the Company, review the
proposed scope of such audit and approve the audit fees to be paid, review the
adequacy and effectiveness of the accounting and internal financial controls
of the Company with the independent public accountants and the Company's
financial and accounting staff and review and approve transactions between the
Company and its directors, officers and affiliates.
The responsibilities of the Compensation Committee will be to provide a
general review of the Company's compensation and benefit plans to ensure that
they meet corporate financial and strategic objectives. The responsibilities
of the Compensation Committee also include administering the Equity
50
<PAGE>
Incentive Plan and the Annual Incentive Plan (both of which are described
below), including selecting the officers and salaried employees to whom awards
will be granted and making such awards.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as officers or
employees of the Company are entitled to an annual cash retainer fee of
$15,000 plus an honorarium of $1,000 and $500 for each board meeting and
committee meeting, respectively, which they attend, plus reimbursement of
expenses. In addition, prior to the consummation of the Offerings, the Company
intends to adopt a non-employee director stock plan (the "Directors' Plan")
pursuant to which each member of the Board of Directors who is not an employee
of the Company and who is elected or continues as a member of the Board of
Directors is entitled to receive an initial grant of 1,500 shares of Common
Stock and thereafter an annual grant of 1,500 shares of Common Stock. The
Directors' Plan provides that non-employee directors aged 65 or older, upon
their appointment or election to the Board of Directors, will receive, in lieu
of such initial and annual grants of shares of Common Stock, 7,500 shares of
restricted stock which shall vest in five equal installments on the date of
grant and each of the following four anniversaries thereof. Prior to vesting,
no shares of restricted stock may be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of, subject to certain exceptions. The
Directors' Plan will continue in effect until the earlier of ten years from
the date of the first grant or the termination of the Directors' Plan by the
Board of Directors. The Compensation Committee of the Board of Directors
administers the Directors' Plan.
The maximum number of shares of Common Stock reserved for issuance under
the Directors' Plan is 100,000 shares (subject to adjustment for certain
events such as stock splits and stock dividends), and the Company intends to
file immediately after the Offerings a registration statement on Form S-8
under the Securities Act to register the shares of Common Stock reserved for
issuance under the Directors' Plan.
EXECUTIVE COMPENSATION
The table below shows information concerning cash and noncash compensation
for the Chief Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer of the Company (the "Named
Executive Officers") for the fiscal year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
---------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (2) COMPENSATION ($) (3)
- --------------------------- ---------- ------------- --------------------
<S> <C> <C> <C>
Peter Wirth...................... $231,236 $20,684 --
Chairman, Chief Executive Offi-
cer and President
Hinrich Martinen................. 206,796 20,684 --
Executive Vice President, Re-
search and Development/ Opera-
tions and Chief Technical Offi-
cer
Gunther Braun.................... 129,980 13,789 --
Executive Vice President, Fi-
nance and Administration, and
Chief Financial Officer
Walter Volkmar................... 132,675 20,250 --
Manager, RSL Marking Division
Joseph Ferrario.................. 133,900 49,754 5,510
President, RSI
</TABLE>
- --------
(1) Amounts paid in German marks have been translated into U.S. dollars at the
weighted average exchange rate for the fiscal year ended September 30,
1995 (US$1.00 : DM 1.4504).
(2) Includes discretionary bonuses awarded by Siemens (with respect to Messrs.
Wirth, Martinen and Braun), and bonuses awarded pursuant to the RSL Bonus
Plan (as defined below) (with respect to Mr. Volkmar) and the RSI
Incentive Compensation Plan (as defined below) (with respect to Mr.
Ferrario).
(3) With respect to Messrs. Wirth, Martinen, Braun and Volkmar, the amounts
shown represent contributions to a [deferred] pension plan account in
Germany. With respect to Mr. Ferrario, the amount shown represents RSI's
matching contribution on behalf of Mr. Ferrario to the Siemens Savings
Plan.
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PENSION PLANS
RSL Pension Plan
Messrs. Wirth, Martinen, Braun and Volkmar participate in the Rofin-Sinar
Laser GmbH Pension Plan (the "RSL Pension Plan") for RSL executives. As is the
normal practice with German companies, the RSL Pension Plan is unfunded.
According to the provisions of the RSL Pension Plan, a participant will
receive a pension if he (i) is at least 60 years old when he leaves RSL or he
is no longer employed due to a permanent disability resulting in more than 50%
inability to practice his profession and (ii) has served at least ten years
with RSL at the time of separation.
The annual benefits payable under the RSL Pension Plan commencing at the
statutory retirement age of 65 (according to German law) are calculated based
upon the age at which the participant leaves RSL pursuant to tables attached
to the RSL Pension Plan. Book reserves are kept to record benefit accruals
under the RSL Pension Plan. Messrs. Wirth, Martinen, Braun and Volkmar joined
RSL on July 1, 1979, October 1, 1981, November 1, 1984 and March 1, 1985,
respectively. Assuming retirement at or after age 60, Messrs. Wirth, Martinen,
Braun and Volkmar would receive a monthly pension benefit of $2,765, $2,765,
$902 and $1,289, respectively (at the German mark/U.S. dollar exchange rate in
effect on August 2, 1996).
Siemens Corporation Retirement Plan
RSI is a participating employer in the Siemens Corporation Retirement Plan,
a qualified defined benefit pension plan maintained for U.S. employees. Under
the Siemens Corporation Retirement Plan, employees receive annual pension
benefits equal to the sum of 1.125% of the first $12,000 of the employee's
average final compensation and 1.5% of "average final compensation" in excess
of $12,000, multiplied by the number of years of service in which the employee
was employed by a participating employer. Average final compensation is based
upon the period of four consecutive plan years out of the last ten full plan
years preceding the employee's retirement which produces the highest amount.
Pension benefits under the Siemens Corporation Retirement Plan are subject to
reduction for benefits payable to the employee under any other tax-qualified
defined benefit pension plan attributable to the same period of service as the
benefits payable under the Siemens Corporation Retirement Plan. Benefits under
the Siemens Corporation Retirement Plan are funded through contributions by SC
to a trust maintained in connection with such plan.
RSI employees who are participants in the Siemens Corporation Retirement
Plan will cease to participate in such plan after a transition period
following the consummation of the Offerings. In connection with the
consummation of the Offerings, SC will transfer an amount required pursuant to
Section 414(l) of the Internal Revenue Code of 1986, as amended (the "Code")
to satisfy the pension obligation relating to the RSI participants in the
Siemens Corporation Retirement Plan to a separate trust in favor of such
participants.
Retirement benefits payable under qualified defined benefit plans are
subject to annual pension limitations imposed under Section 415 of the Code,
for which limitations vary annually. The current Section 415 limitation is
$120,000. In addition, Section 401(a)(17) of the Code specifies a maximum
amount of annual compensation, also adjusted annually, that may be taken into
account in computing benefits under a qualified defined benefit plan. The
current Section 401(a)(17) limitation is $150,000. The Siemens Corporation
Pension Preservation Plan, a nonqualified and unfunded plan in which certain
highly compensated employees of RSI (including Mr. Ferrario) participate,
provides benefits in excess of the applicable Code limitations. Such RSI
employees will cease to participate in the Siemens Corporation Pension
Preservation Plan upon the consummation of the Offerings.
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The following table shows the estimated annual pension benefits provided by
the combination of the Siemens Corporation Retirement Plan and the Siemens
Corporation Pension Preservation Plan, based on the remuneration and years of
service classifications indicated:
PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000.............................. $27,450 $36,600 $45,750 $ 54,900 $ 64,050
150,000.............................. 33,075 44,100 55,125 66,150 77,175
175,000.............................. 38,700 51,600 64,500 77,400 90,300
200,000.............................. 44,325 59,100 73,875 88,650 103,425
225,000.............................. 49,950 66,600 83,250 99,900 116,550
250,000.............................. 55,575 74,100 92,625 111,150 129,675
</TABLE>
- --------
(1) Annual pension benefits are calculated with respect to remuneration levels
of up to $250,000, which amount is in excess of 120% of the covered
compensation of Mr. Ferrario, the only Named Executive Officer who
participates in either the Siemens Corporation Retirement Plan or the
Siemens Corporation Pension Preservation Plan.
The amounts shown are on a single life annuity basis and assume retirement
at age 65. As of September 30, 1995, Mr. Ferrario had one year of benefit
service under the Siemens Corporation Retirement Plan. Mr. Ferrario's
covered compensation under the Siemens Corporation Retirement Plan does not
differ by more than 10% from his annual compensation set forth in the
Summary Compensation Table.
EQUITY INCENTIVE PLAN
Prior to the consummation of the Offerings, the Company intends to adopt
the Equity Incentive Plan. The Equity Incentive Plan will be administered by
the Compensation Committee, which will be comprised exclusively of nonemployee
Directors. The Equity Incentive Plan will provide for the grant of incentive
and nonqualified stock options, restricted stock and performance shares
(individually, an "Award" or collectively, "Awards"). Employees who will be
eligible to receive Awards are officers or certain salaried employees with
potential to contribute to the future success of the Company or its
subsidiaries. The Compensation Committee will have discretion to select the
employees to whom Awards will be granted (from among those eligible), to
determine the type, size and terms and conditions applicable to each Award and
the authority to interpret, construe and implement the provisions of the
Equity Incentive Plan, subject to applicable requirements under Section 162(m)
of the Code. The Compensation Committee's decisions will be binding on the
Company and employees eligible to participate in the Equity Incentive Plan and
all other persons having any interest in the Equity Incentive Plan. It is
presently anticipated that grants of Awards will be made to the executive
officers and certain other officers of the Company concurrently with the
Offerings as set forth in the Equity Incentive Plan Table below.
EQUITY INCENTIVE PLAN TABLE
<TABLE>
<CAPTION>
NO. OF
NAME AND POSITION OPTIONS
----------------- -------
<S> <C>
Peter Wirth........................................................... 42,000
Chairman, Chief Executive Officer and President
Hinrich Martinen...................................................... 36,000
Executive Vice President, Research and Development/Operations
and Chief Technical Officer
Gunther Braun......................................................... 36,000
Executive Vice President, Finance and Administration
and Chief Financial Officer
Walter Volkmar........................................................ 30,000
Manager, RSL Marking Division
Joseph Ferrario....................................................... 30,000
President, RSI
</TABLE>
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The material terms of the Awards described in the table above are as
follows: The exercise price for all Options granted as of the Effective Date
will be equal to the initial public offering price. All Options granted as of
the closing of the Offerings will vest at the rate of 20% annually on the
first five anniversaries of the closing of the Offerings.
The number of shares that will be available for award under the Equity
Incentive Plan through the fifth anniversary of the closing of the Offerings
is 1,500,000 shares (includes Awards issued effective as of the closing of the
Offerings). Common Stock issued under the Equity Incentive Plan may be either
authorized but unissued shares, treasury shares or any combination thereof. To
the fullest extent permitted under Section 422 of the Code, any shares of
Common Stock subject to an Award which lapses, expires or is otherwise
terminated without the issuance of such shares may become available for new
Awards.
Set forth below is a description of the types of Awards that may be granted
under the Equity Incentive Plan.
Stock Options
Options (each an "Option") to purchase shares of Common Stock, which may be
nonqualified or incentive stock options, may be granted under the Equity
Incentive Plan at an exercise price (the "Option Price") determined by the
Compensation Committee in its discretion, provided that, with respect to
incentive stock options, the Option Price may be no less than the fair market
value of the underlying Common Stock on the date of grant (110% of fair market
value in the case of an incentive stock option granted to a ten percent
shareholder). Each Option represents the right to purchase one share of Common
Stock at a specified price.
Options will expire not later than ten years after the date on which they
are granted (five years in the case of an incentive stock option granted to a
ten percent shareholder). Options become exercisable at such times and in such
installments as determined by the Compensation Committee and such
exerciseability will generally be based on (i) length of service or (ii) the
attainment of performance goals established by the Compensation Committee;
provided that no Option may be exercised within the first six months following
the date of grant. The Compensation Committee may also accelerate the period
for the exercise of any or all Options held by an optionee. Payment of the
Option Price must be made in full at the time of exercise in cash, certified
or bank check, note or other instrument acceptable to the Compensation
Committee.
Restricted Stock
An Award of restricted stock ("Restricted Stock") is an Award of Common
Stock that is subject to such restrictions as the Compensation Committee deems
appropriate, including forfeiture conditions and restrictions against transfer
for a period specified by the Compensation Committee. Restricted Stock Awards
may be granted under the Equity Incentive Plan for or without consideration.
Restrictions on Restricted Stock may lapse in installments based on factors
selected by the Compensation Committee. The Compensation Committee, in its
sole discretion, may waive or accelerate the lapsing of restrictions in whole
or in part. Prior to the expiration of the restricted period, except as
otherwise provided by the Compensation Committee, a grantee who has received a
Restricted Stock Award has the rights of a shareholder of the Company,
including the right to vote and to receive cash dividends on the shares
subject to the Award. Stock dividends issued with respect to shares covered by
a Restricted Stock Award will be treated as additional shares under such Award
and will be subject to the same restrictions and other terms and conditions
that apply to the shares with respect to which such dividends are issued.
Performance Shares
A performance share Award (a "Performance Share") is an Award of a number
of units that represent the right to receive a specified number of shares of
Common Stock upon satisfaction of
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<PAGE>
certain specified performance criteria, subject to such other terms and
conditions as the Compensation Committee deems appropriate. Performance
objectives will be established before, or as soon as practicable after, the
commencement of the performance period (the "Performance Period") and may be
based on net earnings, operating earnings or income, absolute and/or relative
return on equity or assets, earnings per share, cash flow, pre-tax profits,
earnings growth, revenue growth, comparisons to peer companies, any
combination of the foregoing and/or such other measures, including individual
measures of performance, as the Compensation Committee deems appropriate.
Prior to the end of a Performance Period, the Compensation Committee, in its
discretion and only under conditions that do not affect the deductibility of
compensation attributable to Performance Shares under Section 162(m) of the
Code, may adjust the performance objectives to reflect an event that may
materially affect the performance of the Company, or a subsidiary or a
division of the Company, including, but not limited to, market conditions or a
significant acquisition or disposition of assets or other property by the
Company, or a subsidiary or a division of the Company. The extent to which a
grantee is entitled to payment in settlement of a Performance Share Award at
the end of the Performance Period will be determined by the Compensation
Committee, in its sole discretion, based on whether the performance criteria
have been met.
Payment in settlement of a Performance Share Award will be made as soon as
practicable following the last day of the Performance Period, or at such other
time as the Compensation Committee may determine, in shares of Common Stock.
Additional Information
Under the Equity Incentive Plan, if there is any change in the outstanding
shares of Common Stock by reason of any stock dividend, recapitalization,
merger, consolidation, stock split, combination or exchange of shares or other
form of reorganization, or any other change involving the Common Stock, such
proportionate adjustments as may be necessary (in the form determined by the
Compensation Committee) to reflect such change will be made to prevent
dilution or enlargement of the rights with respect to the aggregate number of
shares of Common Stock for which Awards in respect thereof may be granted
under the Equity Incentive Plan, the number of shares of Common Stock covered
by each outstanding Award, and the price per share in respect thereof.
Generally, an individual's rights under the Equity Incentive Plan may not be
assigned or transferred (except in the event of death).
In the event of a change in control and except as the Compensation
Committee (as constituted immediately prior to such change in control) may
otherwise determine in its sole discretion: (i) all Options then outstanding
will become fully exercisable as of the date of the change in control, whether
or not then exercisable; (ii) all restrictions and conditions of all
Restricted Stock Awards then outstanding will lapse as of the date of the
change in control; (iii) all Performance Share Awards will be deemed to have
been fully earned as of the date of the change in control; and (iv) in the
case of a change in control involving a merger of, or consolidation involving,
the Company in which the Company is (A) not the surviving corporation (the
"Surviving Entity") or (B) becomes a wholly owned subsidiary of the Surviving
Entity or a parent thereof, each outstanding Option granted under the Equity
Incentive Plan and not exercised (a "Predecessor Option") will be converted
into an Option (a "Substitute Option") to acquire Common Stock of the
Surviving Entity or its parent, which Substitute Option will have
substantially the same terms and conditions as the Predecessor Option, with
appropriate adjustments as to the number and kind of shares and exercise
prices. The above notwithstanding, any Award granted within six months of a
change in control will not be afforded any such acceleration as to exercise,
vesting and payment rights or lapsing as to conditions or restrictions. For
purposes of the Equity Incentive Plan, a "change in control" shall have
occurred when (A) any person (other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of the
Company, or any person or entity organized, appointed or established by the
Company or any subsidiary of the Company for or pursuant to the terms of any
such plans), alone or together with its affiliates and associates
(collectively, an "Acquiring Person"), shall become the
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<PAGE>
beneficial owner of 20% or more of the then outstanding shares of Common Stock
or the combined voting power of the Company's then outstanding voting
securities (except pursuant to an offer for all outstanding shares of Common
Stock at a price and upon such terms and conditions as a majority of the
Continuing Directors (as defined below) determine to be in the best interests
of the Company and its shareholders (other than an Acquiring Person on whose
behalf the offer is being made)), (B) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors and any new director (other than a director who is a representative
or nominee of an Acquiring Person) whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote
of at least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved (collectively, the "Continuing
Directors"), no longer constitute a majority of the Board of Directors, (C)
the shareholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the Surviving Entity or any parent
of such Surviving Entity) at least 80% of the combined voting power of the
Company, such Surviving Entity or the Parent of such Surviving Entity
outstanding immediately after such merger or consolidation, or (D) the
shareholders of the Company approve a plan of reorganization (other than a
reorganization under the United States Bankruptcy Code) or complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; provided, that a
change in control shall not be deemed to have occurred in the event of (x) a
sale or conveyance in which the Company continues as a holding company of an
entity or entities that conduct all or substantially all of the business or
businesses formerly conducted by the Company or (y) any transaction undertaken
for the purpose of incorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.
The Equity Incentive Plan will remain in effect until terminated by the
Board of Directors and thereafter until all Awards granted thereunder are
satisfied by the issuance of shares of Common Stock or the payment of cash or
otherwise terminated pursuant to the terms of the Equity Incentive Plan or
under any Award agreements. Notwithstanding the foregoing, no Awards may be
granted under the Equity Incentive Plan after the fifth anniversary of the
effective date of the Equity Incentive Plan. The Board of Directors may at any
time terminate, modify or amend the Equity Incentive Plan; provided, however,
that no such amendment, modification or termination may adversely affect an
optionee's or grantee's rights under any Award theretofore granted under the
Equity Incentive Plan, except with the consent of such optionee or grantee,
and no such amendment or modification will be effective unless and until the
same is approved by the shareholders of the Company when such shareholder
approval is required to comply with applicable law, regulation or stock
exchange rule.
Certain U.S. Federal Income Tax Consequences of Options
Certain of the U.S. federal income tax consequences to optionees and the
Company of Options granted under the Equity Incentive Plan are generally set
forth in the following summary.
An employee to whom an incentive stock option ("QSO") that qualifies under
Section 422 of the Code is granted will not recognize income at the time of
grant or exercise of such Option. No federal income tax deduction will be
allowable to the Company upon the grant or exercise of such QSO. However, upon
the exercise of a QSO, any excess in the fair market price of the Common Stock
over the Option Price constitutes a tax preference item that may have
alternative minimum tax consequences for the employee. When the employee sells
such shares more than one year after the date of transfer of such shares and
more than two years after the date of grant of such QSO, the employee will
normally recognize a long-term capital gain or loss equal to the difference,
if any, between the sale prices of such shares and the aggregate Option Price.
If the employee does not hold such shares of the required period, when the
employee sells such shares, the employee will generally
56
<PAGE>
recognize ordinary compensation income and possibly capital gain or loss in
such amounts as are prescribed by the Code and the regulations thereunder and
the Company will generally be entitled to a federal income tax deduction in
the amount of such ordinary compensation income.
An employee to whom a nonqualified stock option ("NSO") is granted will not
recognize income at the time of grant of such Option. When such employee
exercises such NSO, the employee will recognize ordinary compensation income
equal to the difference, if any, between the Option Price paid and the fair
market value, as of the date of Option exercise, of the shares the employee
receives. The tax basis of such shares to such employee will be equal to the
Option Price paid plus the amount includible in the employee's gross income,
and the employee's holding period for such shares will commence on the date on
which the employee recognized taxable income in respect of such shares.
Subject to the applicable provisions of the Code and regulations thereunder,
the Company will generally be entitled to a federal income tax deduction in
respect of an NSO in an amount equal to the ordinary compensation income
recognized by the employee.
ANNUAL INCENTIVE PLAN ARRANGEMENTS
The Company currently has in effect two short-term cash incentive plans,
the RSL Annual Bonus Plan in Germany and the RSI Incentive Compensation Plan
in the United States. The Company intends to replace such plans with an Annual
Incentive Plan as described below. See "--Annual Incentive Plan."
RSL Annual Bonus Plan. Approximately 20 key managers in Germany are
eligible for participation in RSL's annual bonus program. This program
provides for annual cash bonus payments based on (i) the operating results of
the respective business unit, and (ii) personal targets established for each
participating manager. Depending on the seniority and the position held by the
respective manager, such bonus payments can account for up to 40% of the
salary to be paid. In fiscal 1995, approximately $20,250 was paid out to Mr.
Volkmar pursuant to this plan.
In March 1996, RSL agreed with its central works council with respect to
fiscal 1996 to pay a special bonus to its employees (excluding Messrs. Wirth,
Martinen and Braun) aggregating 7.5% of RSL's income from operations for such
fiscal year as reflected in RSL's statutory accounts, to be paid in the first
quarter of fiscal 1997.
RSI Incentive Compensation Plan. Under the RSI Incentive Compensation Plan,
cash incentive compensation is awarded to all RSI employees on an annual basis
based upon the extent to which RSI's financial performance (in terms of annual
revenue and pre-tax profits) exceeds certain threshold performance goals.
Individual performance is also considered in determining an employee's
incentive compensation. In fiscal 1995, Mr. Ferrario earned $49,754 under this
plan.
Annual Incentive Plan. Prior to the consummation of the Offerings, the
Company intends to adopt the Rofin-Sinar Technologies Inc. Annual Incentive
Plan (the "Annual Incentive Plan"), which will be administered by the
Compensation Committee. Certain management employees will be eligible to
participate in the Annual Incentive Plan.
Under the Annual Incentive Plan, annual bonuses will be based upon the
extent to which the Company's financial performance (in terms of net earnings,
operating income, earnings per share, cash flow, absolute and/or relative
return on equity or assets, pre-tax profits, earnings growth, revenue growth,
comparison to peer companies, any combination of the foregoing and/or other
appropriate measures in such manner as the Compensation Committee deems
appropriate) during the year has met or exceeded certain performance goals
specified by the Compensation Committee. Performance goals will be determined
by the Compensation Committee prior to the commencement of the applicable plan
year. In determining performance, the Compensation Committee may adjust the
performance goals or financial performance to reflect extraordinary
organizational, operational or other changes that
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<PAGE>
have occurred during the year, such as acquisitions, dispositions, and
expansions. The Compensation Committee may also provide that the Chief
Executive Officer shall have discretion to increase or decrease the award
otherwise payable to a participant based upon individual performance. The
Annual Incentive Plan also provides for discretionary bonuses in amounts
determined by the Compensation Committee in its discretion.
Unless otherwise determined by the Compensation Committee in its sole
discretion, if a participant ceases to be employed by the Company and its
subsidiaries prior to the end of the year for any reason other than
disability, retirement at or after age 55 or death, his participation in the
Annual Incentive Plan will terminate and he will not be entitled to any award
for that year. If the participant's employment ceases due to disability,
retirement at or after age 55 or death, the participant shall receive that
proportion of the amount that he would otherwise have received under the
Annual Incentive Plan for the full calendar year which the number of calendar
days of his participation in the Annual Incentive Plan during such year bears
to the total number of days in such year.
The Board of Directors may terminate, amend or suspend the Annual Incentive
Plan, in whole or in part, at any time and, if suspended, may reinstate any or
all of the provisions of the Annual Incentive Plan in such respects as the
Board of Directors may deem advisable; provided that no such termination or
amendment may impair any rights that may have accrued under such plan. Because
awards under the Annual Incentive Plan are based on the attainment of
specified performance goals, it is not possible to determine the benefits and
amounts that will be received by any individual participant or group of
participants in the future.
EMPLOYMENT AGREEMENTS
In August 1994, RSL entered into an employment agreement with Peter Wirth
(the "Wirth Employment Agreement"). Pursuant to the terms of the Wirth
Employment Agreement, Mr. Wirth agreed to serve as RSL's General Manager. The
Wirth Employment Agreement can be terminated either by RSL or by the executive
upon two years' prior notice. Mr. Wirth also agreed not to compete with RSL
throughout the term of his employment with RSL and not to disclose any
confidential information thereafter. In exchange for his services, RSL agreed
to compensate Mr. Wirth with a base salary of $228,800 per annum (subject to
annual adjustment). Mr. Wirth is entitled to a yearly discretionary bonus
determined by the Chairman of the Shareholder's Advisory Board of RSL.
Effective simultaneously with the closing of the Offerings, the Wirth
Employment Agreement will be terminated and the Company intends to enter into
a new employment agreement with the executive, the terms of which are
described below.
In June 1987, RSL entered into an employment agreement with Hinrich
Martinen (the "Martinen Employment Agreement"). Pursuant to the terms of the
Martinen Employment Agreement, Mr. Martinen agreed to serve as RSL's Technical
Director--Research and Development Operations. The Martinen Employment
Agreement can be terminated either by RSL or by the executive upon two years'
prior notice. Mr. Martinen also agreed not to compete with RSL throughout the
term of his employment, and not to disclose any confidential information
thereafter. In exchange for his services, RSL agreed to compensate Mr.
Martinen with a base salary of $175,770 per annum (subject to annual
adjustment). Mr. Martinen is entitled to a yearly discretionary bonus
determined by the Chairman of the Shareholder's Advisory Board. Effective
simultaneously with the closing of the Offerings, the Martinen Employment
Agreement will be terminated and the Company intends to enter into a new
employment agreement with the executive, the terms of which are described
below.
In January 1994, RSL entered into an employment agreement with Gunther
Braun (the "Braun Employment Agreement"). Pursuant to the terms of the Braun
Employment Agreement, Mr. Braun agreed to serve as RSL's Financial Director.
The Braun Employment Agreement can be terminated either by RSL or by the
executive upon one year's prior notice. Mr. Braun also agreed not to compete
with RSL throughout the term of his employment with RSL, and for six months
thereafter, and to not
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<PAGE>
disclose any confidential information thereafter. In exchange for his
services, RSL agreed to compensate Mr. Braun with a base salary of $122,615
per annum (subject to annual adjustment). Mr. Braun is also entitled to a
yearly discretionary bonus determined by the Chairman of the Shareholder's
Advisory Board. Effective simultaneously with the closing of the Offerings,
the Braun Employment Agreement will be terminated and the Company intends to
enter into a new employment agreement with the executive, the terms of which
are described below.
Effective simultaneously with the closing of the Offerings, the Company and
RSL intend to enter into new employment agreements with Messrs. Wirth,
Martinen and Braun (collectively, the "New Employment Agreements"), under
which the executives will each retain their existing job titles, and will each
be entitled to a base compensation of not less than DM 367,500, DM 319,500 and
DM 231,000, respectively ($245,000, $213,000 and $154,000, respectively, at an
exchange rate of DM 1.5 per $1.00) plus a yearly discretionary bonus
determined by the Compensation Committee. Each New Employment Agreement will
have an indefinite term, subject to earlier termination by either the Company
and RSL or the executive upon two years' prior notice; provided that such
notice may not be given by either the Company and RSL or the executive prior
to the second anniversary of the closing of the Offerings. In accordance with
the New Employment Agreements, each executive will agree (i) not to disclose
or exploit any of the Company's Confidential Information (as defined therein),
(ii) to assign to the Company all inventions or improvements made by the
executive in the course of his employment with the Company, and (iii) not to
compete with the Company for a six month period after the completion of his
term of employment with the Company. During any such six-month period, the
executive is entitled under German law to receive half of his monthly salary.
OWNERSHIP OF COMMON STOCK
Rofin-Sinar Technologies Inc. was incorporated prior to the Offerings as a
holding company for RSL and RSI. Prior to the closing of the Offerings, SPC
will hold all of the outstanding stock of Rofin-Sinar Technologies Inc.
Contemporaneously with the consummation of the Offerings, the Company will
repurchase the one share of Common Stock held by SPC for $1,000. Immediately
after the closing of the Offerings, all of the shares of Rofin-Sinar
Technologies Inc.'s outstanding Common Stock will be held by persons who have
purchased Common Stock in the Offerings.
CERTAIN TRANSACTIONS
Prior to the Offerings, the business of the Company was conducted by
subsidiaries of Siemens, which is a company organized under the laws of the
Federal Republic of Germany whose principal business is the design,
development, manufacture and marketing of a wide range of electrical and
electronics products and systems. Siemens originally acquired the laser
businesses of Rofin-Sinar in 1987 to obtain access to laser technologies for
application in a number of industrial areas. Since being acquired, however,
the Company has been allowed to pursue broader goals and to develop
capabilities independent of Siemens. Siemens and the Company have concluded
that Rofin-Sinar will have a better opportunity to achieve its full potential
as an independent entity rather than as a part of Siemens. In connection with
the Offerings, Siemens and certain of its subsidiaries will enter into the
following agreements with respect to the transfer of the laser business of
Siemens to the Company. The transfers contemplated by such agreements will be
consummated immediately prior to the closing of the Offerings.
TRANSFER AGREEMENTS
The Company, Siemens and SPC will, prior to the closing of the Offerings,
enter into certain sale and transfer agreements (collectively, the "Transfer
Agreements") pursuant to which, immediately prior to the closing of the
Offerings, the Company will purchase all of the outstanding capital stock of
RSL from Siemens and all of the outstanding capital stock of RSI from SPC for
an aggregate purchase
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price of approximately $70.3 million. Because the purchase price for RSL and
RSI is based on the offering price of the shares of Common Stock of the
Company being sold in the Offerings, it reflects the factors considered in
determining such offering price. Such offering price was determined through
discussions and negotiations among the Company, Siemens, SPC and the
Underwriters. See "Underwriting."
The Transfer Agreements will govern the allocation of liabilities and
obligations of the respective businesses of the Company, Siemens and their
respective subsidiaries. Pursuant to the Transfer Agreements, the Company and
Siemens will each be responsible for all claims and liabilities relating to
its own business and the businesses of its respective subsidiaries (whether or
not such claims and liabilities are asserted, or arise from activities
occurring, prior to the closing of the Offerings), except as provided in the
Transfer Agreements and the Tax Allocation and Indemnification Agreement (as
defined below), and will each indemnify the other against such claims and
liabilities.
Pursuant to the Transfer Agreements, the Company and Siemens have each
agreed to indemnify each other and their respective affiliates for certain
liabilities that may arise after the offering date (which is defined to be the
date of closing of the Offerings). The Company will indemnify Siemens and its
affiliates for any claims or liabilities arising out of (i) the ownership or
operation by the Company of its business, properties or assets after the
completion of the Offerings, (ii) any breach or inaccuracy in any of the
representations or warranties of the Company contained in the Transfer
Agreements or (iii) any failure by the Company to perform any of its
obligations, covenants or agreements contained in or contemplated by the
Transfer Agreements. In addition, the Company irrevocably and unconditionally
waives any right against Siemens or any of its subsidiaries for any
reimbursement or funding of any losses incurred by RSL pursuant to a profit
and loss transfer arrangement between RSL and Siemens which has been
terminated and relating to periods following the termination for tax purposes
of such arrangement.
Siemens will indemnify the Company and its affiliates for (i) any breach or
inaccuracy in any of the representations or warranties relating to Siemens
contained in the Transfer Agreements, (ii) any failure by Siemens to perform
any of its obligations, covenants or agreements contained in the Transfer
Agreements and (iii) for all German and certain other taxes imposed upon RSL
for tax periods prior to the consummation of the Offerings (for fiscal 1996,
in excess of amounts recorded or incurred in the ordinary course). Although
Siemens will receive a dividend in respect of RSL's fiscal 1996 earnings
shortly before the end of such fiscal year, a capital contribution in like
amount will be made to RSL by Siemens immediately prior to the transfer of the
RSL stock to the Company, with the effect that such earnings will be for the
account of RSL. Siemens and the Company have also agreed that the Company will
bear a pro rata portion (based on the proportion that $13 million bears to the
total gross proceeds of the Offerings assuming no exercise of the
Underwriters' over-allotment option) of the expenses of the Offerings,
including underwriting discounts and commissions, all legal, financial
advisory, accounting and auditing fees and expenses, all SEC, NASD and other
filing fees and expenses, and certain other fees and expenses incurred in
connection with the Offerings.
The Transfer Agreements also provide that Siemens and its subsidiaries,
subject to certain exceptions, will not engage in the design, development,
engineering, manufacture and marketing of laser products for material
processing applications for a period of four years after the closing of the
Offerings.
TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
For United States federal income tax reporting purposes, for periods prior
to the date of consummation of the Offerings, the Company and RSI will, until
the date of the Offerings, file a consolidated federal income tax return with
other members of the affiliated group of corporations of which Siemens
Corporation ("SC"), the parent company of SPC, is the common parent (the "SC
Group"). Under United States Federal income tax law, each corporation in a
consolidated group is liable for all taxes of the consolidated group. In the
event that SC and other members of the SC Group
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do not discharge the tax obligations for Federal income tax periods of the SC
Group which end with the tax period which includes the date of consummation of
the Offerings, the Company and RSI could be required under law to satisfy such
obligations. The Company believes that it is not reasonably likely that the
Company will incur any material liability for tax obligations of the SC Group
for income prior to the date of consummation of the Offerings in excess of the
tax obligations imposed on the income of the Company and RSI prior to such
date.
The Company, RSI, SC and SPC will enter into a Tax Allocation and
Indemnification Agreement (the "TAIA") to reflect the fact that the Company
and RSI will no longer be a part of the SC Group because of the consummation
of the Offerings. Pursuant to the TAIA, the SC Group will bear the economic
burden of all income taxes imposed on the income of any member of the SC
Group, including the Company and RSI, with respect to a tax period prior to
the date of consummation of the Offerings. SC and SPC will indemnify the
Company and RSI for (i) all such income taxes and (ii) any reduction in the
deferred tax asset of RSI attributable to its net operating loss
carryforwards, which reduction results from an adjustment to taxable income
for a period prior to the date of consummation of the Offerings. The TAIA also
contains provisions for the disposition of audits and contests regarding tax
items relating to RSI during the period it was a member of the SC Group.
INTERCOMPANY TRANSACTIONS
In the ordinary course of business, the Company and its subsidiaries and
Siemens or affiliates of Siemens have from time to time entered into various
business transactions and agreements, and the Company and its subsidiaries and
Siemens or such affiliates of Siemens may enter into additional transactions
and agreements from time to time in the future. See Note 10 of the Notes to
the Combined Financial Statements.
The Company and its subsidiaries have provided certain products (primarily
laser markers) and related services to Siemens and its affiliates. Revenue
from such transactions amounted to $1.6 million, $2.9 million and $1.2 million
for the fiscal years ended September 30, 1993, 1994 and 1995, and $3.5 million
for the nine-month period ended June 30, 1996, respectively. In addition, the
Company and its subsidiaries have from time to time purchased certain products
(primarily electrical components, subassemblies and computers used in the
Company's products) from Siemens and its affiliates. Such purchases totalled
approximately $2.2 million, $2.7 million and $2.4 million for the fiscal years
ended September 30, 1993, 1994 and 1995 and $4.1 million for the nine-month
period ended June 30, 1996, respectively. The Company expects to continue to
engage in transactions involving products and services with Siemens and its
affiliates following the Offerings on generally the same basis as it would
engage in transactions with any other unaffiliated third party. In addition,
the Company and Siemens intend to continue their cooperative relationship for
the development of certain advanced industrial laser technologies.
The Company also had sales to one of its joint venture partners in Japan
amounting to $255,000 in 1993, $1.3 million in 1994, $2.2 million in 1995 and
$1.2 million for the nine-month period ended June 30, 1996, respectively.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $0.01 per share, and 5,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). The following
summary description of the capital stock of the Company does not purport to be
complete and is subject to the detailed provisions of, and qualified in its
entirety by reference to, the Certificate of Incorporation as amended by a
Certificate of Amendment to be effective as of the date of the Underwriting
Amendment (the "Certificate of Incorporation") and By-laws, copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part, and to the applicable provisions of the DGCL.
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COMMON STOCK
Upon completion of the Offerings, the Company will have 10,000,000 shares
of Common Stock outstanding (assuming no exercise of the Underwriters' over-
allotment option and excluding 400,000 shares issuable at the initial public
offering price upon exercise of options to be granted to certain officers of
the Company and 7,500 shares of restricted stock issued at the initial public
offering price to non-employee directors of the Company pursuant to employee
benefit plans at the time of the Offerings).
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of Preferred Stock, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in the distribution of all assets
remaining after payment of liabilities, subject to the rights of any holders
of Preferred Stock. The holders of Common Stock have no preemptive rights to
subscribe for additional shares of the Company and no right to convert their
Common Stock into any other securities. In addition, there are no redemption
or sinking fund provisions available to the Common Stock. All of the
outstanding shares of Common Stock are, and the Common Stock offered hereby
will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of authorized Preferred Stock
into one or more series and to fix and determine the designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereon, of any series so
established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion or exchange privileges. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock and could have the effect of delaying, deferring or impeding a
change in control of the Company. As of the date of this Prospectus, the Board
of Directors of the Company has not authorized any series of Preferred Stock
and there are no plans, agreements or understandings for the issuance of any
shares of Preferred Stock.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS
Shareholders' rights and related matters are governed by the DGCL, the
Certificate of Incorporation and By-laws. Certain provisions of the
Certificate of Incorporation and By-laws, which are summarized below, may have
the effect, either alone or in combination with each other and the ability of
the Board of Directors to issue preferred stock without further stockholder
approval, of discouraging or making more difficult a tender offer or takeover
attempt that is opposed by the Company's Board of Directors but that a
shareholder might consider to be in its best interest. Such provisions may
also adversely affect prevailing market prices for the Common Stock. See "Risk
Factors--Potential Anti-Takeover Effects of Delaware Law; Possible Issuances
of Preferred Stock." The Company believes that such provisions are necessary
to enable the Company to develop its business in a manner that will foster its
long-term growth without disruption caused by the threat of a takeover not
deemed by the Board of Directors to be in the best interests of the Company
and its stockholders. For purposes of this description, the term "Rofin-Sinar"
or the "Company" refers only to Rofin-Sinar Technologies Inc., and excludes
its subsidiaries.
Classified Board of Directors and Related Provisions. The Certificate of
Incorporation provides that the Board of Directors shall be classified with
approximately one-third of the Board of Directors elected each year. The By-
laws provide that the Board of Directors will consist of not less than three
nor more than ten directors, with the exact number of directors initially to
be equal to six and thereafter
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to be fixed from time to time by a majority of the total number of directors
which the Company would have if there were no vacancies. See "Management--
Executive Officers, Key Employees and Directors." The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The initial
division of the Board of Directors into classes shall be made by the decision
of a majority of the entire Board of Directors. The term of the initial Class
I directors shall terminate on the date of the 1997 annual meeting of
stockholders; the terms of the Initial Class II directors shall terminate on
the date of the 1998 annual meeting of stockholders; and the term of the
initial Class III directors shall terminate on the date of the 1999 annual
meeting of stockholders. At each annual meeting of stockholders beginning in
1997, successor to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. In addition, subject to
certain limited exceptions, if the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. Subject to the rights
of holders of any outstanding preferred stock issued by the Company, vacancies
on the Board of Directors may be filled only by the Board of Directors or the
shareholders acting at an annual meeting.
The Certificate of Incorporation also provides that, subject to the rights
of holders of any preferred stock then outstanding and any requirements of
law, directors may be removed only for cause by the affirmative vote of the
holders of at least 80% of the outstanding shares of the Company then entitled
to vote generally in the election of directors, voting as a single voting
group.
Action by Written Consent; Special Meeting. The Certificate of
Incorporation and By-laws provide that an action may be taken by written
consent in lieu of a meeting of shareholders only with the consent of the
holders of 100% of the outstanding shares of the Company. The Certificate of
Incorporation and By-laws provide that special meetings of shareholders may
only be called by the Chairman of the Board or a majority of the Board of
Directors.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Certificate of Incorporation and By-laws establish advance
notice procedures with regard to shareholder proposals and the nomination,
other than by or at the direction of the Board of Directors or a committee
thereof, of candidates for election as directors. These procedures provide
that the notice of shareholder proposals and shareholder nominations for the
election of directors at an annual meeting must be in writing and received by
the Secretary of the Company not less than 60 days nor more than 90 days prior
to the anniversary date of the previous year's annual meeting or, if the date
of the annual meeting is not within 30 days of the anniversary date of the
previous year's annual meeting, not later than the close of business on the
tenth day following the day on which notice of the date of such meeting was
mailed or public disclosure of the date of the meeting of shareholders was
made, whichever first occurs. The notice of shareholder nominations must set
forth certain information with respect to the shareholder giving the notice
and with respect to each nominee.
Indemnification. The Certificate of Incorporation and By-laws provide that
the Company shall advance expenses to and indemnify each director and officer
of the Company to the fullest extent permitted by law.
Amendments. Shareholders may adopt, alter, amend or repeal provisions of
the By-laws only by vote of the holders of 80% or more of the outstanding
Common Stock and any other voting securities. In addition, the affirmative
vote of the holders of 80% or more of the outstanding Common Stock and any
other voting securities is required to amend certain provisions of the
Certificate of Incorporation, including the provisions referred to above
relating to the classification of the Company's Board of Directors, filling
vacancies on the Board of Directors, removal of directors only for cause,
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prohibiting shareholder action by written consent, prohibiting the calling of
special meetings by shareholders and approval of amendments to the By-laws.
LIMITATIONS ON DIRECTORS' LIABILITY
The Company's Certificate of Incorporation provides that no director of the
Company shall be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases
pursuant to Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions
is to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director
(including breaches resulting from grossly negligent behavior), except in the
situations described above. These provisions will not limit the liability of
directors under federal securities laws.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder," which is defined as a person who,
together with any affiliates or associates of such person, beneficially owns,
directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period
of three years after the date the interested stockholder becomes an interested
stockholder, unless (i) the business combination is approved by the
corporation's board of directors prior to the date the interested stockholder
becomes an interested stockholder, (ii) the interested stockholder acquired at
least 85% of the voting stock of the corporation (other than stock held by
directors who are also officers or by certain employee stock plans) in the
transaction in which it becomes an interested stockholder or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder.
RIGHTS AGREEMENT
The Company intends to enter into a Rights Agreement between the Company
and The Bank of New York, as Rights Agent, immediately prior to the Closing of
the Offerings. Pursuant to the Rights Agreement, a right (a "Right") to
purchase one share of Common Stock at a price of $ (the "Purchase Price"),
exercisable only in certain circumstances, will be issued along with each
share of Common Stock offered hereby. A Right will also be issued along with
each other share of Common Stock issued by the Company until the earliest of
the Distribution Date (as defined below), the redemption of the Rights or the
Expiration Date (as defined below). Rights may also be issued with respect to
shares of Common Stock issued after the Distribution Date in certain
circumstances.
Until the earlier of (i) such time as the Company learns that a person or
group (including any affiliate or associate of such person or group) has
acquired, or has obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding Common Stock (such person or group, subject to certain
exceptions, being an "Acquiring Person") and (ii) such date, if any, as may be
designated by the Board of Directors following the commencement of, or first
public disclosure of an intent to commence, a tender or exchange offer for
outstanding Common Stock which could result in the offeror becoming the
beneficial owner of 20% or more of the outstanding Common Stock (the earlier
of such dates, subject to certain exceptions, being the "Distribution Date"),
the Rights will be evidenced by the
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certificates for the Common Stock registered in the names of the holders
thereof (which certificates for Common Stock will also be deemed to be Right
Certificates, as defined below) and not by separate Right Certificates.
Therefore, until the Distribution Date, the Rights will be transferred with
and only with the Common Stock.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date (and to each initial record holder of certain Common Stock
originally issued after the Distribution Date), and such separate Right
Certificates alone will thereafter evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
on the tenth anniversary of the closing of the Offerings (the "Expiration
Date") unless earlier redeemed or canceled by the Company as described below.
The number of shares of Common Stock or other securities issuable upon
exercise of a Right, the Purchase Price, the Redemption Price (as defined
below) and the number of Rights associated with each outstanding share of
Common Stock are all subject to adjustment by the Board of Directors in the
event of any change in the Common Stock, whether by reason of stock dividends,
stock splits, recapitalization, mergers, consolidations, combinations or
exchanges of securities, other similar changes in capitalization, or any
distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of Common Stock (other
than the Rights or regular quarterly cash dividends), or otherwise.
In the event a person becomes an Acquiring Person, the Rights will entitle
each holder of a Right (other than those held by an Acquiring Person (or any
affiliate or associate of such Acquiring Person)) to purchase, for the
Purchase Price, that number of shares of Common Stock equivalent to the number
of shares of Common Stock which at the time of the transaction would have a
market value of twice the Purchase Price. Any Rights that are at any time
beneficially owned by an Acquiring Person (or any affiliate or associate of an
Acquiring Person) will be null and void and nontransferable and any holder of
any such Right (including any purported transferee or subsequent holder) will
be unable to exercise or transfer any such Right.
After there is an Acquiring Person, the Board of Directors may elect to
exchange each Right (other than Rights that have become null and void and
nontransferable as described above) for consideration per Right consisting of
one-half of the securities that would be issuable at such time upon the
exercise of one Right pursuant to the terms of the Rights Agreement, and
without payment of the Purchase Price.
In the event the Company is acquired in a merger by, or other business
combination with, or 50% or more of its assets or assets representing 50% or
more of its earning power are sold, leased, exchanged or otherwise transferred
(in one or more transactions) to, a publicly traded corporation, each Right
will entitle its holder (subject to the next paragraph) to purchase, for the
Purchase Price, that number of common shares of such corporation which at the
time of the transaction would have a market value of twice the Purchase Price.
In the event the Company is acquired in a merger by, or other business
combination with, or 50% or more of its assets or assets representing 50% or
more of the earning power of the Company are sold, leased, exchanged or
otherwise transferred (in one or more transactions) to, an entity that is not
a publicly traded corporation, each Right will entitle its holder (subject to
the next paragraph) to purchase, for the Purchase Price, at such holder's
option, (i) that number of shares of such entity (or, at such holder's option,
of the surviving corporation in such acquisition, which could be the Company)
which at the time of the transaction would have a book value of twice the
Purchase Price or (ii) if such entity has an affiliate which has publicly
traded common shares, that number of common shares of such affiliate which at
the time of the transaction would have a market value of twice the Purchase
Price.
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At any time prior to the earlier of (i) such time as a person becomes an
Acquiring Person and (ii) the Expiration Date, the Board of Directors may
redeem the Rights in whole, but not in part, at a price (in cash or Common
Stock or other securities of the Company deemed by the Board of Directors to
be at least equivalent in value) of $.01 per Right, subject to adjustment as
provided in the Rights Agreement (the "Redemption Price"); provided that, for
the 120-day period after any date of a change (resulting from a proxy or
consent solicitation) in a majority of the Board in office at the commencement
of such solicitation, the Rights may only be redeemed if (A) there are
directors then in office who were in office at the commencement of such
solicitation and (B) the Board, with the concurrence of a majority of such
directors then in office, determines that such redemption is, in its judgment,
in the best interests of the Company and its stockholders. Immediately upon
the action of the Board of Directors electing to redeem the Rights, the
Company will make an announcement thereof, and, upon such election, the right
to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
At any time prior to the Distribution Date, the Company may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Rights Agreement (including the date on which the Distribution Date would
occur or the time during which the Rights may be redeemed), except that no
supplement or amendment shall be made which reduces the Redemption Price
(other than pursuant to certain adjustments therein), provides for an earlier
Expiration Date or makes certain changes to the definition of Acquiring
Person. However, for the 120-day period after any date of a change (resulting
from a proxy or consent solicitation) in a majority of the Board of Directors
in office at the commencement of such solicitation, the Rights Agreement may
be supplemented or amended only if (A) there are directors then in office who
were in office at the commencement of such solicitation and (B) the Board of
Directors, with the concurrence of a majority of such directors then in
office, determines that such supplement or amendment is, in their judgment, in
the best interests of the Company and its stockholders.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on substantially all the Rights being acquired.
The Rights will not interfere with any merger or other business combination
approved by the Board since the Board of Directors may, at its option, at any
time prior to any person becoming an Acquiring Person, redeem all but not less
than all of the then outstanding Rights at a redemption price of $.01 per
Right (subject to adjustment).
Reference is hereby made to the Rights Agreement to be entered into between
the Company and the Rights Agent specifying the terms of the Rights, which
includes as Exhibit A the form of Rights Certificate, and this description is
qualified in its entirety by reference to the terms and conditions thereof.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The Bank of New
York.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have 10,000,000 shares
of Common Stock outstanding (assuming no exercise of any options granted by
the Company or the Underwriters' overallotment option and excluding any shares
of restricted stock issued to non-employee directors of the Company). All
shares sold in the Offerings will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares purchased
by "affiliates" (as defined in the Securities Act) of the Company, which will
be subject to the resale limitations of Rule 144 under the Securities Act
("Rule 144").
Generally, Rule 144 provides that a person who has owned "restricted"
shares of Common Stock for at least two years, is entitled to sell on the open
market in broker's transactions within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of Common Stock and (ii) the average weekly trading volume
in the Common Stock on the open market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
restrictions relating to manner of sale and the availability of current public
information about the Company. As defined in Rule 144, an "affiliate" of an
issuer is a person that directly or indirectly controls, or is controlled by,
or is under the common control with, such issuer.
The Company has agreed not to directly or indirectly offer for sale, pledge
to sell, file a registration statement relating to, announce the intention to
sell, issue (in the case of the Company), contract to sell or otherwise
dispose of any Common Stock, with certain limited exceptions, for a period of
180 days after the date of this Prospectus without the prior written consent
of the Representatives of the Underwriters.
The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable under the Equity Incentive
Plan. See "Management--Equity Incentive Plan." This registration statement is
expected to be filed as soon as practicable following the consummation of the
Offerings and will become effective immediately upon filing. Shares covered by
this registration statement as to which an Equity Incentive Plan participant's
rights have fully vested and been exercised will be eligible for sale in the
public market after the effective date of such registration.
Prior to the Offerings, there has been no public market for the Common
Stock and there can be no assurance that a regular trading market will develop
or be sustained after the Offerings. The initial public offering price will be
determined through negotiations between the Company and the Underwriters based
on factors described under the caption "Underwriting" and may not be
indicative of the market price after the Offerings. See "Underwriting."
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal tax
considerations applicable to the ownership and disposition of Common Stock by
"Non-U.S. Holders." In general, a "Non-U.S. Holder" is a beneficial owner of
Common Stock other than: (i) a citizen or resident of the United States, (ii)
a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state or (iii) an estate or
trust, the income of which is includible in gross income for United States
federal income tax purposes regardless of its source. The term "Non-U.S.
Holder" does not include individuals who were United States citizens within
the ten-year period immediately preceding the date of this Prospectus and
whose loss of United States citizenship had as one of its principal purposes
the avoidance of United States taxes. This discussion is based on current law,
which is subject to change and is for general information only. There are a
number of proposed changes to existing law that would affect the taxation of
income earned by foreign trusts and their beneficiaries and the taxation of
citizens or residents of the U.S. who abandon their U.S. citizenship or
residence. It is not clear whether these proposals will ultimately be enacted,
but holders should consult with their tax advisors concerning the possible
effect of such proposed legislation. This discussion does not address aspects
of United States federal taxation other than income and estate taxation and
does not address all aspects of income and estate taxation, nor does it
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. The
discussion below is not intended to be a complete discussion of the provisions
of the Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the Proposed Regulations would
have if adopted.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER
TAX CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
DIVIDENDS
The Company does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The Company may in the future consider paying cash
dividends on the Common Stock. However, the Board of Directors of the Company
has made no decision with respect to the payment of any such dividends,
including the timing and amount of any such dividend. See "Dividend Policy."
If dividends are paid on the Common Stock, these payments will be treated as a
dividend for United States federal income tax purposes to the extent of the
Company's current or accumulated earnings and profits for such tax purposes.
The portion of a payment that exceeds such earnings and profits will be
treated as a return of capital to the extent of each Non-U.S. Holder's tax
basis in the Common Stock. The portion of a payment that exceeds such earnings
and profits and tax basis will be treated as a gain from the sale or other
disposition of the Common Stock to the extent of such excess, with the tax
consequences described below under "--Sale of Common Stock."
In general, any dividends (i.e., distributions to the extent of current or
accumulated earnings and profits for United States federal income tax
purposes) paid to a Non-U.S. Holder of Common Stock will be subject to United
States withholding tax at a 30% rate (or a lower rate prescribed by an
applicable tax treaty) unless the dividends are either (i) effectively
connected with a trade or business carried on by the Non-U.S. Holder within
the United States or (ii) if certain income tax treaties apply,
68
<PAGE>
attributable to a permanent establishment in the United States maintained by
the Non-U.S. Holder. For purposes of determining whether tax is to be withheld
at a 30% rate or at a lower rate as prescribed by an applicable tax treaty,
the Company ordinarily will presume that dividends paid to an address in a
foreign country are paid to a resident of such country absent knowledge that
such presumption is not warranted. Under the Proposed Regulations, to obtain a
reduced rate of withholding under a treaty, a Non-U.S. Holder would generally
be required to provide an Internal Revenue Service Form W-8 certifying such
Non-U.S. Holder's entitlement to benefits under a treaty. The Proposed
Regulations would also provide special rules to determine whether, for
purposes of determining the applicability of a tax treaty, dividends paid to a
Non-U.S. Holder that is an entity should be treated as paid to the entity or
to those holding an interest in that entity.
Dividends effectively connected with such a United States trade or business
or attributable to such United States permanent establishment generally will
not be subject to withholding tax (if the Non-U.S. Holder files certain forms,
including IRS Form 4224, with the payor of the dividend) and generally will be
subject to United States federal tax on a net income basis, in the same manner
as if the Non-U.S. Holder were a resident of the United States. In the case of
a Non-U.S. Holder that is a corporation, dividend income so connected or
attributable may also be subject to the branch profits tax (which is generally
imposed on a foreign corporation on the repatriation from the United States of
its effectively connected earnings and profits subject to certain adjustments)
at a 30% rate (or a lower rate prescribed by an applicable income tax treaty).
A Non-U.S. Holder that is eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund
with the IRS.
SALE OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain recognized upon the disposition of Common Stock unless:
(i) the gain is effectively connected with a trade or business carried on by
the Non-U.S. Holder within the United States or, alternatively, if certain tax
treaties apply, attributable to a permanent establishment in the United States
maintained by the Non-U.S. Holder (and in either such case, the branch profits
tax may also apply if the Non-U.S. Holder is a corporation), (ii) in the case
of a Non-U.S. Holder who is a nonresident alien individual and holds Common
Stock as a capital asset, such individual is present in the United States for
183 days or more in the taxable year of disposition, and either (a) such
individual has a "tax home" (as defined for United States federal income tax
purposes) in the United States or (b) the gain is attributable to an office or
other fixed place of business maintained by such individual in the United
States, (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of the United States tax law applicable to certain United States expatriates
or (iv) the Company is or has been a United States real property holding
corporation for United States federal income tax purposes (which the Company
does not believe that it is or is likely to become) at any time within the
shorter of the five-year period preceding such disposition or such Non-U.S.
Holder's holding period.
ESTATE TAX
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax purposes)
of the United States at the time of death will be includible in the
individual's gross estate for United States federal estate tax purposes unless
an applicable estate tax treaty provides otherwise, and therefore may be
subject to United States federal estate tax.
69
<PAGE>
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, each Non-
U.S. Holder. These reporting requirements apply regardless of whether
withholding was reduced or eliminated by an applicable tax treaty. Copies of
this information also may be made available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the Non-
U.S. Holder resides or is established.
Under current rules, United States backup withholding (which generally is
imposed at the rate of 31% on certain payments to persons that fail to furnish
the information required under the United States information reporting
requirements) and information reporting generally will not apply to (i)
dividends paid on Common Stock to a Non-U.S. Holder that is subject to
withholding at the 30% rate (or that is subject to withholding at a reduced
rate under an applicable treaty), (ii) under current law, dividends paid to a
Non-U.S. Holder at an address outside of the United States or (iii) persons
who otherwise establish an exemption from backup withholding. However, under
the proposed regulations, in the case of dividends paid after December 31,
1997 (December 31, 1999 in the case of dividends paid to accounts in existence
on or before the date that is 60 days after the Proposed Regulations are
published as final regulations), a Non-U.S. Holder generally would be subject
to backup withholding at a 31% rate, unless certain certification procedures
(or, in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures) are complied with,
directly or through an intermediary.
The payment of proceeds from the disposition of Common Stock to or through
a United States office of a broker will be subject to information reporting
and United States backup withholding unless the owner, under penalties of
perjury, certifies among other things, its status as a Non-U.S. Holder, or
otherwise establishes an exemption. The payment of proceeds from the
disposition of Common Stock to or through a non-U.S. office of a non-U.S.
broker generally will not be subject to backup withholding and information
reporting, except as noted below. In the case of proceeds from the disposition
of Common Stock paid to or through a non-United States office of a broker that
is: (i) a United States person, (ii) a "controlled foreign corporation" for
United States federal income tax purposes or (iii) a foreign person 50% or
more of whose gross income for a specified three-year period is effectively
connected with a United States trade or business, (a) backup withholding will
not apply unless such broker has actual knowledge that the owner is not a Non-
U.S. Holder and (b) information reporting will apply unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder (and the
broker has no actual knowledge to the contrary). The Proposed Regulations
would, if adopted, alter the foregoing rules in certain respects. Among other
things, the Proposed Regulations would provide certain presumptions under
which a Non-U.S. Holder would be subject to backup withholding and information
reporting unless the Company receives certification from the holder of non-
U.S. status.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded
or credited against the Non-U.S. Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
IRS.
70
<PAGE>
UNDERWRITING
The U.S. Underwriters named below, for whom Deutsche Morgan Grenfell/C. J.
Lawrence Inc., Alex. Brown & Sons Incorporated and Lehman Brothers Inc. are
acting as representatives (the "U.S. Representatives"), and the International
Underwriters named below, for whom Morgan Grenfell & Co., Limited, Alex. Brown
& Sons Limited and Lehman Brothers International (Europe) are acting as
representatives (the "International Representatives") have severally agreed,
subject to the terms and conditions contained in the Underwriting Agreement
(the form of which is filed as an exhibit to the Company's Registration
Statement, of which this Prospectus is a part), to purchase from the Company
the respective number of shares of Common Stock indicated below opposite their
respective names. The Underwriters are committed to purchase all of the
shares, if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
Deutsche Morgan Grenfell/C. J. Lawrence Inc........................
Alex. Brown & Sons Incorporated....................................
Lehman Brothers Inc................................................
-------
Subtotal.....................................................
-------
<CAPTION>
INTERNATIONAL UNDERWRITERS
--------------------------
<S> <C>
Morgan Grenfell & Co., Limited.....................................
Alex. Brown & Sons Limited.........................................
Lehman Brothers International (Europe).............................
-------
Subtotal.....................................................
-------
Total......................................................
=======
</TABLE>
Deutsche Morgan Grenfell/C. J. Lawrence Inc. is acting as Global
Coordinator of the Offerings.
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.
The U.S. Underwriters and the International Underwriters have entered into
an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of shares of Common Stock as may be
mutually agreed. The price of any shares of Common Stock so sold shall be the
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the International
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are United States
or Canadian persons or to persons they believe intend to resell to persons who
are United States or Canadian persons, and the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to any non-United States or Canadian person or to
persons they believe intend to resell to non-United States or Canadian
persons, except, in each case, for transactions pursuant to such agreement. As
used herein, "United States or Canadian person" means any national or resident
of the United States or Canada or any corporation, pension, profit-sharing or
other trust or other entity organized under the laws of the United States or
Canada or of any political subdivision thereof (other than a branch located
outside of the United States or Canada of any United States or Canadian
person) and includes any United States or Canadian branch of a person who is
otherwise not a United States or Canadian person and "United States" means the
United States of America, its territories, its possessions and all areas
subject to its jurisdiction.
The Underwriters propose to offer the Common Stock to the public on the
terms set forth on the cover page of this Prospectus. The Price to Public and
Underwriting Discount will be identical in
71
<PAGE>
the U.S. and International Offerings. The U.S. Underwriters may allow to
selected dealers (who may include the Underwriters) a concession of not more
than $ per share. Such selected dealers may reallow a concession of not
more than $ to certain other dealers. After the public offering, the price
and concessions and re-allowances to dealers and other selling terms may be
changed by the Underwriters. The Common Stock is offered subject to receipt
and acceptance by the Underwriters, and to certain other conditions, including
the right to reject orders in whole or in part. The Underwriters do not intend
to sell any of the shares of Common Stock offered hereby to accounts over
which they exercise discretionary authority.
The Company has granted an option to the Underwriters to purchase up to a
maximum of 1,500,000 additional shares of Common Stock to cover over-
allotments, if any, at the public offering price, less the underwriting
discount set forth on the cover page of this Prospectus. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with the Offering.
Pursuant to the Intersyndicate Agreement, each U.S. Underwriter has
represented and agreed that it has not offered or sold, and has agreed not to
offer or sell, any shares of Common Stock, directly or indirectly, in Canada
in contravention of the securities laws of Canada or any province or territory
thereof and has represented that any offer of shares of Common Stock in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance that, by
purchasing such shares such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of
such shares in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of shares of Common Stock in Canada will be made
only pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made, and that such
dealer will deliver to any other dealer to whom it sells any of such shares of
Common Stock a notice to the foregoing effect.
Pursuant to the Intersyndicate Agreement, each International Underwriter
has represented and agreed that (i) it has not offered or sold and will not
offer or sell any shares of Common Stock offered hereby to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purpose of their business or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
(the "Regulations"), (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock offered
hereby in, from or otherwise involving the United Kingdom, and (iii) it has
only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issue of the
shares of Common Stock offered hereby if that person is a kind described in
Article 11 (3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Pursuant to the Intersyndicate Agreement, each International Underwriter
has represented and agreed that it has not offered or sold, and will not offer
or sell, directly or indirectly, in Japan or to or for the account of any
resident thereof, any shares of Common Stock acquired in connection with this
offering, except for offers or sales to Japanese International Underwriters or
dealers and except
72
<PAGE>
pursuant to any exemption from the regulation requirement of the Securities
and Exchange Law of Japan. Each International Underwriter has further agreed
to send to any dealer who purchases from it any of such shares of Common Stock
a notice stating in substance that such dealer may not offer or sell any of
such shares, directly or indirectly, in Japan or to or for the account of any
resident thereof, except pursuant to any exemption from the registration
requirement of the Securities and Exchange Law of Japan, and that such dealer
will send to any other dealer to whom it sells any shares a notice to the
foregoing effect.
The Company and SC have agreed to indemnify the several Underwriters
against certain liabilities including civil liabilities under the Securities
Act of 1933, as amended, or contribution to payments the Underwriters may be
required to make in respect thereof.
In connection with the Offering, the Company has agreed, with certain
exceptions, not to offer, sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the first date on which shares of Common
Stock are offered hereby to the public, without the prior written consent of
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
The Company has reserved up to 300,000 shares of Common Stock, representing
three percent of the shares of Common Stock to be sold in the Offering, for
sale to all of its employees and to three director nominees at the public
offering price set forth on the cover page hereof. The Company's employees in
Germany will be entitled to pay for a portion of the shares they purchase on a
deferred basis through payroll deductions to be made prior to December 31,
1996. If the reserved shares are not sold to employees of the Company, they
will be sold to the public in the U.S. Offering and the International Offering
in the same proportion as the total number of shares of Common Stock to be
offered to the public is allocated between such offerings.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock has been
determined by negotiations between Siemens, the Company and the U.S.
Representatives. Among the factors considered in determining the initial
public offering price were the market values and price/earnings multiples of
publicly traded common stock of certain other companies in the material
processing and electro-optical laser industries and in the machine tool
industry of comparable size serving similar markets, the sales, earnings and
cash flow history and trends of the Company, the experience of the Company's
management and the position of the Company in its industry and its prospects.
Additionally, consideration was given to the general status of the securities
markets, the market conditions for new offerings of securities, the demand for
the Common Stock and for similar securities of comparable companies.
The Company has obtained a commitment letter for a loan facility with
Deutsche Bank AG, an affiliate of Deutsche Morgan Grenfell/C. J. Lawrence Inc.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Shearman & Sterling, New York, New York. Certain legal
matters in connection with the Offerings will be passed upon for the
Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The financial statements of the Company as of September 30, 1994 and 1995
and June 30, 1996 and for each of the fiscal years in the three-year period
ended September 30, 1995 and for the nine-month period ended June 30, 1996
have been included in this Prospectus and elsewhere in this Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, included herein, and upon the authority of said
firm as experts in accounting and auditing.
73
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement (which term shall
encompass any amendment thereto) on Form S-1 under the Securities Act, with
respect to the shares of Common Stock offered by this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to summarize the material terms of such
documents, but are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
Upon completion of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act, and in accordance therewith
will file reports and other information with the Commission. The Registration
Statement and the exhibits and schedules thereto, as well as all such reports
and other information filed with the Commission, may be inspected at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are also
available for inspection and copying at prescribed rates at the regional
offices of the Commission located at 500 West Madison Street, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048, and at the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of such site is: http://www.sec.gov.
The Company intends to distribute to its stockholders annual reports
containing audited financial statements.
74
<PAGE>
GLOSSARY OF SELECTED TECHNICAL TERMS
BEAM-SWITCHING/BEAM-SPLITTING Techniques used in laser beam
delivery systems which permit the
laser beam to be used alternately or
simultaneously at different
workstations.
CO\2\ LASERS Lasers in which the lasing medium is
carbon dioxide. CO\2\ lasers used
today for material processing
usually are based either on cross-
flow or axial flow designs.
CO\2\ SLAB LASERS CO\2\ lasers in which a HF discharge
takes place between water-cooled
copper electrodes which have a large
surface allowing maximum heat
dissipation (known as "diffusion
cooling") and achieving high power
density.
CROSS-FLOW CO\2\ LASERS CO\2\ lasers in which the laser gas
flows perpendicularly to the
resonator axis.
DIFFUSION-COOLING TECHNOLOGY See definition of Slab lasers.
DIODE-PUMPED SOLID STATE LASERS Nd:YAG lasers in which the source of
excitation is a laser diode instead
of a flash lamp.
ELECTRICAL EFFICIENCY The ratio of output light energy to
input electrical energy.
FAST AXIAL-FLOW CO\2\ LASERS CO\2\ lasers in which the laser gas
discharge occurs in a tube, through
which the laser gas mixture flows at
a high speed, ensuring that heat is
effectively removed.
FLASH LAMP-PUMPED SOLID STATE LASERS Nd:YAG lasers in which the source of
excitation is a krypton flash lamp
or krypton arc lamp.
GALVO-HEAD A moving mirror system used in a
laser marker to deflect the Nd:YAG
laser beam during the vector marking
process.
ND:YAG LASERS Lasers in which the lasing medium is
neodymium located in a solid crystal
made up of yttrium-aluminum-garnet,
usually rod-shaped.
OPTICAL RESONATOR The part of laser in which the
excited emission of photons bounces
back and forth through the lasing
medium.
PHOTONS Particles of light.
Q-SWITCH A fast electro-optical shutter
inserted into the laser resonator,
enabling frequencies to be switched
at multiples of 10kHz.
SPATIAL COHERENCE One of the chief characteristics of
a laser beam: light in which the
light waves are all moving along
together in unison.
TAILORED BLANK WELDING
A welding technique pioneered by the
Company for welding dissimilar
metals of different thicknesses into
one sheet.
75
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Combined Financial Statements:
Independent Auditors' Report............................................ F-2
Combined Balance Sheets as of September 30, 1994 and 1995 and June 30,
1996................................................................... F-3
Combined Statements of Operations for the fiscal years ended September
30, 1993,
1994 and 1995 and the nine months ended June 30, 1995 (unaudited) and
June 30, 1996.......................................................... F-4
Combined Statements of Stockholders' Equity for the fiscal years ended
September 30, 1993, 1994 and 1995 and the nine months ended June 30,
1996................................................................... F-5
Combined Statements of Cash Flows for the fiscal years ended September
30, 1993, 1994 and 1995 and the nine months ended June 30, 1995
(unaudited) and
June 30, 1996.......................................................... F-6
Notes to Combined Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders of Rofin-Sinar Technologies Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Rofin-Sinar
Technologies Inc. and Affiliates as of September 30, 1994 and 1995 and June
30, 1996, and the related combined statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1995 and for the nine month period ended June 30, 1996. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Rofin-Sinar
Technologies Inc. and Affiliates as of September 30, 1994 and 1995 and June
30, 1996, and the results of their operations and their cash flows for each of
the years in the three-year period ended September 30, 1995 and the nine month
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Detroit, Michigan
July 19, 1996
F-2
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
1994 1995 1996
------------- ------------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................... $ 839 $ 691 $ 1,260
Trade accounts receivable.............. 18,858 26,404 36,696
Less allowance for doubtful accounts... (1,005) (1,252) (1,120)
-------- -------- --------
Trade accounts receivable, net....... 17,853 25,152 35,576
Other accounts receivable.............. 851 1,264 1,419
Inventories (note 2)................... 20,634 28,169 34,142
Prepaid expenses....................... 158 184 183
Deferred income tax assets -- current
(note 9).............................. 7,864 6,614 5,721
-------- -------- --------
Total current assets................. 48,199 62,074 78,301
PROPERTY AND EQUIPMENT, AT COST (note
3)...................................... 38,148 41,352 40,217
Less accumulated depreciation.......... (12,113) (14,237) (15,241)
-------- -------- --------
Property and equipment, net.......... 26,035 27,115 24,976
DEFERRED INCOME TAX ASSETS -- NONCURRENT
(note 9)................................ 1,745 1,574 1,085
OTHER ASSETS............................. 688 232 147
-------- -------- --------
Total assets......................... $ 76,667 $ 90,995 $104,509
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit (note 6)................ $ 18,900 $ 18,900 $ 18,900
Bank loans (note 5).................... 3,480 2,905 --
Loan from affiliate (note 5)........... -- -- 6,687
Advances from Parent (note 6).......... 7,000 7,000 7,000
Accounts payable, trade................ 3,808 5,640 5,819
Income taxes payable (note 9).......... -- -- 3,333
Accrued liabilities (note 4)........... 10,084 11,496 16,442
Deferred income tax liability --
current (note 9)..................... -- 1,603 1,139
-------- -------- --------
Total current liabilities............ 43,272 47,544 59,320
PENSION OBLIGATIONS (note 8)............. 2,840 3,762 3,369
MINORITY INTERESTS....................... (28) 16 22
-------- -------- --------
Total liabilities.................... 46,084 51,322 62,711
COMMITMENTS AND CONTINGENCIES (note 7)...
STOCKHOLDERS' EQUITY:
Parent's capital....................... 29,114 34,224 39,021
Cumulative foreign currency translation
adjustment............................ 1,469 5,449 2,777
-------- -------- --------
Total stockholders' equity........... 30,583 39,673 41,798
-------- -------- --------
Total liabilities and stockholders'
equity.............................. $ 76,667 $ 90,995 $104,509
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER ENDED
30, JUNE 30,
-------------------------- -------------------
1993 1994 1995 1995 1996
-------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................... $ 60,034 $69,217 $92,466 $65,460 $83,372
Cost of goods sold............ 47,745 46,993 57,162 40,475 51,466
-------- ------- ------- ------- -------
Gross profit............ 12,289 22,224 35,304 24,985 31,906
Selling, general, and
administrative expenses...... 20,438 16,228 19,124 13,434 14,954
Provision for doubtful
accounts..................... 1,513 831 1,549 1,100 267
Research and development
expenses..................... 10,276 6,834 6,719 5,903 5,850
-------- ------- ------- ------- -------
Income (loss) from
operations................... (19,938) (1,669) 7,912 4,548 10,835
Other expense (income):
Interest expense, net (notes
5 and 6)................... 1,654 1,308 1,272 947 790
Minority interest........... (720) 5 9 2 6
Miscellaneous............... 514 134 366 110 (53)
-------- ------- ------- ------- -------
Total other expense, net.. 1,448 1,447 1,647 1,059 743
-------- ------- ------- ------- -------
Income (loss) before
income taxes............. (21,386) (3,116) 6,265 3,489 10,092
Income tax expense (benefit)
(note 9)..................... (1,565) (1,422) 3,052 1,725 4,354
-------- ------- ------- ------- -------
Net income (loss)....... $(19,821) $(1,694) $ 3,213 $ 1,764 $ 5,738
======== ======= ======= ======= =======
Pro forma net income per
share........................ $ .37 $ .66
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1993, 1994, AND 1995
AND THE NINE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY TOTAL
PARENT'S TRANSLATION STOCKHOLDERS'
CAPITAL ADJUSTMENT EQUITY
-------- ----------- -------------
<S> <C> <C> <C>
BALANCES at September 30, 1992 ............ $ 59,574 $ 2,885 $ 62,459
Foreign currency translation adjustment.... -- (3,054) (3,054)
Capital distributions to Parent............ (3,747) -- (3,747)
Net loss................................... (19,821) -- (19,821)
-------- ------- --------
BALANCES at September 30, 1993 ............ 36,006 (169) 35,837
Foreign currency translation adjustment.... -- 1,638 1,638
Capital distributions to Parent............ (5,198) -- (5,198)
Net loss................................... (1,694) -- (1,694)
-------- ------- --------
BALANCES at September 30, 1994 ............ 29,114 1,469 30,583
Foreign currency translation adjustment.... -- 3,980 3,980
Capital contributions from Parent.......... 1,897 -- 1,897
Net income................................. 3,213 -- 3,213
-------- ------- --------
BALANCES at September 30, 1995 ............ 34,224 5,449 39,673
Foreign currency translation adjustment.... -- (2,672) (2,672)
Capital distributions to Parent............ (941) -- (941)
Net income................................. 5,738 -- 5,738
-------- ------- --------
BALANCES at June 30, 1996.................. $ 39,021 $ 2,777 $ 41,798
======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
--------- -------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)....... $ (19,821) $ (1,694) $ 3,213 $ 1,764 $ 5,738
Adjustments to reconcile
net income (loss) to
net cash provided
(used) by operating
activities:
Depreciation and
amortization......... 2,803 2,527 2,364 1,773 1,830
Provision for doubtful
accounts............. 1,513 831 1,549 1,100 267
Loss on disposal of
property and
equipment............ 244 32 214 369 19
Deferred income
taxes................ (1,565) (1,328) 2,476 2,787 908
Minority interest in
losses of
subsidiary........... (720) 5 9 2 6
Change in operating
assets and
liabilities:
Trade accounts
receivable......... 12,446 3,138 (8,232) (8,449) (11,671)
Other accounts
receivable......... 4,812 (5) (184) (146) (354)
Inventories......... 6,881 3,846 (6,204) (3,548) (6,197)
Prepaid expenses and
other.............. 312 60 235 62 56
Accounts payable,
trade.............. (3,377) (1,961) 2,782 7,384 263
Income taxes
payable............ -- -- -- -- 3,446
Accrued liabilities
and pension
obligation......... 85 414 1,619 (494) 4,636
--------- -------- -------- ------- -------
Net cash provided
(used) by
operating
activities....... 3,613 5,865 (159) 2,604 (1,053)
--------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to furniture
and equipment.......... (1,086) (452) (1,936) (1,447) (1,393)
Proceeds from sale of
furniture and
equipment.............. 280 201 553 100 --
Investment in
subsidiary............. -- -- (19) (19) --
--------- -------- -------- ------- -------
Net cash used by
investing
activities....... (806) (251) (1,402) (1,366) (1,393)
--------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase (decrease) in
parent capital......... (3,747) (5,198) 1,897 (1,293) (941)
Borrowings from
affiliate.............. -- -- -- -- 6,921
Repayments to bank...... -- (79) (515) (94) (2,905)
--------- -------- -------- ------- -------
Net cash provided
(used) by
financing
activities....... (3,747) (5,277) 1,382 (1,387) 3,075
--------- -------- -------- ------- -------
Effect of foreign currency
translation on cash...... 144 (88) 31 87 (60)
--------- -------- -------- ------- -------
Net increase (decrease) in
cash..................... (796) 249 (148) (62) 569
Cash at beginning of
period................... 1,386 590 839 839 691
--------- -------- -------- ------- -------
Cash at end of period..... $ 590 $ 839 $ 691 $ 777 $ 1,260
========= ======== ======== ======= =======
Cash paid during the
period for interest...... $ 131 $ 125 $ 139 $ 60 $ 90
========= ======== ======== ======= =======
Cash paid during the
period for income taxes.. $ -- $ -- $ -- $ -- $ --
========= ======== ======== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993, 1994, AND 1995
(DOLLARS IN THOUSANDS)
1.SUMMARY OF ACCOUNTING POLICIES
(a) Description of the Company and Business
The accompanying financial statements present the historical financial
information of the industrial laser businesses of Siemens AG (Siemens
or Parent), representing the combined operations of Rofin-Sinar Inc. (a
United States company), and Rofin-Sinar Laser GmbH (a Federal Republic
of Germany limited liability company), each of which is owned either
directly or indirectly by Siemens. Rofin-Sinar Laser GmbH includes the
consolidated accounts of its 99.97 percent-owned subsidiary, Rofin-
Sinar France S.A.; its 90.65 percent (83.5 percent in 1993 and 1994)-
owned subsidiary, Rofin-Sinar Italiana S.r.L.; and its 51 percent-owned
subsidiary, Rofin Marubeni Laser Corporation (a Japanese entity).
Because Rofin-Sinar Inc. and Rofin-Sinar Laser GmbH are each directly
or indirectly wholly owned by a common parent, the accompanying
financial statements are presented as combined rather than
consolidated. All significant intercompany balances and transactions
have been eliminated in combination.
Immediately prior to the closing of a public offering (the "Offering")
of common stock of Rofin-Sinar Technologies Inc., a newly formed
holding company indirectly owned by Siemens AG, the business operations
of Rofin-Sinar Inc. and Rofin-Sinar Laser GmbH (Rofin Sinar Group),
including all assets and liabilities, will be sold to Rofin-Sinar
Technologies Inc. (reorganization). A portion of the proceeds from the
public offering will be used to purchase all outstanding stock of
Rofin-Sinar Group from Siemens AG and its subsidiaries. The
reorganization will constitute a combination of entities under common
control and, for financial statement purposes, will be accounted for by
combining the historical accounts of Rofin-Sinar Group and Rofin-Sinar
Technologies Inc. (Rofin-Sinar or Company), in a manner similar to
pooling-of-interests accounting.
The primary business of Rofin-Sinar is to develop, manufacture, and
market industrial lasers and supplies used for material processing
applications. The majority of the Company's customers are in the
machine tool, automotive, semiconductor, and electronics industries and
are located in the United States, Europe, and Asia. Rofin-Sinar
generates approximately 75 percent of its revenues from the sale and
installation of new lasers and approximately 25 percent from
aftermarket support for the Company's existing laser products.
The combined financial statements are derived from the historical
financial statements of Rofin-Sinar Group. Management believes the
accompanying statements of operations include a reasonable allocation
of all expenses the Company will incur as an independent company.
The accompanying unaudited comparative combined statements of
operations and cash flows for the nine months ended June 30, 1995 have
been prepared by management and in their opinion, contain all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly the Company's results of operations and cash flows for
the nine months ended June 30, 1995.
(b)Inventories
Inventories are stated at the lower of cost or market after provisions
for excess and obsolete inventory salable at prices below cost. Costs
are determined using the first in, first out and weighted average cost
methods.
F-7
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(c)Property and Equipment
Property and equipment are recorded at cost and depreciated over their
useful lives, except for leasehold improvements, which are amortized
over the lesser of their useful lives or the term of the lease. The
methods of depreciation are straight line for financial reporting
purposes and accelerated for income tax purposes. Depreciable lives for
financial reporting purposes are as follows:
<TABLE>
<CAPTION>
USEFUL
LIVES
----------
<S> <C>
Buildings....................................................... 40 years
Machinery and equipment......................................... 3-10 years
Furniture and fixtures.......................................... 3-10 years
Computers and software.......................................... 3-4 years
Leasehold improvements.......................................... 5-15 years
</TABLE>
(d)Revenue Recognition
Revenues are recognized when a laser product is shipped or services are
performed.
(e)Income Taxes
Income taxes are accounted for following Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (Statement
109). Under the asset and liability method of Statement 109, deferred
income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment
date.
The Company's results have been included in the consolidated federal
income tax return of Siemens Corporation in the U.S. and, for periods
prior to October 1, 1995, Siemens AG in Germany. For periods from and
after October 1, 1995, the Company will file a separate tax return in
Germany. For purposes of these financial statements, income taxes are
computed on a separate tax return basis.
(f)Accounting for Warranties
The Company issues a standard warranty of one year for parts and labor
on lasers that are sold. However, extended warranties for up to two
years on parts and one year on labor are negotiated on a contract-by-
contract basis. The Company provides for estimated warranty costs as
products are shipped.
(g)Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards No. 52,
Foreign Currency Translation, the assets and liabilities of the
Company's operations outside the United States are translated into U.S.
dollars at exchange rates in effect on the balance sheet date, and
revenues and expenses are translated using a weighted average exchange
rate during the period. Gains or losses resulting from translating
foreign currency financial statements are recorded in a separate
component of shareholders' equity. Gains or losses resulting from
foreign currency transactions are included in net income.
F-8
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(h)Research and Development Expenses
Research and development costs are expensed when incurred and are net
of government grants of $448, $611, $1,400 and $476 received for the
years ended September 30, 1993, 1994, and 1995 and the nine months
ended June 30, 1996, respectively. The Company has no future
obligations under such grants.
(i)Financial Instruments
Financial instruments of the Company, consisting principally of cash,
accounts receivable, accounts payable, and bank loans, are recorded at
amounts which approximate estimated fair value. The estimated fair
value amounts are determined by the Company using available market
information and available valuation methodologies.
(j)Use of Estimates
Management of the Company makes a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from these estimates.
(k)Earnings per Share
Pro forma net income per share has been calculated for the year ended
September 30, 1995 and the nine months ended June 30, 1996 assuming
that 8,631,578 shares have been outstanding for such periods. Such
shares represent a portion of the shares to be issued pursuant to the
Offerings, the proceeds from which will be used to purchase the shares
of Rofin-Sinar Group and to repay $7 million of indebtedness owed to
Siemens and its affiliate.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE
SEPTEMBER 30, 30,
--------------- -------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Finished goods...................................... $ 5,502 $ 8,243 $ 6,699
Work in progress.................................... 4,824 5,595 7,535
Raw materials and supplies.......................... 5,401 7,337 10,094
Demo inventory...................................... 1,998 2,754 4,609
Service parts....................................... 2,909 4,240 5,205
------- ------- -------
Total inventories................................. $20,634 $28,169 $34,142
======= ======= =======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment include the following:
<TABLE>
<CAPTION>
JUNE
SEPTEMBER 30, 30,
--------------- -------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Buildings........................................... $24,166 $26,159 $24,197
Technical machinery and equipment................... 4,635 5,491 5,512
Furniture and fixtures.............................. 5,822 5,907 6,153
Computers and software.............................. 2,619 2,828 2,916
Leasehold improvements.............................. 906 967 1,439
------- ------- -------
$38,148 $41,352 $40,217
======= ======= =======
</TABLE>
F-9
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
4. ACCRUED LIABILITIES
At September 30, 1994 and 1995 and June 30, 1996, accrued liabilities are
comprised of the following:
<TABLE>
<CAPTION>
JUNE
30,
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Employee compensation............................... $ 3,646 $ 4,256 $ 5,910
Warranty reserves................................... 2,375 4,020 4,561
Customer deposits................................... 509 395 1,868
Other............................................... 3,554 2,825 4,103
------- ------- -------
$10,084 $11,496 $16,442
======= ======= =======
</TABLE>
5. BANK AND AFFILIATE LOANS
The Company's Japanese subsidiary had loans with Bank of Yokohama and
Sakura Bank totalling $3,480 and $2,905 at September 30, 1994 and 1995,
respectively. The floating interest rates to
the banks ranged from 4.0 percent to 4.75 percent in 1993, 3.4 percent to
4.4 percent in 1994, and 1.6 percent to 2.6 percent in 1995. Such loans
were guaranteed by Siemens affiliates.
In fiscal 1996 the Company's Japanese subsidiary repaid its bank loans and
borrowed amounts from an affiliate of Siemens which totaled $6,687 at June
30, 1996. Interest on the affiliate loans is at a floating market rate
which was 2 percent at June 30, 1996.
6. LINE OF CREDIT
The line of credit represents intercompany borrowings outstanding from the
Parent of $18,900 for all periods presented. Interest expense has been
calculated at floating market rates for each of the periods presented,
which were 8.8 percent, 6.7 percent and 6.2 percent for the years ended
September 30, 1993, 1994, and 1995, respectively, and 6.2 percent and 4.9
percent for the nine months ended June 30, 1995 and 1996, respectively.
In addition, these financial statements assume non-interest bearing
advances from Siemens AG of $7,000 for all periods presented which will be
repaid by the Company from the proceeds of the Offering.
7. LEASE COMMITMENTS
The Company leases operating facilities and equipment under operating
leases which expire at various dates through 2001. The lease agreements
require payment of real estate taxes, insurance, and maintenance expenses
by the Company.
Minimum lease payments for future fiscal years under noncancelable
operating leases as of June 30, 1996 are:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30, TOTAL
-------------------------------- -----
<S> <C>
1996.............................................................. $282
1997.............................................................. 928
1998.............................................................. 538
1999.............................................................. 248
2000.............................................................. 185
2001 and thereafter............................................... 45
</TABLE>
F-10
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Rent expense charged to operations for the years ended September 30, 1993,
1994, and 1995 and the nine months ended June 30, 1996, approximates
$1,335, $1,306, $1,300, and $1,000, respectively.
8. EMPLOYEE BENEFIT PLANS
Substantially all of the Company's U.S. and German employees participate in
defined benefit pension plans. The Company's U.S. plan began in fiscal
1995.
The following table sets forth the funded status of the plans at the
balance sheet dates:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
-------------- --------
1994 1995 1996
------- ------ --------
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested employees................................ $ 810 $1,363 $1,413
Nonvested employees............................. 1,010 1,709 1,801
------- ------ ------
Accumulated benefit obligation................ 1,820 3,072 3,214
Effects of assumed future compensation increase... 357 880 1,018
------- ------ ------
Projected benefit obligation.................. 2,177 3,952 4,232
Plan assets....................................... -- -- 682
------- ------ ------
Projected benefit obligation in excess of plan
assets....................................... 2,177 3,952 3,550
Unrecognized net gain............................. 663 465 426
Unrecognized prior service cost................... -- (655) (607)
------- ------ ------
Accrued Pension Cost............................ $ 2,840 $3,762 $3,369
======= ====== ======
</TABLE>
Pension costs consist of the following components:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
SEPTEMBER 30, JUNE 30,
--------------- -----------
1993 1994 1995 1996
---- ---- ---- -----------
<S> <C> <C> <C> <C>
Service cost.................................. $199 $203 $391 $323
Interest on projected benefit obligations..... 141 144 229 206
Amortization of unrecognized prior service
cost......................................... -- -- 63 47
Amortization of unrecognized gain............. -- (2) (32) (16)
---- ---- ---- ----
Net pension cost.............................. $340 $345 $651 $560
==== ==== ==== ====
</TABLE>
Pensions generally provide benefits based on years of service. A discount
rate for the U.S. of 7.5 percent (7.0 percent for foreign plan) as of
September 30, 1993 and 1995 and June 30, 1996, and 8.0 percent (7.5 percent
for foreign plan) as of September 30, 1994, is assumed. Increases in future
compensation levels for the plan are projected at 5 percent. Prior service
costs and actuarial gains and losses are generally amortized over the
average remaining service period of active employees.
The Company has a 401(k) profit-sharing plan for the benefit of all
eligible U.S. employees, as defined by the plan. Participating employees
may contribute up to 16 percent of their qualified annual compensation. The
Company matches 50 percent of the first 6 percent of the employees'
compensation contributed as a salary deferral. Company contributions for
the years ended September 30, 1993, 1994, and 1995, and the nine months
ended June 30, 1996 are $103, $95, $115, and $90, respectively.
F-11
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
9. INCOME TAXES
Income (loss) before income taxes is attributable to the following
geographic regions:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER ENDED
30, JUNE 30,
------------------------- -----------
1993 1994 1995 1996
-------- ------- ------ -----------
<S> <C> <C> <C> <C>
United States......................... $ (4,598) $ 1,315 $ 649 $ 3,108
Germany............................... (15,257) (3,845) 5,631 6,562
France................................ 21 140 289 203
Italy................................. (250) 93 193 122
Japan................................. (1,302) (819) (497) 97
-------- ------- ------ -------
$(21,386) $(3,116) $6,265 $10,092
======== ======= ====== =======
</TABLE>
The provision for income tax expense (benefit) is comprised of the
following amounts:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
---------------------------------------
1993 1994 1995 1996
-------- -------- -------------------
<S> <C> <C> <C> <C>
Current:
United States.................... $ -- $ -- $ -- $ --
Foreign.......................... -- (94) 576 3,446
-------- -------- ------- ------
Total current.................. -- (94) 576 3,446
Deferred:
United States.................... (1,565) 465 249 1,107
Foreign.......................... -- (1,793) 2,227 (199)
-------- -------- ------- ------
Total deferred................. (1,565) (1,328) 2,476 908
-------- -------- ------- ------
Total income tax expense
(benefit)..................... $ (1,565) $(1,422) $ 3,052 $4,354
======== ======== ======= ======
</TABLE>
Statutory tax rates in the U.S., Italy, France, and Japan approximate 35
percent, 52 percent, 37 percent (33 percent in 1993 and 1994), and 52
percent, respectively, for all periods presented.
German corporate tax law applies the imputation system with regard to the
taxation of the income of a corporation (such as Rofin-Sinar Laser GmbH
("RSL")). In general, retained corporate income is subject to a municipal
trade tax (which for Hamburg and Gunding on a combined basis is 16.7%),
which is deductible for federal corporate income tax purposes, a federal
corporate income tax rate of 45% (50% prior to January 1, 1994) and,
effective January 1, 1995, a surcharge of 7.5% on the federal corporate
income tax amount.
Profits which are distributed by a German corporate taxpayer (such as RSL)
in the form of a dividend are subject to a reduced federal corporate income
tax rate of 30% (36% prior to January 1, 1994) plus the 7.5% surcharge on
the federal corporate income tax amount calculated at the reduced rate.
Dividends paid by RSL to Rofin-Sinar Technologies Inc. ("RST") are subject
to a withholding tax at a rate of 5% pursuant to the income tax treaty
currently in effect between the United States and Germany.
Tax expense and deferred taxes have been recorded at rates assuming all
earnings of RSL will be dividended to RST.
F-12
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The difference between actual income tax expense and the amount computed by
applying the U.S. federal income tax rate of 35 percent is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30,
---------------------------- -----------
1993 1994 1995 1996
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit)........................ $ (7,485) $ (1,060) $ 2,193 $3,532
Foreign operating loss for which
no benefit is recognized......... 8,378 421 257 --
Use of unrecognized net operating
loss carryforward................ -- -- -- (50)
Difference between U.S. and
foreign statutory rates.......... (2,233) (387) 446 775
Change in foreign tax rate........ (19) (365) 147 --
Other............................. (206) (31) (9) 97
-------- -------- ------- ------
Actual tax expense (benefit)...... $ (1,565) $(1,422) $ 3,052 $4,354
======== ======== ======= ======
</TABLE>
The tax effects of temporary differences that give rise to the net deferred
tax assets are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
---------------- --------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Deferred tax assets:
Foreign:
German reorganization benefits.................. $ 3,708 $ 3,621 $ 2,970
Net operating loss carryforwards................ 4,155 2,157 1,861
Other, net...................................... 234 283 640
------- ------- -------
8,097 6,061 5,471
United States:
Bad debt allowance.............................. 105 105 105
Accrued liabilities............................. 573 980 1,399
Inventory....................................... 1,058 1,300 928
Net operating loss carryforward................. 5,257 4,340 3,495
Other........................................... 42 60 27
------- ------- -------
Gross deferred tax assets....................... 15,132 12,846 11,425
Less: Valuation allowance....................... 2,192 2,028 1,861
------- ------- -------
Net deferred tax assets....................... $12,940 $10,818 $ 9,564
Deferred tax liabilities:
Foreign:
Depreciation.................................... (2,227) (2,501) (2,405)
Inventory....................................... (435) (916) (1,138)
Bad debt allowance.............................. (87) (297) (354)
Accrued liabilities ............................ (582) (519) --
------- ------- -------
(3,331) (4,233) (3,897)
------- ------- -------
Net deferred income tax assets................ $ 9,609 $ 6,585 $ 5,667
======= ======= =======
</TABLE>
F-13
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely
than not that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at June 30, 1996.
At June 30, 1996, the Company has U.S. federal net operating loss
carryforwards available of $9,800, which expire in 2008, and Japanese net
operating loss carryforwards of $3,800, which expire in 2000. Upon the
consummation of the Offerings, the utilization by the Company of its U.S.
net operating loss carryforwards will be subject to limitation under
Section 382 of the Internal Revenue Code of 1986, as amended, as a result
of the occurrence of a change of ownership within the meaning of Section
382.
Pursuant to tax arrangements between the Company and Siemens in Germany,
certain prior period net operating losses of the Company in Germany have
been used by Siemens and are not available to the Company to reduce future
income tax liabilities in Germany.
10.RELATED PARTY TRANSACTIONS
The Company purchases certain goods and services from Siemens AG and its
affiliates. The amount of such purchases, which are primarily raw material
inventories, is $2,204, $2,704, $2,445 and $4,098 for the years ended
September 30, 1993, 1994, 1995 and the nine months ended June 30, 1996,
respectively. The Company also recorded sales to Siemens AG and its
affiliates totaling $1,598, $2,890, $1,241 and $3,450 for the years ended
September 30, 1993, 1994, 1995 and the nine months ended June 30, 1996,
respectively.
The Company also had sales to one of its joint venture partners in Japan
amounting to $255 in 1993, $1,323 in 1994, $2,172 in 1995, and $1,193 for
the first nine months of 1996.
The terms of the Company's purchases from and sales to related parties have
generally been on terms comparable to those available in connection with
purchases from or sales to unaffiliated parties.
F-14
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
11.GEOGRAPHIC INFORMATION
Assets, revenues and income (loss) before taxes, by geographic region, at
September 30, 1994 and 1995 and June 30, 1996 and for the years ended
September 30, 1993, 1994, and 1995 and the nine months ended June 30, 1996,
are summarized below:
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
---------------- --------
1994 1995 1996
ASSETS ------- ------- --------
<S> <C> <C> <C>
United States.................................... $21,692 $28,129 $ 27,636
Germany.......................................... 52,129 59,678 70,176
Other............................................ 7,990 9,524 13,798
Intercompany eliminations........................ (5,144) (6,336) (7,101)
------- ------- --------
Total........................................ $76,667 $90,995 $104,509
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
TOTAL BUSINESS INTERSEGMENT REVENUE
------------------------------------- --------------------------------------
NINE NINE
MONTHS MONTHS
ENDED YEARS ENDED ENDED
YEARS ENDED SEPTEMBER 30, JUNE 30, SEPTEMBER 30, JUNE 30,
--------------------------- -------- ---------------------------- --------
1993 1994 1995 1996 1993 1994 1995 1996
REVENUES ------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States...... $25,371 $ 30,627 $ 35,189 $ 32,928 $ 2,636 $ 1,668 $ 3,595 $ 5,464
Germany............ 42,490 44,479 70,020 51,480 13,881 12,884 21,419 7,172
Other.............. 9,889 8,936 12,534 12,144 1,199 273 263 544
Intercompany
eliminations...... (17,716) (14,825) (25,277) (13,180) (17,716) (14,825) (25,277) (13,180)
------- -------- -------- -------- -------- -------- -------- --------
Total........... $60,034 $ 69,217 $ 92,466 $ 83,372 $ -- $ -- $ -- $ --
======= ======== ======== ======== ======== ======== ======== ========
<CAPTION>
EXTERNAL REVENUES
--------------------------------
NINE
MONTHS
YEARS ENDED ENDED
SEPTEMBER 30, JUNE 30,
----------------------- --------
1993 1994 1995 1996
REVENUES ------- ------- ------- --------
<S> <C> <C> <C> <C>
United States...... $22,735 $28,959 $31,594 $27,464
Germany............ 28,609 31,595 48,601 44,308
Other.............. 8,690 8,663 12,271 11,600
Intercompany
eliminations...... -- -- -- --
------- ------- ------- --------
Total........... $60,034 $69,217 $92,466 $83,372
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
NINE
MONTHS
YEARS ENDED ENDED
SEPTEMBER 30, JUNE 30,
------------------------- --------
1993 1994 1995 1996
INCOME (LOSS) BEFORE TAXES -------- ------- ------ --------
<S> <C> <C> <C> <C>
United States............................ $ (4,598) $ 1,315 $ 649 $ 3,108
Germany.................................. (15,257) (3,845) 5,631 6,562
Other.................................... (1,531) (586) (15) 422
-------- ------- ------ -------
Total................................ $(21,386) $(3,116) $6,265 $10,092
======== ======= ====== =======
</TABLE>
12.RECENTLY ISSUED ACCOUNTING STANDARDS
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation." Effective for
fiscal years beginning after December 15, 1995, Statement No. 123
encourages companies to include the fair value of any stock awards issued
as compensation expense within their income statements. Companies that
choose to remain with Accounting Principles Board Opinion No. 25 (which
uses the intrinsic value method to account for stock awards) must disclose
pro forma net income and earnings per share as if the fair value of the
award had been included as compensation expense. The Company anticipates
remaining with the intrinsic value method.
On March 31, 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." This Statement provides guidance
for recognition and measurement of impairment of long-lived assets, certain
identifiable intangibles and goodwill related both to assets to be held and
used and assets to be disposed of. The Company intends
F-15
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
to adopt this Statement as of the first quarter of its next fiscal year and
anticipates that the effect of such adoption will be immaterial.
F-16
<PAGE>
[Product Photos]
7. Installation for welding the roof of a car body using a 6 kWatt CO-Laser.
8. Nd:YAG-laser marker with galvohead, Model RSM 120Q.
9. Cross-flow 6 kWatt CO2-Laser, Model RS 860HF.
10. Laser welded transmission and motor components.
11. 2.5 kWatt diffusion-cooled Slab laser, Model DC025.
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE
SHARES OF COMMON STOCK TO WHICH IT
RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 3
Risk Factors............................................................ 7
Use of Proceeds......................................................... 13
Dividend Policy......................................................... 14
Dilution................................................................ 14
Capitalization.......................................................... 15
Selected Combined Financial Information and Operating Data.............. 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................. 17
Business................................................................ 27
Management.............................................................. 49
Ownership of Common Stock............................................... 59
Certain Transactions.................................................... 59
Description of Capital Stock............................................ 61
Shares Eligible for Future Sale......................................... 67
Certain United States Federal Tax Considerations for Non-U.S. Holders of
Common Stock........................................................... 68
Underwriting............................................................ 71
Legal Matters........................................................... 73
Experts................................................................. 73
Additional Information.................................................. 74
Glossary of Selected Technical Terms.................................... 75
Index to Financial Statements........................................... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN
THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
[ROFIN-SINAR LOGO APPEARS HERE]
10,000,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
ALEX. BROWN & SONS
INCORPORATED
LEHMAN BROTHERS
PROSPECTUS
, 1996
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the expenses, other than underwriting discounts
and commissions, to be incurred in connection with the sale and distribution
of the securities being registered. Except for the SEC registration fee, the
NASD filing fee and the Nasdaq National Market quotation fee, all of the
following amounts are estimates.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC Registration Fee............................................. $ 39,656
NASD Filing Fee.................................................. 12,000
Nasdaq National Market Quotation Fee............................. 42,511
Blue Sky Fees and Expenses....................................... 20,000
Legal Fees and Expenses.......................................... 600,000
Accounting Fees and Expenses..................................... 450,000
Printing Expenses................................................ 200,000
Transfer Agent Fees.............................................. 7,500
Miscellaneous Expenses........................................... 328,333
----------
Total.......................................................... $1,700,000
==========
</TABLE>
The Company will bear a pro rata portion of the foregoing expenses equal to
the proportion between $13 million and the total gross proceeds from the
Offerings. The remainder of such expenses will be borne by Siemens and SPC.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, in summary,
that directors and officers of Delaware corporations are entitled, under
certain circumstances, to be indemnified against all expenses and liabilities
(including attorney's fees) incurred by them as a result of suits brought
against them in their capacity as a director or officer, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful; provided that no indemnification may be made against expenses in
respect of any claim, issue or matter as to which they shall have been
adjudged to be liable to the Company, unless and only to the extent that the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, they are fairly and reasonably entitled to
indemnification for such expenses which the court shall deem proper. Any such
indemnification may be made by the Company only as authorized in each specific
case upon a determination by the shareholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable
standard of conduct. The Certificate of Incorporation of the Company permits
indemnification of its directors and officers to the maximum extent permitted
by Delaware law, as the same may be amended from time to time.
The Company has in effect a directors and officers liability insurance
policy indemnifying the directors and officers of the Company for certain
liabilities incurred by them, including liabilities under the Securities Act.
The Company pays the entire premium of this policy.
The Company's Certificate of Incorporation contains a provision that
eliminates the personal liability of directors of the Company for monetary
damages for certain breaches of fiduciary duty, as permitted by Section
102(b)(7) of the Delaware General Corporation Law.
Pursuant to the Underwriting Agreement between the Company and the
Underwriters included as Exhibit 1 to this Registration Statement, the
officers and directors of the Company are indemnified by the Underwriters
against certain civil liabilities under the Securities Act.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Other than one share issued to Siemens Power Corporation upon the
Registrant's incorporation, no securities of the Registrant have been issued
or sold by the Registrant in the last three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1.1 --Form of Underwriting Agreement+
3.1 --Certificate of Incorporation of the Company and Form of Certificate of
Amendment thereto+
3.2 --By-laws of the Company+
4.1 --Specimen Certificate of Common Stock+
4.2 --Form of Rights Agreement+
5.1 --Opinion of Shearman & Sterling as to the validity of Common Stock+
10.1 --Form of Sale and Transfer Agreement between Siemens
Aktiengesellschaft and Rofin-Sinar Technologies Inc.+
10.2 --Form of Sale and Transfer Agreement by and among Siemens Power Corpora-
tion and Rofin-Sinar Technologies Inc.+
10.3 --Form of Tax Allocation and Indemnification Agreement among Rofin-Sinar
Technologies Inc., Rofin-Sinar Inc., Siemens Corporation and Siemens
Power Corporation+
10.4 --Joint Venture Agreement, dated as of May 27, 1992, by and among Rofin
Sinar Laser GmbH, Marubeni Corporation and Nippei Toyama Corporation+
10.5 --Cooperation Agreement, dated as of May 27, 1992, among Nippei Toyama
Corporation, Rofin-Sinar Laser GmbH and Marubeni Corporation+
10.6 --Cooperation Agreement, dated as of May 27, 1992, among Rofin Sinar Laser
GmbH, Marubeni Corporation and Nippei Toyama Corporation+
10.7 --Inheritable Building Right (Erbbaurecht), dated as of March 1, 1990, be-
tween Rofin Sinar Laser GmbH and Lohss GmbH (in German, English summary
provided)+
10.8 --Lease Agreement, dated August 10, 1990, between Josef and Maria Kranz
and Rofin Sinar Laser GmbH (in German, English summary provided)+
10.9 --Lease Agreement, dated June 14, 1989, between DR Group and Rofin-Sinar
Incorporated (Mast Street property)+
10.10 --Lease Agreement, dated March 25, 1993, between DR Group and Rofin-Sinar
Incorporated (Plymouth Oaks Drive property)+
10.11 --Rofin-Sinar Laser GmbH Pension Plan (in German, English summary
provided)+
10.12 --Form of 1996 Equity Incentive Plan+
10.13 --Form of 1996 Non-Employee Directors' Stock Plan+
10.14 --Deutsche Bank AG Commitment Letter dated August 22, 1996+
10.15 --Form of Employment Agreement, dated as of September 2, 1996, among Peter
Wirth, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies Inc. (in
German, English summary provided)+
10.16 --Form of Employment Agreement, dated as of September 2, 1996, among
Hinrich Martinen, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies
Inc. (in German, English summary provided)+
10.17 --Form of Employment Agreement, dated as of September 2, 1996, among Gun-
ther Braun, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies Inc. (in
German, English summary provided)+
21.1 --List of Subsidiaries of the Registrant+
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Shearman & Sterling (included in Exhibit 5.1 above)+
23.3 --Consents of Persons About to Become Directors
24.1 --Power of Attorney+
27.1 --Financial Data Schedule for fiscal year ended September 30, 1995+
27.2 --Financial Data Schedule for nine months ended June 30, 1996+
</TABLE>
- --------
+ Previously filed.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts
II-2
<PAGE>
All other supplementary schedules relating to the registrant are omitted
because they are not required or because the required information, where
material, is contained in the Consolidated Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended (the "Act"), the information omitted from the
form the prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described above under Item 14 "Indemnification of
Directors and Officers," or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of a Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of their counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) The Registrant hereby further undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON SEPTEMBER 24, 1996.
Rofin-Sinar Technologies Inc.
/s/ Peter Wirth
By: _________________________________
PETER WIRTH CHAIRMAN OF THE BOARD
OF DIRECTORS, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND AS OF THE 24TH DAY OF SEPTEMBER, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Peter Wirth Chairman of the September 24,
- ------------------------------------- Board of Directors, 1996
PETER WIRTH Chief Executive
Officer and
President
* Executive Vice September 24,
- ------------------------------------- President, Research 1996
HINRICH MARTINEN and
Development/Operations,
Chief Technical
Officer and
Director
* Executive Vice September 24,
- ------------------------------------- President, Finance 1996
GUNTHER BRAUN and Administration,
Chief Financial
Officer, Principal
Accounting Officer
and Director
/s/ Peter Wirth
*By__________________________________
Peter Wirth
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
SCHEDULE II
ROFIN-SINAR TECHNOLOGIES INC. AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1993, 1994, AND 1995
AND NINE MONTHS ENDED JUNE 30, 1996
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO COSTS BALANCE AT
DESCRIPTION BEGINNING OF PERIOD AND EXPENSES DEDUCTIONS END OF PERIOD
----------- ------------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C>
September 30, 1993...... 1,035 1,513 (553) 1,995
September 30, 1994...... 1,995 831 (1,821) 1,005
September 30, 1995...... 1,005 1,549 (1,302) 1,252
June 30, 1996........... 1,252 267 (399) 1,120
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
1.1 --Form of Underwriting Agreement+
3.1 --Certificate of Incorporation of the Company and Form of Certificate of
Amendment thereto+
3.2 --By-laws of the Company+
4.1 --Specimen Certificate of Common Stock+
4.2 --Form of Rights Agreement+
5.1 --Opinion of Shearman & Sterling as to the validity of Common Stock+
10.1 --Form of Sale and Transfer Agreement between Siemens
Aktiengesellschaft and Rofin-Sinar Technologies Inc.+
10.2 --Form of Sale and Transfer Agreement by and among Siemens Power Corpora-
tion and Rofin-Sinar Technologies Inc.+
10.3 --Form of Tax Allocation and Indemnification Agreement among Rofin-Sinar
Technologies Inc., Rofin-Sinar Inc., Siemens Corporation and Siemens
Power Corporation+
10.4 --Joint Venture Agreement, dated as of May 27, 1992, by and among Rofin
Sinar Laser GmbH, Marubeni Corporation and Nippei Toyama Corporation+
10.5 --Cooperation Agreement, dated as of May 27, 1992, among Nippei Toyama
Corporation, Rofin-Sinar Laser GmbH and Marubeni Corporation+
10.6 --Cooperation Agreement, dated as of May 27, 1992, among Rofin Sinar Laser
GmbH, Marubeni Corporation and Nippei Toyama Corporation+
10.7 --Inheritable Building Right (Erbbaurecht), dated as of March 1, 1990, be-
tween Rofin Sinar Laser GmbH and Lohss GmbH (in German, English summary
provided)+
10.8 --Lease Agreement, dated August 10, 1990, between Josef and Maria Kranz
and Rofin Sinar Laser GmbH (in German, English summary provided)+
10.9 --Lease Agreement, dated June 14, 1989, between DR Group and Rofin-Sinar
Incorporated (Mast Street property)+
10.10 --Lease Agreement, dated March 25, 1993, between DR Group and Rofin-Sinar
Incorporated (Plymouth Oaks Drive property)+
10.11 --Rofin-Sinar Laser GmbH Pension Plan (in German, English summary
provided)+
10.12 --Form of 1996 Equity Incentive Plan+
10.13 --Form of 1996 Non-Employee Directors' Stock Plan+
10.14 --Deutsche Bank AG Commitment Letter dated August 22, 1996+
10.15 --Form of Employment Agreement, dated as of September 2, 1996, among Peter
Wirth, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies Inc. (in
German, English summary provided)+
10.16 --Form of Employment Agreement, dated as of September 2, 1996, among
Hinrich Martinen, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies
Inc. (in German, English summary provided)+
10.17 --Form of Employment Agreement, dated as of September 2, 1996, among Gun-
ther Braun, Rofin-Sinar Laser GmbH and Rofin-Sinar Technologies Inc. (in
German, English summary provided)+
21.1 --List of Subsidiaries of the Registrant+
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Shearman & Sterling (included in Exhibit 5.1 above)+
23.3 --Consents of Persons About to Become Directors
24.1 --Power of Attorney+
27.1 --Financial Data Schedule for fiscal year ended September 30, 1995+
27.2 --Financial Data Schedule for nine months ended June 30, 1996+
</TABLE>
- --------
+ Previously filed.
<PAGE>
EXHIBIT 23.1
The Board of Directors
Rofin-Sinar Technologies Inc. and Affiliates:
We consent to the use of our report, dated July 19, 1996, included in
Amendment No. 3 to the Registration Statement of Rofin-Sinar Technologies Inc.
and Affiliates on Form S-1 and to the reference to our firm under the headings
"Experts", "Summary Combined Financial Information" and "Selected Combined
Financial Information and Operating Data" in the related prospectus.
KPMG Peat Marwick LLP
Detroit, Michigan
September 24, 1996
<PAGE>
EXHIBIT 23.3
CONSENT
I consent to the use of my name under the caption "Management" in the
prospectus included in Amendment No. 3 to the Registration Statement on Form S-1
of Rofin-Sinar Technologies Inc. as a person to be appointed to the Board of
Directors of Rofin-Sinar Technologies Inc. and to the inclusion of the other
information relating to me under said caption and under the caption
"Underwriting."
/s/ Gary K. Willis
__________________________
Gary K. Willis
Middlefield, Connecticut
September 23, 1996
<PAGE>
CONSENT
I consent to the use of my name under the caption "Management" in the
prospectus included in Amendment No. 3 to the Registration Statement on Form S-1
of Rofin-Sinar Technologies Inc. as a person to be appointed to the Board of
Directors of Rofin-Sinar Technologies Inc. and to the inclusion of the other
information relating to me under said caption and under the caption
"Underwriting."
/s/ Ralph E. Reins
______________________
Ralph E. Reins
Toledo, Ohio
September 23, 1996
<PAGE>
CONSENT
I consent to the use of my name under the caption "Management" in the
prospectus included in Amendment No. 3 to the Registration Statement on Form S-1
of Rofin-Sinar Technologies Inc. as a person to be appointed to the Board of
Directors of Rofin-Sinar Technologies Inc. and to the inclusion of the other
information relating to me under said caption and under the caption
"Underwriting."
/s/ William R. Hoover
__________________________
William R. Hoover
El Segundo, California
September 23, 1996
