UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number: 000-21377
ROFIN-SINAR TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 38-3306461
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45701 Mast Street, Plymouth, MI 48170
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(Address of principal executive offices) (Zip Code)
(734) 455-5400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] / No [ ]
11,522,440 shares of the registrant's common stock, par value $0.01 per
share, were outstanding as of August 10, 1998.
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ROFIN-SINAR TECHNOLOGIES INC.
INDEX
PART I FINANCIAL INFORMATION Page No.
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Item 1
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Condensed Consolidated Balance Sheets
June 30, 1998 and September 30, 1997 3
Condensed Consolidated Statements of Operations
Nine months and three months ended
June 30, 1998 and June 30, 1997 4
Condensed Consolidated Statements of Cash Flows
Nine months ended June 30, 1998 and June 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2
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Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION 17
SIGNATURES 19
Exhibit 11.1 - Computation of Earnings Per Share
Exhibit 27.1 - Financial data schedule for the
Nine-month period ended June 30, 1998
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PART I. FINANCIAL INFORMATION
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands)
June 30, September 30,
1998 1997
ASSETS (Note 1) (Note 1)
Current Assets: ----------- -------------
Cash and cash equivalents $ 36,431 $ 40,743
Trade accounts receivable, net 31,225 27,148
Inventories, net (Note 2) 32,989 28,731
Deferred income tax assets - current 3,696 3,508
Other current assets and prepaid expenses 1,948 1,837
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Total current assets 106,289 101,967
Property and equipment, net 22,483 22,118
Intangibles, net 4,676 5,054
Deferred income tax assets - noncurrent 1,740 2,769
Other noncurrent assets 467 281
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Total assets $ 135,655 $ 132,189
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 3) $ 15,323 $ 18,569
Accounts payable, trade 7,171 5,837
Accrued liabilities (Note 2) 19,559 22,554
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Total current liabilities 42,053 46,960
Long-term debt (Note 4) 3,317 0
Deferred income tax liability, long-term 340 191
Pension obligations 3,214 3,044
Minority interests 343 69
Other long-term liabilities 27 0
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Total liabilities 49,294 50,264
Stockholders' equity
Preferred stock, 5,000,000 shares authorized,
none issued or outstanding 0 0
Common stock, $0.01 par value, 50,000,000 shares
authorized, 11,522,440 (11,510,500 at
September 30, 1997) issued and outstanding 115 115
Additional paid-in-capital 75,845 75,666
Cumulative foreign currency translation adjustment ( 3,774) ( 2,810)
Retained earnings 14,175 8,954
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Total stockholders' equity $ 86,361 $ 81,925
Total liabilities and stockholders' equity $ 135,655 $ 132,189
========== ==========
See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Periods Ended June 30, 1998 and 1997
(dollars in thousands, except per share amounts)
Nine Months Three Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net sales $ 87,075 $ 98,677 $ 28,902 $ 31,209
Cost of goods sold 55,105 62,395 18,941 19,163
---------- ---------- ---------- ----------
Gross profit 31,970 36,282 9,961 12,046
Selling, general, and
administrative expenses 16,640 17,636 5,319 6,103
Research and development expenses 7,280 6,958 2,566 2,083
Special charge 0 1,350 0 1,350
---------- ---------- ---------- ----------
Income from operations 8,050 10,338 2,076 2,510
Other expense (income):
Interest expense (income), net ( 607) ( 662) ( 207) ( 211)
Other expense (income) ( 548) ( 590) ( 127) ( 198)
---------- ---------- ---------- ----------
Income before income taxes 9,205 11,590 2,410 2,919
Income tax expense 3,984 4,913 1,160 1,408
---------- ---------- ---------- ----------
Net income $ 5,221 $ 6,677 $ 1,250 $ 1,511
========== ========== ========== ==========
Net income per common
share (Note 5):
Basic $ 0.45 $ 0.58 $ 0.11 $ 0.13
Diluted $ 0.45 $ 0.57 $ 0.11 $ 0.13
========== ========== ========== ==========
Weighted average shares
used in computing net
income per share (Note 5):
Basic 11,514,380 11,504,500 11,521,481 11,504,500
Diluted 11,620,757 11,603,100 11,686,885 11,627,965
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 1998 and 1997
(dollars in thousands)
June 30, June 30,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,221 $ 6,677
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Changes in operating assets and liabilities ( 8,948) 2,510
Other adjustments 1,841 2,243
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Net cash provided (used) by operating activities ( 1,886) 11,430
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 33 55
Additions to property and equipment ( 2,776) ( 1,265)
Other 371 0
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Net cash used by investing activities ( 2,372) ( 1,210)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of former parent loans - ( 16,735)
Borrowings from bank 1,721 12,655
Repayment to bank ( 563) 0
Repayment to related party ( 873) 0
Other 179 0
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Net cash provided (used) by financing activities 464 ( 4,080)
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Effect of foreign currency translation on cash ( 518) ( 580)
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Net increase (decrease) in cash and cash equivalents ( 4,312) 5,560
Cash and cash equivalents at beginning of period 40,743 34,869
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Cash and cash equivalents at end of period $ 36,431 $ 40,429
========== ==========
See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(dollars in thousands)
1. Summary of Accounting Policies
The accompanying consolidated condensed financial statements have been
prepared in conformity with generally accepted accounting principles,
consistent with those reflected in the Company's annual report to
stockholders for the year ended September 30, 1997. All adjustments
necessary for a fair presentation have been made which comprise only normal
recurring adjustments; however, interim results of operations are not
necessarily indicative of results to be expected for the year. September 30,
1997 balances are derived from audited financial statements, however, all
interim period amounts have not been audited.
2. Balance Sheet Detail:
Inventories are stated at the lower of cost (first-in, first-out or weighted
average) or market, and are summarized as follows:
June 30, September 30,
1998 1997
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Raw materials and supplies $ 10,386 $ 6,903
Work in progress 8,056 7,944
Service parts 7,363 6,817
Finished goods 3,092 2,732
Demonstration inventory 4,092 4,335
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Total inventories, net $ 32,989 $ 28,731
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Accrued liabilities are comprised of the following:
June 30, September 30,
1998 1997
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Employee compensation $ 4,985 $ 4,960
Warranty reserves 4,785 5,724
Deferred revenue 225 244
Income taxes payable 5,491 5,826
Customer deposits 1,752 2,016
Other 2,321 3,784
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Total accrued liabilities $ 19,559 $ 22,554
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3. Line of Credit
In October 1996 the Company obtained a credit line for a $25,000 revolving
loan facility with Deutsche Bank AG to support its working capital needs. As
of June 30, 1998, $10,543 was borrowed on a short term basis against this
loan facility by Rofin-Sinar Laser GmbH, Dilas GmbH, Rofin Marubeni Laser
Corp., Rofin-Sinar S.r.L., and Rofin-Sinar UK Ltd. at an average interest
rate of 3.4%.
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In addition, the Company's foreign subsidiaries have several lines of credit
which allow them to borrow in the applicable local currencies. At June 30,
1998, direct borrowings under these agreements totaled $4,780; and $2,910
remained unused.
4. Long-Term Debt
At June 30, 1998, $553 was borrowed under the credit line with Deutsche Bank
with extended payment terms into the year 2000. Further, Rofin-Sinar Laser
GmbH entered into a loan agreement with a German bank for a $2,790 long-term
credit facility. As of June 30, 1998, $2,764 was borrowed against this loan.
Both loan agreements expire in 2000.
5. Net Income Per Common Share
On March 31, 1997, the Financial Accounting Standards Board issued SFAS No.
128 (FAS 128) , "Earnings Per Share". FAS 128 establishes standards for
computing and presenting earnings per share (EPS) and applies to entities
with publicly held common stock or potential common stock. During the
quarter ended December 31, 1997, the Company adopted FAS 128 and is now
required to report both basic and diluted earnings per share. Basic EPS is
computed by dividing net income by the weighted average number of common
shares outstanding during the period. Diluted EPS reflects the potential
dilution from common stock equivalents (stock options). The Company has
restated earnings per share for the comparative prior periods for fiscal 1997
as required by FAS 128. The calculation of the weighted average number of
common shares outstanding for each period is as follows:
Nine Months Ended Three Months Ended
June 30, June 30,
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1998 1997 1998 1997
---------- ---------- ---------- ----------
Weighted average number of
shares for BASIC net income
per common share 11,514,380 11,504,500 11,521,481 11,504,500
Potential additional shares
due to outstanding dilutive
stock options 106,377 98,600 165,404 123,465
---------- ---------- ---------- ----------
Weighted average number of
shares for DILUTED net
income per common share 11,620,757 11,603,100 11,686,885 11,627,965
========== ========== ========== ==========
Excluded from the calculation of diluted EPS for the nine months ended June
30, 1998 were 193,000 outstanding stock options. These could potentially
dilute future EPS calculations but were not included in the current period
because their effect was antidilutive.
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6. Recently Issued Accounting Standards
In 1997 Financial Accounting Standards No. 130 (FAS 130), "Reporting
Comprehensive Income", was issued and is effective for fiscal years
commencing after December 15, 1997. The Company will comply with FAS 130 in
fiscal year 1999.
In 1997 Financial Accounting Standards No. 131 (FAS 131), "Disclosures about
Segments of an Enterprise and Related Information", was issued and is
effective for fiscal years commencing after December 15, 1997. The Company
will comply with the requirements of FAS 131 in fiscal year 1999.
In 1998 Financial Accounting Standards No. 133 (FAS 133), "Accounting for
Derivative Instruments and Hedging Activities", was issued and is effective
for fiscal years commencing after June 15, 1999. The Company will comply
with FAS 133 in fiscal year 2000.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties, and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include the following:
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 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; Potential
Volatility of Stock Price
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
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reschedule shipments, and production difficulties could delay shipments.
Accordingly, the Company's results of operations are subject to significant
variability from quarter to quarter.
Other factors which the Company believes may cause the market price of its
Common Stock to fluctuate, perhaps substantially, include announcements of
new products, technologies or customers by the Company or its competitors and
developments with respect to intellectual property and shortfalls in the
Company's operations relative to analysts' expectations. In addition, in
recent years, the stock market in 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.
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 $2.8 million debit at September 30, 1997 to a $3.8
million debit at June 30, 1998. This change arose primarily from the
strengthening of the U.S. dollar against the German mark, and reflects 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 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 gross margin
and selling, general and administrative expenses denominated in such foreign
currencies when translated into U.S. dollars as compared to prior periods.
The Company's subsidiaries will from time to time pay dividends in their
respective functional currencies, thus presenting another area of potential
currency exposure in the future.
The Company has implemented a policy to hedge up to 50% of its net foreign
currency exposure on sales transactions utilizing forward exchange contracts
or foreign exchange options. The Company has also implemented a policy to
continue to borrow in each operating subsidiary's functional currency to
reduce exposure to exchange gains and losses. 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.
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Competition
The laser industry is characterized by significant price and technical
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 CO2, diode laser and
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.
Risks Relating to Sales Growth in CO2, Diode 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 CO2 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
CO2 Slab laser sources and to developing low-power CO2 Slab lasers, diode
lasers and 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 CO2 Slab lasers to achieve more
attractive pricing. The Company's diode-pumped lasers, however, are
currently being introduced to the market and are not expected to result in
marketable products in fiscal 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 and Japan. If
the Company is unable to implement its strategy of increasing its market
share for laser marking products and of expanding its product range to
include higher output power diffusion-cooled CO2 Slab lasers, low-power CO2
Slab lasers, diode 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
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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 CO2 Slab laser sources, successfully
redesign diode lasers for industrial production environments or develop
diode-pumped Nd:YAG solid state laser products and low-power CO2 Slab lasers,
or that any such products will achieve market acceptance or not be rendered
obsolete or uncompetitive by products of other companies.
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. 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.
Conflicting Patents and Other Intellectual Property Rights of Third Parties;
Limited Protection of 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
available to the Company on commercially reasonable terms, the Company would
be adversely affected.
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 46 United States and foreign patents on its laser sources
which expire from 1998 to 2016. 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.
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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.
Asia-Pacific Risk
Countries in the Asia Pacific region, including Japan, have recently
experienced weaknesses in their currency, banking and equity markets. As the
Asia Pacific market currently represents approximately 16% of the Company's
revenue, these weaknesses could adversely affect consumer demand for the
Company's product, the U.S. dollar value of the Company's foreign currency
denominated sales, and ultimately the Company's consolidated results of
operations.
Year 2000 Compliance
The Company has evaluated the costs necessary to make its computer systems
Year 2000 compliant. The bulk of these costs are expected to be incurred
during fiscal years 1998 and 1999 and are not expected to have a material
impact on the Company's cash flows, results of operations or financial
condition.
Overview
Rofin-Sinar Technologies, Inc. ("Rofin-Sinar", or the "Company") 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 third quarter of fiscal year 1997 and
fiscal year 1998, respectively, approximately 70% and 65% of the Company's
revenues were from sales and servicing of laser products for cutting and
welding applications and approximately 30% and 35% 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 who integrate Rofin-Sinar's laser sources with
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other system components and to distributors. Many of Rofin-Sinar's customers
are among the largest global participants in their respective industries.
In January 1998, RSTI formed a new company, Rofin-Sinar UK, Ltd., based in
Kingston upon Hull, England, and acquired the business assets of Palomar
Technologies, Ltd., to design, manufacture and sell low-power CO2 lasers.
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
consolidated statements of operations.
Nine Months Three Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net sales 100% 100% 100% 100%
Cost of goods sold 63% 63% 66% 61%
Gross profit 37% 37% 34% 39%
Selling, general and
administrative expenses 19% 18% 18% 20%
Research and development expenses 9% 7% 9% 7%
Special charge 0% 1% 0% 4%
Income from operations 9% 11% 7% 8%
Income before income taxes 11% 12% 8% 9%
Net income 6% 7% 4% 5%
Net Sales - Net sales of $28.9 million and $87.1 million represent decreases
of $2.3 million (7%) and $11.6 million (12%) for the three months and nine
months ended June 30, 1998, respectively, compared to the corresponding
periods of fiscal 1997. The reduction resulted from net sales decreases of
$8.3 million, or 23%, in the United States, and $3.3 million, or 5%, in
Europe/Asia for the corresponding nine month periods as compared to the prior
year. The strengthening of the U.S. dollar against foreign currencies
resulted in lower net sales of $5.8 million for the nine month period. Net
sales of laser products for cutting and welding applications for the three
and nine months periods decreased by 14% to $18.8 million, and by 21% to
$57.7 million as compared to the same periods for fiscal 1997. Net sales of
lasers for marking applications for the three and nine month periods
increased by 9% to $10.1 million and by 14% to $29.4 million as compared to
fiscal 1997. The decrease in cutting and welding products is caused mainly
by the inclusion in the fiscal 1997 revenue of a major program to a single
automotive airbag company and lower unit shipments due to the Companies
world-wide markets. The increase in marking revenue is due mainly to strong
sales for marking systems in the semi-conductor and electronics industry.
Cost of Goods Sold - Cost of goods sold decreased $0.2 million (1%) and $7.3
million (12%) for the three months and nine months ended June 30, 1998,
respectively, compared to the corresponding periods of fiscal 1997, and
reflect the decrease in net sales.
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Gross Profit - The Company's gross profit of $10.0 million and $32.0 million
for the three months and nine months ended June 30, 1998, respectively,
represents a $2.1 million and $4.3 million decrease from the same periods of
the prior year. This is due partially to the decline in sales between these
two periods as well as the current year inclusion of start-up manufacturing
costs associated with the UK acquisition and due to a larger proportion of
lower-margin marking systems and lower unit shipments of cutting and welding
lasers. As a percentage of sales over the corresponding three month periods
gross profit decreased from 39% to 34%, whereas for the corresponding nine
month periods it remained steady at 37%. Gross profit was unfavorably
affected by $0.5 million and $2.2 million, for the three and nine month
periods in fiscal 1998, due to the strengthening of the U.S. dollar.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses decreased $0.8 million (13%) and $1.0 million (6%)
for the three months and nine months ended June 30, 1998, respectively,
compared to the corresponding periods of fiscal 1997. The third quarter
decrease is primarily due to last years one-time provision for a bankrupt
customer and biannual trade show costs. In addition, the current quarter
results were favorably impacted by $0.1 million related to the amortization
of the unallocated negative goodwill which resulted from the Rofin-Sinar UK
Ltd. asset purchase. SG&A expenses increased from 18% to 19% as a percentage
of sales for the nine month periods ended June 30, 1998, due to the fixed
nature of certain costs as compared to lower sales levels in the current
year.
Research and Development - The Company spent net $2.6 million and $7.3
million on research and development during the three and nine month periods.
This represents increases of 23% and 5% over the same periods of the prior
year. The increase in spending was primarily due to the on-going research
and development work for diode-pumped and Nd:YAG lasers, and output power
increases of the slab laser generation. Gross research and development
expenses for the three and nine months were $2.8 and $8.3 million and were
reduced by $0.2 and $1.0 million of government grants.
Income from Operations - The Company's income from operations of $2.1 million
and $8.1 million for the three and nine months ended June 30, 1998 represent
decreases of $0.4 million, or 17%, and $2.3 million, or 22% over the
corresponding prior year periods. Income from operations was unfavorably
affected by $0.1 million, for the three month period in fiscal 1998, due to
the strengthening of the U.S. dollar. The unfavorable effect on net sales
was partly offset by corresponding decreases in costs of sales, research and
development, and SG&A from the Company's foreign operations.
Income Before Income Taxes - The Company's income before income taxes of $2.4
million and $9.2 million for the three and nine months ended June 30, 1998,
represent decreases of $0.5 million (17%) and $2.4 million (21%) over the
corresponding prior year periods. Net interest income declined due to lower
investment activity in the current period versus the comparable period in the
prior year. In addition, the Company's investment portfolio now includes a
higher ratio of tax-exempt investment vehicles which serve to lower the
interest income yet lower the effective tax rate.
- 15 -
<PAGE>
Income Tax Expense - Income tax expense of $1.2 million and $4.0 million for
the three and nine month periods ended June 30, 1998 represent effective tax
rates of 48.1% and 43.3%, compared to prior year corresponding effective tax
rates of 48.2% and 42.4%, respectively. This change in rates is primarily
due to a higher proportion of current year profit generated in Germany,
partially due to first year operations of the Dilas subsidiary. In addition,
rates increased in Italy due to recent tax legislation.
Net Income - In light of the foregoing factors, the Company realized a
consolidated net income of $1.3 million and $5.2 million for the three and
nine month periods ended June 30, 1998, which represent decreases of $0.3
million (17%) and $1.5 million (22%) over the comparable prior periods. For
the three months ended June 30, 1998 both basic and diluted earnings per
share equaled $0.11 based upon 11.5 million and 11.7 million common shares
outstanding, respectively, as compared to basic and diluted earnings per
share of $0.13 for the same period in 1997, based on 11.5 million and 11.6
million shares outstanding, respectively.
Liquidity and Capital Resources
The Company's primary sources of liquidity at June 30, 1998 were cash and
cash equivalents of $36.4 million, a $25.0 million line of credit with
Deutsche Bank AG, and several other lines of credit to support foreign
subsidiaries in their local currencies. As of June 30, 1998, $11.1 million
was borrowed against the Deutsche Bank facility, $4.8 million from other
lines of credit, and $2.8 million from a loan agreement. Of this total $3.3
million is classified as long-term and is due in the year 2000.
Cash and cash equivalents decreased by $4.3 million during the nine months
ended June 30, 1998. Approximately $1.9 million in cash and cash equivalents
were used in operating activities, primarily as the result of increased
accounts receivable due to a high proportion of shipments in June 1998, as
well as an increase in inventories due to the delay in production in cutting
and welding products and the initial production for new product-lines. These
increases in operating assets were offset by a corresponding increase in
accounts payable since year end.
Uses of cash from investing activities totaled $2.4 million for the nine
months ended June 30, 1998 and was due primarily to leasehold improvements
and various additions to property and equipment related to introduction of
new products and computer upgrades. Of this amount, $1.0 million is related
to the newly formed Rofin-Sinar UK subsidiary.
Cash provided from financing activities totaled $0.5 million. Proceeds from
bank borrowings totaled $1.7 million which were partially offset by
repayments of $0.9 million to a related party and repayments of $0.6 million
to the bank.
Management believes that the Company's cash flow from operations, along with
existing cash and cash equivalents and credit facilities, will provide
adequate resources to meet its capital requirements and operational needs for
the foreseeable future.
- 16 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Use of IPO Proceeds
The Company completed its initial public offering of 11,500,000 shares of its
common stock on September 30, 1996 for gross proceeds of $109.2 million
pursuant to its registration statement on Form S-1 (No. 333-09539) declared
effective on September 25, 1996. The lead managers for the offering were
Deutsche Morgan Grenfell / C.J. Lawrence, Inc., Alex Brown & Sons Inc., and
Lehmann Brothers, Inc. Net proceeds of the offering (after deduction of $6.6
million in underwriting discounts and commissions and $0.3 million in other
offering expenses) were $102.3 million. Of such amount approximately $77.1
million were used to purchase all outstanding shares of Rofin-Sinar Laser and
Rofin-Sinar, Inc. from the former Parent and to repay certain indebtedness
owed to the former Parent. Of the remainder, $25.0 million was invested in
certificates of deposit, with the balance applied to working capital. In the
fourth quarter of fiscal 1997 the Company used approximately $5.2 million of
the $25.0 million of net invested proceeds to consummate the acquisition of
Dilas. In the first quarter of fiscal 1998 the Company used approximately
$0.8 million for working capital purposes. In the second quarter of fiscal
1998 the Company used approximately $0.9 million to consummate the
acquisition of the business assets of Palomar Technologies Ltd., a wholly
owned subsidiary of Palomar Medical Technologies Inc. Of the remaining
proceeds approximately $1.6 million was used for working capital purposes.
Since the date of the Company's last report on its use of the proceeds of its
initial public offering approximately $0.7 million was used for working
capital purposes. Accordingly, approximately $15.8 million of the net
offering proceeds remain to be applied.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
- 17 -
<PAGE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of earnings per share.
27.1 Financial data schedule for nine month period ended
June 30, 1998.
(b) Reports on Form 8-K
The Registrant filed the following Current Reports on Form 8-K
during the quarter ended June 30, 1998:
Current Report on Form 8-K, dated April 16, 1998, announced that an
independent jury has chosen the "Modular Diode Laser-Tools" project presented
by Rofin-Sinar Laser as one of the five new projects to be supported by the
German Federal Ministry of Education, Science, Research and Technology BMBF.
Current Report on Form 8-K, dated May 12, 1998, announced the Company's
earnings for the second quarter of fiscal 1998.
Current Report on Form 8-K, dated June 4, 1998, announced the signing of a
technology co-operation and distribution agreement between Rofin-Sinar UK
Ltd. and Lasertechnics Marking Corporation.
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Rofin-Sinar Technologies Inc.
---------------------------------
(Registrant)
Date: August 13, 1998 /S/ Gunther Braun
---------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration, and
Chief Financial Officer
- 19 -
<PAGE>
-----------------------------------
Exhibit 11.1 - Earnings Per Share
-----------------------------------
Nine Months Three Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net income $ 5,221 $ 6,677 $ 1,250 $ 1,511
Weighted average
shares outstanding:
Basic 11,514,380 11,504,500 11,521,481 11,504,500
Diluted 11,620,757 11,603,100 11,686,885 11,627,965
========== ========== ========== ==========
Earnings per share:
Basic $ 0.45 $ 0.58 $ 0.11 $ 0.13
Diluted $ 0.45 $ 0.57 $ 0.11 $ 0.13
========== ========== ========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Rofin-Sinar Technologies, Inc. and
Subsidiaries for the nine months ended June 30, 1998, and is qualified
in its entirety by reference to such consolidated financial statements.
</LEGEND>
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