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 December 31, 1997
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
11,511,400 shares of the registrant's common stock, par value $.01 per share,
were outstanding as of February 13, 1998.
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ROFIN-SINAR TECHNOLOGIES INC.
INDEX
PART I FINANCIAL INFORMATION Page No.
Item 1
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Condensed Consolidated Balance Sheets 3
December 31, 1997 and September 30, 1997
Condensed Consolidated Statements of Income 4
Three months ended December 31, 1997 and
December 31, 1996
Condensed Consolidated Statements of Cash Flows 5
Three months ended December 31, 1997 and
December 31, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2
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Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II OTHER INFORMATION 16
SIGNATURES 17
Exhibit 11.1 - Computation of Earnings Per Share 18
Exhibit 27.1 - Financial data schedule for three-month
Period ended December 31, 1997 19
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PART I. FINANCIAL INFORMATION
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
December 31, September 30,
1997 1997
(Unaudited) (Audited)
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 39,439 $ 40,743
Trade accounts receivable, net 29,939 27,148
Inventories (Note 2) 28,681 28,731
Deferred income tax assets - current 2,939 3,508
Other current assets and prepaid expenses 1,450 1,837
---------- ----------
Total current assets 102,448 101,967
Property and equipment, net 21,706 22,118
Intangibles, net 4,969 5,054
Deferred income tax assets - noncurrent 2,734 2,769
Other assets 228 281
---------- ----------
Total assets $ 132,085 $ 132,189
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 3) $ 15,988 $ 18,569
Accounts payable, trade 6,352 5,837
Accrued liabilities (Note 2) 19,406 22,554
---------- ----------
Total current liabilities 41,746 46,960
Long-term debt (Note 4) 3,348 0
Deferred income tax liability, long-term 258 191
Pension obligations 3,168 3,044
Minority interests 78 69
Other long-term liabilities 27 0
---------- ----------
Total liabilities 48,625 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, 11,510,200 issued and
outstanding 115 115
Additional paid-in-capital 75,693 75,666
Cumulative foreign currency
translation adjustment ( 3,339) ( 2,810)
Retained earnings 10,991 8,954
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Total stockholders' equity $ 83,460 $ 81,925
---------- ----------
Total liabilities and stockholders' equity $ 132,085 $ 132,189
========== ==========
See accompanying notes to condensed consolidated financial statements.
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended December 31, 1997 and 1996
(dollars in thousands, except per share amounts)
December 31, December 31,
1997 1996
------------ ------------
Net sales $ 28,212 $ 34,034
Cost of goods sold 17,190 21,921
------------ ------------
Gross profit 11,022 12,113
Selling, general, and administrative expenses 5,420 5,883
Research and development expenses 2,529 2,156
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Income from operations 3,073 4,074
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Other expense (income):
Interest expense (income), net ( 299) (174)
Other expenses (income) ( 84) (96)
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Income before income taxes 3,456 4,344
Income tax expense 1,419 1,666
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Net income $ 2,037 $ 2,678
============ ============
Net income per common share (Note 5):
Basic $ 0.18 $ 0.23
============ ============
Diluted $ 0.18 $ 0.23
============ ============
Weighted average shares used in
Computing net income per share (Note 5):
Basic 11,510,200 11,504,500
============ ============
Diluted 11,597,916 11,569,042
============ ============
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)
Three Months Ended December 31, 1997 and 1996
(dollars in thousands, except per share amounts)
December 31, December 31,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,037 $ 2,678
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Changes in operating assets and liabilities (3,854) 3,146
Other adjustments 705 551
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Net cash provided (used) by
operating activities (1,112) 6,375
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 12 0
Additions to property and equipment (520) (259)
-------- --------
Net cash used by investing activities (508) (259)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of former parent loans 0 (18,200)
Borrowings from bank 1,342 13,768
Repayments to related party (881) 0
Other 27 0
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Net cash provided (used) by
financing activities 488 (4,432)
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Effect of foreign currency translation on cash (172) (47)
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Net decrease in cash and cash equivalents (1,304) 1,637
Cash and cash equivalents at beginning of period 40,743 34,869
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Cash and cash equivalents at end of period 39,439 36,506
======== ========
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.
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:
December 31, September 30,
1997 1997
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Finished goods $ 2,210 $ 2,732
Work in progress 7,790 7,944
Raw materials and supplies 7,659 6,903
Demonstration inventory 3,823 4,335
Service parts 7,199 6,817
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Total inventories, net $ 28,681 $ 28,731
========= =========
Accrued liabilities are comprised of the following:
December 31, September 30,
1997 1997
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Employee compensation $ 3,983 $ 4,960
Warranty reserves 5,280 5,724
Deferred revenue 221 244
Income taxes payable 5,398 5,826
Customer deposits 2,101 2,016
Other 2,423 3,784
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Total accrued liabilities $ 19,406 $ 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 December 31, 1997, $11,106 was borrowed against this loan facility by
Rofin-Sinar Laser GmbH, Dilas GmbH, Rofin Marubeni Laser Corp., and Rofin-
Sinar S.r.L. at a average interest rate of 3.3%.
In addition, the Company's foreign subsidiaries have several lines of credit
which allow them to borrow in the applicable local currencies. At December
31, 1997, direct borrowings under these agreements totaled $4,882; and $2,232
remained unused.
4. Long-Term Debt
At December 31, 1997, $558 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 which was used at the end of the Quarter. 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:
Three Months Ended December 31,
-------------------------------
1997 1996
-------------- --------------
Weighted average number of shares
for BASIC net income per common share 11,510,200 11,504,500
Potential additional shares due to
outstanding dilutive stock options 87,716 64,542
-------------- --------------
Weighted average number of shares
for DILUTED net income per common share 11,597,916 11,569,042
============== ==============
Excluded from the calculation of diluted EPS for the three months ended
December 31, 1997 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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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 $3.3
million debit at December 31, 1997. 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.
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.
The Company has implemented a policy to hedge up to 50% of its net foreign
currency exposure on sales transactions utilizing forward exchange contracts.
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 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 and Nd:YAG and Diode 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 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, 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
condition could be adversely affected. No assurance can be given that the
Company will successfully expand its marking products' market share, increase
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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, 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 41 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 21% 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.
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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 first quarter of fiscal year 1997 and fiscal
year 1998, respectively, approximately 75% and 73% of the Company's revenues
were from sales and servicing of laser products for cutting and welding
applications and approximately 25% and 27% 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
other system components and to distributors. Many of Rofin-Sinar's customers
are among the largest global participants in their respective industries.
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.
Three Months Ended
December 31,
---------------------------
1997 1996
----------- -----------
Net sales 100% 100%
Cost of goods sold 61% 64%
Gross profit 39% 36%
Selling, general and administrative expenses 19% 17%
Research and development expenses 9% 7%
Income from operations 11% 12%
Income before income taxes 12% 13%
Net income 7% 8%
Net Sales - Net sales of $28.2 million were down by $5.8 million, or 17%, in
the first quarter of fiscal 1998 as compared to the same period of fiscal
1997. The decrease resulted from net sales decrease of $4.3 million, or 36%,
in the United States, and $1.5 million, or 7%, in Europe/Asia. The decrease
in European/Asian sales was caused by the translation of foreign currency
denominated sales into a strong US dollar, as sales for the first quarter of
fiscal 1998 would have increased by 6% when converted at exchange rates
consistent with the first quarter of fiscal 1997. Net sales of laser products
for cutting and welding applications decreased by $6.4 million to $19.0
million, representing 67% of total sales, as compared to the same period for
fiscal 1997, while net sales of lasers for marking increased by $0.6 million
to $9.2 million, representing 33% of total sales, as compared to fiscal 1997.
The previous year's cutting and welding sales included a substantial shipment
to a single customer in the North American automotive industry. The increase
in sales of laser products for marking applications is caused mainly by
strong activity in the semiconductor industry. The effect of currency
translation was to reduce Net Sales by $2.8 million, or 10%.
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Cost of Goods Sold - Cost of goods sold of $17.2 million in the first quarter
of fiscal 1998 decreased by $4.7 million, or 22%, over the comparable prior
period, and reflect the decrease in net sales as well as the shift towards
higher margin marker unit shipments.
Gross Profit - The Company's gross profit of $11.0 million, or 39.1% of net
sales in the first quarter of fiscal 1998 represents a $1.1 million, or 9%,
decrease in gross profit over the same period of the prior year. This is due
to the decline in sales between these two periods as well as a higher
proportion of service and spare parts shipments in the current quarter as
compared to the prior period. As a percentage of sales gross profit
increased from 35.6% to 39.1%, as described under Cost of Goods Sold. The
effect of currency translation was to reduce Gross Profit by $0.8 million,
or 7%.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses of $5.4 million, for the first quarter of 1998,
decreased $0.5 million, or 8%, over the same period in the prior year. The
reduction was caused mainly by the benefit of translation of foreign currency
denominated expenses into the strong US dollar. As a percentage of sales,
selling, general and administrative expenses increased from 17.3% in 1997 to
19.2% in 1998, which results from the fixed nature of certain selling,
general and administrative expenses, as compared to lower net sales in the
first quarter of fiscal 1998. The current quarter amounts also include the
selling, general and administrative expenses of the newly acquired Dilas
subsidiary, which was absent from the comparable prior period amount.
Research and Development - Net spending on research and development in the
first quarter of 1998 of $2.5 million, or 9.0% of sales, was $0.3 million
higher than the comparable prior year period. Gross spending before
government grants of $0.2 million and $0.5 million in the first quarter of
fiscal 1997 and 1998, respectively, was unchanged at $2.7 million.
Additional expenses incurred due to the new Dilas subsidiary offset the
beneficial effect of translation of foreign currency denominated expenses
into the strong US dollar.
Income from Operations - The Company's income from operations of $3.1 million
decreased $1.0 million, or 25%, over the prior year income from operations of
$4.1 million. As a percentage of net sales, income from operations decreased
from 12.0% in the first quarter of 1997 to 10.9% in the comparable period of
fiscal 1998. The effect of currency translation was to reduce Income from
Operations by $0.2 million, or 6%.
Income Before Income Taxes - The Company's income before income taxes of $3.4
million in the first quarter of fiscal 1998 decreased by $0.9 million, or
20%, over the prior year amount of $4.3 million during the same period.
Interest income increased due to the higher cash position as well as reduced
borrowing in the current quarter versus the comparable period in the prior
year.
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Income Tax Expense - Income tax expense of $1.4 million in the first quarter
of 1998 represents an effective tax rate of 41.1% versus an effective rate of
38.4% in the first quarter of 1997. This is due to the fact that the
Company's European/Asian operations, with its higher effective tax rate,
realized a greater portion of the consolidated income before income taxes
than did the U.S. operations in fiscal 1998 compared to 1997. This is
slightly offset by the fact that a higher proportion of the U.S.'s
investments were invested in tax-exempt instruments in the current year
fiscal quarter.
Net Income - In light of the foregoing factors, the Company realized a
consolidated net income of $2.0 million in the first quarter of fiscal 1998,
which represents a 24% decrease over the comparable prior period net income
of $2.7 million. As a percentage of Net Sales, Net Income was 7.9% and 7.2%
in the first quarters of fiscal 1997 and 1998, respectively. Diluted and
basic earnings per share in the first quarter equaled $0.18 based upon 11.6
million and 11.5 million common shares, respectively, as compared to restated
diluted and basic earnings per share of $0.23 for the same period of 1997,
based on 11.6 million and 11.5 million shares, respectively. The effect of
currency translation was to reduce Net Income by $0.1 million, or 5%.
Liquidity and Capital Resources
The Company's primary sources of liquidity at December 31, 1997 were cash and
cash equivalents of $39.4 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 December 31, 1997, $11.7
million was borrowed against the Deutsche Bank facility and $7.6 million from
the other lines of credit. Of this total $3.3 million is classified as long-
term and is due in the year 2000.
Cash and cash equivalents decreased by $1.3 million during the quarter ended
December 31, 1997. Approximately $1.1 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 December 1997.
Sources of cash from financing activities totaled $0.5 million. Proceeds from
bank borrowing to fund the newly acquired Dilas subsidiary of $1.3 million
were partially offset by repayments of $0.9 million to a related party.
Cash from investing activities totaled $0.5 million in the quarter ended
December 31, 1997 and was used primarily for various additions to property
and equipment related to introduction of new products and computer upgrades.
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.
15
<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. Since the date of the Company's last report on its use of the
proceeds of its initial public offering, the Company has not used any of the
invested proceeds, except for use towards working capital. Accordingly,
approximately $19.0 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.
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 three month period ended
December 31, 1997.
(b) Reports on Form 8-K
None.
16
<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: February 13, 1997 /s/ Gunther Braun
-----------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
17
-----------------------------------
Exhibit 11.1 - Earnings Per Share
-----------------------------------
Three Months Ended December 31,
-------------------------------
1997 1996
------------ ------------
Net income $ 2,037 $ 2,678
============ ============
Net income per common share:
Basic $ 0.18 $ 0.23
============ ============
Diluted $ 0.18 $ 0.23
============ ============
Weighted average shares used in
Computing net income per share:
Basic 11,510,200 11,504,500
============ ============
Diluted 11,597,916 11,569,042
============ ============
18
<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 three month period ended December 31, 1997, and is
qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<CIK> 0001019361
<NAME> ROFIN-SINAR TECHNOLOGIES, INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
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0
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<COMMON> 115
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<TOTAL-LIABILITY-AND-EQUITY> 132,085
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