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, 1999
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 [ ]
11,531,900 shares of the registrant's common stock, par value $0.01 per
share, were outstanding as of February 10, 2000.
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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
December 31, 1999 and September 30, 1999 3
Condensed Consolidated Statements of Operations
Three months ended December 31, 1999 and
December 31, 1998 4
Condensed Consolidated Statements of Cash Flows
Three months ended December 31, 1999 and
December 31, 1998 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 8
Item 3
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Quantitative and Qualitative Disclosures about
Market Risk 19
PART II OTHER INFORMATION 17
SIGNATURES 18
Exhibit 11.1 - Computation of Earnings Per Share
Exhibit 27.1 - Financial data schedule for the
three-month period ended December 31, 1999
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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,
1999 1999
ASSETS (Unaudited) (Note 1)
Current Assets: ----------- -------------
Cash and cash equivalents $ 35,429 $ 36,805
Accounts receivable, trade, net 36,310 36,089
Inventories, net (Note 2) 39,206 40,314
Deferred income tax assets - current 3,717 3,714
Other current assets and prepaid expenses 1,574 1,200
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Total current assets 116,236 118,122
Property and equipment, net 20,488 21,912
Intangibles, net 4,288 4,373
Deferred income tax assets - noncurrent 2,091 2,341
Other noncurrent assets 456 465
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Total assets $ 143,559 $ 147,213
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 3) $ 18,860 $ 19,984
Accounts payable, trade 8,639 6,917
Accrued liabilities (Note 2) 14,950 17,487
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Total current liabilities 42,449 44,388
Long-term debt (Note 4) 6,340 7,287
Pension obligations 4,286 4,279
Minority interests 530 513
Other long-term liabilities 53 70
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Total liabilities 53,658 56,537
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, 11,531,900 (11,527,400 at
September 30, 1999) issued and outstanding 115 115
Additional paid-in-capital 75,964 75,956
Accumulated other comprehensive income (Note 6) ( 7,078) ( 4,663)
Retained earnings 20,900 19,268
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Total stockholders' equity $ 89,901 $ 90,676
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Total liabilities and stockholders' equity $ 143,559 $ 147,213
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See accompanying notes to condensed consolidated financial statements
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Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended December 31, 1999 and 1998
(dollars in thousands, except per share amounts)
Three Months
Ended December 31,
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1999 1998
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Net sales $ 33,155 $ 28,638
Cost of goods sold 22,068 19,474
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Gross profit 11,087 9,164
Selling, general, and administrative expenses 5,697 5,908
Research and development expenses 2,583 3,102
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Income from operations 2,807 154
Other income:
Interest income, net ( 269) ( 218)
Other income ( 63) ( 419)
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Income before income taxes 3,139 791
Income tax expense 1,507 417
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Net income $ 1,632 $ 374
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Net income per common share (Note 5):
Basic $ 0.14 $ 0.03
Diluted $ 0.14 $ 0.03
============ ============
Weighted average shares used in computing
net income per share (Note 5):
Basic 11,531,900 11,527,400
Diluted 11,538,720 11,527,400
============ ============
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, 1999 and 1998
(dollars in thousands)
Three Months
Ended December 31,
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1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,632 $ 374
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Changes in operating assets and liabilities ( 2,055) ( 4,709)
Other adjustments (including depreciation) 674 951
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Net cash provided (used) by operating activities 251 ( 3,384)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 12 37
Additions to property and equipment ( 388) ( 869)
Other 0 ( 21)
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Net cash used by investing activities ( 376) ( 853)
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CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from bank 13,226 8,881
Repayment to bank ( 14,248) (5,171)
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Net cash provided (used) by financing activities ( 1,022) 3,710
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Effect of foreign currency translation on cash ( 229) 57
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Net (decrease) in cash and cash equivalents ( 1,376) ( 470)
Cash and cash equivalents at beginning of period 36,805 34,874
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Cash and cash equivalents at end of period $ 35,429 $ 34,404
========== ==========
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, 1999. 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,
1999 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:
December 31, September 30,
1999 1999
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Raw materials and supplies $ 12,356 $ 10,634
Work in progress 8,438 11,141
Service parts 9,065 8,814
Finished goods 3,371 3,607
Demonstration inventory 5,976 6,118
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Total inventories, net $ 39,206 $ 40,314
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Accrued liabilities are comprised of the following:
December 31, September 30,
1999 1999
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Employee compensation $ 3,977 $ 4,581
Warranty reserves 6,203 6,570
Deferred revenue 205 220
Income taxes payable 608 1,058
Customer deposits 1,677 1,647
Other 2,280 3,411
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Total accrued liabilities $ 14,950 $ 17,487
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3. Line of Credit
The Company maintains a $25,000 annually renewable line of credit with
Deutsche Bank AG to support its working capital needs. As of December 31,
1999, $ 13,561 was borrowed against this loan facility by RSL, Dilas, Rofin
Marubeni, Rofin-Sinar Italiana S.r.L., Rasant and Rofin-Sinar UK Ltd. at an
average fixed interest rate of 3.6 %.
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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 December
31, 1999, direct borrowings under these agreements totaled $ 5,299 with
$11,140 remaining unused. Fixed interest rates under these agreements vary
from 1.2% to 6.5%, depending upon the country and usage of the available
credit.
4. Long-Term Debt
As of December 31, 1999, $ 513 was borrowed under the line of credit with
Deutsche Bank AG at a fixed interest rate of 3.9% (see Note 3).
Further, RSL, Dilas and Rasant entered into loan agreements with German banks
for long-term credit facilities of $ 7,366. As of December 31, 1999 $ 5,827
was borrowed against such loans at an average interest rate of 4.0%. Of the
total long-term debt, $ 6,152 is due in 2001 and $ 188 in 2009.
5. Net Income Per Common 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. 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 calculation of the weighted average number of common shares
outstanding for each period is as follows:
Three Months Ended December 31,
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1999 1998
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Weighted average number of shares
for BASIC net income per common share 11,531,900 11,527,400
Potential additional shares due to
outstanding dilutive stock options 6,820 0
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Weighted average number of shares
for DILUTED net income per common share 11,538,720 11,527,400
============ ============
Excluded from the calculation of diluted EPS for the three months ended
December 31, 1999, and December 31, 1998, were 441,900 and 485,500
outstanding stock options, respectively. 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. Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for the
reporting and display of comprehensive income as part of a full set of
financial statements. Comprehensive income for a period encompasses net
income and all other changes in a company's equity other than from
transactions with the company's owners. For the three months ended December
31, 1999 and 1998 comprehensive income was comprised of the following:
Three Months Ended December 31,
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1999 1998
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Net Income $ 1,632 $ 374
Foreign currency translation adjustment ( 2,415) ( 193)
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Total comprehensive income $( 783) $( 181)
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7. Recently Issued Accounting Standards
In 1998 Financial Accounting Standards No. 133 (FAS 133), "Accounting for
Derivative Instruments and Hedging Activities", was issued to be effective
for all fiscal quarters and fiscal years commencing after June 15, 1999. The
Board deferred the effective date of FAS 133 when Financial Accounting
Standards No. 137 (FAS 137), "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133"
was introduced in 1999. FAS 133 shall be effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The Company will comply
with the requirements of FAS 133 in fiscal year 2001. It is not anticipated
that the implementation of this standard will have a material impact on the
financial statements.
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, including those factors set forth below. In
making these forward-looking statements, the Company claims the protection of
the safe-harbor for forward-looking statements contained in the Reform Act.
The Company does not assume any obligation to update these forward-looking
statements to reflect actual results, changes in assumptions, or changes in
other factors affecting such forward-looking statements.
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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 and the delay
between incurrence of expenses to further develop marketing and service
capabilities and realization of benefits from such improved capabilities.
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.
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
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companies in particular, have experienced wide price fluctuations. These
broad market and industry fluctuations, particularly in the semiconductor &
electronics and automotive industries, 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 70%
of its sales are denominated in other currencies, including primarily German
marks, as well as French francs, Italian lire, British pounds 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 $1.0 million debit at December 31, 1998
to a $7.1 million debit at December 31, 1999. This change arose primarily
from the strengthening of the U.S. dollar against such foreign currencies 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 hedges a certain portion of its net foreign currency exposure on
sales transactions utilizing forward exchange contracts and forward exchange
options. The Company also continues 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.
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
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
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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
From fiscal 1997 to fiscal 1998, the Company experienced a decline in sales
revenues. If the Company is to increase 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 laser
sources. The Company intends to devote substantial resources to broadening
its low-power CO2 Slab laser product range, 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 developing low-power CO2 Slab
lasers with broadened output powers to offer the full range of low-power CO2
lasers and on continuing to reduce the manufacturing costs of its diffusion-
cooled CO2 Slab lasers to achieve more attractive pricing. The Company's
diode-pumped lasers were introduced to the market in fiscal 1999 and are
expected to generate substantial revenue in fiscal 2000. The Dilas diode
lasers are modified for use in industrial production environments and are
marketed for welding, soldering, and surface treatment applications. 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 demand for
its laser marking products, expanding the product range in the CO2 Slab laser
Series to include both higher and lower output power levels, and developing
diode lasers and diode-pumped Nd:YAG solid-state lasers at attractive prices,
it may not be able to increase its revenue, 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, broaden the low-power CO2 Slab
laser Series product range, increase the output power of its diffusion cooled
CO2 Slab laser sources, successfully market diode lasers for welding and
hardening applications or successfully market 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
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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 laser 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 59 United States and foreign patents on its laser sources
which expire from calendar 2000 to 2018. In addition, 34 patent applications
have been filed and are under review by the patent authorities at December
31, 1999. 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.
Risks Associated with International Operations
The Company's products are currently marketed in approximately 30 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
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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 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.
Risks Associated with the Conversion by EU Member States to the "Euro"
The "euro" is a new legal currency being introduced by certain European Union
member states. On January 1, 1999, eleven European countries established
fixed conversion rates between their existing currencies (legacy currencies)
and the euro. As of that date, the legacy currencies of such countries are
not directly convertible into each other; instead a legacy currency must be
converted into the euro, which then can be converted into a target legacy
currency. The legacy currencies and the euro will both be used through June
30, 2002, after which the legacy currencies will be withdrawn. The Company's
review indicates that its information systems can operate in the "euro only"
environment.
The Company is currently unable to determine the ultimate long-term financial
impact of the exclusive use of the euro on the Company's markets and on the
economies of the countries in which it operates. This impact will depend
upon the evolving competitive situations and macro-economic impact of the
introduction of the euro.
Year 2000
No Year 2000 compliance failures or service interruptions were experienced.
All of our suppliers reported having no Year 2000 problems.
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 1999 and
fiscal year 2000, respectively, approximately 72% and 61% of the Company's
revenues were from sales and servicing of laser products for cutting and
welding applications and approximately 28% and 39% 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.
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,
----------------------
1999 1998
---------- ----------
Net sales 100% 100%
Cost of goods sold 67% 68%
Gross profit 33% 32%
Selling, general and administrative expenses 16% 20%
Research and development expenses 8% 11%
Income from operations 9% 1%
Income before income taxes 10% 3%
Net income 5% 1%
Net Sales - Net sales of $33.2 million represents an increase of $4.5
million (16%) for the three months ended December 31, 1999, as compared to
the corresponding period of fiscal 1999. The increase resulted from net
sales increases of $2.8 million, or 13%, in Europe/Asia and $1.7 million, or
23%, in the United States, for the corresponding three month period as
compared to the prior year. The U.S. dollar strengthened against foreign
currencies which had an unfavorable effect on net sales of $2.8 million for
the three month period. Net sales of laser products for cutting and welding
applications for the three month period decreased by 2% to $20.4 million, as
compared to the same period of fiscal 1999. Net sales of lasers for marking
applications for the three month period increased by 61% to $12.8 million as
compared to fiscal 1999. The decrease in cutting and welding products come
primarily from the strengthening of the U.S. dollar. The increase in marking
revenue was due to strong demand in the semi-conductor and electronics
industry, especially in Asia.
Gross Profit - The Company's gross profit of $11.1 million for the three
months ended December 31, 1999, represents a $1.9 million (21%) increase from
the same period of the prior year. As a percentage of sales over the
corresponding three month periods gross profit increased from 32% to 33%.
The main cause of the higher percentage margin was the favorable product mix
which included a higher content of higher margin marking lasers. Gross profit
was negatively affected by $0.9 million, for the three month period in fiscal
2000 compared to the same period of the previous year, due to the
strengthening of the U.S. dollar.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses decreased $0.2 million (4%) to $5.7 million for the
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three months ended December 31, 1999, compared to the corresponding period of
fiscal 1999. SG&A was favorably affected by $0.4 million, for the three month
period in fiscal 2000, due to the strengthening of the U.S. dollar.
Research and Development - The Company spent net $2.6 million on research and
development during the three month period. This represents a decrease of 17%
over the same period of the prior year. The decrease in spending was
primarily due to the strengthening of the U.S. dollar. Gross research and
development expenses for the three months ended December 31, 1999 and 1998
were $2.8 million and $3.4 million, respectively, and were reduced by $0.2
million and $0.3 million of government grants during each respective period.
Other Expense (Income) - Other Expense (Income) of ($0.3) million for the
three months ended December 31, 1999, represents an decrease in income of
$0.3 million over the corresponding prior year period. Other income
decreased $0.3 million over the corresponding prior year period due to lower
foreign exchange gains.
Income Tax Expense - Income tax expense of $1.5 million for the three month
period ended December 31, 1999 represents an effective tax rate of 48%,
compared to a prior year corresponding effective tax rate of 53%. This
change in effective rate is due primarily to a higher portion of current year
profit generated in the United States with its lower statutory tax rates than
the other major countries, such as Germany, in which the Company operates.
Net Income - In light of the foregoing factors, the Company realized a
consolidated net income of $1.6 million for the three month period ended
December 31, 1999, which represents an increase of $1.3 million over the
comparable prior period. For the three months ended December 31, 1999 both
basic and diluted earnings per share equaled $0.14 based on 11.5 million
common shares outstanding, as compared to basic and diluted earnings per
share of $0.03 for the same period in fiscal 1999, also based on 11.5 million
shares outstanding.
Liquidity and Capital Resources
The Company's primary sources of liquidity at December 31, 1999 were cash and
cash equivalents of $35.4 million at December 31, 1999. Additional sources
of liquidity include the Company's $25 million line of credit with Deutsche
Bank and $20 million of long and short-term credit facilities with other
foreign banks. As of December 31, 1999, $23.6 million was unused and
available.
Cash and cash equivalents decreased by $1.4 million during the three months
ended December 31, 1999. Net cash provided by operating activities of $0.3
million was due primarily to net income and an increase in trade accounts
payable offset by an increase in trade accounts receivable.
Uses of cash from investing activities totaled $0.4 million for the three
months ended December 31, 1999 and was due primarily to leasehold
improvements and various additions to property and equipment related to
introduction of new products and computer upgrades.
- 15 -
<PAGE>
Cash used by financing activities totaled $1.0 million, which was entirely
related to net repayment of bank borrowings.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The following discussion about the Company's market risk disclosures involves
forward looking statements. Actual results could differ materially from
those projected in the forward looking statements. The Company is exposed to
market risk related to changes in interest rates and foreign currency
exchange rates. The Company does not use derivative financial instruments
for speculative or trading purposes.
Interest Rate Sensitivity
As of December 31, 1999, the Company maintained a cash equivalents portfolio
of $35.4 million, consisting mainly of taxable interest bearing securities
and demand deposits all with maturities of less than three months. If short
term interest rates were to increase or decrease by 10% annual pre-tax
interest income would increase or decrease by less than $0.2 million,
accordingly.
At December 31, 1999, the Company had $18.9 million of annually adjusted
interest rate debt and $6.3 million of fixed rate debt (of which $6.1 million
is due in 2001 and $0.2 million in 2009). A 10% change in the average cost
of the Company's debt would result in an annual increase or decrease in
pre-tax interest expense of less than $0.1 million.
Foreign Currency Exchange Risk
The Company enters into foreign currency forward contracts and forward
exchange options generally of less than six months duration to hedge its
foreign currency risk on sales transactions. At December 31, 1999, the
Company had contracts in Japanese yen to buy German marks, which will result
in gains or losses which would not be material, were the Japanese yen /
German mark currency exchange to increase or decrease by 10 percent. Such
gains and losses would be offset by gains and losses on the related
receivables.
PART II. OTHER INFORMATIONItem 1. Legal Proceedings None.
- 16 -
<PAGE>
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 Incorporated
and Lehman 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 was used to purchase all outstanding shares of RSL and RSI from
the former parent (Siemens AG) and to repay certain indebtedness owed to
Siemens AG. Of the remainder, $25.0 million was invested in certificates of
deposit, with the balance applied to working capital. In fiscal 1997 the
Company used approximately $5.2 million to consummate the acquisition of
Dilas, and $1.8 million to acquire other operating assets. In fiscal 1998
the Company used approximately $3.5 million to acquire business assets, which
included the acquisition of certain business assets of Palomar Technologies
Ltd. In addition, the Company used $1.8 million to fund working capital
needs. In fiscal 1999 the Company used approximately $2.3 million to acquire
operating assets. In fiscal 2000 the Company used approximately $0.4 million
to acquire operating assets. Accordingly, approximately $10.0 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, 1999.
- 17 -
<PAGE>
(b) Reports on Form 8-K
The Registrant did not file any Current Reports on Form 8-K
during the quarter ended December 31, 1999.
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 7, 2000 /S/ Gunther Braun
---------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration, and
Chief Financial Officer
- 18 -
<PAGE>
-----------------------------------
Exhibit 11.1 - Earnings Per Share
-----------------------------------
Three Months
Ended December 31,
--------------------------
1999 1998
------------ ------------
Net income $ 374 $ 374
Weighted average shares used in computing
net income per share:
Basic 11,531,900 11,527,400
Diluted 11,538,720 11,527,400
============ ============
Net income per common share:
Basic $ 0.14 $ 0.03
Diluted $ 0.14 $ 0.03
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Rofin-Sinar Technologies, Inc. and
Subsidaries for the three-months ended December 31, 1999, and is qualified
in its entirety by reference to such consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
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