UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 000-21377
ROFIN-SINAR TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3306461
-------------------------------- --------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45701 Mast Street, Plymouth, MI 48170
---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(734) 455-5400
-----------------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------------
(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 [ ]
11,533,400 shares of the registrant's common stock, par value $0.01 per
share, were outstanding as of May 10, 2000.
<PAGE>
ROFIN-SINAR TECHNOLOGIES INC.
INDEX
PART I FINANCIAL INFORMATION Page No.
----------------------------------------------- ----------
Item 1
------
Condensed Consolidated Balance Sheets
March 31, 2000 and September 30, 1999 3
Condensed Consolidated Statements of Operations
Six months and three months ended
March 31, 2000 and March 31, 1999 4
Condensed Consolidated Statements of Cash Flows
Six months ended March 31, 2000 and March 31, 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2
------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3
------
Quantitative and Qualitative Disclosures about
Market Risk 19
PART II OTHER INFORMATION 20
SIGNATURES 22
Exhibit 11.1 - Computation of Earnings Per Share
Exhibit 27.1 - Financial data schedule for the
six-month period ended March 31, 2000
<PAGE>
PART I. FINANCIAL INFORMATION
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
March 31, September 30,
2000 1999
ASSETS (Unaudited) (Note 1)
Current Assets: ----------- -------------
Cash and cash equivalents $ 36,013 $ 36,805
Accounts receivable, trade, net 34,773 36,089
Inventories, net (Note 2) 40,790 40,314
Deferred income tax assets - current 3,710 3,714
Other current assets and prepaid expenses 1,850 1,200
----------- -----------
Total current assets 117,136 118,122
Property and equipment, net 19,716 21,912
Intangibles, net 4,202 4,373
Deferred income tax assets - noncurrent 2,517 2,341
Other noncurrent assets 473 465
----------- -----------
Total assets $ 144,044 $ 147,213
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit (Note 3) $ 18,296 $ 19,984
Accounts payable, trade 9,367 6,917
Accrued liabilities (Note 2) 15,533 17,487
----------- -----------
Total current liabilities 43,196 44,388
Long-term debt (Note 4) 6,029 7,287
Pension obligations 4,289 4,279
Minority interests 737 513
Other long-term liabilities 60 70
----------- -----------
Total liabilities 54,311 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, 11,533,400 (11,527,400 at
September 30, 1999) issued and outstanding 115 115
Additional paid-in-capital 75,987 75,956
Accumulated other comprehensive income (Note 6) ( 9,123) ( 4,663)
Retained earnings 22,754 19,268
----------- -----------
Total stockholders' equity $ 89,733 $ 90,676
Total liabilities and stockholders' equity $ 144,044 $ 147,213
=========== ===========
See accompanying notes to condensed consolidated financial statements
- 3 -
<PAGE>
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Periods Ended March 31, 2000 and 1999
(dollars in thousands, except per share amounts)
Six Months Three Months
Ended March 31, Ended March 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net sales $ 67,768 $ 59,674 $ 34,614 $ 31,036
Cost of goods sold 43,658 40,011 21,591 20,537
---------- ---------- ---------- ----------
Gross profit 24,110 19,663 13,023 10,499
Selling, general, and
administrative expenses 12,112 11,868 6,414 5,959
Research and development expenses 5,701 6,188 3,119 3,087
---------- ---------- ---------- ----------
Income from operations 6,297 1,607 3,490 1,453
Other expense (income):
Interest expense (income), net ( 530) ( 381) ( 261) ( 164)
Other expenses (income) 6 ( 298) 69 122
---------- ---------- ---------- ----------
Income before income taxes 6,821 2,286 3,682 1,495
Income tax expense 3,335 1,040 1,827 623
---------- ---------- ---------- ----------
Net income $ 3,486 $ 1,246 $ 1,855 $ 872
========== ========== ========== ==========
Net income per common
share (Note 5):
Basic $ 0.30 $ 0.11 $ 0.16 $ 0.08
Diluted $ 0.30 $ 0.11 $ 0.16 $ 0.08
========== ========== ========== ==========
Weighted average shares
used in computing net
income per share (Note 5):
Basic 11,533,400 11,527,400 11,533,400 11,527,400
Diluted 11,584,225 11,527,400 11,653,302 11,527,400
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements
- 4 -
<PAGE>
Rofin-Sinar Technologies Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31, 2000 and 1999
(dollars in thousands)
Six Months
Ended March 31,
------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,486 $ 1,246
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Changes in operating assets and liabilities ( 3,343) ( 3,148)
Other adjustments 1,723 1,606
---------- ----------
Net cash provided by (used in) operating
activities 1,866 ( 296)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment 25 46
Additions to property and equipment ( 1,216) ( 1,281)
Other 0 ( 19)
---------- ----------
Net cash used in investing activities ( 1,191) ( 1,254)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from bank 13,860 9,623
Repayment to bank ( 14,734) ( 6,381)
Other 46 0
---------- ----------
Net cash provided by (used in) financing
activities ( 828) 3,242
---------- ----------
Effect of foreign currency translation on cash ( 639) ( 288)
---------- ----------
Net (decrease) in cash and cash equivalents ( 792) 1,404
Cash and cash equivalents at beginning of period 36,805 34,874
---------- ----------
Cash and cash equivalents at end of period $ 36,013 $ 36,278
========== ==========
See accompanying notes to condensed consolidated financial statements
- 5 -
<PAGE>
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:
March 31, September 30,
2000 1999
------------ ------------
Raw materials and supplies $ 13,923 $ 10,634
Work in progress 7,806 11,141
Service parts 8,871 8,814
Finished goods 3,802 3,607
Demonstration inventory 6,388 6,118
----------- -----------
Total inventories, net $ 40,790 $ 40,314
=========== ===========
Accrued liabilities are comprised of the following:
March 31, September 30,
2000 1999
------------ ------------
Employee compensation $ 4,397 $ 4,581
Warranty reserves 5,435 6,570
Deferred revenue 152 220
Income taxes payable 1,788 1,058
Customer deposits 1,382 1,647
Other 2,379 3,411
----------- -----------
Total accrued liabilities $ 15,533 $ 17,487
=========== ===========
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 March 31, 2000,
$13,097 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 %.
In addition, the Company's foreign subsidiaries have several lines of credit
which allow them to borrow in the applicable local currencies. At March 31,
2000, direct borrowings under these agreements totaled $ 5,199 with $9,039
remaining unused. Fixed interest rates under these agreements vary from 1.2%
to 5.8%, depending upon the country and usage of the available credit.
4. Long-Term Debt
As of March 31, 2000, $ 488 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 $ 7,004. As of March 31, 2000 $ 5,541 was
borrowed against such loans at an average interest rate of 4.0%. Of the total
long-term debt, $ 5,851 is due in 2001 and $ 178 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:
Six Months Ended Three Months Ended
March 31, March 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Weighted average number of
shares for BASIC net income
per common share 11,533,400 11,527,400 11,533,400 11,527,400
Potential additional shares
due to outstanding dilutive
stock options 50,825 - 119,902 -
---------- ---------- ---------- ----------
Weighted average number of
shares for DILUTED net
income per common share 11,584,225 11,527,400 11,653,302 11,527,400
========== ========== ========== ==========
Excluded from the calculation of diluted EPS for the three months ended March
31, 2000, and March 31, 1999, were 169,000 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.
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 six months and the three
months ended March 31, 2000 and 1999 comprehensive income was comprised of
the following:
Six Months Ended Three Months Ended
March 31, March 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net income $ 3,486 $ 1,246 $ 1,855 $ 872
Foreign currency
translation adjustment ( 4,460) ( 3,424) ( 2,045) ( 3,231)
---------- ---------- ---------- ----------
Total comprehensive
income (loss) $( 974) $( 2,178) $( 190) $( 2,359)
========== ========== ========== ==========
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 subsequently deferred the effective date of FAS 133 which 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 137 in fiscal
year 2001. It is not anticipated that the implementation of this standard
will have a material impact on the financial statements.
8. Subsequent Event
On April 29, 2000, Rofin-Sinar Technologies, Inc., through its subsidiary
Rofin-Sinar Laser GmbH, in Hamburg, Germany has entered into a definitive
agreement to acquire 90.01% of the share capital in Carl Baasel Lasertechnik
GmbH, in Starnberg, Germany (CBLT). CBLT and its worldwide subsidiaries were
acquired from Mannesman Demag Krauss-Maffei AG (MDKM) for Euro 44.4 million
in cash. In addition, Rofin-Sinar has assumed the rights and obligations of
MDKM with respect to the purchase of the remaining 9.99% interest in CBLT.
Under the agreement, Rofin-Sinar will refinance the CBLT debt in the amount
of Euro 23.4 million. On May 10, 2000, Rofin-Sinar completed the acquisition
and executed the payments.
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.
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
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 $4.7 million debit at September 30, 1999
to a $9.1 million debit at March 31, 2000. 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
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 certain prior fiscal years, the Company has 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
beginning 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.
The Company's business strategy includes the expansion of its products and
services, which may be effected through its current and future 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 61 United States and foreign patents on its laser sources
which expire from calendar 2000 to 2018. In addition, 32 patent applications
have been filed and are under review by the patent authorities at March 31,
2000. 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
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 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 second quarters of fiscal year 1999 and
fiscal year 2000, respectively, approximately 74% and 68% of the Company's
revenues were from sales and servicing of laser products for cutting and
welding applications and approximately 26% and 32% 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.
Six Months Three Months
Ended March 31, Ended March 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net sales 100% 100% 100% 100%
Cost of goods sold 64% 67% 62% 66%
Gross profit 36% 33% 38% 34%
Selling, general and
administrative expenses 18% 20% 19% 19%
Research and development expenses 8% 10% 9% 10%
Income from operations 9% 3% 10% 5%
Income before income taxes 10% 4% 11% 5%
Net income 5% 2% 5% 3%
Net Sales - Net sales of $34.6 million and $67.8 million represent increases
of $3.6 million (12%) and $8.1 million (14%) for the three months and six
months ended March 31, 2000, as compared to the corresponding periods of
fiscal 1999. The increase resulted from a net sales increase of $7.6
million, or 18%, in Europe/Asia and an increase of $0.5 million, or 3%, in
the United States, for the corresponding six month periods as compared to the
prior year. The U.S. dollar strengthened against foreign currencies which
had a unfavorable effect on net sales of $3.1 million and $5.9 million for
the three and six month periods. Net sales of laser products for cutting and
welding applications for the three month periods increased by 2% and $0.4
million and for the six month periods net sales stayed at the same levels as
compared to the same periods of fiscal 1999. Net sales of lasers for marking
applications for the three month and six month periods increased by 40% to
$11.2 million and by 51% to $24.0 million as compared to fiscal 1999. The
increase in marking revenue was due to the increasing demand for laser
markers in the semiconductor and electronics industry and higher shipments to
the Asian markets.
Gross Profit - The Company's gross profit of $13.0 million and $24.1 million
for the three months and six months ended March 31, 2000, represent increases
of $2.5 million (24%) and $4.4 million (23%) from the same periods of the
prior year. As a percentage of sales over the corresponding six month
periods gross profit increased from 33% to 36%. The main cause of the higher
percentage margin was the favorable product mix to the higher margin marking
lasers and the increased sales of diodelasers. Gross profit was unfavorably
affected by $1.1 million and $2.0 million for the three month and six month
periods in fiscal 2000 due to the strengthening of the U.S. dollar.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased $0.5 million (8%) and $0.2 million (2%) for
the three months and six months ended March 31, 2000, compared to the
corresponding periods of fiscal 1999. SG&A was favorably affected by $0.5
million and $0.9 million for the three month and six month periods in fiscal
2000 due to the strengthening of the U.S. dollar.
Research and Development - The Company spent net $3.1 million and $5.7
million on research and development during the three month and six month
periods of the current year. This represents for the six months period a
decrease of 8% over the corresponding period of the prior year and no change
for the three month periods. Gross research and development expenses for the
three month periods ended March 31, 2000 and 1999 were $3.5 million,
respectively, and were reduced by $0.4 million of government grants during
each respective period. R&D was favorably affected by $0.3 million and $0.6
million for the three month and six month periods in fiscal 2000 due to the
strengthening of the U.S. dollar.
Other Expense (Income) - Other Expense (Income) of ($0.2) million and ($0.5)
for the three month and six month periods ended March 31, 2000 represents an
increase in income of $0.1 million and a decrease in income of $0.2 million
over the corresponding prior year periods. The main cause of this decrease
was related to minority interest.
Income Tax Expense - Income tax expense of $1.8 million and $3.3 million for
the three months and six months ended March 31, 2000 represents effective tax
rates of 49.6% and 48.9%, compared to a prior year corresponding effective
tax rates of 41.7% and 45.5%. This change in effective rates for the six
month periods was due primarily to a higher portion of current year profit
generated in tax jurisdictions, such as Germany, with higher statutory tax
rates.
Net Income - In light of the foregoing factors, the Company realized a
consolidated net income of $1.9 million and $3.5 million for the three and
six months ended March 31, 2000, which represents increases of $1.0 million
and $2.2 million from the comparable prior year periods. For the three
months ended March 31, 2000 both basic and diluted earnings per share equaled
$0.16 based upon 11.5 million and 11.7 million common shares outstanding,
respectively, as compared to basic and diluted earnings per share of $0.08
for the same period in fiscal 1999, based on 11.5 million shares outstanding.
Liquidity and Capital Resources
The Company's primary sources of liquidity at March 31, 2000 were cash and
cash equivalents of $36.0 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 March 31, 2000, $13.6
million was borrowed against the Deutsche Bank facility and $10.7 million
from other lines of credit, therefore $11.4 million and $10.5 million is
unused and available, respectively.
Cash and cash equivalents decreased by $0.8 million during the six months
ended March 31, 2000. Approximately $1.9 million in cash and cash
equivalents were provided by operating activities, primarily as the result of
the increase in net income but offset by an increase in inventory and
accounts receivable.
Uses of cash from investing activities totaled $1.2 million for the six
months ended March 31, 2000 and was due primarily to leasehold improvements
and various additions to property and equipment related to the introduction
of new products and computer upgrades.
Cash used in financing activities totaled $0.8 million, which was entirely
related to current period bank repayments.
On May 9, 2000, subject to the completion of the acquisition of CBLT, Rofin-
Sinar entered into a loan agreement with Deutsche Bank, Hamburg to borrow
Euro 35.4 million. The loan proceeds along with Euro 9.0 million of existing
cash will be used to acquire CBLT. In addition, concurrently, under a
guarantee of Rofin-Sinar, CBLT entered into a loan agreement with Deutsche
Bank, Hamburg, to refinance Euro 23.4 million of indebtedness to the seller.
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 at
least through 2001.
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 March 31, 2000, the Company maintained a cash equivalents portfolio of
$29.0 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% interest income would
increase or decrease by less than $0.2 million, accordingly.
At March 31, 2000, the Company had $18.3 million of annually adjusted
interest rate debt and $6.0 million of fixed rate debt (of which $5.8 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 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 March 31, 2000, 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 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 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 $1.2 million
to acquire operating assets. Accordingly, approximately $9.2 million of the
net offering proceeds remain to be applied. In May 2000, the Company used
approximately $8.1 million to consummate the acquisition of CBLT, and to
acquire other operating assets.
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
March 31, 2000.
(b) Reports on Form 8-K
The Registrant did not file any Current Reports on Form 8-K
during the quarter ended March 31, 2000.
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: May 12, 2000 /S/ Gunther Braun
---------------------------------
Gunther Braun
Executive Vice President,
Finance and Administration, and
Chief Financial Officer
- xx -
<PAGE>
-----------------------------------
Exhibit 11.1 - Earnings Per Share
-----------------------------------
Three Months
Ended March 31,
--------------------------
2000 1999
------------ ------------
Net income $ 1,855 $ 872
Weighted average shares used in computing
net income per share:
Basic 11,533,400 11,527,400
Diluted 11,653,302 11,527,400
============ ============
Net income per common share:
Basic $ 0.16 $ 0.08
Diluted $ 0.16 $ 0.08
============ ============
<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 six-months ended March 31, 2000, and is qualified
in its entirety by reference to such consolidated financial statements.
</LEGEND>
<CIK> 0001019361
<NAME> ROFIN-SINAR TECHNOLOGIES INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 36013
<SECURITIES> 0
<RECEIVABLES> 36081
<ALLOWANCES> (1308)
<INVENTORY> 40790
<CURRENT-ASSETS> 117136
<PP&E> 37834
<DEPRECIATION> (18118)
<TOTAL-ASSETS> 144044
<CURRENT-LIABILITIES> 43196
<BONDS> 0
0
0
<COMMON> 115
<OTHER-SE> 89618
<TOTAL-LIABILITY-AND-EQUITY> 144044
<SALES> 67768
<TOTAL-REVENUES> 67768
<CGS> 43658
<TOTAL-COSTS> 43658
<OTHER-EXPENSES> 17813
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6821
<INCOME-TAX> 3335
<INCOME-CONTINUING> 3486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3486
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
</TABLE>
