SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT UNDER SECTION 13 or 15(d) of the Securities and Exchange Act
of 1934 for the Year Ended December 31, 1995.
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______.
COMMISSION FILE NO. (0-16577)
CYBEROPTICS CORPORATION
(Name of small business issuer in its charter)
Minnesota 41-1472057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2505 Kennedy Street NE
Minneapolis, Minnesota 55413
(Address of principal executive offices) (Zip Code)
(612) 331-5702
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
no par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 ___
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State the issuer's revenues for its most recent fiscal year: $30,518,000
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of February 29, 1996 was approximately $179,661,000 (based on the
closing sale price of such stock on February 29, 1996 as reported by the NASDAQ
National Market System).
The number of shares outstanding of each of the registrant's classes of common
stock, as of February 29, 1996 was:
Common Stock, no par value: 5,638,501 shares
DOCUMENTS INCORPORATED BY REFERENCE: The responses to Items 5, 6, and 7 are
incorporated herein by reference to certain information contained in the
Company's Annual Report to Shareholders for the year ended December 31, 1995.
The responses to Items 9, 10, 11 and 12 are incorporated herein by reference to
certain information contained in the Company's Definitive Proxy Statement for
its Annual Meeting of Shareholders to be held May 14, 1996.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES ___ NO _X_
PART I.
Item 1. DESCRIPTION OF BUSINESS
General
CyberOptics Corporation (the "Company" or "CyberOptics") designs,
manufactures and markets intelligent, non-contact sensors and integrated systems
that measure the minute characteristics, dimensions and distances required for
process and quality control in the automated assembly of complex manufactured
goods. Utilizing proprietary laser and optics technology combined with advanced
software and electronics, the Company's products enable manufacturers to
increase operating efficiencies, product yields and quality by measuring the
characteristics and placement of components both during and after the
manufacturing process. The Company offers individual sensors that provide data
in one, two or three dimensions, as well as complete, non-contact three
dimensional profiling systems, that allow manufacturers to inspect product
features as small as 0.1 microns.
The Company was founded in 1984 by Dr. Steven Case, a professor
researching and teaching optical engineering at the University of Minnesota, to
commercialize technology for non-contact three-dimensional sensing systems.
During the first year and one-half of its existence, the Company performed
primarily custom contracting work through Dr. Case. In 1985, the Company
received a $1.5 million development grant from the Defense Advanced Research
Projects Agency to develop sensor systems. The Company introduced its first
commercial product, the Point Range Sensor, in 1986 and began producing full
non-contact profiling systems used in metrology, CAD-CAM and electronics
inspection in 1987. The Company continued to expand its line of products and
sensing systems for general applications through 1991.
Since 1992, the Company has made significant investments in the
development of new technology and products designed specifically for
applications in the electronics industry. Designed primarily for applications in
the rapidly growing surface mount technology ("SMT") market, these products
measure screen printed solder paste, align electronic components and measure
electronic component lead coplanarity during automated assembly of circuit
boards. The Company's revenue has been significantly affected by the timing of
the introduction of these products and the acceptance and shipment of versions
of these products by OEM and end user customers.
The Company's operations during 1995 reflect both the investment in
products designed for the SMT industry and the strength of global markets in
microelectronics in 1995. The Company's sales doubled and its earnings tripled
in 1995, primarily from increased sales of intelligent sensors and systems that
control the SMT process. Sales of LaserAlign(TM) and Laser Lead Locator sensors
and the CyberSentry(TM) system increased 217% in 1995 and accounted for 73% of
revenue. The following table sets forth revenues generated by sales of systems
(including CyberSentry), custom sensors (including LaserAlign and Laser Lead
Locator) and standard sensors during the past three years and the percentage of
total revenue represented by such sales:
<TABLE>
<CAPTION>
1993 1994 1995
------------------- -------------------- --------------------
Dollars Percent Dollars Percent Dollars Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Systems $6,027 51.9% $5,876 38.5% $8,166 26.8%
Custom Sensors 4,379 37.6% 7,981 52.2% 21,023 68.9%
Standard Sensors 1,215 10.5% 1,418 9.3% 1,329 4.3%
</TABLE>
Substantial increases in sales during 1995 were achieved through
further penetration of the SMT industry internationally. International sales
constituted 68% of sales during 1995 as compared to 57% in 1994.
The Company also continued to develop products for additional
applications in the electronics and other industries during 1995. New products
are under development for inspection of components and solder ball placement for
"chip-on-board" or "flip-chip" technology and during 1995 the Company introduced
a laser-based range sensor, CyberGage, and an integrated measurement system,
CyberScan LV, that have many industrial applications.
To support the growth in its operations, the Company completed a public
offering of 1,200,000 shares of its common stock generating net proceeds of
$37.4 million in September 1995. The Company has also committed to move to a
newly constructed 70,000 square foot production and headquarters facility in the
Spring of 1996. The new facility will be financed through a long-term operating
lease. The Company's current principal executive office is located at 2505
Kennedy Street Northeast, Minneapolis, Minnesota 55413 and its telephone number
is (612) 331-5702. Its new facility will be at 5900 Golden Hills Drive, Golden
Valley, Minnesota 55416 and its telephone number will be (612) 542-5000.
Products
CyberOptics has developed intelligent, non-contact sensors and systems
for in-line process control and inspection as well as sensors and scanning
stations for quality control and inspection. The Company's products enable
manufacturers to increase operating efficiencies, product yields and quality in
a variety of industries. Although a majority of the Company's revenue is
generated through sales of its in-line process control products for SMT, the
Company also offers several specialized products for through-hole process
control and more generalized products for inspection and quality control.
In addition to proprietary hardware designs that combine precision
optics, various light sources, and multiple detectors, the Company's products
incorporate high value-added software that controls the hardware, filters and
converts raw data into application specific information, and automatically
communicates this information to a host processor for ultimate use in process
control. Software represents approximately 50% of the CyberOptics research and
development effort and distinguishes CyberOptics' intelligent sensors and
systems from simpler data-gathering products.
In-Line Process Control--SMT:
CyberSentry. The CyberSentry system measures the deposition of solder
paste after the first step of the SMT assembly process. Because of the small
size of the component that must be placed on each pad of solder paste and the
density of component placement on the circuit board, a significant amount of SMT
assembly problems are related to the quality of solder paste deposition.
Misplaced solder paste, excess or inadequate amounts of paste can lead to
improper connections or bridges between leads causing an entire circuit board to
malfunction.
Introduced in its current format in the first quarter of 1995, the
CyberSentry system is designed to be installed in existing automated production
lines and to strike a balance between inspection of 100% of each circuit board
and the off-line measurement devices used in quality control laboratories. The
CyberSentry incorporates a sensor extended on a mechanical robot arm over the
production line that measures the height, area and volume measurements of solder
paste pads. The CyberSentry can be retrofitted and integrated into most SMT
production lines, providing real time process control immediately after a PCB
leaves the screen printer and before component placement commences.
LaserAlign. After solder paste has been inspected and measured,
extremely small surface mount components are placed on the solder pads by
component placement machines. CyberOptics' LaserAlign sensors are incorporated
into the heads of component placement machines to ensure accurate component
placement at high production speeds. Various high speed component placement
machine types utilize between one and sixteen LaserAlign sensors per machine.
LaserAlign integrates an intelligent sensor, composed of a laser,
optics and detectors with a microprocessor and software for making specific
measurements. LaserAlign quickly and accurately aligns each component as it is
being transported by the pick-and-place arm for surface mount assembly. Using
non-contact technology, LaserAlign facilitates orientation and placement of
components at much higher speeds than can be achieved using conventional process
control systems.
Laser Lead Locator. Following placement of the smallest leadless
components, more sophisticated components, including microprocessor chips, are
applied to the printed circuit boards by fine pitch component placement
machines. These components have leads on all sides that are soldered to the
circuit board. Since all of these surface mount leads must make contact with the
solder paste, lead coplanarity is a critical quality factor. Misaligned, bent or
damaged leads will result in missed connections, open circuits and ultimately a
defective end product.
The Laser Lead Locator ensures the coplanarity of component leads. The
Laser Lead Locator, which is incorporated directly into a fine pitch component
placement machines, inspects components immediately before placement on the
circuit board to identify defective or damaged leads and determines if all lead
tips lie within the same plane. Components meeting these parameters are placed
on the printed circuit board. Parts falling outside the specified tolerances are
rejected before placement, saving both time and money.
Process Control--Through-Hole:
A substantial number of circuit boards are made with through-hole
technology using high speed drills to fabricate printed circuit boards. These
drills are highly automated and contain multiple drill heads that cannot be
constantly monitored by attendants. CyberOptics manufactures two process control
sensors for measuring characteristics of drill bits used in drilling holes in
printed circuit boards. The first of these, the ADM, was completed in the third
quarter of 1989 and is used to ensure that drill bits are not damaged and that
holes are drilled with the proper size. The second sensor, the LTC, was
completed in May 1990 and is used to detect broken drill bits so that all of the
preprogrammed holes in the circuit board are properly drilled. Both sensors are
sold under an exclusive arrangement to a manufacturer of drilling machines for
incorporation into its products.
Off-Line Inspection Sensors and Systems:
The Company built its commercial business with laser sensors designed
to precisely measure, without contact, the distance to a point on an object.
These sensors have been refined and combined with software and processing
capability and are sold as both single sensors for incorporation into the
equipment of customers and as complete inspection systems for use in the quality
control laboratory and off-line process control.
The Company's off-line sensors and systems are used in a broad array of
applications in a number of different industries. Included among such
applications is the measurement of the score in a beverage can lid, collection
of three-dimensional digital data for use in a CAD-CAM system, measurement of
the thickness of resistive inks applied in the manufacture of hybrid electronic
circuits and measurement of the bend angles of suspension arms for disc drives.
PRS and CyberGage Sensors. The Company offers two lines of range
sensors designed to measure distance to a point on a test object. The Point
Range Sensor ("PRS"), was the Company's first commercial product and is
currently offered in seven models that provide varying resolutions and are
designed for optimal function at varying standoff distances. The CyberGage
sensor is a new series of range sensors that gather data up to 40 times faster
than the PRS product line and is sold with a video camera view port that allows
the user to integrate laser sensing and video in the same sensor. The Company
believes this is the first product available with both laser sensing and video
capabilities.
CyberScan and CyberScan LV. CyberScan stations are complete height
profiling systems capable of producing precise, two- and three-dimensional
analysis of complex surfaces. These stations incorporate the Company's CyberGage
or PRS mounted over a computer-controlled mechanical table with a personal
computer and the Company's proprietary software. The recently introduced
CyberScan LV series of scanning stations, which incorporate the CyberGage
sensors and video cameras, offers a unique quilting feature that allows the user
to view and select test sites over a large area of a test object.
Laser Section Microscope (LSM). The LSM is a low cost instrument for
making height and registration measurement of screen printed solder paste during
the assembly of electronic circuit boards. One of the principal advantages of
the LSM is its ease of use--unskilled operators can make non-contact
measurements with only minimal training.
Markets and Customers
A majority of the Company's products are currently sold in the
microelectronics market, particularly the portion servicing manufacturers using
SMT. The value of automation is high in this market because the products
produced, have high unit costs and are manufactured at speeds too high for
effective human intervention. Moreover, the trend in these industries toward
smaller devices with higher circuit densities and smaller circuit paths requires
manufacturing and testing equipment capable of extremely accurate alignment and
multi-dimensional measurement such as achieved using non-contact optical
sensors. Customers in these industries, moreover, also employ knowledgeable
engineers who are competent to work with computer-related equipment. The
Company's Laser Lead Locator and LaserAlign products are sold to OEMs serving
this market and the CyberSentry, LSM, CyberGage, and CyberScan systems are most
often sold to manufacturers in this market. In addition, the Company's more
generalized products, including the PRS, CyberGage and CyberScan products, are
used in the general metrology and gauging, precision plastic manufacturing and
computer aided design and manufacturing markets.
The Company sells its products worldwide to many of the leading
manufacturers of electronics and electronic equipment. The following table sets
forth the percentage of the Company's total product sales (including sales
delivered through distributors) by location during the past three years:
Year Ended December 31,
-------------------------------
1993 1994 1995
---- ---- ----
North America(1)................ 61% 43% 33%
Asia............................ 27% 30% 31%
Europe.......................... 8% 26% 35%
Other........................... 4% 1% 1%
(1) Includes export sales in North America (primarily Canada and
Mexico) of less than 1% of revenue in 1994 and 1995 and 3.5% of revenue
in 1993.
See Note 7 to the Company's Financial Statements contained on Page 19 of its
Annual Report to Shareholders. Substantially all of the Company's export sales
are negotiated, invoiced and paid in United States dollars.
Sales to two principal customers, Philips Electronics N.V. and Juki
Corporation, leading manufacturers of component placement machines in the
Netherlands and Japan, constituted 29.7% and 13.0%, respectively, of total sales
in 1995. Although no other customer generated more than 10% of the Company's
revenues, sales to the Company's five largest OEM customers in the aggregate
constituted 58.1% of such sales. The loss of any of such customers, or a
substantial decrease in orders therefrom, could have a material adverse effect
on the Company's results of operations.
Sales and Marketing
The Company sells its products through a combination of direct sales
staff and independent distributors. The Company maintains a direct sales staff
at its headquarters in Minneapolis, Minnesota that call on large house accounts
and that sell to OEM customers. The Company also has agreements with seven
stocking distributors in the United States who focus primarily on products sold
to end-users. Most sales to international end-users of sensors and systems are
made through 13 representatives and distributors covering Western Europe and the
Pacific Rim.
The Company markets its products through appearances at industry trade
shows, advertising in industry journals and articles published in industry and
technical journals. In addition, the Company's strategic relationships with
customers serve as highly visible references.
Backlog
CyberOptics products are typically shipped two weeks to four months
after the receipt of an order. Since 1993, however, certain OEM customers have
placed orders for delivery over as many as 12 months. Product backlog was
$6,884,000 at December 31, 1995 of which approximately $4.9 million is
deliverable in the first quarter of 1996, $1.5 million is deliverable in the
second quarter of 1996 and $0.4 million is deliverable in the third quarter of
1996. Although the Company's business is generally not of a seasonal nature, its
sales may vary based on the capital procurement practices in the electronics
industry. Historically, the Company's quarterly revenue has been largest in the
last quarter of the year. The Company's scheduled backlog at any time may vary
significantly based on the timing of orders from OEM customers. Accordingly,
backlog may not be an accurate indicator of the Company's performance in the
future.
Research and Development
The Company distinguishes its products primarily on the basis of its
unique technology and on the Company's ability to synthesize several different
technical disciplines to address industry needs. CyberOptics was founded by
research scientists and has retained relationships with academic institutions to
ensure that the most current information on technological developments is
obtained. In addition, the Company actively seeks ongoing strategic customer
relationships with leading product innovators in the markets it serves and
actively investigates the needs of, and seeks input from, these customers to
identify opportunities to improve the manufacturing process. The Company
provides direct interaction between its engineers and scientists and these key
accounts to ensure adoption of current technologies. In some instances, the
Company provides the outsourced research and development for these customers
through funded development contracts that provide the customer with an exclusive
selling period but allows the Company to retain technology and distribution
rights.
CyberOptics believes that continued and timely development of new
products and enhancements to existing products is essential to maintaining its
competitive position. The Company has committed and expects to continue to
commit substantial resources to its research and development effort, which plays
a critical role in maintaining and advancing its position as a leading provider
of optical sensors and systems. CyberOptics' research and development efforts
during 1995 were directed to increasing performance of its LaserAlign and
CyberSentry products for use in process automation in electronics circuit board
assembly and completion of its CyberGage and CyberScan LV products for general
metrology and gauging applications. In addition, a significant amount of
research and development effort was expended, and continues to be expended, on
developing new technology that will allow for height mapping in the flip chip
manufacturing process. There can be no assurances that such efforts, or any
other research and development efforts of the Company, will be successful in
producing products that respond effectively to technological changes or new
product announcements by others.
Research and development expenses were $2.4 million, $2.7 million, and
$4.1 million for the years ended December 31, 1993, 1994 and 1995, respectively.
These amounts represented 21%, 18% and 14% of revenues, respectively. Research
and development expenses consist primarily of salaries, project materials and
other costs associated with CyberOptics' ongoing product development and
enhancement efforts.
Manufacturing
Much of the Company's product manufacturing, consisting primarily of
circuit board manufacturing, component placement and soldering, lens
manufacturing and machined parts production, is contracted with outside vendors.
Company personnel inspect incoming parts, assemble sensor heads, calibrate and
perform final quality control testing of finished products. The Company believes
that its products are not suited for the large production runs that would
justify the capital investment necessary for complete internal manufacturing.
A variety of components used in the Company's products are available
only from single sources and involve relatively long order cycles, in some cases
over one year. Although the Company has located alternative sources for most of
such components, use of those alternative components could require substantial
rework of the Company's product designs, resulting in periods during which it
could not satisfy customer orders. Further, although the Company believes it has
identified alternative assembly contractors for most of its subassemblies, an
actual change in such contractors would likely require a period of training and
test. Accordingly, an interruption in a supply relationship or the production
capacity of one or more of such contractors could result in the Company's
inability to deliver one or more products for a period of several months. To
help prevent delays in the shipment of its products, the Company maintains in
inventory, or on scheduled delivery from suppliers, what it believes to be a
sufficient amount of certain components based on forecasted demand (forecast
extends a minimum of 6 months). Currently the Company has approximately 350
remaining detectors used in its PRS that are manufactured by a single supplier
and have been discontinued by such supplier. The Company anticipates that this
supply will be adequate to satisfy customer orders until the design and
production of a replacement sensor is completed.
Competition
Although the Company believes that its products are unique, competitors
offer technologies and systems that are capable of certain of the visual
inspection and alignment functions performed by the Company's products. The
Company faces competition from a number of companies in the machine vision,
image processing and inspection systems market, some of which have greater
manufacturing and marketing capabilities, and greater financial, technological
and personnel resources. Potential competitors in these markets include Cognex
Corporation, Robotic Visions Systems, Inc., View Engineering, Inc., ICOS
Systems, GmbH and Keyence Incorporated. In addition, the Company may compete
with the internal development efforts of its current prospective customers. The
Company believes that its sensors offer several advantages over competitive
optical sensors and vision systems in terms of speed, flexibility, cost and ease
of control. The Company's OEM products are typically very specialized in their
applications. The Company believes that its OEM products compete favorably with
other product alternatives based on the speed and accuracy of their performance,
their price and certain technological advantages.
Although the Company believes its current products offer several
advantages in terms of price and suitability for specific applications and
although the Company has attempted to protect the proprietary nature of such
products, it is possible that any of the Company's products could be duplicated
by other companies in the same general market. There can be no assurances that
the Company would be able to compete with similar products produced by a
competitor.
Employees
The Company currently has 185 full-time employees including 23 in Sales
and Marketing and Customer Support, 69 in Manufacturing, 74 in Research,
Development and Engineering and 19 in Finance and Administration at its
headquarters in Minneapolis. To date, the Company has been successful in
attracting and retaining qualified technical personnel, although there can be no
assurance that this success will continue. None of the Company's employees are
covered by collective bargaining agreements or are members of a union.
Proprietary Protection
The Company relies on the technical expertise and know-how of its
personnel and trade secret protection, as well as on patents, to maintain its
competitive position. The Company attempts to protect its intellectual property
by restricting access to its proprietary methods by a combination of technical
and internal security measures. In addition, the Company makes use of
non-disclosure agreements with customers, consultants, suppliers and employees.
Nevertheless, there can be no assurance that any of the above measures will be
adequate to protect the proprietary technology of the Company.
The Company holds nine patents on a number of its technologies,
including those used in its Laser Lead Locator, LaserAlign and PRS. In addition,
the Company protects the proprietary nature of its software primarily through
copyright and license agreements, but also through close integration with its
hardware offerings. It is the Company's policy to protect the proprietary nature
of its new product developments whenever they are likely to become significant
sources of revenue. No guarantee can be given that the Company will be able to
obtain patent or other protection for other products.
As the number of its products increases and the functionality of those
products expands, the Company believes that it may become increasingly subject
to attempts to duplicate its proprietary technology and to infringement claims.
In some geographic markets, it is the practice of companies to engage in "patent
flooding" by seeking patent protection for multiple functional applications that
are incremental rather than technological advances. Yamaha Motor Company, Ltd.
has filed a number of patent applications in Japan, and received two patents in
the United States that the Company believes are based on inventions by the
Company and the Company is currently seeking to invalidate or receive an
assignment of such United States Patents, see "Item 3. Legal Proceedings" below.
Further, certain individuals have claimed United States patent protection of
extremely broad techniques and have notified customers of the Company that any
use of products that employ such techniques would be infringing and require a
license. Although the Company believes that none of the products purchased by
those customers employ such techniques, there can be no assurance that third
parties will not assert infringement claims against the Company in the future or
that any such assertion will not require the Company to enter into a royalty
arrangement or result in costly litigation.
Government Regulation
All of the Company's products which contain lasers are classified as
either Class I, Class II or Class IIIb Laser Products under applicable rules and
regulations of the Center for Devices and Radiological Health ("CDRH") of the
Food and Drug Administration. Such regulations generally require a
self-certification procedure pursuant to which a manufacturer must file with the
CDRH with respect to each product incorporating a laser device, periodic
reporting of sales and purchases and compliance with product labeling standards.
The Company's lasers are generally not harmful to human tissue, but could result
in injury if directed into the eyes of an individual or otherwise misused. The
Company is not aware of any incident involving injury or a claim of injury from
its laser devices and believes that its sensors and sensor systems comply with
all applicable laws for the manufacture of laser devices.
Item 2. DESCRIPTION OF PROPERTIES
The Company leases approximately 30,000 square feet of office,
warehouse, laboratory and demonstration space at its corporate offices at 2505
Kennedy Street Northeast, Minneapolis, Minnesota. The lease expires in October
1999 and is cancelable in October 1997. The lease requires the Company to pay
rent at rates from $6.50 to $7.50 per square foot per year plus property taxes
and other operational expenses.
As of September 1, 1995, the Company executed a lease agreement for
70,000 square feet of mixed office and warehouse space in a new facility to be
built to its specifications in Golden Valley, Minnesota. The lease, which is on
a triple net basis for a ten year term with two three year renewal options,
provides for rental payments at approximately $7.50 per square foot initially,
increasing to $8.50 per square foot. The Company anticipates that the property
will be completed and available for occupancy in May 1996 and has listed its
current facility for sublease after such time.
Item 3. LEGAL PROCEEDINGS
In January 1996, the Company filed suit in federal court in Minnesota
against Yamaha Motor Company, Ltd. of Japan for fraud and theft of technology
related to the LaserAlign sensor and its applications. The Company is asking the
federal court to reassign or to invalidate two United States patents that Yamaha
obtained by falsely claiming to be the inventor of CyberOptics' technology, to
award CyberOptics damages for the harm Yamaha's patents have already done, and
to order Yamaha to stop filing additional patents relating to CyberOptics'
inventions. CyberOptics is seeking expedited proceedings. No trial date has yet
been set.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1995.
PART II.
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information contained under the caption "Common Stock Information"
in the Company's 1995 Annual Report to Shareholders (hereafter the "Annual
Report") is hereby incorporated by reference.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information contained in the Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is hereby incorporated by reference.
Item 7. FINANCIAL STATEMENTS
The following financial statements included in the Annual Report on
pages 8 to 20 are hereby incorporated by reference:
Balance Sheets as of December 31, 1995 and 1994
Statements of Income for the years ended December 31, 1995, 1994 and
1993
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993
Statements of Stockholders' Equity for the years ended December 31,
1995, 1994 and 1993
Notes to the Financial Statements
Report of Independent Accountants as of December 31, 1995 and 1994 and
for the years then ended.
The Report of Independent Accountants for the year ended December 31,
1993 is included as Exhibit 99.0 of this Form 10-KSB.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE.
PART III.
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The information contained under the heading "Election of Directors--Nominees and
- --Executive Officers" and "Shares Outstanding" of the Company's definitive proxy
statement for its annual meeting of shareholders to be held May 14, 1996
(hereafter, the "Proxy Statement"), is hereby incorporated by reference.
Item 10. EXECUTIVE COMPENSATION
The information under the heading "Election of Directors--Compensation of
Directors," and "Executive Compensation" of the Proxy Statement is hereby
incorporated by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Shares Outstanding" of the Proxy
Statement is hereby incorporated by reference.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Election of Directors--Compensation of
Directors", of the Proxy Statement is hereby incorporated by reference.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) LISTING OF EXHIBITS
Exhibit Number Description
3.1 Articles of Incorporation of Company, as amended (Incorporated
by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-18 (Registration No. 33-17628C) (the
"Registration Statement")).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit
3.2 to the Registration Statement).
4.1 Restated Stock Option Plan of the Company, as amended
(Incorporated by reference to Exhibit 4.1 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1989).
4.2 CyberOptics Corporation Stock Option Plan for Non-Employee
Directors, as amended (Incorporated by reference to Exhibit
4.2 to the Company's Form 10-K for the year ended December 31,
1994).
4.3 Form of Indemnification Agreement with Directors (Incorporated
by reference to Exhibit 4.2 of the Company's Form 10-K for the
year ended December 31, 1987).
4.4 CyberOptics Corporation Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 4.7 to the Company's
quarterly report on Form 10-Q for the quarter ended September
30, 1992).
10.4 Lease Agreement between MIW-GL Partners and the Company dated
June 28, 1991 (Incorporated by reference to Exhibit 10.4 of
the Company's Form 10-K for the year ended December 31, 1991).
10.5 Lease Agreement between MEPC American Properties, Inc. and the
Company dated September 15, 1995 (Incorporated by reference to
Exhibit 10 of the Company's Form 10-QSB for the quarter ended
September 30, 1995).
13.0 Pages 8 through 19 of the Company's 1995 Annual Report to
Shareholders.
16.0 Letter regarding change in Independent Accountant
(Incorporated by reference to Exhibit 16.0 of the Company's
Form 8-K filed July 14, 1994.)
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Price Waterhouse LLP
99.0 Report of Independent Accountants for the year ended December
31, 1993.
27.0 Financial Data Schedule (For SEC use only)
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed for the quarter ended December
31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CYBEROPTICS CORPORATION
Dated: March 27, 1996 By /s/STEVEN K. CASE
Steven K. Case,
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
/s/STEVEN K. CASE President (Principal March 27, 1996
Steven K. Case Executive Officer)
/s/KENT O. LILLEMOE Vice President and Treasurer March 27, 1996
Kent O. Lillemoe (Principal Financial and
Accounting Officer)
/s/ALEX B. CIMOCHOWSKI Director March 27, 1996
Alex B. Cimochowski
/s/GEORGE E. KLINE Director March 27, 1996
George E. Kline
/s/STEVEN M. QUIST Director March 27, 1996
Steven M. Quist
/s/P. JUNE MIN Director March 27, 1996
P. June Min
/s/ERWIN KELEN Director March 27, 1996
Erwin Kelen
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CYBEROPTICS CORPORATION
OVERVIEW
Since 1992, the Company has made significant investments in the development of
new technology and products designed specifically for applications in the
electronics industry. Designed primarily for applications in the rapidly growing
surface mount market, these products measure screen printed solder paste, align
electronic components and measure electronic component lead coplanarity during
automated assembly of circuit boards. The Company's revenues have been
significantly affected by the timing of the introduction of these products and
the acceptance and shipment of versions of these products by original equipment
manufacturer (OEM) and end user customers.
RESULTS OF OPERATIONS
The table below sets forth, for the years indicated, certain financial data
derived from the Company's statements of income expressed as a percentage of
revenues, and expressed as a percentage increase from the previous period's
results.
REVENUES
Revenues increased 100% to $30.5 million in 1995 from $15.3 million in 1994 and
$11.6 million in 1993, primarily as the result of increased unit shipments of
sensor products to OEM customers. Revenues from sensor products increased $13.0
million or 138% during 1995 compared to 1994, and $3.8 million or 68% during
1994 compared to 1993. The Company's LaserAlign and Laser Lead Locator sensors
contributed $18.6 million in revenues in 1995 compared to $6.4 million in 1994
and $3.4 million in 1993, reflecting both additional OEM customers and increased
sales to existing customers. Systems revenues increased $2.3 million or 39%
during 1995 as compared to 1994, after remaining relatively flat between 1994
and 1993. The increase in systems revenues during 1995 is primarily attributable
to increased sales of the CyberSentry product. Originally planned for release in
the spring of 1994, CyberSentry was delayed until 1995 in order to improve its
precision and speed.
Pie Chart:
1995 REVENUE DISTRIBUTION:
PRODUCT FAMILY
Systems 27%
Sensors 73%
International revenues totaled $20.7 million in 1995, $8.6 million in 1994 and
$4.5 million in 1993, comprising 68%, 57% and 39% of total revenue,
respectively. Sales of the Company's products in Western Europe, Japan and the
rest of the Far East have increased significantly during the three year period.
These international markets account for a significant portion of the production
capability of capital equipment for the manufacture of electronics, the primary
market for the LaserAlign and Laser Lead Locator products.
- -------------------------------------------------------------------------
Percentage of Revenues Percentage Increase
- -------------------------------------------------------------------------
1995 1994
Years Ended December 31, 1995 1994 1993 to 1994 to 1993
- -------------------------------------------------------------------------
Revenues 100% 100% 100% 100% 31%
- -------------------------------------------------------------------------
Gross margin 53 57 61 85 22
- -------------------------------------------------------------------------
Research and development
expenses 14 18 21 51 14
- -------------------------------------------------------------------------
Selling, general and
administrative expenses 18 25 31 40 8
- -------------------------------------------------------------------------
Income from operations 21 13 9 216 89
- -------------------------------------------------------------------------
Net income 16 10 8 217 62
- -------------------------------------------------------------------------
Pie Chart:
1995 REVENUE DISTRIBUTION: GEOGRAPHIC MARKET
Europe 35%
North America 33%
Pacific Rim 32%
COST OF REVENUES
Cost of revenues as a percentage of total revenues for 1995 was 47%, compared to
43% in 1994 and 39% in 1993. The increase in the percentage from 1994 to 1995
was primarily the result of start-up and rework costs for new product lines,
including CyberSentry which was introduced in final form in 1995, additional
manufacturing costs to support increased capacity for LaserAlign, volume price
reductions given to certain significant customers and increases in the reserve
for inventory obsolescence and warranty accrual by $450,000 during 1995. The
Company believes these increases are appropriate and are due to volume increases
in revenues and inventories. The increase in the cost of revenues percentage
from 1993 to 1994 was primarily due to start-up manufacturing costs, overhead
costs to support higher production volumes and product mix changes.
Bar Chart:
R&D EXPENSE AS A PERCENT OF REVENUES
1993 21%
1994 18%
1995 14%
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 51% to $4.1 million in 1995 compared
to $2.7 million in 1994 and $2.4 million in 1993, but decreased as a percentage
of revenues to 14% in 1995 compared to 18% in 1994 and 21% in 1993. The
increased expenditures in 1995 primarily reflect costs associated with
completion of CyberSentry, CyberGage and CyberScan LV. The increase in 1994
research and development costs was primarily due to development of additional
models of LaserAlign and development of the CyberSentry and CyberGage products
which were introduced in the first half of 1995. The Company anticipates that
research and development expenses will increase in future periods, although the
Company does not believe these expenses will return to historical levels as a
percentage of revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 40% to $5.4 million in
1995 compared to $3.9 million in 1994 and $3.6 million in 1993, but decreased as
a percentage of revenues to 18% in 1995 from 25% in 1994 and 31% in 1993. The
decrease in selling, general and administrative expenses as a percentage of
revenues is primarily the result of increases in the revenue base over this
period, enabling the Company to spread fixed overhead costs over a larger
revenue base. To a lesser extent, changes in the revenue mix toward a greater
portion of revenue from OEM sensor customers and end-user distributors has also
contributed to lower costs.
Bar Chart:
SG&A EXPENSE AS A PERCENT
OF REVENUES
1993 31%
1994 25%
1995 18%
EFFECTIVE TAX RATE
The Company's effective tax rate was 32%, 28% and 16% in 1995, 1994 and 1993,
respectively. Benefits from the Company's foreign sales corporation and the use
of the research and experimentation tax credit were primarily responsible for
reducing the effective tax rate below the statutory rate. The increase in the
effective rate from 1994 to 1995 is primarily the result of the research and
experimentation credit expiring as of June 30, 1995. The increase in the
effective rate from 1993 to 1994 was primarily the result of the 1993 effective
rate being impacted by reinstatement of the research and experimentation tax
credit retroactive to the second half of 1992. Although the research and
experimentation credit has expired and has not been reinstated, the Company
anticipates that its tax rate will continue to benefit from sales through its
foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
In September 1995, the Company completed a public offering of Common Stock that
generated net proceeds of $37.4 million from the issuance of 1,200,000 shares.
Bar Chart:
CASH AND SHORT-TERM INVESTMENTS
(in millions)
1994 $ 2.6
1995 $18.9
Primarily as the result of funds generated from the offering, working capital
has increased from $6.9 million as of December 31, 1994 to $28.7 million as of
December 31, 1995. These amounts include cash, cash equivalents and short-term
marketable securities of $18.9 million and $2.6 million as of December 31, 1995
and 1994, respectively. Additionally, at December 31, 1995, the Company had
long-term marketable securities (those with maturities greater than one year) of
$21.0 million.
The Company used $307,000 in operations during 1995, primarily to finance a $5.6
million increase in accounts receivable and a $2.0 million increase in
inventories. The increase in accounts receivable and inventories are primarily
due to the timing and increased level of shipments and orders. During 1994,
operating activities generated $854,000 in cash, primarily due to net income for
the year of $1.5 million.
Bar Chart:
WORKING CAPITAL
(in millions)
1994 $ 6.9
1995 $28.7
Investing activities used $30.8 million during 1995, primarily as the result of
the Company investing proceeds from the public offering. Investments consist
primarily of U.S. Government or U.S. Government backed obligations. The Company
also made additions to furnishings and equipment of $831,000 during 1995,
primarily consisting of manufacturing and computer equipment to support
increased production volume and employee headcount. During 1994, investing
activities required $1.1 million in cash, which primarily represented purchases
of investments with cash generated from operations.
In September 1995, the Company executed a lease agreement for 70,000 square feet
of mixed office and warehouse space in a new facility, which it will take
occupancy of in May 1996. The Company anticipates an investment of approximately
$1.5 million in furniture, fixtures and equipment in connection with its new
facility.
At the present time, the Company has no material capital commitments, except as
described above. The Company believes its current working capital and
anticipated cash flows from operations will be adequate for anticipated
operating needs.
Bar Chart:
STOCKHOLDERS' EQUITY
(in millions)
1994 $ 7.5
1995 $50.7
OTHER FACTORS
The Company's increases in revenues have resulted from increases in units
shipped and new product introductions. The Company believes that inflation has
had no appreciable effect on operations. Substantially all of the Company's
international export sales are negotiated, invoiced and paid in U.S. dollars.
<TABLE>
<CAPTION>
BALANCE SHEETS
CYBEROPTICS CORPORATION
(In thousands, except share amounts)
December 31, 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 8,718 $ 1,428
Marketable securities, at cost 10,146 1,180
Accounts receivable, less allowance for doubtful
accounts of $100 and $50, respectively 8,514 2,964
Inventories 3,874 2,335
Other current assets 1,473 340
- ------------------------------------------------------------------------------------
Total current assets 32,725 8,247
Marketable securities, at cost 21,000
Equipment and furnishings, net 943 478
Capitalized patent costs, less accumulated amortization
of $253 and $193, respectively 72 98
- ------------------------------------------------------------------------------------
Total assets $54,740 $ 8,823
====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 737 $ 572
Income taxes payable 898 212
Accrued expenses 2,368 561
- ------------------------------------------------------------------------------------
Total current liabilities 4,003 1,345
Commitments and Contingency
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized,
none outstanding
Common stock, no par value, 10,000,000 shares
authorized, 5,612,114 and 4,235,141 shares issued
and outstanding, respectively 42,658 4,230
Retained earnings 8,079 3,248
- ------------------------------------------------------------------------------------
Total stockholders' equity 50,737 7,478
- ------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $54,740 $ 8,823
====================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF INCOME
CYBEROPTICS CORPORATION
(In thousands, except per share amounts)
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
Revenues $30,518 $15,276 $11,621
Cost of revenues 14,485 6,604 4,531
- ------------------------------------------------------------------------------
Gross margin 16,033 8,672 7,090
Research and development expenses 4,143 2,749 2,410
Selling, general and administrative expenses 5,433 3,881 3,600
- ------------------------------------------------------------------------------
Income from operations 6,457 2,042 1,080
Interest income 624 72 43
- ------------------------------------------------------------------------------
Income before income taxes 7,081 2,114 1,123
Provision for income taxes 2,250 590 180
- ------------------------------------------------------------------------------
Net income $ 4,831 $ 1,524 $ 943
==============================================================================
Net income per share (primary and
fully diluted) $ 0.95 $ 0.35 $ 0.22
==============================================================================
Weighted average common and common
equivalent shares outstanding 5,104 4,404 4,328
==============================================================================
The accompanying notes are an integral part of the financial statements
<TABLE>
<CAPTION>
STATMENTS OF CASH FLOWS
CYBEROPTICS CORPORATION
(In thousands)
Year ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,831 $ 1,524 $ 943
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 426 295 247
Provisions for losses on accounts receivable 50 73 15
Provisions for losses on inventories 466 124 235
Deferred income taxes (498) (67) (27)
Changes in operating assets and liabilities:
Accounts receivable (5,600) (885) (334)
Inventories (2,005) (703) (255)
Other current assets (635) (24) (14)
Accounts payable 165 239 (150)
Income taxes payable 686 174 (39)
Accrued expenses 1,807 104 140
- ----------------------------------------------------------------------------------------------
Net cash provided (used)
by operating activities (307) 854 761
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities 1,706 993 955
Purchases of marketable securities (31,672) (1,733) (440)
Additions to equipment and furnishings (831) (281) (131)
Additions to patents (34) (64) (50)
- ----------------------------------------------------------------------------------------------
Net cash provided (used) by investing
activities (30,831) (1,085) 334
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock (235)
Proceeds from issuance of common stock 37,391
Proceeds from exercise of stock options
and warrants 340 19 219
Proceeds from issuance of common stock
under Employee Stock Purchase Plan 148 94 66
Tax benefit from exercise of stock options 549 3 4
- ----------------------------------------------------------------------------------------------
Net cash provided (used) by financing
activities 38,428 (119) 289
Increase (decrease) in cash and cash equivalents 7,290 (350) 1,384
Cash and cash equivalents - beginning of year 1,428 1,778 394
- ----------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 8,718 $ 1,428 $ 1,778
==============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
CYBEROPTICS CORPORATION
(In thousands, except share amounts)
Common Stock Total
--------------------- Retained Stockholders'
Shares Amount Earnings Equity
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 4,163,409 $ 4,060 $ 781 $ 4,841
Tax benefit from exercise of stock options 4 4
Exercise of stock options and warrants
net of shares exchanged as payment
and subsequently retired 71,565 219 219
Issuance of common stock under
Employee Stock Purchase Plan 14,446 66 66
Net income 943 943
- -------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 4,249,420 4,349 1,724 6,073
Tax benefit from exercise of stock options 3 3
Exercise of stock options
net of shares exchanged as payment
and subsequently retired 8,606 19 19
Issuance of common stock under
Employee Stock Purchase Plan 20,615 94 94
Repurchase of common stock (43,500) (235) (235)
Net income 1,524 1,524
- -------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 4,235,141 4,230 3,248 7,478
Tax benefit from exercise of stock options 549 549
Exercise of stock options
net of shares exchanged as payment
and subsequently retired 145,358 340 340
Issuance of common stock under
Employee Stock Purchase Plan 31,615 148 148
Issuance of common stock for cash, net
of offering costs of $205 1,200,000 37,391 37,391
Net income 4,831 4,831
- -------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 5,612,114 $ 42,658 $ 8,079 $ 50,737
=================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
CYBEROPTICS CORPORATION
(In thousands)
NOTE 1 - BUSINESS DESCRIPTION AND SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS DESCRIPTION
CyberOptics Corporation designs and manufactures intelligent sensors and systems
for high-precision, non-contact dimensional measurement and process control.
Utilizing proprietary laser and optics technology combined with advanced
software and electronics, the Company's products enable manufacturers to
increase operating efficiencies, product yields and quality by measuring the
characteristics and placement of components both during and after the
manufacturing process. The Company sells its products worldwide through a
combination of direct sales staff and independent distributors.
REVENUE RECOGNITION
Revenues are recognized upon shipment. Estimated warranty costs are recorded at
the time of sale.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The Company's cash and
cash equivalents were concentrated in one money market account at December 31,
1995 and 1994.
MARKETABLE SECURITIES
Marketable securities generally consist of U.S. Government or U.S. Government
backed obligations. Marketable securities are classified as short-term or
long-term in the balance sheet based on their maturity date.
At December 31, 1995 and 1994, all of the Company's marketable securities are
classified as held to maturity and, therefore, are carrried at amortized cost.
All marketable securities have maturities of three years or less. Certain
marketable securities held by the Company are subject to call provisions prior
to their maturity date. At December 31, 1995, the estimated fair value of the
securities approximated their amortized cost. Unrealized holding gains and
losses were not significant.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
using the first-in, first-out (FIFO) method.
PATENTS
Patents consist of legal and patent registration costs for protection of the
Company's proprietary sensor technology. The Company amortizes such expenditures
over a three-year period on a straight-line basis.
EQUIPMENT AND FURNISHINGS
Equipment and furnishings are stated at cost. Significant additions or
improvements extending asset lives are capitalized, while repairs and
maintenance are charged to expense as incurred. Depreciation is recorded using
the straight-line method over the estimated useful lives of the assets, ranging
from three to five years. Gains or losses on dispositions are included in
current operations.
RESEARCH AND DEVELOPMENT
Research and development (R&D) costs, including software development, are
expensed when incurred. Software development costs are required to be expensed
until the point that technological feasibility and proven marketability of the
product are established; costs otherwise capitalized after such point also are
expensed because they are insignificant. Customer funded research and
development is deferred and recognized as a reduction of research and
development expenses as costs are incurred in the accompanying statements of
income.
INCOME TAXES
Deferred income taxes are recorded to reflect the tax consequences in future
years of differences between the financial reporting and tax bases of assets and
liabilities using currently enacted tax rates in effect for the years in which
the differences are expected to reverse. Income tax expense is the sum of the
tax currently payable and the change in the deferred tax assets and liabilities
during the period.
NET INCOME PER SHARE
Net income per common and common equivalent share has been computed using the
weighted average shares outstanding plus common stock equivalents for each
period. Common equivalent shares include dilutive options and warrants using the
treasury stock method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant areas
which require the use of management's estimates relate to the determination of
the allowances for obsolete inventories, uncollectible accounts receivable and
accrued warranty costs.
NOTE 2 - OTHER FINANCIAL STATEMENT DATA
INVENTORIES CONSISTS OF THE FOLLOWING:
- -------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------
Raw materials and
purchased parts $3,172 $1,902
Work in process 608 406
Finished goods 94 27
- -------------------------------------------------------
$3,874 $2,335
=======================================================
EQUIPMENT AND FURNISHINGS, NET CONSIST OF THE FOLLOWING:
- -------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------
Equipment and furnishings $2,435 $1,604
Less accumulated
depreciation (1,492) (1,126)
- -------------------------------------------------------
$ 943 $ 478
=======================================================
OTHER ACCRUED EXPENSES CONSIST OF THE FOLLOWING:
- -------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------
Accrued wages and benefits $1,352 $ 313
Accrued lease expense 54 84
Deferred R&D reimbursement 556 --
Other accrued expenses 406 164
- -------------------------------------------------------
$2,368 $ 561
=======================================================
NOTE 3 - INCOME TAXES
The provision for income taxes consists of the following:
- ----------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------
Current:
Federal $ 2,523 $ 643 $ 206
State 225 14 1
Deferred (498) (67) (27)
- ----------------------------------------------------------------
$ 2,250 $ 590 $ 180
================================================================
Deferred tax assets (liabilities) consist of the following:
- ----------------------------------------------------------------
December 31, 1995 1994 1993
- ----------------------------------------------------------------
Inventories $ 218 $ 41 $ 49
Vacation accrual 67 36 27
Accounts receivable
allowances 37 52 11
Warranty reserve 55 22 15
Deferred R&D
reimbursement 204
R&E credit
carryforward 17
Other, net 71 (14) (15)
- ----------------------------------------------------------------
Net deferred tax asset
included in other
current assets $ 652 $ 154 $ 87
================================================================
A reconciliation of the statutory rate to the effective income tax rate is as
follows:
- ----------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------
Federal statutory rate 34.0% 34.0% 34.0%
Increase (decrease) resulting
from:
State income taxes, net
of federal benefit 2.1 0.7 0.1
Benefits of current period
tax credits (4.7) (7.9) (18.4)
Other, net 0.4 1.1 0.3
- ----------------------------------------------------------------
Effective rate 31.8% 27.9% 16.0%
================================================================
The benefit of current period tax credits in 1993 of 18.4% includes the impact
of the reinstatement of the tax law which allowed the Company to claim tax
credits for its research and experimentation activities retroactive to July
1992. As a result, the 1993 tax provision includes 18 months of research and
experimentation tax credits. The 1995 tax provision includes only 6 months of
research and experimentation tax credits, as the credit expired as of June 30,
1995. Cash payments of income taxes for the years ended December 31, 1995, 1994
and 1993, were approximately $1,518, $480 and $294, respectively.
NOTE 4 - OPERATING LEASES
The Company leases office, warehouse and manufacturing facilities under an
operating lease that is cancelable at October 31, 1997. This lease generally
requires the Company to pay insurance, property taxes and other expenses related
to the leased property. Total rental expenses for the years ended December 31,
1995, 1994 and 1993, were approximately $241, $255 and $241, respectively.
In September 1995, the Company executed a 10 year lease agreement for 70,000
square feet of mixed office and warehouse space in a new facility. The lease
requires the Company to pay insurance, property taxes and other operating
expenses related to the leased property. The Company anticipates moving to the
new leased facility in May 1996, and subleasing the space currently occupied.
At December 31, 1995, the future minimum lease payments required under lease
agreements are as follows:
Year ending December 31,
1996 $ 550
1997 764
1998 553
1999 564
2000 564
Thereafter 3,186
- --------------------
Total $6,181
====================
NOTE 5 - STOCKHOLDERS' EQUITY
During the second quarter of 1994, the Company's Board of Directors authorized
the repurchase of up to 100,000 shares of CyberOptics common stock, and
terminated such plan late in 1994. During the first half of 1994, the Company
repurchased 43,500 shares pursuant to such program in open market transactions
to provide for issuance of shares under the Company's stock option plans and
Employee Stock Purchase Plan.
NOTE 6 - BENEFIT PLANS
STOCK OPTION PLANS
The Company has two stock option plans that reserve 647,005 shares of common
stock in the aggregate for issuance to employees, directors, officers and
others. Canceled options are available for future grant under both plans.
Options are granted at an option price per share equal to or greater than fair
value at the date of grant. Generally, options granted to employees vest over a
four-year period and expire five years after the date of grant. The plans allow
for option holders to tender shares of the Company's common stock as
consideration for the option price. Options exercised by tendering shares are
shown at the net amount.
The following is a summary of stock option plan activity:
Option Price
Range per Share Options
- -------------------------------------------------------
Outstanding at
December 31, 1992 $2.12 $9.67 385,808
Granted 5.00 6.00 190,000
Exercised 2.21 4.57 (71,565)
Canceled 2.35 9.67 (39,742)
- -------------------------------------------------------
Outstanding at
December 31, 1993 2.12 9.67 464,501
Granted 5.00 7.13 68,400
Exercised 2.21 5.00 (12,536)
Canceled 2.35 6.00 (26,538)
- -------------------------------------------------------
Outstanding at
December 31, 1994 2.12 9.67 493,827
Granted 9.25 33.00 144,150
Exercised 2.35 9.67 (155,452)
Canceled 5.00 6.00 (4,425)
- -------------------------------------------------------
Outstanding at
December 31, 1995 3.18 33.00 478,100
Exercisable at
December 31, 1995 172,239
=======================================================
EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan available to eligible employees.
Under terms of the plan, eligible employees may designate from 1 to 10% of their
compensation to be withheld through payroll deductions for the purchase of
common stock at 85% of the lower of the market price on the first or last day of
the offering period. Under the plan, 200,000 shares of common stock have been
reserved for issuance. As of December 31, 1995, 66,676 shares have been issued
under this plan.
401(k) PLAN
The Company has a savings plan pursuant to Section 401(k) of the Internal
Revenue Code ("the Code"), whereby eligible employees may contribute up to 15%
of their earnings, not to exceed amounts allowed under the Code. In addition,
the Company may also make contributions at the discretion of the Board of
Directors. During 1995, 1994 and 1993, the Company provided for matching
contributions totaling $67, $43, and $37, respectively.
NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, Accounting for Stock-Based Compensation. In 1996, the Company intends to
adopt the disclosure provisions of the statement while continuing to account for
options and other stock-based compensation using the intrinsic value based
method.
NOTE 7 - MAJOR CUSTOMER AND EXPORT SALES
The following summarizes significant customers:
Significant Percentage
Customer Revenues of Revenues
- --------------------------------------------------------
Year ended
December 31, 1995 A $9,052 30%
C 3,979 13%
Year ended
December 31, 1994 A $2,115 14%
B $1,894 12%
Year ended
December 31, 1993 B $1,682 14%
As of December 31, 1995, accounts receivable from significant customers A and C
were $2,767 and $1,572, respectively.
Export sales amounted to 68%, 57% and 39% for 1995, 1994 and 1993, respectively.
Substantially all of the Company's export sales are negotiated, invoiced and
paid in U.S. dollars. Foreign sales by geographic area are summarized as
follows:
- -----------------------------------------------------
1995 1994 1993
- -----------------------------------------------------
North America $ 117 $ 141 $ 406
Europe 10,762 3,895 951
Asia 9,596 4,555 3,155
Other 233 45 -
- -----------------------------------------------------
$20,708 $8,636 $4,512
=====================================================
NOTE 8 - LITIGATION
In January 1996, the Company filed suit against Yamaha Motor Company, Ltd.
alleging fraud and theft of technology related to the LaserAlign sensor and its
applications. The Company intends to protect its intellectual property rights
and pursue its remedies.
NOTE 9 - BANK LINE OF CREDIT
In May 1995, the Company entered into an unsecured revolving line of credit
which provides for borrowings up to $2,000. Amounts outstanding under this
agreement bear interest, payable monthly, at the bank's prime rate or LIBOR plus
2.25%. The Company did not borrow against this line of credit during 1995. The
line of credit expires May 31, 1996 and contains covenants including not
incurring other forms of debt or liens other than for this line or other credit
facilities of the lender.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
CyberOptics Corporation
We have audited the accompanying balance sheets of CyberOptics Corporation as of
December 31, 1995 and 1994, and the related statements of income, cash flows and
stockholders' equity for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The statements of
income, cash flows and stockholders' equity of CyberOptics Corporation for the
year ended December 31, 1993, were audited by other auditors whose report, dated
February 1, 1994, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statments. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CyberOptics Corporation as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Minneapolis, Minnesota
January 30, 1996
CYBEROPTICS CORPORATION
FIVE-YEAR FINANCIAL SUMMARY
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $30,518 $15,276 $11,621 $8,425 $7,803
Operating Income 6,457 2,042 1,080 447 1,108
Net Income 4,831 1,524 943 339 829
Net Income Per Share .95 .35 .22 .08 .20
- --------------------------------------------------------------------------------------
Working Capital $28,722 $ 6,902 $ 5,548 $4,249 $3,763
Total Assets 54,740 8,823 6,901 5,717 5,308
Stockholders' Equity 50,737 7,478 6,073 4,840 4,259
</TABLE>
QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts)
Quarter Ended March 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------
1995 (unaudited and not reviewed)
REVENUES $4,555 $7,240 $8,196 $10,527
GROSS MARGIN 2,506 3,854 4,375 5,298
OPERATING INCOME 681 1,567 1,920 2,289
NET INCOME 497 1,101 1,307 1,926
NET INCOME PER SHARE 0.11 0.24 0.27 0.32
=============================================================================
1994 (unaudited and not reviewed)
Revenues $3,132 $3,245 $4,346 $4,553
Gross margin 1,907 1,949 2,392 2,424
Operating income 384 292 673 693
Net income 272 238 484 530
Net income per share 0.06 0.06 0.11 0.12
=============================================================================
The summation of quarterly net income per share may not equate to the year end
calculation as quarterly calculations are performed on a discrete basis.
COMMON STOCK INFORMATION
The Company's common stock is traded on the national over-the-counter market,
with prices quoted on the National Association of Securities Dealers Automated
Quotation (Nasdaq) National Market System. The following table sets forth, for
the fiscal periods indicated, the high and low quotations for the Company's
common stock as reported by the Nasdaq National Market System. These prices do
not reflect adjustments for retail markups, markdowns or commissions.
- -----------------------------------------------------
1995 1994
- -----------------------------------------------------
Quarter HIGH LOW High Low
First $11.38 $ 7.50 $6.38 $5.50
Second 25.50 11.00 5.88 5.00
Third 35.75 20.88 6.50 4.63
Fourth 39.75 24.00 8.63 5.75
As of February 29, 1996, the Company had 275 stockholders of record and
estimates that it has appoximately 4,900 beneficial owners. The Company has
never paid a cash dividend and does not intend to pay cash dividends in the
foreseeable future.
EXECUTIVE OFFICERS
Steven K. Case, Ph.D.
President
Jeffrey A. Jalkio, Ph.D.
Vice President - Research
Kent O. Lillemoe
Vice President - Finance and Administration
Carl D. Moe
Vice President - Sales and Marketing
John D. Beagan
Vice President - Operations
William Farmer
Director - Product Development
DIRECTORS
Steven K. Case, Ph.D.
President
CyberOptics Corporation
Alex B. Cimochowski
Independent Business Consultant
George E. Kline
Owner
Venture Management
Steven M. Quist
President
Rosemount Measurement, Inc.
P. June Min, Ph.D.
Vice Chairman
Anam Industrial Co., Ltd.
Erwin Kelen
Owner
Kelen Ventures
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
CyberOptics Corporation
2505 Kennedy Street NE
Minneapolis, MN 55413
612-331-5702
Effective May 6, 1996 the
Company's new address will be
5900 Golden Hills Drive
Golden Valley, MN 55416
612-542-5000
COUNSEL
Dorsey & Whitney L. L. P.
Minneapolis, Minnesota
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L. L. P.
Minneapolis, Minnesota
ANNUAL MEETING
The annual meeting of stockholders will be held at 3:30 p.m. on May 14, 1996, at
the Radisson Plaza Hotel, 35 South 7th Street, Minneapolis, Minnesota 55402.
REGISTRAR AND STOCK TRANSFER AGENT
Norwest Bank Minnesota, N.A.
Minneapolis, Minnesota
FORM 10-KSB
The Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission is available to stockholders at no charge by writing to CyberOptics.
[LOGO]
CYBEROPTICS
CORPORATION
2505 Kennedy Street N.W.
Minneapolis, MN 55413
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
CyberOptics Corporation on Form S-8 (File No. 33-21092, 33-41509, 33-41515,
33-50510 and 33-80838) of our report dated January 30, 1996, on our audits of
the financial statements of CyberOptics Corporation as of December 31, 1995 and
1994, and for the years ended December 31, 1995 and 1994, which report is
incorporated by reference in this Annual Report on Form 10-KSB.
COOPERS & LYBRAND L.L.P
Minneapolis, Minnesota
March 22, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-21092, 33-41509, 33-41515, 33-50510 and 33-80838)
of CyberOptics Corporation of our report dated February 1, 1994 appearing in
Exhibit 99.0 in this Annual Report on Form 10-KSB.
Price Waterhouse LLP
Minneapolis, Minnesota
March 22, 1996
Exhibit 99.0
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
CyberOptics Corporation
In our opinion, the accompanying statements of income, of stockholders' equity
and of cash flows present fairly, in all material respects, the results of
operations and cash flows of CyberOptics Corporation for the year ended December
31, 1993, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Minneapolis, Minnesota
February 1, 1994
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,718
<SECURITIES> 10,146
<RECEIVABLES> 8,164
<ALLOWANCES> 100
<INVENTORY> 3,874
<CURRENT-ASSETS> 32,725
<PP&E> 2,435
<DEPRECIATION> 1,492
<TOTAL-ASSETS> 54,740
<CURRENT-LIABILITIES> 4,003
<BONDS> 0
0
0
<COMMON> 42,658
<OTHER-SE> 8,079
<TOTAL-LIABILITY-AND-EQUITY> 54,740
<SALES> 30,518
<TOTAL-REVENUES> 30,518
<CGS> 14,485
<TOTAL-COSTS> 14,485
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 7,081
<INCOME-TAX> 2,250
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<NET-INCOME> 4,831
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