SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Check One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 0-16577
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CYBEROPTICS CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota 41-1472057
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5900 Golden Hills Drive, Minneapolis, Minnesota 55416
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(Address of principal executive offices)
(763) 542-5000
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(Issuer's telephone number)
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 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 ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 10, 2000, 7,939,067 shares of the issuer's Common Stock, no par value,
were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CYBEROPTICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 2000 DEC. 31, 1999
(Unaudited)
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ASSETS
<S> <C> <C>
Cash and cash equivalents $11,336 $10,196
Marketable securities 11,071 8,509
Accounts receivable, net 8,768 7,762
Inventories 6,467 4,997
Other current assets 1,892 1,756
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Total current assets 39,534 33,220
Marketable securities 6,729 4,396
Equipment and leasehold improvements, net 3,315 2,705
Intangible and other assets, net 9,835 11,143
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Total assets $59,413 $51,464
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $2,309 $1,886
Income taxes payable 1,251 879
Accrued expenses 3,688 2,195
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Total current liabilities 7,248 4,960
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value, 5,000 shares
authorized, none outstanding
Common stock, no par value, 25,000 shares
authorized, 7,780 and 7,527 shares issued
and outstanding, respectively 36,054 33,479
Retained earnings 16,341 13,029
Accumulated other comprehensive income (loss) (230) (4)
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Total stockholders' equity 52,165 46,504
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Total liabilities and stockholders' equity $59,413 $51,464
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</TABLE>
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
CYBEROPTICS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
2000 1999
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<S> <C> <C>
Revenues $14,692 $8,811
Cost of revenues 5,318 3,905
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Gross margin 9,374 4,906
Research and development expenses 2,495 2,469
Selling, general and administrative expenses 3,488 2,396
Acquired in-process research and development - 7,301
Amortization of goodwill and other intangibles 434 353
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Income (loss) from operations 2,957 (7,613)
Interest income 222 310
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Income (loss) before income taxes 3,179 (7,303)
Provision for income taxes 1,200 (54)
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Net income (loss) $1,979 ($7,249)
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Net income (loss) per share - Basic $0.26 ($0.97)
Net income (loss) per share - Diluted $0.24 ($0.97)
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Weighted average shares outstanding - Basic 7,674 7,452
Weighted average shares outstanding - Diluted 8,391 7,452
=====================================================================================
SIX MONTHS ENDED JUNE 30,
2000 1999
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Revenues $28,201 $16,516
Cost of revenues 10,513 7,442
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Gross margin 17,688 9,074
Research and development expenses 4,891 4,221
Selling, general and administrative expenses 7,108 4,554
Acquired in-process research and development - 7,301
Amortization of goodwill and other intangibles 860 359
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Income (loss) from operations 4,829 (7,361)
Interest income 563 840
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Income (loss) before income taxes 5,392 (6,521)
Provision for income taxes 2,080 178
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Net income (loss) $3,312 ($6,699)
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Net income (loss) per share - Basic $0.43 ($0.90)
Net income (loss) per share - Diluted $0.40 ($0.90)
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Weighted average shares outstanding - Basic 7,625 7,445
Weighted average shares outstanding - Diluted 8,345 7,445
=====================================================================================
</TABLE>
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE>
CYBEROPTICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $3,312 ($6,699)
Adjustments to reconcile net income (loss) to
net cash provided by operating
activities:
Acquired in-process research and
development, net of tax benefit 7,038
Depreciation and amortization 1,609 945
Provision for losses on inventories 276 149
Provision for doubtful accounts 10
Amortization of restricted stock 20 20
Changes in operating assets and liabilities
excluding impact of acquisitions:
Accounts receivable (1,016) 32
Inventories (1,746) 1,005
Other current assets (45) 190
Accounts payable 423 400
Income taxes payable 372 137
Accrued expenses 1,493 343
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Net cash provided
by operating activities 4,708 3,560
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities 2,615 16,181
Purchases of marketable securities (7,481) (2,035)
Purchases of businesses and technology, net of
cash acquired (54) (17,124)
Additions to equipment and leasehold improvements (1,104) (477)
Additions to patents (99) (24)
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Net cash provided (used) by
investing activities (6,123) (3,479)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,555 198
Repurchase of common stock - -
Repayment of long-term debt - (2,364)
Other 25
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Net cash provided (used) by financing
activities 2,555 (2,141)
Increase (decrease) in cash and cash equivalents 1,140 (2,060)
Cash and cash equivalents - beginning
of period 10,196 4,963
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Cash and cash equivalents - end of period $11,336 $2,903
========================================================================================
</TABLE>
SEE THE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
CYBEROPTICS CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. INTERIM REPORTING:
The interim consolidated financial statements presented herein as of June 30,
2000, and for the six and three month periods ended June 30, 2000 and 1999, are
unaudited; however, in the opinion of management, the interim consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of financial position,
results of operations and cash flows for the periods presented.
The results of operations for the six and three month periods ended June 30,
2000, do not necessarily indicate the results to be expected for the full year.
The December 31, 1999, consolidated balance sheet data was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles. These unaudited interim
consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto, contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
2. PRO-FORMA INFORMATION:
The following table presents unaudited pro forma consolidated results of
operations as if the acquisitions of Kestra Limited (Kestra), acquired on April
6, 1999, and certain assets and liabilities of HAMA Laboratories, Inc. (HAMA),
acquired on May 5, 1999, had occurred as of the beginning of 1999. The unaudited
pro forma consolidated results of operations for the six months ended June 30,
1999 include adjustments for additional amortization of identifiable intangibles
and goodwill, the reduction of historical HAMA compensation expense for
executives to reflect contractual changes to the Company's compensation
structure, the reduction of interest income due to the cash used for the
acquisitions and the related tax impacts of these adjustments. The unaudited pro
forma consolidated results of operations are presented for illustrative purposes
only and are not necessarily indicative of the combined financial results that
actually would have resulted had the acquisitions, in fact, occurred on those
dates (In thousands):
Pro Forma
Six Months Ended
June 30,
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1999
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Revenue $17,311
Net loss ($548)
Net loss per share - Basic ($0.07)
Net loss per share - Diluted ($0.07)
-5-
<PAGE>
3. INVENTORIES (IN THOUSANDS):
June 30, Dec. 31,
2000 1999
(unaudited)
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Raw materials $4,401 $3,076
Work in process 937 912
Finished goods 1,129 1,009
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Total inventories $6,467 $4,997
=======================
4. NET INCOME (LOSS) PER SHARE:
Basic net income per share has been computed using the weighted average number
of shares outstanding. The diluted net income per share includes the effect of
common stock equivalents for each period. The number of shares utilized in the
denominator of the diluted net income per share computation has been increased
by 720,000 and 717,000 equivalent shares for the six and three month periods
ended June 30, 2000, respectively. The shares used in the basic and diluted net
income per share computation for the six and three month periods ended June 30,
1999 are the same as additional shares in the denominator would be antidilutive
due to the Company's net loss. Shares excluded due to the option exercise price
exceeding the average market price were 760,913 and 787,163 for the six and
three month periods ended June 30, 1999. For the six and three month periods
ended June 30, 2000, effectively all options (less than 1,000 options excluded)
were included in the computation of diluted net income per share, as the average
market price exceeded the option exercise price of the options.
5. COMPREHENSIVE INCOME (LOSS):
Statement of Financial Accounting Standards No. 130 requires that unrealized
gains and losses on the Company's available-for-sale marketable securities and
certain foreign currency translation adjustments be included as a component of
other comprehensive income.
During the six month periods ended June 30, 2000 and 1999, total comprehensive
income (loss) amounted to $3,086,000 and ($6,907,000), respectively. During the
three month periods ended June 30, 2000 and 1999, total comprehensive income
(loss) amounted to $1,936,000 and ($7,332,000), respectively. Accumulated other
comprehensive income (loss) at June 30, 2000 and December 31, 1999 was
($230,000) and ($4,000), respectively.
6. SUBSEQUENT EVENT:
In August 2000, the Company acquired a 19% ownership interest in CyberOptics
Communications Corporation (CO3). Consideration paid in exchange for the equity
interest included cash of $190,000 and a license to CO3 of certain intellectual
property. The founder and primary shareholder of CO3 is Steven Case, Chairman of
CyberOptics Corporation. The Company intends to account for the investment under
the equity method of accounting. Accordingly, the Company will adjust the
carrying amount of the investment to recognize its pro rata share of the
earnings or losses of CO3 beginning in August 2000.
-6-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's results and financial position during
the periods included in the accompanying financial statements. This discussion
should be read in conjunction with the interim consolidated financial statements
and associated notes.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The following Management's Discussion
and Analysis contains "forward looking statements" within the meaning of federal
securities laws which represent management's expectations or beliefs relating to
future events, including statements regarding trends in the industries in which
the Company functions, levels of orders, research and development expenses,
taxation levels, the sufficiency of cash to meet operating and capital expenses
and the ability to continue to price foreign transactions in U.S. currency.
These and other forward looking statements made by the Company, must be
evaluated in the context of a number of factors that may affect the Company's
financial condition and results of operations, including the following:
-- The cyclical nature of capital expenditures in the electronics
industry;
-- The dependence of such operations on orders of one sensor
product line from several large OEM's of component placement
machines in the surface mount industry;
-- The dependence of such operations on orders from two OEM
customers;
-- The significant proportion of the Company's revenue that is
derived from export sales;
-- The dependence of the Company's manufacturing on outside
contractors and suppliers, many of which require significant
lead time;
-- The ability of the Company to produce products that do not
experience significant quality errors;
-- The degree to which the Company is successful in protecting
its technology and enforcing its technology rights in the
United States and other countries;
-- The dependence of the Company's operations on several key
personnel;
-- The ability of the Company to effectively integrate the
operations of Kestra and HAMA so as to effectively introduce
new products and the ability to effectively introduce other
significant new products planned for 2000;
-- The speed of changes in technology in the microelectronics
manufacturing industry from which most of the Company's sales
are derived;
-- Competition for the functions that the Company's products
perform by larger "vision" companies and by other optical
sensor companies;
-- The ability of the Company to successfully develop in-process
technology acquired from Kestra and HAMA into viable products.
-7-
<PAGE>
RESULTS OF OPERATIONS
REVENUES
The following table sets forth revenues by product group for the three and six
month periods ended June 30 (in Thousands):
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
OEM Sensors $19,788 $11,107 $10,245 $ 5,529
SMT Systems 5,028 3,794 2,638 2,265
Semiconductor/Industrial Measurement 3,385 1,615 1,809 1,017
------- ------- ------- -------
Total $28,201 $16,516 $14,692 $ 8,811
</TABLE>
Revenues from the OEM sensor product group increased 78% during the six months
ended June 30, 2000 compared to the same period in 1999. During the second
quarter of 2000, OEM sensor revenues increased 85% compared to the same period
in 1999. Revenues from OEM sensors have increased primarily due to growth in
worldwide demand for SMT production equipment, and the resulting increase in
revenue from the Company's two largest OEM customers. The increase in revenues
during 2000 from one of the Company's largest customers is due in part to a
recovery in the Asian economy that began in the second half of 1999. The
Company's two largest OEM customers accounted for approximately 55% of total
revenues for the six months ended June 30, 2000, and 50% of revenues for the
comparable period in 1999. These customers accounted for approximately 54% of
revenues in the second quarter of 2000 compared to 49% in the second quarter of
1999.
SMT system product group revenues increased 33% during the six month period
ended June 30, 2000 from the comparable period in 1999, and increased 16% for
the second quarter of 2000 compared to the same period in 1999. SMT systems
revenues reflect sales of the Company's SE 200 and LSM 300 products. Increased
SMT system revenue levels are primarily the result of strong demand for the SE
200 and LSM 300 products from electronic manufacturing services (EMS) customers,
driven by growth in worldwide demand for SMT production equipment. As a result
of industry consolidation, EMS companies are becoming a larger proportion of
worldwide electronic assembly capacity. Growing revenues are a reflection of
efforts to increase the number of EMS companies that purchase CyberOptics
inspection products, as well as the overall increase in market demand for SMT
production equipment.
-8-
<PAGE>
Semiconductor and Industrial measurement product group revenues increased 110%
during the six month period ended June 30, 2000 from the comparable period in
1999, and increased 78% for the second quarter of 2000 compared to the same
period in 1999. Increased revenue levels are primarily the result of $3.1
million of revenue generated by HAMA during the six months ended June 30, 2000
compared to $404,000 in the comparable period in 1999. Revenues for the first
four months of 1999 do not reflect revenues of HAMA as it was acquired in May
1999. HAMA's revenues have grown consistently since the time of acquisition, a
reflection of a growing semiconductor capital equipment market and increased
acceptance of HAMA's products by semiconductor capital equipment manufacturers.
The Company has substantially exited the industrial measurement market.
International revenues comprised approximately 76% of total revenues during the
six month periods ended June 30, 2000 and 1999, and approximately 75% and 76% of
revenues during the second quarter of 2000 and 1999, respectively. The
international markets in Europe, Japan and the rest of Asia account for a
significant portion of the production capability of capital equipment for the
manufacture of electronics, the primary market for the Company's OEM sensors and
SMT systems product lines.
Revenues generated from products used primarily for SMT production (revenues
from OEM sensors and SMT systems) were approximately 88% and 90% of revenues for
the six month periods ended June 30, 2000 and 1999, respectively.
GROSS MARGIN
Gross margin for the six months ended June 30, 2000 increased as a percent of
revenues to 63% compared to 55% during the same period in 1999. For the second
quarter of 2000, gross margin increased to 64% of revenues compared to 56%
during the comparable period in 1999. Gross margin is highly dependent on the
level of revenues over which to spread the fixed component of cost of sales and
the related realization of manufacturing efficiencies. During 2000, gross margin
was positively impacted by higher revenue levels, lower warranty costs and by
the acquisition of HAMA, which has products that carry higher gross margins than
the majority of the Company's pre-acquisition products.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 16% to $4.9 million during the six
month period ended June 30, 2000 compared to the same period of 1999. For the
second quarter of 2000, research and development expenses of $2.4 million
remained relatively flat from the comparable period in 1999. As a percentage of
revenue, research and development expenses decreased to 17% during the six
months ended June 30, 2000 from 26% during the comparable period in 1999, and
decreased to 17% in the second quarter of 2000 compared to 28% in the same
period in 1999. Increased research and development expenses in 2000 was
primarily due to the acquisition of Kestra and HAMA in the second quarter of
1999 and development spending required to complete new SMT systems products
scheduled for commercial introduction later in 2000. Customer funded research
and development is recognized as a reduction of research and development
expense. During the six months ended June 30, 2000, customer funded research and
development recognized as a reduction of research and development expense
totaled $97,000. There was no customer funded research and development during
the first half of 1999.
-9-
<PAGE>
Research and development expenses during the first six months of 2000 were
primarily focused on completion of the new high speed solder paste inspection
system, the SE 300 and development work on the in-process products acquired from
Kestra, as well as development of next generation LaserAlign and semiconductor
wafer mapping sensors.
In August 2000, the Company acquired a 19% ownership interest in CyberOptics
Communications Corporation (CO3). The Company has contracted with CO3 to develop
a Photonics inspection system for the fiber optic telecommunications component
assembly market utilizing certain technology owned by the Company. Beginning in
August 2000, the Company will pay CO3 $80,000 per month for a period of 12
months for the development of this inspection system. The Company will own all
technology rights resulting from the development effort and CO3 will distribute
the product to the fiber optics telecommunications market. If the product is
successfully developed, the Company will be the exclusive manufacturer of this
product and will sell to CO3 at a contractually agreed upon markup to cost. The
Company will record total research and development expense of $960,000 over the
12 month term of the development agreement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 56% to $7.1 million
during the six month period ended June 30, 2000 compared to $4.6 million during
the comparable period in 1999. For the second quarter of 2000, selling, general
and administrative expenses increased 46% to $3.5 million compared to the same
period in 1999. As a percentage of revenue, selling, general and administrative
expenses decreased to 25% during the six month period ended June 30, 2000 from
28% in 1999, and for the second quarter decreased to 24% in 2000 from 27% in
1999. Increased selling, general and administrative expenses in 2000 are
primarily the result of personnel and marketing investments made to develop the
end-user SMT systems sales and service channel and the acquisition of Kestra and
HAMA.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
On April 6, 1999, the Company completed the acquisition of Kestra. At the time
of the acquisition, Kestra had under development technologies for application in
the pre-oven and post-oven reflow stages of electronic circuit board production,
and the Company recorded a $6.5 million charge to operations for the estimated
fair value of the acquired in-process research and development. The Company
commercially introduced the pre-oven system in the fourth quarter of 1999, and
is currently performing technical evaluations for potential customers. Revenue
from the first sales of pre-oven systems is anticipated during the third quarter
of 2000. The Company is continuing development of the acquired in-process
post-reflow technology and currently believes that a related product may be
introduced in late 2000 (KS 50 system discussed below). Schedule delays in the
introduction of the post-reflow product are the result of resource constraints
resulting from introduction efforts on the pre-oven system and are not expected
to cause any significant changes in total research and development costs to
complete development.
As the result of market feedback and development resource constraints, the
Company has made the decision to tier its product offerings and introduce a
family of 3 inspection systems for pre-oven and post-oven inspection utilizing
acquired in-process technology at different price points and inspection
capabilities. The initial system, the KS 100, was introduced in the fourth
quarter of 1999 and is expected to begin generating revenue in the third quarter
of 2000. The KS 50 system is expected to be introduced and generate revenue in
the fourth quarter of 2000. An additional system, KS 200 is expected to be
introduced in early 2001. Management does not anticipate any significant change
in expected revenue levels from the pre-oven and post-oven system products, but
is in the process of assessing the market position of the product and the
resulting impact on future revenues. These expectations are subject to change,
given uncertainties of the development process and potential changes in market
conditions.
-10-
<PAGE>
On May 5, 1999, the Company acquired substantially all of the operating assets
and assumed certain liabilities of HAMA Laboratories through HAMA Sensors, Inc.,
a newly formed, wholly-owned subsidiary of the Company. At the time of the
acquisition, HAMA had under development technology to develop laser-based
proximity sensors for robotic semiconductor wafer handling, which can
potentially be used in a vacuum environment, and laser micrometers that will
potentially determine the orientation and alignment of semiconductor wafers
during the production process and other potential applications. The Company
recorded a $771,000 charge to operations for the estimated fair value of the
acquired in-process research and development. Development has been completed on
the vacuum sensor and the custom kit micrometer and these products were
introduced during the fourth quarter of 1999. A mini laser micrometer was
introduced in the second quarter of 2000. The Company has temporarily put on
hold development of the acquired in-process technologies related to the six-inch
micrometer due to manufacturability issues. These factors could impact the
six-inch micrometer product development and release schedule.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS
Amortization of acquired intangible assets was approximately $680,000 and
$434,000 for the six and three month periods ended June 30, 2000. The
amortization is attributable to identifiable intangible assets and goodwill
resulting from the Company's acquisition of certain technology and other assets
of Electronic Packaging Company (EPC) during the first quarter of 1999 and the
Company's acquisition of Kestra and HAMA during the second quarter of 1999.
Amortization of these intangible assets is expected to remain constant at
approximately $434,000 per quarter over the remaining life of the intangible
assets and goodwill, which will run through 2005.
PROVISION FOR INCOME TAXES AND EFFECTIVE INCOME TAX RATE
The Company recorded a tax provision of $2,080,000 for the six month period
ended June 30, 2000, and $1,200,000 for the second quarter of 2000. The tax
provision during 2000 reflects both the non-deductible goodwill amortization
from the intangible assets related to the Kestra acquisition and valuation
allowances established to eliminate the potential future tax benefit of net
operating loss carryforwards generated by Kestra following the acquisition due
to uncertainty about realization. These items were offset somewhat in 2000 by
benefits from the Company's foreign sales corporation and research and
development tax credits. During the three and six month periods ended June 30,
1999 the company's effective tax rate was impacted by the items discussed above,
and the non tax deductible charge for acquired in-process research and
development from the Kestra acquisition.
ORDER RATE AND BACKLOG
CyberOptics' orders totaled $33.4 million during the six month period ended June
30, 2000 compared to $15.9 million during the same period in 1999. For the
second quarter of 2000, orders totaled $21.0 million compared to $9.2 million in
1999. Backlog totaled $16.5 million and $5.1 million at June 30, 2000 and 1999,
respectively. The scheduled shipment of the June 30, 2000 backlog is as follows
(in thousands):
3rd Quarter 2000 $11,060
4th Quarter 2000 and after 5,479
-------
Total backlog $16,539
-11-
<PAGE>
FINANCIAL INSTRUMENTS
The Company invests excess funds not required for current operations in certain
marketable securities. The investment policy for these marketable securities is
approved annually by the Board of Directors and administrated by management. A
third party, at the direction of management, manages the portfolio. The
investment policy dictates that marketable securities consist of U.S. Government
or U.S. Government agency securities with maturities of three years or less and
an average portfolio maturity of not more that 18 months. All marketable
securities are classified as available for sale and carried at fair value.
Consequently, if market rates were to increase, the Company's net income would
only be impacted if securities were sold prior to maturity.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and marketable securities increased $6.0 million to
$29.1 million as of June 30, 2000 from $23.1million as of December 31, 1999,
primarily due to $4.7 million of cash generated from operations and $2.6 million
of cash provided by the exercise of stock options. Increases in cash were
partially offset by $1.2 million of cash used to purchase fixed assets and other
intangibles.
The Company generated $4.7 million of cash from operations during the first six
months of 2000, primarily due to net income of $3.3 million, including $1.9
million of non-cash expenses for depreciation and amortization, and the
provision for inventory obsolescence. The cash generated from operations also
included an increase in accrued expenses of $1.5 million primarily the result of
increased accruals for compensation and payroll tax withholdings. These items
were offset somewhat by a $1.7 million increase in inventories and a $1.0
million increase in accounts receivable. The increase in inventory is the result
of anticipated continuation of recent sales volumes and the planned introduction
of new products later in 2000. The increase in accounts receivable is primarily
the result of higher revenue levels.
The Company used $6.1 million of cash in investing activities during the six
month period ended June 30, 2000. The majority of the change in cash from
investing activities is due to changes in the level of investment in marketable
securities resulting from the purchases and maturities of those securities,
which used $4.9 million of cash in 2000. In addition, the Company used
approximately $1.3 million of cash for the purchase of fixed assets, the
acquisition of certain technology and other intangible assets during the six
months ended June 30, 2000.
The Company generated $2.6 million of cash from financing activities during the
six months ended June 30, 2000, resulting from cash from stock option exercises.
During the second half of 2000 and early 2001, the Company will be implementing
a new configuration management system. Total external cost of implementation is
anticipated to be approximately $600,000, the majority of which will be
capitalized and depreciated beginning on the date of implementation. Other than
as discussed above, the Company has no material capital commitments except for
the funding of working capital requirements of Kestra during its product
development and early product introduction period. The Company believes working
capital and anticipated funds from operations will be adequate for anticipated
operating needs.
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<PAGE>
OTHER FACTORS
Changes in revenues have resulted primarily from changes in the level of unit
shipments and new product introductions. The Company believes that inflation has
not had any significant effect on operations. All of the Company's international
export sales are negotiated, invoiced and paid in U.S. dollars. Accordingly,
although currency fluctuations do not effect the Company's revenue and income
per unit, they can influence the price competitiveness of the Company's products
relative to other technologies and the willingness of existing and potential
customers to purchase units.
As a result of the Kestra acquisition the Company has an operating unit located
in the UK. During the second quarter of 2000, the Company recognized an expense
of $190,000 related to currency fluctuations on loans made to Kestra. However,
due to strategic steps to be undertaken to manage currency fluctuation risks,
the Company does not believe that currency fluctuations will have a material
impact on its future results of operations.
RECENT ACCOUNTING DEVELOPMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The SAB
summarizes certain of the SEC's views regarding revenue recognition. SAB 101 is
currently required to be implemented by the Company prior to December 31, 2000.
The effects of implementation, if any, are required to be reflected
retroactively to January 1, 2000. The Company is currently analyzing the effect
of the guidance outlined in SAB 101 and the potential impact on its consolidated
financial statements. If management determines that the implementation of SAB
101 requires a material change in revenue recognition policy, the Company would
likely record a charge for a cumulative effect of a change in accounting
principal for the year ending December 31, 2000 in accordance with SAB 101's
implementation guidance.
In June 1999 the FASB issued Statement of Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
effective date of FASB Statement No. 133." SFAS No. 137 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS 137 is
effective for the Company in the first quarter of the year beginning January 1,
2000. The adoption of SFAS 137 did not impact the Company.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of CyberOptics Corporation was held at 12:00
p.m. on Friday May 19, 2000. Shareholders holding 4,275,630 shares, or
approximately 83.9% of the outstanding shares, were represented at the meeting
by proxy or in person. Matters submitted at the meeting for vote by the
shareholders were as follows:
a. Election of Directors
The following nominees were elected to serve as members of the Board of
Directors until the annual meeting of shareholders in 2001 or until
such time as a successor may be elected:
TABULATION OF VOTES
-------------------
FOR WITHHELD
--- --------
Steven K. Case 4,265,643 9,987
Steven M. Quist 4,265,543 10,087
Michael A. Bowes 4,264,346 11,284
Alex. B. Cimochowski 4,265,643 9,987
Kathleen P. Iverson 4,256,193 19,437
Erwin A. Kelen 4,265,643 9,987
Irene M. Qualters 4,257,093 18,537
Michael M. Selzer 4,265,443 10,187
b. Approval of amendment to the 1998 Stock Incentive Plan
Shareholders approved an amendment to the 1998 Stock Incentive Plan to
increase the number of shares of common stock reserved for issuance by
250,000 by a vote of 4,126,737 shares in favor, 137,270 shares against.
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
a. Exhibits
Exhibit 27--Financial Data Schedule (For EDGAR filing only)
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
2000, or during the period from June 30, 2000 to the date of this
quarterly report on Form 10-Q.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CyberOptics Corporation
/s/ Steven M. Quist
-------------------
Steven M. Quist, President and Chief Executive Officer
(Principal Executive Officer and
Duly Authorized Officer)
/s/ Scott G. Larson
-------------------
Scott G. Larson, Chief Financial Officer
(Principal Accounting Officer and
Duly Authorized Officer)
Dated: August 11, 2000
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