UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ------- to -------
Commission File Number 0-20206
PERCEPTRON, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-2381442
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
23855 Research Drive
Farmington Hills, Michigan 48335-2643
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 478-7710
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
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 and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, 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-K or any
amendment to this Form 10-K: [ ]
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant, based upon the closing sale price of the
Common Stock on March 14, 1996, as reported by The Nasdaq Stock Market was
approximately $136,752,397 (assuming, but not admitting for any purpose,
that all directors and executive officers of the registrant are affiliates).
The number of shares outstanding of the registrant's Common Stock as of
March 14, 1996, was 6,792,454.
Documents Incorporated by Reference: None.
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants
Consolidated Financial Statements:
Balance Sheets - December 31, 1995 and 1994
Statements of Income for the years ended
December 31, 1995, 1994 and 1993
Statements of Shareholders' Equity
for the years ended December 31, 1995,
1994 and 1993
Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Perceptron, Inc.:
We have audited the accompanying consolidated balance sheets of Perceptron,
Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity and cash flows, and
financial statement schedule referred to in item 14a(2) for each of the
three years in the period ended December 31, 1995. These financial
statements and financial statement schedule are the responsibility of the
Company's mangement. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonably 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.
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 consolidated financial position of Perceptron,
Inc. and Subsidiaries as of December 31, 1995 and 1994, and the consolidated
results of their operaitons and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 14, 1996
<PAGE>
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $14,990,000 $ 7,917,000
Accounts receivable, net of
reserves of $35,000 and $236,000 14,292,000 11,745,000
Inventories, net of reserves
of $670,000 and $700,000 4,114,000 3,263,000
Prepaid expenses and deferred tax asset 2,658,000 419,000
--------- ----------
Total current assets 36,054,000 23,344,000
---------- ----------
Property and equipment:
Leased equipment 318,000 318,000
Machinery and equipment 7,696,000 5,800,000
Furniture and fixtures 492,000 389,000
Leasehold improvements 95,000 95,000
Less: Accumulated depreciation
and amortization (6,074,000) (5,439,000)
---------- ---------
Total property and equipment 2,527,000 1,163,000
---------- ---------
Total assets $38,581,000 $ 24,507,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to a bank $ 0 $ 287,000
Current portion of capital
lease obligations 46,000 94,000
Accounts payable 2,070,000 1,692,000
Accrued expenses 3,823,000 1,186,000
Accrued compensation and stock
option expense 2,284,000 1,465,000
--------- ---------
Total current liabilities 8,223,000 4,724,000
--------- ---------
Capital lease obligations, net of
current portion 0 46,000
--------- ---------
Total liabilities 8,223,000 4,770,000
--------- ---------
Commitments and Contingencies --- ---
Shareholders' equity:
Preferred Stock, no par value,
1,000,000 shares authorized,
none issued 0 0
Common Stock, $.01 par value;
19,000,000 shares authorized,
6,723,000 and 6,380,000 issued
and outstanding at December 31,
1995 and 1994, respectively 67,000 64,000
Cumulative translation adjustments (474,000) (438,000)
Additional paid-in capital 29,876,000 28,526,000
Retained earnings (deficit) 889,000 (8,415,000)
---------- ----------
Total shareholders' equity 30,358,000 19,737,000
---------- ----------
Total liabilities and
shareholders' equity $38,581,000 $24,507,000
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
1995 1994 1993
---------- ---------- ----------
Net sales $ 37,291,000 $ 27,835,000 $ 17,022,000
Cost of sales 14,175,000 11,028,000 6,977,000
---------- ---------- ----------
Gross profit 23,116,000 16,807,000 10,045,000
---------- ---------- ----------
Selling, general and
administrative expense 9,884,000 7,279,000 4,908,000
Engineering, research and
development expense 4,467,000 3,808,000 2,230,000
---------- ---------- ----------
Income from operations 8,765,000 5,720,000 2,907,000
---------- ---------- ----------
Interest income (expense), net 539,000 119,000 (21,000)
Foreign currency
transaction (loss) --- --- (184,000)
---------- ---------- ----------
Net income $ 9,304,000 $ 5,839,000 $ 2,702,000
========== ========== ==========
Net income per weighted
average share $ 1.28 $ 0.83 $ 0.45
==== ==== ====
Weighted average common and
common equivalent shares 7,257,784 6,998,380 5,973,502
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1993, 1994 and 1995
Cumulative
Foreign
Common Stock Currency Additional Retained Total
Translation Paid-In Earnings Shareholders'
Shares Amount Adjustments Capital (Deficit) Equity
-------- ------ ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 5,249,040 $52,000 $(379,000) $24,534,000 (16,956,000) $7,251,000
Net Proceeds from Private
Placement of Common Stock 450,000 5,000 3,389,000 3,394,000
Stock Options Exercised,
net of shares tendered 142,471 1,000 90,000 91,000
Translation Adjustment on
Investment in Foreign
Subsidiaries 13,000 13,000
Net Income 2,702,000 2,702,000
--------- ------ -------- --------- ---------- ----------
Balances, December 31, 1993 5,841,511 $58,000 $(366,000) $28,013,000 $(14,254,000) $13,451,000
--------- ------ -------- ---------- ----------- ----------
Stock Options Exercised,
net of shares tendered 538,708 6,000 513,000 519,000
Translation Adjustment
on Investment in Foreign
Subsidiaries (72,000) (72,000)
Net Income 5,839,000 5,839,000
--------- ------ ------- ---------- ---------- ----------
Balances, December 31, 1994 6,380,219 $64,000 $(438,000) $28,526,000 $(8,415,000) $19,737,000
--------- ------ -------- ---------- ---------- ----------
Stock Options Exercised,
net of shares tendered 342,560 3,000 591,000 594,000
Tax benefit of non-qualified
stock options exercised 632,000 632,000
Benefit of previously recorded
stock option compensation
expense attributable to
options exercised 127,000 127,000
Translation Adjustment on
Investment in Foreign
Subsidiaries (36,000) (36,000)
Net Income 9,304,000 9,304,000
---------- ------ -------- ----------- ---------- ----------
Balances, December 31, 1995 6,722,779 $67,000 $(474,000) $29,876,000 $889,000 $30,358,000
========== ====== ======== =========== ========= ==========
The accompanying notes are an integral part of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,304,000 $ 5,839,000 $ 2,702,000
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 635,000 458,000 317,000
Disposal of fixed assets --- 134,000 ---
Foreign currency transaction loss --- --- 184,000
Changes in operating assets and liabilities:
Accounts receivable (2,645,000) (2,833,000) (4,092,000)
Inventories (851,000) (887,000) (773,000)
Prepaid expenses and deferred tax asset (2,239,000) (164,000) (94,000)
Accounts payable 378,000 267,000 451,000
Accrued expenses 3,456,000 1,356,000 536,000
Deferred revenue --- 175,000 ---
---------- ---------- ----------
Total adjustments (1,266,000) (1,494,000) (3,471,000)
---------- --------- ---------
Net cash provided by (used in)
operating activities 8,038,000 4,345,000 (769,000)
---------- --------- ---------
Cash flows (used in) investing activities:
Capital expenditures (1,999,000) (738,000) (390,000)
--------- -------- --------
Net cash (used in) investing activities (1,999,000) (738,000) (390,000)
--------- -------- --------
Cash flows from financing activities:
Principal payments under capital leases (94,000) (103,000) (72,000)
Proceeds from issuance of short-term debt --- 287,000 2,700,000
Principal payments on short-term debt (287,000) --- (2,700,000)
Proceeds from the private placement of
common stock, net of expenses --- --- 3,394,000
Proceeds from the exercise of stock options 594,000 519,000 91,000
Tax benefit of non-qualified options exercised 632,000 --- ---
Benefit of stock options compensation
expense attributable to options exercised 127,000 --- ----
-------- -------- ----------
Net cash provided by financing activities 972,000 703,000 3,413,000
-------- -------- -----------
Effect of exchange rates on cash and cash equivalents 62,000 36,000 (32,000)
-------- ------- --------
Net increase in cash and cash equivalents 7,073,000 4,346,000 2,222,000
Cash and cash equivalents, beginning of year 7,917,000 3,571,000 1,349,000
--------- --------- ----------
Cash and cash equivalents, end of year $14,990,000 $7,917,000 $3,571,000
========== ========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest expense $28,000 $23,000 $24,000
======= ======= =======
Non-cash transactions:
Equipment acquired under capital leases $ 0 $101,000 $57,000
======= ======= ======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Operations
Perceptron, Inc. and its wholly-owned subsidiaries (the "Company")
are collectively involved in the design, development, manufacture, and
marketing of three-dimensional machine vision systems which are used
primarily in the automotive industry, and to a lesser extent, in other
industries.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Currency Translation
The financial statements of the Company's wholly-owned foreign
subsidiaries have been translated in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, with the functional currency being the
local currency in the foreign country. Under this standard, translation
adjustments are accumulated in a separate component of shareholders' equity.
Gains and losses on foreign currency transactions are included in the
consolidated statement of income.
Three-for-Two-Stock Split
The Company's Board of Directors announced a three-for-two stock
split of the Company's Common Stock which was effected in the form of a
stock dividend payable on November 30, 1995 to shareholders of record on
November 20, 1995. All reported historical information has been adjusted
accordingly to reflect the impact of this stock split.
Concentration of Credit Risk
The Company markets and sells its products primarily to automotive
assembly companies and to system integrators or original equipment
manufacturers, who in turn sell to automotive assembly companies. The
Company's accounts receivable are principally from a small number of large
customers. The Company performs ongoing credit evaluations of its
customers. To date, the Company has not experienced any significant losses
related to the collection of accounts receivable.
A significant portion of the Company's cash and cash equivalents
were on deposit at one bank as of December 31, 1995.
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.
Inventory
Inventory is stated at the lower of cost or market. The cost of
inventory is determined by the first-in, first-out (FIFO) method.
Inventory, net of reserves, is comprised of the following:
December 31,
1995 1994
---------- ----------
Component parts $ 3,022,000 $ 1,427,000
Work in process 641,000 1,341,000
Finished goods 451,000 495,000
--------- ---------
Total $ 4,114,000 $ 3,263,000
========= =========
<PAGE>
Property and Equipment
Property and equipment is recorded at cost. Depreciation related to
leased equipment, machinery and equipment, and furniture and fixtures is
computed on a straight-line basis over estimated useful lives ranging from
three to five years. Leasehold improvements are amortized over the term of
the lease or estimated useful life, whichever is shorter.
When properties are retired, the costs of such properties and
related accumulated depreciation or amortization are eliminated from the
respective accounts, and the resulting gain or loss is reflected in the
consolidated statement of income.
Revenue Recognition
The Company's products are generally configured to customer
specifications. Certain customers may require a demonstration of the system
prior to shipment. At the time of satisfactory demonstration, a written
customer acceptance is completed. Revenue is recognized upon the earlier of
written customer acceptance or shipment of the product to the customer.
Research and Development
Research and development costs, including software development
costs, are expensed as incurred.
Net Income Per Share
Net income per common and common equivalent share is calculated
based upon the weighted average number of shares of Common Stock
outstanding, adjusted for the dilutive effect of stock options and warrants,
using the treasury stock method. The dilutive effect of convertible shares
held by a minority shareholder of a foreign subsidiary has also been
included in the calculation of net income per share up to June 23, 1994, at
which time these shares were converted into Common Stock of the Company.
Cash and Cash Equivalents
In accordance with SFAS No. 95, the Company considers all highly
liquid investments purchased with maturities of three months or less to be
cash equivalents.
Reclassifications
Certain 1994 and 1993 amounts have been reclassified to conform to
the 1995 presentation.
Accounting for Stock Based Compensation
The Company has elected not to adopt SFAS No. 123 "Accounting for
Stock Based Compensation", and will comply with the disclosure provisions of
SFAS No. 123 for the year ended December 31, 1996.
2. Credit Facility:
The Company has unsecured credit facilities totaling $4.0 million
U.S. and 1.0 million DM. These facilities may be used to finance working
capital needs and equipment purchases or capital leases. Any borrowings for
working capital needs will bear interest at the bank's prime rate (8.5% as
of December 31, 1995); any borrowings to finance equipment purchases will
bear interest at the bank's prime rate plus 1/2%. The credit facilities
expire on June 30, 1996, unless canceled earlier by the Company or the bank.
The Company expects to renew these credit facilities. At December 31, 1995,
the Company had no outstanding liabilities under these facilities.
The credit facility requires the Company to maintain a minimum
amount of tangible net worth and a minimum debt to tangible net worth ratio.
The agreement also prohibits the Company from paying dividends, acquiring or
retiring any of its capital stock, or incurring any other debt, liens, or
guarantying any third party debt.
<PAGE>
3. Leases:
The following is a summary, as of December 31, 1995, of the future
minimum annual lease payments required under the Company's real estate and
other operating and capital leases having initial or remaining noncancelable
terms in excess of one year:
Year Capital Operating
---- -------- ---------
1996 $ 43,000 $ 381,000
1997 3,000 114,000
1998 --- 24,000
------ --------
Total minimum lease payments 46,000 $ 519,000
========
Less amount representing interest 0
------
Present value of net minimum lease
payments 46,000
Less current portion 46,000
-------
Long-term obligation under capital
leases $ 0
======
Depreciation of the assets recorded under capital leases is included
in depreciation expense. Rental expense for operating leases in 1995, 1994
and 1993 was $380,000, $365,000 and $333,000, respectively.
On March 5, 1996, the Company signed a 15 year lease for a new
facility which the Company expects to be able to occupy in December 1996.
This lease is expected to be accounted for as a capital lease, unless the
Company elects to exercise its option to purchase the facility for
approximately $5.4 million on or before March 31, 1996. The Company intends
to exercise this purchase option, and purchase the facility in December
1996. In the event the Company does not purchase the facility, minimum
annual lease payments required under this lease are as follows:
1996 $ 55,000
1997 665,000
1998 685,000
1999 706,000
2000 762,000
Thereafter 9,457,000
4. Commitments:
The Company has committed to provide funding in the amount of
$50,000 to a university in conjunction with research in manufacturing
methods utilizing the Company's products and technology. At December 31,
1995, the Company had funded $25,000 of its commitment for the university's
fiscal year ended June 30, 1996.
The Company has received a $1.22 million grant from the U.S.
Department of Commerce, through the National Institute of Standards and
Technology (NIST), for software development related to high-speed image
processing techniques for three-dimensional machine vision systems. This
grant is for the period beginning January 1, 1994, and ending March 31,
1996.
In connection with this grant, the Company has subcontracted a
portion of the research effort to a university and to an independent
research institute, at a total cost of $1.0 million. In addition, the
Company granted warrants to the research institute to purchase 30,000 shares
of Common Stock. The exercise price of these warrants is $11.17 per
share. During 1994 and 1995, the Company incurred total costs of $444,000
and $558,000 in connection with this grant, which were substantially
reimbursed by NIST. The amounts reimbursed by NIST are not recognized as
net sales by the Company, but are rather treated as a reduction of
engineering, research and development expense.
During 1993, the Company began a limited hedging program to minimize
the impact of foreign currency fluctuations. As the Company exports
product, it generally enters into limited hedging transactions relating to
the accounts receivable arising as a result of such shipment. These
transactions involve the use of forward contracts. At December 31, 1995,
the Company had entered into forward contracts covering $975,000 (1,386,000
DM). These contracts mature on various dates through May 1996. The fair
market value of the contracts at December 31, 1995 was $965,000 U.S.,
resulting in a net receivable of $10,000.
5. Shareholders Equity:
--Convertible Equity of Subsidiary
On June 23, 1994 the owner of a minority interest in the Company's
European subsidiary converted its equity interest in this subsidiary into
197,802 shares of Common Stock of the Company.
--Stock options
The Company maintains 1983 and 1992 Stock Option Plans covering
substantially all company employees and certain other key persons, including
the Chairman of the Board of Directors. These Plans are administered by a
committee of the Board of Directors. Activity under these Plans is shown in
the following table:
Number of
Shares Option Price
---------- -----------
Outstanding, January 1, 1993 626,700 $0.23-4.16
Options authorized and granted 1,025,734 3.70-8.66
Options terminated (41,484) 0.23-4.54
Options exercised (144,067) 0.23-4.16
--------- ----------
Outstanding, December 31, 1993 1,466,883 0.23-8.66
Options authorized and granted 253,323 8.83-15.50
Options terminated (46,133) 0.23-11.75
Options exercised (355,333) 0.23-7.33
--------- ----------
Outstanding, December 31, 1994 1,318,740 0.23-15.50
--------- ----------
Options authorized and granted 236,350 10.08-21.87
Options terminated (124,259) 0.23-17.83
Options exercised (353,944) 0.23-11.92
--------- -----------
Outstanding, December 31, 1995 1,076,887 $ 0.23-21.87
--------- -----------
Options outstanding under these Plans generally become exercisable
at 25 percent per year beginning one year after the date of the grant and
expire five to ten years after the date of the grant. At December 31, 1995,
options covering 267,669 shares were exercisable and options covering
231,738 shares were available for future grants under these plans.
During 1993, the Company granted, under the 1992 Stock Option Plan,
a non-qualified option to purchase 120,000 shares to the Chairman of the
Board of Directors, at an exercise price of $3.71 per share. At December
31, 1995, 26,944 of these fully exercisable options remained outstanding.
In connection with the issuance of these non-qualified stock options, the
Company agreed to reimburse the Chairman any difference between his actual
tax rate and the statutory capital gains tax rate in connection with his
exercising these options.
The Company also maintains a Director Stock Option Plan covering all
non-employee directors. This Plan is administered by a committee of the
Board of Directors.
Number of
Shares Option Price
--------- ------------
Outstanding, December 31, 1994 0
Options authorized and granted 60,000 $11.83 - 12.83
Options terminated 0
Options exercised 0
Outstanding, December 31, 1995 60,000 $11.83 - 12.83
Each non-employee director at the date the Director Stock Option
Plan was adopted received, and each non-employee director as of the date
they are first elected to the Board of Directors will receive, an option to
purchase 15,000 shares of Common Stock (the "Initial Option"). Initial
Options become exercisable in full on the first anniversary of the day of
the grant. In addition, each non-employee director who has been a director
for six months before the date of each Annual Meeting of Shareholders
automatically will be granted, as of the date of such Annual Meeting, an
option to purchase an additional 1,500 shares of Common Stock. These Annual
Options become exercisable in three annual increments of 33-1/3% of the
shares subject to the option, and expire ten years from the date of the
grant. During 1995, Initial Options to purchase 60,000 shares of Common
Stock were granted at exercise prices ranging from $11.83 to $12.83 per
share. At December 31, 1995 none of these options were exercisable and
options covering 52,500 shares were available for future grants under this
plan.
The Company granted warrants to an independent research institute to
purchase 30,000 shares of Common Stock, 15,000 of which expire in each of
1997 and 1998. The exercise price of these warrants is $11.17 per share.
6. 401K Plan:
The Company has a 401(k) tax deferred savings plan that covers all
eligible employees. The Company may make discretionary contributions to the
plan. The Company's contributions to the plan during 1995, 1994 and 1993
were $163,000, $108,000 and $48,000, respectively.
7. Income Taxes:
The Company adopted Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" ("SFAS No. 109"), as of January 1, 1993.
The adoption of SFAS No. 109 did not have a significant impact on net income
for the years ended December 31, 1994 or 1993. As a result of available net
operating losses, there was no provision for income taxes in 1994 and 1993.
The income tax provision reflected in the statement of income consists of
the following for the year ended December 31, 1995:
Current provision, included in accrued expenses $ 1,500,000
Deferred taxes (1,500,000)
---------
Total provision -0-
=========
Differences between the deferred tax provision and amounts recorded
as deferred tax assets in the consolidated balance sheet reflect the tax
benefit of approximately $700,000 for deductions on certain stock options
exercised.
Deferred income taxes, on an SFAS No.109 basis, reflect the
estimated future tax effect of temporary differences between the amount of
assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations. The Company's deferred tax assets are
substantially represented by the tax benefit of net operating loss carry
forwards, together with investment tax credit, research activities tax
credit and general business credit carry forwards. As of December 31, 1994,
the Company had deferred tax assets which were entirely offset by a
valuation reserve. The components of deferred tax assets as of December 31,
1995 were as follows:
Deferred
Tax
Assets
---------
Net operating loss carry forwards $ 1,200,000
Investment tax credit carry forwards 100,000
Increasing research activities carry forwards 800,000
Other 300,000
---------
Subtotal 2,400,000
Valuation reserve (200,000)
---------
Deferred tax asset $ 2,200,000
=========
<PAGE>
As of December 31, 1995, net operating loss carry forwards were
available for U.S. income tax purposes of approximately $3.6 million.
Investment tax and research activities credits of $860,000 are also
available to benefit future reported U.S. taxable earnings. These losses
and credits expire, if unused, at various dates from 1998 through 2007. The
Company also has tax loss carry forwards available at foreign subsidiaries
of approximately $4.0 million, which may generally be carried forward
indefinitely. For the years ended December 31, 1995, 1994 and 1993, the
Company realized benefits of approximately $3 million, $2 million and $1
million, respectively, related to the utilization of net operating loss
carry forwards.
Differences between income tax provision (benefit) and that computed
by applying the statutory federal income tax rate is as follows for the year
ended December 31, 1995.
Income tax provision at the federal statutory rate 34%
Utilization of net operating loss carryforwards (34)
Change in the valuation allowance (17)
Net provision for taxes on foreign earnings 17
----
-0-
====
The deferred tax asset relates primarily to net operating loss
carryforwards and tax credit carryforwards. The Company anticipates
utilizing its net operating loss carryforwards and tax credit carryforwards
during 1996. Accordingly, management believes that it is more likely than
not that substantially all of the deferred tax will be realized, although
realization is not assured.
Utilization of the Company's net operating loss carry forwards, tax
credit carry forwards and certain future deductions could be restricted, in
the event of future changes in the Company's equity structure, by provisions
contained in the Tax Reform Act of 1986.
8. Information About Major Customers:
The Company sells its products directly to both domestic and
international automotive assembly companies. For the year ended December
31, 1995, the Company derived 36% of its net sales from three such
customers, one of which was a shareholder until October 1994, when this
customer sold their shares. The Company also sells to system integrators or
original equipment manufacturers ("integrators"), who in turn sell to those
same automotive companies. For the year ended December 31, 1995, 28% of net
sales were to integrators, where those products were for the benefit of the
same three automotive assembly companies. In 1995, sales by the Company to
each of these three customers exceeded 8% of the Company's net sales.
During 1994, 34% of total net sales was derived from three domestic
automotive companies, and 49% from sales by integrators to such companies.
In 1994, sales by the Company to each of these three customers exceeded 10%
of the Company's net sales. During 1993, 38% of net sales were derived
from three automotive companies and 28% from sales by integrators to such
companies. In 1993, sales by the Company to each of these three companies
exceeded 10% of the Company's net sales.
9. Contingencies:
The Company may, from time to time, be subject to legal proceedings
and claims. Litigation involves many uncertainties. Management is
currently unaware of any significant pending litigation affecting the
Company, other than the indemnification matter and the complaint discussed
in the following paragraphs.
The Company has been informed that certain of its customers have
received allegations of possible patent infringement involving processes and
methods used in the Company's products. One such customer is currently
engaged in litigation relating to such matter. This customer has notified
various companies from which it has purchased such equipment, including the
Company, that it expects the suppliers of such equipment to indemnify such
customer, on a pro-rata basis, for expenses and damages, if any, incurred in
this matter. Management believes, however, that the processes used in the
Company's products were independently developed without utilizing any
previously patented process or technology. Because of the uncertainty
surrounding the nature of any possible infringement and the validity of any
such claim or any possible customer claim for indemnity, it is not possible
to estimate the ultimate effect, if any, of this matter on the Company's
financial position.
On March 13, 1996, a complaint was filed naming the Company as a
defendant, along with two other co-defendants, in an action alleging that
the Company's TriCam sensor violates a patent held by the plaintiff and
seeking preliminary and permanent injunctions and damages. Management
believes that its TriCam sensor was independently developed without
utilizing any previously patented process or technology and intends to
vigorously defend its position.
<PAGE>
10. Foreign Operations:
The Company operates in three primary geographic areas: North
America, Europe and Asia. Geographical area data is as follows ($000's):
Years ended December 31,
-----------------------------
1995 1994 1993
---- ---- ----
Net Sales:
North America* $26,899 $25,341 $15,554
Europe and Asia 13,049 3,606 2,351
Intercompany Sales (2,657) (1,112) (883)
------ ------ ------
Total Net Sales $37,291 $27,835 $17,022
====== ====== ======
Income (Loss) from Operations:
North America* $ 3,011 $ 5,513 $ 3,312
Europe and Asia 5,754 207 (405)
------- ------- -------
Total Income from Operations $ 8,765 $ 5,720 $ 2,907
======= ======= =======
Identifiable assets at December 31:
North America* $30,808 $22,209 $13,686
Europe and Asia 7,773 2,298 2,452
------- ------- -------
Total Assets $38,581 $24,507 $16,138
======= ======= =======
__________________________
* Includes intercompany amounts; intercompany sales prices are based on
cost plus a transfer fee.
11. Selected Quarterly Financial Data (unaudited):
Selected unaudited quarterly financial data for the years ended
December 31, 1995 and 1994, are as follows ($000's except earnings per
share):
Quarter ended
----------------------------------
3-31 6-30 9-30 12-31
1995: ---- ---- ---- -----
Net sales $5,989 $8,603 $9,311 $13,388
Gross profit 3,606 5,250 5,823 8,437
Net income 733 1,914 2,516 4,141
Earnings per share $ .10 $ .27 $ .35 $ .56
Weighted average shares 7,087 7,127 7,315 7,391
1994
Net Sales $4,479 $6,251 $7,769 $9,336
Gross profit 2,664 3,868 4,795 5,480
Net income 427 1,371 1,824 2,217
Earnings per share $ .06 $ .20 $ .26 $ .31
Weighted average shares 6,867 6,927 6,974 7,064
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table lists the members of the Board of Directors and
executive officers of the Company. The directors shall serve until the 1997
Annual Meeting of Shareholders or until the election and qualification of
their successors or until their resignation or removal. The officers listed
below were appointed by the Board of Directors and serve in the capacities
indicated. Executive officers are normally appointed annually by the Board
of Directors and serve at the pleasure of the Board.
Position, Principal Occupations and
Name and Age Other Directorships
- - ------------ -----------------------------------------
Dwight D. Carlson, 52 Mr. Carlson has been a director of the Company
since 1981, when he founded the Company. Since
February 1996, Mr. Carlson has served as Vice-
Chairman of the Board of Directors. From 1981 to
February 1996, Mr. Carlson was President and Chief
Executive Officer of the Company. Mr. Carlson also
serves as Chairman of the Board of Michigan Future,
Inc., a Michigan non-profit corporation addressing
competitiveness issues in the State of Michigan,
Chairman of the Auto Body Consortium, a non-profit
company engaged in research to improve
manufacturing processes in the automotive industry,
a director of Industrial Technology Institute of
Michigan, a non-profit corporation focused on
research to enhance Michigan's economy, and a
director of the National Coalition for Advanced
Manufacturing, a non-profit corporation whose
purpose is to develop cooperation between industry,
government and academia in advanced manufacturing
and industrial modernization. Recently, Mr.
Carlson joined the Visiting Committee of the
National Institute of Standards and Technology
(NIST).
Knut M. Heitmann, 60 Mr. Heitmann has been a director of the Company
since May 1995 and a director of Perceptron Europe,
B.V., a wholly owned subsidiary of the Company,
since 1986. Since January 1995, Mr. Heitmann has
served as a consultant to various companies,
including Daimler Benz A.G. From November 1989 to
December 1994, Mr. Heitmann was Director Technical
Strategies, Technology Analyses and Forecasts of
Daimler Benz A.G. Mr. Heitmann also serves as a
board member of various private companies.
Paul L. McDermott, 42 Mr. McDermott has been a director of the Company
since 1993. Mr. McDermott has been Managing
Director of Nomura Securities International, Inc.,
an investment banking firm, since 1993 and has
served in various other capacities at Nomura since
1986. Mr. McDermott also serves as a director of
New Valley Corp. and International Apparel, Inc.
James E. McGrath, 41 Mr. McGrath has been Chairman of the Board since
May 1993 and a director of the Company since 1983.
Since April 1989, Mr. McGrath has been Chairman and
Chief Executive Officer of Fairfax Capital
Partners, Inc., a private merchant banking firm,
and also is currently a director of American
Medical Response, Inc. and Encon Systems, Inc.
<PAGE>
Alfred A. Pease, 50 Mr. Pease has been a director of the Company since
February 1996. Since February 1996, Mr. Pease has
been President and Chief Executive Officer of the
Company. From November 1993 to February 1996, Mr.
Pease was President of Digital Originals, Inc., a
manufacturer of digital imaging products and
related software. From December 1990 to October
1993, Mr. Pease served as Product Line Director of
Advanced Micro Devices, Inc., a manufacturer of
semi-conductor products.
James A. Ratigan, 48 Mr. Ratigan has been a director of the Company
since 1989. Since April 1996, Mr. Ratigan has been
Executive Vice President and Chief Financial
Officer. From May 1994 to April 1996, Mr. Ratigan
served as Executive Vice-President and Chief
Operating Officer of the Company and has served in
various other capacities at the Company since
December 1993. From October 1992 to December 1993,
Mr. Ratigan provided financial consulting services
for a number of companies, including the Company.
From 1987 until October 1992, he was a Venture
Manager with The Adler Group, a private venture
capital firm. Mr. Ratigan has advised the Company
that he intends to leave the Company on August 31,
1996 due to personal and family considerations.
Harry T. Rein, 51 Mr. Rein has been a director of the Company since
1985. Since 1987, he has been Managing General
Partner and founder of Canaan Partners, a venture
capital firm. Mr. Rein also serves as a director
of various other private corporations.
Paul E. Rice, 52 Mr. Rice has been a director of the Company since
1989. Since 1984, he has been Administrator of the
Alternative Investments Division, Bureau of
Investments, Michigan Department of Treasury. Mr.
Rice currently serves on the advisory boards of
numerous alternative investment funds and is also a
director of various other private corporations.
Neil E. Barlow, 40 Mr. Barlow is Executive Vice President -
International and has been an Executive Vice
President of the Company in various capacities
since January 1, 1990. Prior to that, he had held
various positions at the Company including Vice
President-Engineering, Director of Manufacturing
and Managing Director of the Company's European
subsidiaries for more than five years.
ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors announced a three-for-two stock
split of the Company's Common Stock which was effected in the form of a
stock dividend payable on November 30, 1995 to shareholders of record on
November 20, 1995 (the "1995 Stock Split"). All reported historical
information contained in Item 11 and Item 12 has been adjusted accordingly
to reflect the impact of the 1995 Stock Split.
DIRECTORS
All of the members of the Board of Directors who are not employed by
the Company (other than Mr. McGrath) receive $1,000 for each Board meeting
attended. In addition, directors are reimbursed for their out-of-pocket
expenses incurred in attending Board and committee meetings. Directors,
other than directors who are serving on the Company's Management Development
and Compensation Committee, are also eligible to participate in the
Company's 1992 Stock Option Plan (the "1992 Plan").
<PAGE>
All of the members of the Board of Directors who are not employed by
the Company (other than the Chairman of the Board) (the "Eligible
Directors") participate in the Directors Stock Option Plan (the "Directors
Plan"). On February 9, 1995, each of Messrs. McDermott, Rein and Rice were
granted an option to purchase 15,000 shares of Common Stock ("Initial
Option") with an exercise price of $12.83. Any additional Eligible Director
who is first elected or appointed after February 9, 1995 will receive an
Initial Option to purchase 15,000 shares of Common Stock on the date of his
or her election or appointment. On May 15, 1995, Mr. Heitman was appointed
to the Board of Directors and was granted an Initial Option to purchase
15,000 shares of Common Stock with an exercise price of $11.83. In
addition, each Eligible Director who has been a director for six months
before the date of each Annual Meeting of Shareholders held during the term
of the Directors Plan automatically will be granted, as of the date of such
Annual Meeting, an option to purchase an additional 1,500 shares of Common
Stock (an "Annual Option"). The Directors Plan expires on February 9, 2000.
The exercise price of options granted under the Directors Plan is the last
reported sale price per share of the Company's Common Stock as quoted on The
Nasdaq Stock Market's National Market on the date of grant. Each option
granted under the Directors Plan as an Initial Option becomes exercisable in
full on the first anniversary of the date of grant. Options granted as
Annual Options become exercisable in three annual increments of 33-1/3% of
the shares subject to the option. The exercisability of such options is
accelerated in the event of the occurrence of certain changes in control of
the Company. All options granted under the Plan are exercisable for a
period of ten years from the date of grant, unless earlier terminated due to
the termination of the Eligible Director's service as a director of the
Company.
In May 1993, the Company engaged James E. McGrath to serve as
Chairman of the Board of the Company. Mr. McGrath is paid $5,000 per month
for his services as Chairman of the Board. Mr. McGrath was granted
non-qualified stock options to purchase 120,000 shares of Common Stock, all
of which were immediately exercisable at an exercise price of $3.71 per
share, which was the fair market value of the Common Stock on the date such
options were granted. Such options expire on the earlier of May 21, 2003 or
one year following Mr. McGrath's death. By April 15 of the year following
an exercise of Mr. McGrath's option, Mr. McGrath will receive a payment
equal to the difference between Mr. McGrath's actual federal income tax
liability for the calendar year in which an exercise of Mr. McGrath's option
occurs and the amount Mr. McGrath's federal income tax liability for the
calendar year of such exercise would have been if Mr. McGrath's option had
been an incentive stock option rather than a non-qualified stock option, the
shares received upon exercise of the option had been sold at the date of
exercise at the exercise price and such shares had been held for more than
one year at that date (the "Tax Differential Payment"), plus an amount
required for the payment to be received on an After-Tax Basis. After-Tax
Basis means the amount of the Tax Differential Payment supplemented by a
further payment so that the sum of the two payments, after deduction of all
federal, state and local taxes resulting from the receipt of such two
payments, shall be equal to the Tax Differential Payment.
Of the stock options granted to Mr. McGrath to purchase 120,000
shares of Common Stock, options to purchase 93,056 shares were exercised in
1995, and options to purchase 26,944 are outstanding at April 15, 1996. On
April 4, 1996, the Company paid Mr. McGrath $279,565, representing the Tax
Differential Payment due Mr. McGrath related to the options he exercised in
1995.
<PAGE>
EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth certain information as to
compensation paid by the Company for services rendered in all capacities to
the Company and its subsidiaries during the fiscal years ended December 31,
1993, 1994, and 1995 to (i) the individual who served as the Company's Chief
Executive Officer during 1995, (ii) the Company's executive officers at
December 31, 1995 (other than the Chief Executive Officer) and (iii) one
former executive officer, who during portions of the fiscal year ended
December 31, 1995 was classified by the Company as an executive officer for
purposes of the Commission's regulations, whose aggregate annual salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Annual Compensation Awards Compensation
------------------------------------------ ------------ ------------
Other
Name and Principal Annual
Position Year Salary Bonus Compensation<F1> Options
($) ($) ($) (#) ($)
- - ------------------ ----- ------- ------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dwight D. Carlson,
President and 1993 137,500 59,408 --- 263,191 7,757<F3>
Chief Executive 1994 146,000 88,354 --- --- 12,059<F4>
Officer<f(2> 1995 155,000 129,156 --- --- 12,380<F5>
James A. Ratigan,
Executive Vice 1993 6,749 --- --- 172,500 ---
President and 1994 125,000 82,508 18,878<F7> --- 25,810<F4>
Chief Operating 1995 132,500 89,524 --- --- 6,958<F5>
Officer<F6>
Neil E. Barlow
Executive Vice 1993 125,000 41,585 --- 62,961 6,079<F3>
President - 1994 125,000 82,508 --- --- 7,108<F4>
International 1995 132,500 89,524 --- --- 5,958<F5>
Gary D. Johnson,
Executive Vice 1993 107,000 41,585 --- 62,961 3,312<F3>
President - 1994 112,350 86,753 --- --- 6,478<F4>
Marketing<F8> 1995 112,350 30,000 --- --- 8,016<F5>
- - --------------
</TABLE>
<F1> Perquisites and other personal benefits were provided to all of the
persons named in the Summary Compensation Table. Disclosure of such amounts
is not required because such amounts were less than 10% of the total annual
salary and bonus reported for each of the respective individuals for each
period presented.
<F2> Mr. Carlson served as President and Chief Executive Officer until
February 14, 1996, at which time he was appointed Vice Chairman.
<F3> "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1993 as follows: Mr. Carlson $2,520, Mr. Barlow $2,520 and Mr. Johnson
$1,800; (ii) the dollar value of any life insurance premiums paid by the
Company in the fiscal year ended December 31, 1993 with respect to term life
insurance for the benefit of each of the named executives as follows: Mr.
Carlson $1,215, Mr. Barlow $778 and Mr. Johnson $1,512; and (iii) the dollar
value of any disability insurance premiums paid by the Company in the
<PAGE>
<PAGE>
fiscal year ended December 31, 1993 in excess of the Company's standard
disability coverage for the benefit of each of the following named
executives: Mr. Carlson $4,022 and Mr. Barlow $2,781.
<F4> "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1994 as follows: Mr. Carlson $4,620, Mr. Ratigan $2,310, Mr. Barlow $3,675
and Mr. Johnson $3,750; (ii) the dollar value of any life insurance premiums
paid by the Company in the fiscal year ended December 31, 1994 with respect
to term life insurance for the benefit of each of the named executives as
follows: Mr. Carlson $3,075, Mr. Ratigan $842, Mr. Barlow $414 and Mr.
Johnson $2,728; (iii) the dollar value of any disability insurance premiums
paid by the Company in the fiscal year ended December 31, 1994 in excess of
the Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Carlson $4,364 and Mr. Barlow $3,019; and
(iv) temporary housing, moving, travel and other expenses related to Mr.
Ratigan's relocation to Michigan totaling $22,658.
<F5> "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to the fiscal year ended December 31,
1995 as follows: Mr. Carlson $4,620, Mr. Ratigan $4,620, Mr. Barlow $2,100
and Mr. Johnson $4,620; (ii) the dollar value of any life insurance premiums
paid by the Company in the fiscal year ended December 31, 1995 with respect
to term life insurance for the benefit of each of the named executives as
follows: Mr. Carlson $3,396, Mr. Ratigan $2,338, Mr. Barlow $838 and Mr.
Johnson $3,396; (iii) the dollar value of any disability insurance premiums
paid by the Company in the fiscal year ended December 31, 1995 in excess of
the Company's standard disability coverage for the benefit of each of the
following named executives: Mr. Carlson $4,364 and Mr. Barlow $3,020.
<F6> Mr. Ratigan joined the Company in December 1993. Mr. Ratigan served as
Executive Vice President and Chief Operating Officer until April 19, 1996,
at which time he was appointed Executive Vice President and Chief Financial
Officer.
<F7> Includes payment of certain tax "gross up" amounts of $18,878 for
certain taxable income received by Mr. Ratigan in 1994 as described under
"All Other Compensation".
<F8> Mr. Johnson resigned as Executive Vice President-Marketing, effective
July 15, 1995, but continued his employment with the Company.
<PAGE>
Exercise and Value of Options
The following table sets forth certain information concerning exercises of
stock options during the fiscal year ended December 31, 1995 by each of the
persons named in the Summary Compensation Table and the number of and the
value of unexercised stock options held by such persons as of December 31,
1995 on an aggregated basis.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options at Fiscal Options at Fiscal
Exercise Realized Year-End (#) Year-End ($)<F1>
Name (#) ($)<F2> Exercisable Unexercisable Exercisable Unexercisable
- - ---- --------- -------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dwight D. Carlson 31,008 409,301 80,611 165,079 1,358,160 2,853,459
James A. Ratigan 43,125<F3> 548,942 0 43,125 0 643,281
Neil E. Barlow 58.682 667,229 12,710 40,455 199,079 670,869
Gary D. Johnson 31,133<F4> 450,835 10,961 40,458 175,319 670,903
- - ---------
</TABLE>
<F1> Represents the total gain which would have been realized if all such
options had been exercised on December 31, 1995.
<F2> Represents the fair market value of the shares of Common Stock relating
to exercised options as of the date of exercise, less the exercise price of
such options.
<F3> Includes 15,495 shares of Common Stock underlying stock options
retained by the Company as payment for the exercise price of 27,630 shares
of Common Stock.
<F4> 20,755 of the shares acquired on exercise were paid for by the
surrender of 4,699 previously acquired shares of Common Stock.
Employment Contracts
Messrs. Pease, Carlson, Ratigan and Johnson serve in their present
capacities pursuant to the terms of employment agreements.
Mr. Pease' agreement provides for an annual base salary of $200,000, subject
to increase at the discretion of the Management Development and Compensation
Committee, benefits comparable to the Company' other executive officers
including life, disability and health insurance, the use of a Company leased
automobile and an annual bonus target level of 60% of his base salary. In
addition, such agreement provides for the reimbursement of temporary
housing, travel and relocation expenses incurred by Mr. Pease, including
moving expenses, real estate brokerage commissions and certain closing and
loan costs associated with the sale of Mr. Pease's prior residence and
purchase of a new residence in the state of Michigan and certain incidental
expenses related to the relocation, plus a payment equal to the income taxes
payable by Mr. Pease as a result of the receipt of such reimbursements and
tax payment. In the event Mr. Pease's employment is terminated without
cause, his salary and benefits will continue for twelve months and he will
earn a pro rata portion of any bonus that would have been earned in the year
of the termination.
<PAGE>
Mr. Pease was granted options to purchase 200,000 shares of Common Stock
under the 1992 Plan (the "Original Options") which do not become exercisable
until shareholders approve certain amendments to the 1992 Plan. In the
event shareholders do not approve such amendments, the Company has agreed to
grant Mr. Pease an option to purchase 100,000 shares of Common Stock (the
"Substitute Option") on terms no less favorable than those applicable to the
Original Options, options to purchase 100,000 of the Original Options shall
expire and be canceled and the Company shall use its best efforts to obtain
shareholder approval for the remainder of the Original Options. The
Original Options consist of non-qualified stock options for 182,980 shares
of Common Stock exercisable at an exercise price of $20.625 per share and
the remainder as incentive stock options exercisable at an exercise price of
$23.50 per share. These options become exercisable in cumulative annual
installments of 25% beginning February 14, 1997 and expire on February 14,
2006. In addition, in the event Mr. Pease's employment is terminated
without cause after July 14, 1996, unexercisable options for 66,667 shares
of Common Stock held by him will become immediately exercisable.
Mr. Carlson's agreement provides for an annual base salary of $155,000,
benefits comparable to the Company's other executive officers, reimbursement
of reasonable monthly club dues, and an annual bonus target level of
$95,000. In the event Mr. Carlson's employment is terminated without cause,
his salary, a $7,917 monthly bonus and his benefits will continue for the
longer of (a) the number of months following the termination of the
agreement which is equal to one month for each year Mr. Carlson was employed
by the Company or (b) March 1, 1999, and all options held by him to the
extent not then exercisable, shall become immediately exercisable. If Mr.
Carlson's employment terminates for any reason, he will earn a pro rata
portion of any bonus that would have been earned in the year of the
termination.
The Company can elect to convert Mr. Carlson's employment agreement into a
consulting arrangement at any time, with Mr. Carlson receiving the same
annual base salary, bonus and perquisites as set forth above through March
1, 1999 and the Company extending the term of his stock options so that they
continue to vest through March 1, 1999. Mr. Carlson is required to render
at least sixteen hours of consulting services per month. Upon the
termination of the consulting arrangement, Mr. Carlson will receive the same
benefits he would have received, as described above, upon termination of his
employment. Mr. Carlson will also be entitled to office space and
secretarial support for one year after he is no longer an employee of the
Company and so long as he continues to serve as Vice Chairman.
Mr. Ratigan's employment agreement provides for an annual base salary of
$132,500, subject to increase at the discretion of the Management
Development and Compensation Committee, benefits comparable to the Company's
other executive officers and an annual bonus target level in 1996 of
$72,000. In addition, such agreement provides for loans to Mr. Ratigan in
amounts required to pay taxes incurred by Ratigan upon the exercise of non-
qualified stock options granted to him. No loans have ever been made by the
Company to Mr. Ratigan under this agreement. In the event Mr. Ratigan's
employment is terminated without cause, prior to August 31, 1996, he will
continue to receive his full salary, together with full life, disability and
health benefits and a $1,112 monthly payment through August 31, 1996 and all
options held by him to extent not then exercisable, shall become immediately
exercisable. Following termination of Mr. Ratigan's employment in August
1996, he will continue to receive one-half of his salary, together with full
life, disability and health insurance benefits and a $1,585 monthly payment
until August 31, 1997. If Mr. Ratigan's employment terminates for any
reason, he will earn a pro rata portion of any bonus that would have been
earned in the year of the termination.
Mr. Johnson's agreement provides for a monthly salary of $9,362.50 through
September 15, 1996, benefits comparable to the executive officers of the
Company and a payment of $54.00 per hour of service in excess of eight hours
a month. Beginning September 15, 1996, Mr. Johnson becomes a consultant to
the Company under an arrangement which expires April 1, 1998, unless
terminated by the Company upon 90 days prior written notice or by Mr.
Johnson upon 60 days prior written notice. Under this consulting
arrangement, Mr. Johnson will be compensated at a per diem rate of $1,000,
with a minimum monthly fee of $2,000. If the Company terminates the
consulting arrangement, Mr. Johnson will vest in 60% of the options held by
him which are not then exercisable and if Mr. Johnson terminates the
consulting arrangement, Mr. Johnson will vest in 40% of the options held by
him which are not then exercisable.
Termination of Employment and Change of Control Arrangements
Payments due to Messrs. Pease, Carlson, Ratigan and Johnson upon termination
of their employment with the Company are described above under Item 11
"Executive Compensation - Employment Agreements."
Agreements relating to stock options granted under the 1992 Plan to each of
the executive officers named in the Summary Compensation Table, as well as
certain other officers of the Company, also provide that such options become
immediately exercisable in the event that the optionee's employment is
terminated without cause, or there is a diminishment of the optionee's
responsibilities, following a Change of Control of the Company or, if, in
the event of a Change of Control, such options are not assumed by the person
surviving the Change of Control or purchasing the assets
<PAGE>
in the Change of Control. A "Change of Control" is generally defined as a
merger of the Company in which the Company is not the survivor, certain
share exchange transactions, the sale or transfer of all or substantially
all of the assets of the Company, or any person or group of persons (as
defined by Section 13(d) the Securities Exchange Act of 1934, as amended)
acquires more than 50% of the Common Stock ("Option Acceleration
provision").
Certain option agreements issued to officers of the Company contain a
provision accelerating the exercisability of options granted under the 1992
Plan in the event of certain terminations of employment without cause.
In addition to the Option Acceleration Provision contained in the 1992 Plan
agreements, the Company's 1983 Stock Option Plan provides that options
granted under such plan to each of the executive officers named in the
Summary Compensation Table become fully exercisable, even if not otherwise
exercisable, if such options are not assumed by the surviving corporation of
any merger or consolidation of the Company or in connection with the sale or
transfer by the Company of substantially all of its assets.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to its Annual Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized.
May 8, 1996 PERCEPTRON, INC.
By: /s/ Alfred A. Pease
Its: President and Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibits
23 Consent of Independent Accountants
27 Financial Data Schedule
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Perceptron, Inc. on Form S-8 (File Nos. 33-63666, 33-63664, 33-85656, 33-
93910, 333-00446 and 333-00444) and on Form S-3 (File No. 33-78594)) of our
report dated March 14, 1996, on our audits of the consolidated financial
statements and the financial statement schedule of Perceptron, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and for the years ended
December 31, 1995, 1994 and 1993, which report is included in this Annual
Report on Form 10-K for the year ended December 31, 1995.
Coopers & Lybrand L.L.P.
Detroit, Michigan
May 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 14,990,000
<SECURITIES> 0
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0
0
<OTHER-SE> 30,291,000
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</TABLE>
