<PAGE> 1
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 13(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 25, 1997
PERCEPTRON, INC.
(Exact Name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation)
0-20206 38-2381442
(Commission File Number) (IRS Employer Identification No.)
47827 Halyard Drive
Plymouth, Michigan 48170-2461
(313) 414-6100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 414-6100
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
I. ACQUISITION OF AUTOSPECT, INC.
On February 3, 1997, Perceptron, Inc. (the "Company") consummated its
acquisition of Autospect, Inc. ("Autospect") through the merger of a wholly
owned subsidiary of the Company with and into Autospect for aggregate
consideration consisting of 387,093 shares of Common Stock of the Company.
Autospect, based in Ann Arbor, Michigan, designs, develops and manufactures
information-based coatings inspection and defect detection systems primarily
for use in the automotive industry. The transaction was accounted for as a
pooling-of-interests.
The following are the supplemental consolidated balance sheets of
Perceptron, Inc. and its subsidiaries, including Autospect, as of December 31,
1996 and December 31, 1995 and the related supplemental consolidated statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996, together with the report of independent
accountants relating thereto. See Note 1 to Notes to Supplemental Consolidated
Financial Statements.
2
<PAGE> 3
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Perceptron, Inc.:
We have audited the supplemental consolidated balance sheets of Perceptron,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
supplemental consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial 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.
The supplemental combined financial statements give retroactive effect to the
acquisition by Perceptron, Inc. of Autopect, Inc., to be accounted for as a
pooling of interests as described in Note 1 to the supplemental consolidated
financial statements. Generally accepted accounting principles proscribe
giving effect to a consummated business combination accounted for by the
pooling of interests method in financial statements that do not include the
date of consummation. These financial statements do not extend through the date
of consummation; however, they become the historical consolidated financial
statements of Perceptron, Inc. and subsidiaries after financial statements
covering the date of consummation of the business combination are issued.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the supplemental consolidated financial position of
Perceptron, Inc. and subsidiaries at December 31, 1996 and 1995, and the
supplemental consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles applicable after financial
statements are issued for a period which includes the date of consummation of
the business combination.
Coopers & Lybrand LLP
Detroit, Michigan
January 31, 1997, except for Note 14
as to which the date is February 3, 1997
3
<PAGE> 4
PERCEPTRON, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1996 1995
--------------------------------------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,677,000 $ 15,185,000
Accounts receivable, net of reserves of $60,000 and $35,000 22,477,000 14,672,000
Inventories, net of reserves of $860,000 and $670,000 6,574,000 4,412,000
Income tax receivables 2,103,000 ---
Prepaid expenses and deferred tax asset 2,001,000 2,750,000
------------ -------------
Total current assets 47,832,000 37,019,000
------------ -------------
Property and equipment:
Construction in progress 6,202,000 ---
Machinery and equipment 4,544,000 8,288,000
Furniture and fixtures 252,000 492,000
Leasehold improvements 0 95,000
------------ -------------
10,998,000 8,875,000
Less: Accumulated depreciation and amortization (1,654,000) (6,227,000)
------------ -------------
Net property and equipment 9,344,000 2,648,000
Intangible assets 2,352,000 15,000
------------ -------------
Total assets $ 59,528,000 $ 39,682,000
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Due to bank 830,000 0
Accounts payable 4,534,000 2,175,000
Accrued payables 4,435,000 4,023,000
Accrued compensation and stock option expense 1,930,000 2,284,000
------------ -------------
Total current liabilities 11,729,000 8,482,000
------------ -------------
Shareholders' equity:
Preferred Stock, no par value, 1,000,000 shares authorized,
none issued 0 0
Common Stock, $0.01 par value; 19,000,000 shares authorized,
7,640,000 and 7,110,000 issued and outstanding at
December 31, 1996 and 1995, respectively 77,000 71,000
Cumulative translation adjustments (929,000) (474,000)
Additional paid-in capital 39,468,000 30,767,000
Retained earnings 9,183,000 836,000
------------ -------------
Total shareholders' equity $ 47,799,000 $ 31,200,000
------------ -------------
Total liabilities and shareholders' equity $ 59,528,000 $ 39,682,000
============ =============
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
4
<PAGE> 5
PERCEPTRON, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
----------- ------------- -----------
<S> <C> <C> <C>
Net sales $53,669,000 $39,563,000 $29,626,000
Cost of sales 20,556,000 14,945,000 11,742,000
----------- ----------- -----------
Gross profit 33,113,000 24,618,000 17,884,000
----------- ----------- -----------
Selling, general and administrative expense 12,635,000 10,470,000 7,764,000
Engineering, research and development expense 6,396,000 4,745,000 4,158,000
Non-cash stock compensation expense 3,202,000 1,377,000 ---
----------- ----------- -----------
Income from operations 10,880,000 8,026,000 5,962,000
----------- ----------- -----------
Interest income, net 762,000 542,000 123,000
----------- ----------- -----------
Net income before provision for income taxes 11,642,000 8,568,000 6,085,000
Provision for income taxes 3,295,000 (273,000) 54,000
----------- ----------- -----------
Net income $ 8,347,000 $ 8,841,000 $ 6,031,000
=========== =========== ===========
Net income per weighted average share $1.04 $ 1.16 $ 0.82
=========== =========== ===========
Weighted average common and
common equivalent shares 8,023,389 7,644,877 7,385,473
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements.
5
<PAGE> 6
PERCEPTRON, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
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, 1994 6,228,604 $62,000 $ (366,000) $28,009,000 $(14,036,000) $13,669,000
Stock options exercised, net of shares tendered 538,708 6,000 513,000 519,000
Translation adjustment on investment (72,000) (72,000)
in foreign subsidiaries
Net Income 6,031,000 6,031,000
---------- ------- ---------- ----------- ------------ -----------
Balances, December 31, 1994 6,767,312 $68,000 $ (438,000) $28,522,000 $ (8,005,000) $20,147,000
---------- ------- ---------- ----------- ------------ -----------
Stock options exercised, net of shares tendered 342,560 3,000 591,000 594,000
Tax benefit of non-qualified stock 150,000 150,000
options exercised
Previously recorded stock option
compensation expense attributable to
options exercised 127,000 127,000
Non-cash stock compensation expense
attributable to options exercised 1,377,000 1,377,000
Translation adjustment on investment
in foreign subsidiaries (36,000) (36,000)
Net Income 8,841,000 8,841,000
---------- ------- ---------- ----------- ------------ -----------
Balances, December 31, 1995 7,109,872 $71,000 $ (474,000) $30,767,000 $ 836,000 $31,200,000
========== ======= ========== =========== ============ ===========
Shares issued for intangible assets 82,510 1,000 2,299,000 2,300,000
Stock options exercised, net of shares tendered 447,278 5,000 2,066,000 2,071,000
Tax benefit of non-qualified stock
options exercised 600,000 600,000
Previously recorded stock option
compensation attributable to options
exercised 534,000 534,000
Non-cash compensation expense
attributable to options exercised 3,202,000 3,202,000
Translation adjustment on investment in foreign
subsidiaries (455,000) (455,000)
Net income 8,347,000 8,347,000
---------- ------- ---------- ----------- ------------ -----------
Balances, December 31, 1996 7,639,660 77,000 (929,000) 39,468,000 9,183,000 47,799,000
========== ======= ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
statements.
6
<PAGE> 7
PERCEPTRON, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C>
Cash flows from operating activities:
Net income $ 8,347,000 $ 8,841,000 $ 6,031,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 804,000 689,000 487,000
Disposal of fixed assets 293,000 ---- 134,000
Non-cash stock compensation expense 3,202,000 1,377,000 ----
Changes in operating assets and liabilities:
Accounts receivable and income
tax receivable (10,188,000) (2,806,000) (2,833,000)
Inventories (2,162,000) (891,000) (1,021,000)
Prepaid expenses and deferred tax asset 845,000 (2,239,000) (164,000)
Accounts payable 91,000 397,000 309,000
Accrued expenses 497,000 3,630,000 1,338,000
Deferred revenue ---- ---- 175,000
------------- ----------- -----------
Total adjustments (6,618,000) 157,000 (1,575,000)
------------- ----------- -----------
Net cash provided by operating activities 1,729,000 8,998,000 4,456,000
------------- ----------- -----------
Cash flows (used in) investing activities:
Capital expenditures (5,563,000) (2,146,000) (771,000)
------------- ----------- -----------
Net cash (used in) investing activities (5,563,000) (2,146,000) (771,000)
------------- ----------- -----------
Cash flows from financing activities:
Principal payments under capital leases -0- (94,000) (103,000)
Proceeds from issuance of short-term debt 830,000 ---- 287,000
Principal payments on short-term debt -0- (342,000) (58,000)
Proceeds from the exercise of stock options 2,071,000 596,000 519,000
Tax benefit of non-qualified options exercised 600,000 150,000 ----
------------- ----------- -----------
Net cash provided by financing activities 3,501,000 310,000 645,000
------------- ----------- -----------
Effect of exchange rates on cash and cash equivalents (175,000) 62,000 36,000
------------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents (508,000) 7,224,000 4,366,000
Cash and cash equivalents, beginning of year 15,185,000 7,961,000 3,595,000
------------- ----------- -----------
Cash and cash equivalents, end of year $ 14,677,000 $15,185,000 $ 7,961,000
============= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest expense $ 24,000 $ 31,000 $ 24,000
============= =========== ===========
Cash paid during the year for income taxes $ 2,759,000 $ 309,000 $ 204,000
============= =========== ===========
Non-cash transactions:
Equipment acquired under capital leases $ 0 $ 0 $ 101,000
Previously recorded compensation expense
attributable to options exercised 534,000 127,000 0
Intangible assets acquired for stock 2,300,000 0 0
</TABLE>
The accompanying notes are an integral part of the supplemental consolidated
financial statements
7
<PAGE> 8
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
Perceptron, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") are involved in the design, development, manufacture, and marketing
of machine vision systems which are used primarily in the automotive industry,
and to a lesser extent, in other industries.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The supplemental consolidated financial statements of the Company have
been prepared to give retroactive affect to the acquisition by the Company of
Autospect, Inc. ("Autospect"), which acquisition was consummated on February 3,
1997. The acquisition is being accounted for as a pooling-of-interests.
Generally accepted accounting principals proscribe giving the effect to a
consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they become the historical consolidated financial statements of the
Company after financial statements covering the date of consummation of the
business combination are issued.
The supplemental 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.
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 with
one bank as of December 31, 1996.
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.
8
<PAGE> 9
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out (FIFO) method.
Inventories, net of reserves, are comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Component parts $ 4,498,000 $ 3,252,000
Work in process 1,396,000 641,000
Finished goods 680,000 519,000
----------- -----------
Total $ 6,574,000 $ 4,412,000
=========== ===========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation related to
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. Intangible assets recorded in
1996 will be amortized over approximately 5 years.
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. Fair value approximates carrying value because of the short
maturity of the cash equivalents.
IMPAIRMENT OF LONG-LIVED ASSETS AND CERTAIN IDENTIFIABLE INTANGIBLES
The Company adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," as of January 1, 1996. The effect of adopting this
standard was not material.
The Company evaluates the carrying value of long-lived assets and
long-lived assets to be disposed of for potential impairment on an ongoing
basis. The Company considers projected future operating results, trends and
other circumstances in making such estimates and evaluations.
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<PAGE> 10
2. NON-CASH STOCK COMPENSATION EXPENSE
Beginning in late 1994, some participants in the Company's stock option
plan have used Perceptron stock options to pay the exercise price of stock
options issued under the plan. The Company was recently advised by its
independent accounting firm that generally accepted accounting principles
require the recording of a non-cash compensation expense relating to certain
option exercises during 1996 and 1995.
The Company has restated its 1995 financial statements to record non-cash
stock compensation expense, net of taxes, of $895,000.
3. CREDIT FACILITY:
At December 31, 1996 the Company has unsecured credit facilities totaling
$5.2 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 (8.25% as of December 31, 1996); any borrowings to finance equipment
purchases will bear interest at the bank's prime rate plus 1/2%. The credit
facilities expire on May 31, 1997 unless canceled earlier by the Company or the
bank. A portion of the credit facilities are subject to a borrowing formula
based on eligible accounts receivables. The Company expects to renew these
credit facilities. At December 31, 1996, borrowings under a portion of the
facilities, by Autospect, were collateralized by substantially all of the
assets of Autospect.
The principal 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.
4. LEASES:
The following is a summary, as of December 31, 1996, of the future minimum
annual lease payments required under the Company's real estate and other
operating leases having initial or remaining noncancelable terms in excess of
one year:
<TABLE>
<CAPTION>
Year Operating
---- ---------
<S> <C>
1997 $ 202,000
1998 158,000
1999 42,000
---------
Total minimum lease payments $ 402,000
=========
</TABLE>
Rental expense for operating leases in 1996,1995 and 1994 was $414,000,
$421,000 and $387,000, respectively.
5. COMMITMENTS AND OTHER:
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, 1996, the Company had
funded $25,000 of its commitment for the university's fiscal year ended June
30, 1997.
The Company had 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 was for the period which
began on January 1, 1994, and which ended March 31, 1996.
In connection with this grant, the Company had 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, 15,000 of
which are currently unexercised. The exercise price of these warrants is
$11.17 per share. During 1994, 1995, and 1996, the Company incurred total
costs of $444,000, $558,000, and $250,000 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.
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<PAGE> 11
In 1993, the Company was awarded a $1.22 million NIST-ATP grant from the
United States Department of Commerce for software development related to
high-speed image processing techniques for three-dimensional machine vision
systems. This grant, now completed, provided the Company $0.4 million in 1994,
$0.6 million in 1995, and $0.2 million in 1996. The Company includes all
development costs incurred internally and subcontracted to an independent
research organization and to a university in engineering, research and
development expense, and offsets these costs with any reimbursements due from
NIST. Work under this grant has supplied the Company with a substantial
repertoire of widely usable and tested machine vision algorithm components for
use with its TriCam and LASAR products.
In late 1995, Autospect received a $1.8 million NIST grant which will
provide funding of $600,000 per year over three years for development of a
system to measure the thickness of wet film (e.g. paint). Prototype testing of
this system has begun. During 1996 Autospect received revenue reimbursements
of $0.4 million which offset the related cost.
The Company uses, from time to time, 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, 1996, the Company had no forward
contracts outstanding.
6. 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. These Plans
are administered by a committee of the Board of Directors. Activity under
these Plans is shown in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C>
Shares subject to option
Outstanding at beginning of period 1,060,943 $ 8.26 1,318,740 $ 5.85 1,466,883 $ 4.35
New grants (based on fair value of
Common Stock at dates of grant) 339,300 25.24 236,350 14.93 253,323 10.08
Exercised* (430,129) 6.07 (353,944) 3.81 (355,333) 2.47
Terminated and expired (16,603) 9.90 (140,203) 7.93 (46,133) 7.63
Outstanding at end of Period** 953,511 15.22 1,060,943 8.26 1,318,740 5.85
Outstanding but not exercisable 799,224 16.35 829,205 8.29 1,094,106 5.88
Exercisable at end of period 154,287 9.36 231,738 8.13 224,634 5.71
</TABLE>
* Exercised at option prices ranging from $.23 to $21.87 during 1996, $.23
to $11.92 during 1995, and $.23 to $7.33 during 1994
** All outstanding shares at December 31, 1996 are under the 1992 Plan.
The following table summarizes information about stock options at
December 31, 1996:
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
---------------------------------------------------------- ---------------------------
Weighted-Average
Range of Remaining Weighted-Average Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3.00 to $10.00 358,132 6.7 years $ 6.25 108,703 $ 6.60
$10.01 to $20.00 198,553 8.1 years $12.29 31,271 $12.92
$20.01 to $30.00 322,875 9.2 years $24.30 14,313 $22.48
$30.01 to $40.00 73,951 9.6 years $36.02 0 $ 0
- ---------------------------------------------------------------------------------------------------------------
$3.00 to $40.00 953,511 8.1 years $15.22 154,287 $ 9.36
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
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, 1996, options
covering 154,287 shares were exercisable and options covering 174,983 shares
were available for future grants under these plans.
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.
<TABLE>
<CAPTION>
1996 1995
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
<S> <C> <C> <C>
Shares subject to option
Outstanding at beginning of period 60,000 $ 12.58
New grants 64,500 $ 30.75 60,000 $12.58
Terminated and expired (16,500) $ 13.55 0
Outstanding at end of period 108,000 $ 23.28 60,000 $12.58
Outstanding but not exercisable 63,000 $ 30.75 60,000 $12.58
Exercisable at end of period 45,000 $ 12.58 0
</TABLE>
At December 31, 1996, the weighted-average remaining exercise period
relating to the outstanding options was approximately 8.6 years.
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. At December 31, 1996,
45,000 of these options were exercisable and options covering 67,500 shares
were available for future grants under this plan.
The estimated fair value as of the date options were granted in 1996 and
1995, using the Black-Scholes option-pricing model was as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Weighted average estimated fair
value per share of options granted
during the year $16.55 $12.33
Assumptions:
Amortized dividend yield - -
Common Stock price volatility 57.94% 57.94%
Risk-free rate of return 5.78% 6.46%
Expected option term (in years) 6 6
</TABLE>
12
<PAGE> 13
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," effective with the 1996 financial statements, but elected to
continue to measure compensation cost using the intrinsic value method, in
accordance with APB Opinion No. APB 25 ("APB 25"), "Accounting for Stock Issued
to Employees." Accordingly, compensation cost for stock options has been
recognized under the provisions of APB 25. If compensation cost had been
determined based on the estimated fair value of options granted in 1996 and
1995, consistent with the methodology in SFAS 123, the Company's net income and
income per share would have been adjusted to the proforma amount indicated
below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net income ..As reported $8,347,000 $8,841,000
..Pro forma 5,248,000 7,975,000
Primary earnings per share ..As reported $ 1.04 $ 1.16
..Pro forma $ 0.66 $ 1.04
</TABLE>
The Company granted warrants to an independent research institute to
purchase 30,000 shares of Common Stock, 15,000 which were exercised in 1996
and 15,000 of which expire in 1998. The exercise price of these warrants is
$11.17 per share.
7. 401K PLAN:
The Company has 401(k) tax deferred savings plans that cover all eligible
employees. The Company may make discretionary contributions to the plan. The
Company's contributions to the plan during 1996, 1995 and 1994 were $282,000,
$181,000, and $124,000, respectively.
8. INCOME TAXES:
The income tax provision reflected in the statement of income consists of
the following for the years ending December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Current provision:
U.S. federal $1,384,000 $263,000
Foreign 1,136,000 1,446,000
Deferred taxes 775,000 (1,500,000)
Tax benefit attributable to non-cash stock compensation 0 (482,000)
---------- ----------
Total provision 3,295,000 (273,000)
========== ==========
</TABLE>
The Company's deferred tax assets are substantially represented by the tax
benefit of minimum tax credits, investment tax credits, research activities
credits, and general business credits carry forwards. The components of
deferred tax assets as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Net operating loss carry forwards $ 0 $ 1,200,000
Minimum tax credits 400,000 300,000
Investment tax credits 100,000 100,000
Research activities and general business credits 600,000 800,000
Other 325,000 ----
----------- -----------
Subtotal 1,425,000 2,400,000
Valuation reserve 0 (200,000)
----------- -----------
Deferred tax asset $ 1,425,000 $ 2,200,000
=========== ===========
</TABLE>
13
<PAGE> 14
With the exception of the minimum tax credits, which have an indefinite
carryforward period, the credits giving rise to the deferred tax assets will
expire, if unused, at various dates from 1998 through 2008.
<TABLE>
<CAPTION>
Rate reconciliation: 1996 1995
---- ----
<S> <C> <C>
Provision at U.S. statutory rate 34% 34%
Recognition of net operating loss carryforwards and other credits - (37%)
Net effect of taxes on foreign activities (4%) 20%
Change in valuation allowance (2%) (20%)
---- ----
28% (3%)
==== ====
</TABLE>
9. INFORMATION ABOUT MAJOR CUSTOMERS:
The Company sells its products directly to both domestic and international
automotive assembly companies. For the year ended December 31, 1996, the
Company derived 51% 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, 1996, 18% of net sales were to
integrators, where those products were for the benefit of the same three
automotive assembly companies. In 1996, sales by the Company to each of these
three customers exceeded 13% of the Company's net sales. During 1995, 37% of
total net sales was derived from three domestic automotive companies, and 28%
from sales by integrators to such companies. In 1995, sales by the Company to
each of these three customers exceeded 8% of the Company's net sales. During
1994, 36% of net sales were derived from three automotive companies and 49%
from sales by integrators to such companies. In 1994, sales by the Company to
each of these three companies exceeded 10% of the Company's net sales.
10. 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 Trident and Nanoose, 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.
14
<PAGE> 15
11. FOREIGN OPERATIONS:
The Company operates in three primary geographic areas: North America,
Europe and Asia. Geographical area data is as follows ($000):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Net sales:
North America* $45,284 $ 29,171 $ 27,132
Europe and Asia 12,744 13,049 3,606
Intercompany Sales (4,359) (2,657) (1,112)
------- --------- --------
Total Net Sales $53,669 $ 39,563 $ 29,626
======= ========= ========
Income from operations:
North America* $ 6,283 $ 2,272 $ 5,755
Europe and Asia 4,597 5,754 207
------- --------- --------
Total Income from Operations $10,880 $ 8,026 $ 5,962
======= ========= ========
Identifiable assets at December 31:
North America* $47,031 $ 31,909 $ 22,789
Europe and Asia 12,497 7,773 2,298
------- --------- --------
Total Assets $59,528 $ 39,682 $ 25,087
======= ========= ========
</TABLE>
- -----------------------
* Includes intercompany amounts; intercompany sales prices are based on
cost plus a transfer fee.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected unaudited quarterly financial data for the years ended
December 31, 1996 and 1995, are as follows ($000's except earnings per share):
<TABLE>
<CAPTION>
Quarter ended
1996 3-31 6-30 9-30 12-31
---- ---- ---- ---- -----
<S> <C> <C> <C> <C>
Net Sales $9,510 $12,458 $13,845 $17,856
Gross profit 5,589 7,489 8,732 11,303
Net income 859 715 2,594 4,179
Earnings per share $ .11 $ .09 $.32 $.52
Weighted average shares 7,855 8,064 8,067 8,093
<CAPTION>
3-31 6-30 9-30 12-31
---- ----- ---- -----
1995
----
<S> <C> <C> <C> <C>
Net sales $6,658 $9,556 $ 9,552 $13,797
Gross profit 4,062 5,920 5,977 8,659
Net income 949 2,215 1,562 4,115
Earnings per share $ .13 $ .29 $ .20 $ .53
Weighted average shares 7,474 7,514 7,697 7,778
</TABLE>
15
<PAGE> 16
13. INTANGIBLE ASSETS
On November 26, 1996, the Company's German subsidiary acquired the assets
of a division of HGV Vosseler GmbH ("Vosseler") engaged in the development and
sale of non-contact three-dimensional measurement systems for aggregate
consideration consisting of 82,150 shares of Common Stock and DM 300,000 and
recorded $2.3 million in intangible assets relating to the acquisition.
14. SUBSEQUENT EVENTS [Unaudited]
The Company recently signed letters of intent to acquire Trident Systems,
Inc. ("Trident") and Nanoose Systems Corporation ("Nanoose"). The closing of
these acquisitions is subject to a number of factors, including the
negotiation, approval and execution of definitive documents and completion of
satisfactory due diligence. The proposed consideration for these acquisitions
will be shares of Common Stock of the Company, aggregating less than 5% of the
outstanding Common Stock.
16
<PAGE> 17
II. RESULTS FOR QUARTER ENDED MARCH 31, 1997
The Company recently announced its new order bookings and estimates of its
revenues and net income per weighted average common share for the quarter ended
March 31, 1997. The press release announcing these matters is attached as
Exhibit 99(a).
17
<PAGE> 18
ITEM 7 EXHIBITS
11. Computation of per share earnings
23. Consent of Experts
27. Financial Data Schedule
99.(a) Press Release issued April 8, 1997
18
<PAGE> 19
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.
PERCEPTRON, INC.
(Registrant)
By: /S/ Alfred A. Pease
---------------------------------
Alfred A. Pease, Chairman, President
and Chief Executive Officer
Date: April 25, 1997
19
<PAGE> 20
INDEX TO EXHIBITS
11 Computation of per share earnings
23 Consent of Experts
27 Financial Data Schedule
99(a) Press Release issued April 8, 1997
20
<PAGE> 1
EXHIBIT 11
PERCEPTRON, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Earnings Per Share
Year Ended December 31,
----------------------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
A. Net Income $8,347,000 $8,841,000 $6,031,000
---------- ---------- ----------
Weighted average number of common shares outstanding 7,351,371 6,941,538 6,517,065
Effect of the issuance of stock options and warrants and assumed
exercise of stock options and warrants at prices which are lower
than the average market price of the common shares
during the period, using the treasury stock method 672,018 703,339 774,655
Effect of convertible shares held by a minority shareholder
of a foreign subsidiary, which were converted into
common stock on June 23, 1994 --- --- 93,753
B. Weighted average number of common shares and common ---------- ---------- ----------
equivalent shares for primary earnings per share 8,023,389 7,644,877 7,385,473
---------- ---------- ----------
Weighted average number of common shares outstanding 7,351,371 6,941,538 6,517,065
Effect of the issuance of stock options and warrants and assumed
exercised of stock options and warrants at prices which are lower
than the market price of the common shares at the
end of the period, using the treasury stock method 740,229 871,833 946,413
Effect of convertible shares held by a minority shareholder
of a foreign subsidiary, which were converted into
common stock on June 23, 1994 --- --- 93,753
C. Weighted average number of common shares and common ---------- ---------- ----------
equivalent shares for fully diluted earnings per share 8,091,600 7,813,371 7,557,231
---------- ---------- ----------
Primary earnings per share (A/B) $ 1.04 $ 1.16 $ .82
========== ========== ==========
Fully diluted earnings per share (A/C) $ 1.03 $ 1.13 $ .80
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Perceptron, Inc. and Subsidiaries 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 Nos.
33-78594 and 333-24239) of our report dated January 31, 1997, except for Note
14 as to which the date is February 3, 1997, on our audits of the supplemental
consolidated financial statements of Perceptron, Inc. and subsidiaries as of
December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995 and
1994, which report is included in this Current Report on Form 8-K.
/s/ Coopers & Lybrand L.L.P.
Detroit, Michigan
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,677,000
<SECURITIES> 0
<RECEIVABLES> 22,537,000
<ALLOWANCES> (60,000)
<INVENTORY> 6,574,000
<CURRENT-ASSETS> 47,832,000
<PP&E> 10,998,000
<DEPRECIATION> (1,654,000)
<TOTAL-ASSETS> 59,528,000
<CURRENT-LIABILITIES> 11,729,000
<BONDS> 0
0
0
<COMMON> 77,000
<OTHER-SE> 47,722,000
<TOTAL-LIABILITY-AND-EQUITY> 59,528,000
<SALES> 53,669,000
<TOTAL-REVENUES> 53,669,000
<CGS> 20,556,000
<TOTAL-COSTS> 19,031,000
<OTHER-EXPENSES> 3,202,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (762,000)
<INCOME-PRETAX> 11,642,000
<INCOME-TAX> 3,295,000
<INCOME-CONTINUING> 8,347,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,347,000
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.03
</TABLE>
<PAGE> 1
Exhibit 99(a)
FOR IMMEDIATE RELEASE
CONTACT: JOHN G. ZIMMERMAN STEFANIE KING
VICE PRESIDENT & CFO EDELMAN FINANCIAL
PERCEPTRON, INC. (212) 704-8291
(313) 414-4816
PERCEPTRON REPORTS LARGER THAN EXPECTED FIRST QUARTER BOOKINGS OF $17.7 MILLION
COMPANY ANNOUNCES TWO NEW FIRST-TIER SUPPLIER ORDERS AND NEW KOREAN ORDER
COMPANY ANNOUNCES ESTIMATES OF FIRST QUARTER REVENUE AND EARNINGS
PLYMOUTH, MI, APRIL 8, 1997 - PERCEPTRON, INC. (NASDAQ: PRCP) today announced
that the Company's new order bookings during the first quarter of 1997 were
$17.7 million, more than double the $8.7 million for the comparable period last
year. The bookings figures for both years include those of the Company's
recently acquired subsidiary, Autospect, Inc. At March 31, backlog stood at a
record $28 million.
Bookings for the first quarter include two new first-tier supplier orders
totaling approximately $2.2 million. In addition, a new second quarter order
was received by the Company's Korean office for a major automotive system,
totaling approximately $0.6 million.
As previously announced, both revenues and earnings for the first quarter will
be below expectations. Early indications are that revenues for the combined
companies of Perceptron and Autospect will be $10.2 million, a record for a
first quarter. Combined revenues for the comparable prior year period were
$9.5 million.
Net income for Perceptron alone is expected to be in the range of $0.12 to
$0.14 per share. This compares with $0.12 a year ago, after the $0.04 per share
non-cash stock compensation charge to earnings. The first quarter of
operations of Autospect are expected to produce a reduction to earnings of
approximately $.04 per share, including expenses incurred in the acquisition.
Consolidated results for the first quarter are expected to be in the range of
$0.08 to $0.10 per share, compared to $0.11 per share in the first quarter of
1996. The Company expects Autospect to be accretive to earnings for the year.
Alfred A. Pease, Chairman, President and Chief Executive Officer of Perceptron
commented, "I am very pleased with the performance of our teams during the
quarter. Both the size and diversity of our new bookings to date are strong
indicators of the Company's overall strength. Despite the first quarter
reported revenue and earnings shortfalls brought about by the granular nature
of our businesses, and based upon the current outlook, we expect the second
quarter of 1997 to show a marked improvement over the first quarter, as well as
over the second quarter of 1996. In addition, we would expect the continued
strong demand for our products to be reflected in our 1997 results.
"We are very excited about our continued penetration of the first-tier
supplier and emerging Asian marketplaces. These new orders represent an
important element of our strategies to expand our presence into other arenas on
a global basis."
Perceptron designs, manufactures and markets information-based process
measurement and guidance solutions for industry. Perceptron's systems are
recognized in a number of industries and market segments as important tools for
improvement of manufacturing time-to-market, quality, throughput, and costs.
Perceptron markets its products worldwide through its offices in Michigan,
Germany, Brazil, The Netherlands, Korea, and Japan.
- more -
<PAGE> 2
Safe Harbor Statement
Certain statements in this press release may be "forward looking statements"
within the meaning of the Securities Exchange Act of 1934. Actual results
could differ materially, from those in the forward looking statements due to a
number of uncertainties, including, but not limited to the dependence of the
Company's revenue on a number of sizable orders from a small number of
customers, the timing of orders which can cause the Company to experience
significant fluctuations in its quarterly and annual revenue and operating
results, general product demand and market acceptance risks, the ability of the
Company to successfully compete with alternative and similar technologies, the
timing and continuation of the automotive industry's retooling programs, the
ability of the Company to resolve technical issues inherent in the development
of new products and technologies, the ability of the Company to identify and
satisfy market needs, general product development and commercialization
difficulties, the quality and cost of competitive products already in existence
or developed in the future, the level of interest existing and potential new
customers may have in new products and technologies generally, rapid or
unexpected technological changes, and the effect of economic conditions.
# # #
