<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A-1
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 1996.
Commission file number: 0-20206
PERCEPTRON, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-2381442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47827 Halyard Drive, Plymouth, Michigan 48170-2461
(Address of principal executive offices)
(313) 414-6100
(Registrants telephone number, including area code)
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 proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock as of April 15, 1996 was:
Common Stock, $0.01 par value 6,805,478
----------------------------- ------------------
Class Number of shares
1
<PAGE> 2
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page
ITEM I Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1996 3
and December 31, 1995
Condensed Consolidated Statements of Income - Three
Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-7
ITEM 2 Management's Discussion and Analysis of Financial Condition 8-10
and Results of Operations
PART II. OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 11
The company has restated its financial statements to reflect the effects of a
non-cash compensation expense. Beginning in late 1994, some participants in
the Company's stock option plan used Perceptron stock options to pay the
exercise price of stock options issued under the plan. The Company was
advised by its independent accounting firm that generally accepted
accounting principles (GAAP) require the recording of a non-cash compensation
expense relating to the certain option exercises during 1996 and 1995. See
Note 2 to the financial statements.
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- -------------
(as restated) (as restated)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,263,000 $ 14,990,000
Accounts receivable and other receivables,
net of reserves of $170,000 and $35,000 10,630,000 14,292,000
Inventory, net of reserves of $661,000 and $700,000 5,277,000 4,114,000
Prepaid expenses and deferred tax asset 2,131,000 2,658,000
------------- -------------
Total current assets 35,301,000 36,054,000
------------- -------------
Property and equipment:
Leased equipment 318,000 318,000
Machinery and equipment 8,155,000 7,696,000
Furniture and fixtures 469,000 492,000
Leasehold improvements 95,000 95,000
Less accumulated depreciation and amortization (6,213,000) (6,074,000)
------------- -------------
Total property and equipment 2,824,000 2,527,000
------------- -------------
Total assets $ 38,125,000 $ 38,581,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Capital lease obligations, current $ 32,000 $ 46,000
Accounts payable 1,541,000 2,070,000
Accrued expenses 3,481,000 3,823,000
Accrued compensation and stock option expense 1,154,000 2,284,000
------------- -------------
Total current liabilities 6,208,000 8,223,000
------------- -------------
Commitments and Contingencies --- ---
Shareholders' equity:
Preferred Stock, no par value, 1,000,000 shares
authorized, none issued --- ---
Common stock, $.01 par value; 19,000,000 shares
authorized, 6,790,000 and 6,723,000 issued and
outstanding at March 31, 1996 and December 31, 1995,
respectively 68,000 67,000
Cumulative translation adjustments (605,000) (474,000)
Additional paid-in capital 31,532,000 30,771,000
Retained earnings / (deficit) 922,000 (6,000)
------------- -------------
Total shareholders' equity 31,917,000 30,358,000
------------- -------------
Total liabilities and shareholders' equity $ 38,125,000 $ 38,581,000
============= =============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
1996 1995
------------- ----------
(as restated)
<S> <C> <C>
Net sales $ 9,062,000 $5,989,000
Cost of sales 3,755,000 2,383,000
------------- ----------
Gross profit 5,307,000 3,606,000
Selling, general and administrative expense 2,591,000 1,921,000
Engineering, research and development expense 1,160,000 1,058,000
Non-cash stock compensation expense 421,000 ---
------------- ----------
Income from operations 1,135,000 627,000
Interest income, net 161,000 106,000
------------- ----------
Income before provision for federal income taxes 1,296,000 733,000
------------- ----------
Provision for federal income taxes 368,000 0
------------- ----------
Net income $ 928,000 $ 733,000
============= ==========
Net income per weighted average share $ .12 $ .10
============= ==========
Weighted average common and common
equivalent shares 7,467,557 7,087,170
============= ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------------- -----------
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 928,000 $ 733,000
------------- -----------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 139,000 206,000
Non-cash stock compensation 421,000 ---
Changes in operating assets and liabilities:
Accounts receivable and other receivables 3,583,000 2,538,000
Inventory (1,163,000) (748,000)
Prepaid expenses and other current assets 527,000 57,000
Accounts payable (529,000) 91,000
Accrued expenses (1,472,000) (510,000)
------------- -----------
Total adjustments 1,506,000 1,634,000
------------- -----------
Net cash provided by operating activities 2,434,000 2,367,000
------------- -----------
Cash flows (used in) investing activities:
Capital expenditures (436,000) (221,000)
------------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations (14,000) (27,000)
Proceeds from issuance of short-term debt 0 86,000
Proceeds from exercise of options and other 341,000 176,000
------------- -----------
Net cash provided by financing activities 327,000 235,000
------------- -----------
Effect of exchange rates on cash and cash equivalents (52,000) 36,000
------------- -----------
Net increase in cash and cash equivalents 2,273,000 2,417,000
Cash and cash equivalents, beginning of year 14,990,000 7,917,000
------------- -----------
Cash and cash equivalents, end of period $ 17,263,000 $10,334,000
============= ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES 1. FINANCIAL STATEMENT PRESENTATION
Information for the three months ended March 31, 1996 and 1995 is
unaudited, but includes all adjustments, consisting of normal recurring
adjustments, which the management of Perceptron, Inc. ("Perceptron" or the
"Company") consider necessary for fair presentation of financial position,
results of operations and cash flows. In accordance with the instructions for
the completion of the Quarterly Report on Form 10Q, certain information and
footnote disclosures necessary to comply with generally accepted accounting
principles have been condensed or omitted. Certain 1995 amounts have been
reclassified to conform to the 1996 presentation.
These financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
which contains a summary of Perceptron's accounting principles and other
footnote information. The results of operations for any interim period are not
necessarily indicative of the results of operations for a full year.
NOTE 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 advised by its
independent accounting firm that generally accepted accounting principles
(GAAP) require the recording of a non-cash compensation expense relating to
certain option exercises during 1996 and 1995.
The Company has restated its financial statements to record non-cash stock
compensation expense, net of taxes, of $274,000 in the first quarter of fiscal
1996, and non-cash stock compensation expense, net of taxes, of $895,000 in the
third quarter of fiscal 1995. The effect of these non-cash stock compensation
charges on net income for the first quarter of fiscal year 1996 was a reduction
of $.04 per share. The effect of these non-cash stock compensation charges on
net income for the third quarter of fiscal year 1995 was a reduction of $.12
per share.
NOTE 3. 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.
6
<PAGE> 7
NOTE 4. 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:
<TABLE>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Component ........... $3,161,000 $3,022,000
Work in process ........... 1,382,000 641,000
Finished goods ........... 734,000 451,000
---------- ------------
Total ..... $5,277,000 $4,114,000
========== ============
</TABLE>
NOTE 5. 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.
NOTE 6. COMMITMENTS AND 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.
NOTE 7. CREDIT FACILITIES
The Company has unsecured bank credit facilities of $4.0 million US and
1.0 DM, which 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 April 15, 1996) any
borrowings to finance equipment purchases will bear interest at the bank's
prime rate plus 1/2%. These credit facilities expire on June 30, 1996 unless
canceled earlier by
7
<PAGE> 8
the Company or the bank. At March 31, 1996, the Company had no outstanding
liabilities under these facilities.
NOTE 8. FOREIGN EXCHANGE CONTRACTS
The Company has implemented a limited hedging program to minimize the
impact of foreign currency fluctuations. As the Company exports products, 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 March 31, 1996, the Company had entered into
forward contracts covering $525,000 US (760,000 DM). These contracts mature on
various dates through June 1996. The fair market value of the contracts at
March 31, 1996 was $514,000, resulting in a net receivable of $11,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net Sales. The Company's net sales increased by 51% from $6.0 million in
the first quarter of 1995 to $9.1 million in the first quarter of 1996. The
increase of $3.1 million in net sales is attributable to increased sales to
domestic automotive customers, up by $4.2 million from the same quarter last
year. International sales for the first quarter of 1996 totaled $1.2 million,
down from $2.3 million in the same quarter last year. The fluctuations in
these geographic segments is primarily due to the timing of customer delivery
requirements.
New order bookings during the first quarter of 1996 totaled $7.5 million
compared to $8.1 million in the first quarter of 1995. The decrease of $0.6
million is attributable to the timing of orders from domestic automotive
customers, down by $2.7 million on a comparative basis, offset by an increase
of $2.1 million on a comparative basis from European and Asian customers.
New order bookings are dependent on the timing of customer re-tooling
programs, and accordingly may vary significantly from month to month. The
amount of new order bookings during any particular period is not necessarily
indicative of the future operating performance of the Company.
New order bookings for the four months ended April 30, 1996 totaled $16.7
million compared to $8.8 million in the comparable period of 1995. The
increase of $7.9 million is attributable to a $2.6 million increase in orders
from domestic automotive customers, and an increase of $5.3 million from
European and Asian automotive customers.
Backlog at March 31, 1996 and April 30, 1996 totaled $14.7 million and
$21.7 million, respectively, compared to $16.3 million at December 31, 1995.
The level of order backlog at any particular time is not necessarily indicative
of the future operating performance of the Company. The Company expects to be
able to fill substantially all of the orders in backlog by December 31, 1996.
8
<PAGE> 9
Gross profit. Gross profit increased from $3.6 million in the first
quarter of 1995 to $5.3 million in the first quarter of 1996. Gross profit as
a percentage of net sales decreased from 60.2% in the first quarter of 1995 to
58.6% in the first quarter of 1996. The decrease is due primarily to the lower
gross profit percentage associated with one specific sale by the Company of a
new product, which was integrated into equipment acquired from an original
equipment manufacturer ("OEM"), and sold as a complete system. The Company
may, in the future, sell this product to OEM's who will in turn resell these
systems after integrating them into their equipment. The decrease is also due
to lower gross profit percentages on new products which are not being
manufactured in significant quantities at this time.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $1.9 million in the first quarter of
1995 to $2.6 million in the first quarter of 1996. This change is principally
due to increased personnel and related expenses to support the planned 1996
operating activity. As a percentage of sales, selling, general and
administrative expenses decreased from 32.1% in the first quarter of 1995, to
28.6% in the first quarter of 1996.
Engineering, research and development expense. Engineering, research and
development expenses increased from $1.1 million in the first quarter of 1995,
to $1.2 in the first quarter of 1996, due primarily to increased personnel. As
a percentage of net sales, research and development expense decreased from
17.7% in the first quarter of 1995 to 12.8% in the first quarter of 1996.
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 advised that accounting rules require the recording of a
non-cash compensation expense relating to certain of these exercises during
1996 and 1995, including $.4 million in the first quarter of 1996. See Note 2
to the Condensed Consolidated Financial Statements for further information.
Interest income, net. Interest income increased from $106,000 in the
first quarter of 1995, to $161,000 in the first quarter of 1996, due to higher
cash balances and related investments.
Income before provision for federal income taxes. During the first
quarter of 1995, Perceptron had income before provision for federal income
taxes of $733,000, representing 12.2% of net sales, as compared to income
before provision for federal income taxes of $1.3 million, representing 14.3%
of net sales, in the first quarter of 1996.
Provision for federal income taxes. For U.S. federal income tax reporting
purposes, as of December 31, 1995, net operating loss carryforwards were
available in the approximate amount of $3.6 million. Investment tax and
research and development credits of $860,000 were also available to benefit
future reported U.S. taxable earnings. These losses and credits expire, if
unused, on various dates from 1998 through 2007. The Company also had, as of
December 31, 1995, tax loss carryforwards available at foreign subsidiaries of
approximately $4.0 million, which may be carried forward indefinitely.
For financial reporting purposes, because the Company anticipates
utilizing certain of these carryforwards and credits in 1996, a deferred tax
asset was recorded as of December 31,
<PAGE> 10
1995, representing the estimated tax benefit of these items. For the three
months ended March 31, 1996, the Company recorded a $368,000 provision for
federal income taxes, representing an estimated effective tax rate of 28.4%.
Net income. During the first quarter of 1995, Perceptron had net income
of $733,000 representing 12.2% of net sales, as compared to net income of
$928,000 million representing 10.2% of net sales in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents as of March 31, 1996 totaled $17.3
million, as compared with $15.0 million as of December 31, 1995. This increase
was due primarily to net income recorded in the quarter and the collection of
accounts receivable, partially offset by increased inventory levels and reduced
current liabilities.
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 (8.25% as of April 15, 1996)
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. As of March 31, 1996 and December
31, 1995, Perceptron had no domestic short-term or long-term debt other than
capital leases outstanding. The Company expects to renew these credit
facilities.
The Company's working capital increased to $29.1 million at March 31,
1996, from $27.8 million at December 31, 1995. Accounts receivable decreased
from $14.3 million as of December 31, 1995 to $10.6 million as of March 31,
1996 primarily as a result of collections. The increase of approximately $1.2
million in inventory is due primarily to an increase in component parts
inventory in preparation for the planned 1996 operating activity. The decrease
of $2.0 million in current liabilities is due primarily to the payments of 1995
performance bonuses and decreased accounts payable.
The Company does not believe that inflation has had any significant impact
on historical operations, and does not expect any significant near-term
inflationary impact.
The Company expects to expend approximately $2.5 million during 1996 for
capital equipment, although there is no binding commitment to do so.
On March 28, 1996, the Company exercised its option to purchase, for $5.4
million, certain land and a new facility it had previously agreed to lease.
Construction of this facility, which will be financed by the Company, began in
April 1996. The Company expects to occupy this facility in December 1996. The
Company is currently reviewing permanent financing alternatives for this
facility.
The Company believes that available cash on hand and existing credit
facilities, will be sufficient to fund its currently anticipated 1996 cash flow
requirements.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.46 Amendment dated April 19, 1996 to
letter agreement dated December 13, 1993, between the
Company and James A. Ratigan
11. Statement re: computation of earnings per share.
As amended and refiled with Amendment No. 1 to Form
10-Q for the quarterly period ended March 31, 1996.
27. Financial Data Schedule
As filed with Amendment No. 1 to Form 10-Q for the
quarterly period ended March 31, 1996
(B) Reports on Form 8-K
None
11
<PAGE> 12
SIGNATURES
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-Q to
be signed on its behalf by the undersigned, thereunto duly authorized.
PERCEPTRON, INC.
(Registrant)
Date: February 28, 1997 By: /S/ Alfred A. Pease
---------------------------
Alfred A. Pease, President
and Chief Executive Officer
12
<PAGE> 13
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
11 Computation of per Share earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
PERCEPTRON, INC. AND SUBSIDIARIES
EXHIBIT 11, STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Earnings Per Share
Three Months Ended March 31,
------------------------------
1996 1995
-------------- ----------
(as restated)
<S> <C> <C>
A. Net income $ 928,000 $ 733,000
------------- ----------
Weighted average number of common shares outstanding 6,755,890 6,451,239
Effect of the issuance of stock options and assumed
exercise of stock options at prices which are lower
than the average market price of the common shares
during the period, using the treasury stock method 711,667 635,931
------------- ----------
B. Weighted average number of common shares and common
equivalent shares for primary earnings per share 7,467,557 7,087,170
------------- ----------
Weighted average number of common shares outstanding 6,755,890 6,451,239
Effect of the issuance of stock options and assumed
exercise of stock options at prices which are lower
than the market price of the common shares at the
end of the period, using the treasury stock method 782,395 576,230
C. Weighted average number of common shares and common
equivalent shares for fully diluted earnings per share 7,538,285 7,027,469
------------- ----------
Primary earnings per share (A/B) $ 0.12 $ 0.10
============= ==========
Fully diluted earnings per share (A/C) $ 0.12 $ 0.10
============== ==========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,263,000
<SECURITIES> 0
<RECEIVABLES> 10,800,000
<ALLOWANCES> (170,000)
<INVENTORY> 5,277,000
<CURRENT-ASSETS> 35,301,000
<PP&E> 9,037,000
<DEPRECIATION> 6,213,000
<TOTAL-ASSETS> 38,125,000
<CURRENT-LIABILITIES> 6,208,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 31,849,000
<TOTAL-LIABILITY-AND-EQUITY> 38,125,000
<SALES> 9,062,000
<TOTAL-REVENUES> 9,062,000
<CGS> 3,755,000
<TOTAL-COSTS> 3,751,000
<OTHER-EXPENSES> 421,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (161,000)
<INCOME-PRETAX> 1,296,000
<INCOME-TAX> 368,000
<INCOME-CONTINUING> 928,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 928,000
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
