<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 17, 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
1
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ITEM 5. OTHER EVENTS
I. ACQUISITION OF TRIDENT SYSTEMS INC. AND NANOOSE SYSTEMS CORPORATION
On April 30, 1997, Perceptron, Inc. (the "Company") consummated its
acquisitions of Trident Systems Inc. (Trident) and Nanoose Systems Corporation
(Nanoose) through the mergers with wholly owned subsidiaries of the Company for
aggregate consideration consisting of 219,962 and 89,820 shares respectively of
Common Stock of the Company. The transactions were accounted for
as poolings-of-interest.
Trident is a full-service systems integrator for the solid woods
sector of the forest and wood products industry, providing applications that
address a wide spectrum of mill processes.
Trident purchases TriCam and LASAR-based systems from the Company for
integration into systems sold by Trident to the forest and wood products
industry.
Nanoose, based in British Columbia, Canada, is a software design and
engineering company, specializing in industrial scanning and optimization
systems. Optimization software written by Nanoose is an important element of
the systems sold by Trident to the forest and wood products industry. This
software accepts scanner information from the Company's TriCam and LASAR
systems.
The following are the supplemental consolidated balance sheets of
Perceptron, Inc. and its subsidiaries, including Trident and Nanoose, 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
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[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
acquisitions by Perceptron, Inc. of Trident Systems, Inc. and Nanoose Systems
Corporation, to be accounted for as poolings of interests as described in Note
1 to the supplemental consolidated financial statements. Generally accepted
accounting principles prescribe giving effect to consummated business
combinations 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 combinations 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 combinations.
/s/ Coopers & Lybrand LLP
Detroit, Michigan
January 31, 1997
3
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PERCEPTRON, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
--------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,924,000 $ 15,442,000
Accounts receivable, net of reserves of $108,000 and $35,000 22,750,000 15,689,000
Inventories, net of reserves of $860,000 and $670,000 7,176,000 5,038,000
Income tax receivables 2,103,000 ---
Prepaid expenses and deferred tax asset 2,500,000 2,918,000
------------ ------------
Total current assets 49,453,000 39,087,000
------------ ------------
Property and equipment:
Construction in progress 6,202,000 ---
Machinery and equipment 4,986,000 8,617,000
Furniture and fixtures 376,000 589,000
Leasehold improvements 12,000 107,000
------------ ------------
11,576,000 9,313,000
Less: Accumulated depreciation and amortization (1,925,000) (6,398,000)
------------ ------------
Net property and equipment 9,651,000 2,915,000
Intangible assets 2,352,000 15,000
------------ ------------
Total assets $ 61,456,000 $ 42,017,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Due to bank 980,000 200,000
Accounts payable 4,892,000 2,588,000
Accrued payables 6,223,000 5,896,000
Accrued compensation and stock option expense 2,914,000 2,284,000
------------ ------------
Total current liabilities 15,009,000 10,968,000
------------ ------------
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,
7,950,000 and 7,420,000 issued and outstanding at
December 31, 1996 and 1995, respectively 80,000 74,000
Cumulative translation adjustments (929,000) (474,000)
Additional paid-in capital 39,560,000 30,863,000
Retained earnings 7,736,000 586,000
------------ ------------
$ 46,447,000 $ 31,049,000
------------ ------------
Total liabilities and shareholders' equity $ 61,456,000 $ 42,017,000
============ ============
</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 $ 58,975,000 $ 43,154,000 $ 33,224,000
Cost of sales 23,608,000 16,970,000 13,976,000
-------------- -------------- --------------
Gross profit 35,367,000 26,184,000 19,248,000
-------------- -------------- --------------
Selling, general and administrative expense 15,369,000 11,672,000 8,799,000
Engineering, research and development expense 7,294,000 5,436,000 4,403,000
Non-cash stock compensation expense 3,202,000 1,377,000 ---
-------------- -------------- --------------
Income from operations 9,502,000 7,699,000 6,046,000
-------------- -------------- --------------
Interest income, net 743,000 528,000 133,000
-------------- -------------- --------------
Net income before provision for income taxes 10,245,000 8,227,000 6,179,000
Provision for income taxes 3,095,000 (264,000) ---
-------------- -------------- --------------
Net income $ 7,150,000 $ 8,491,000 $ 6,179,000
============== ============== ==============
Net income per weighted average share $ .86 $ 1.07 $ .80
============== ============== ==============
Weighted average common and
common equivalent shares 8,333,171 7,954,659 7,695,255
============== ============== ==============
</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 6,538,386 $ 65,000 $ (366,000) $ 28,105,000 ($ 14,084,000) $ 13,720,000
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 6,179,000 6,179,000
--------- --------- ---------- ------------ ------------- ------------
Balances, December 31, 1994 7,077,094 $ 71,000 $ (438,000) $ 28,618,000 $ (7,905,000) $ 20,346,000
--------- --------- ---------- ------------ ------------- ------------
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 8,491,000 8,491,000
--------- --------- ---------- ------------ ------------- ------------
Balances, December 31, 1995 7,419,654 $ 74,000 $ (474,000) $30,863,000 $ 586,000 $31,049,000
========= ========= ========== ============ ============= ============
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 2,062,000 2,067,000
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 7,150,000 7,150,000
--------- --------- ---------- ------------ ------------- ------------
Balances, December 31, 1996 7,949,442 80,000 (929,000) 39,560,000 7,736,000 46,447,000
========= ========= ========== ============ ============= ============
</TABLE>
The accompanying notes are an integral part of the supplemental
consolidated financial 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> <C> <C>
Cash flows from operating activities:
Net income $ 7,150,000 $ 8,491,000 $ 6,179,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 904,000 854,000 506,000
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 (9,996,000) (3,387,000) (3,361,000)
Inventories (2,138,000) (1,496,000) (1,166,000)
Prepaid expenses and deferred tax asset 510,000 (2,393,000) (270,000)
Accounts payable 588,000 1,201,000 370,000
Accrued expenses 1,396,000 4,679,000 2,196,000
------------ ------------ -------------
Total adjustments (5,241,000) 835,000 (1,591,000)
------------ ------------ -------------
Net cash provided by operating activities 1,909,000 9,326,000 4,588,000
------------ ------------ -------------
Cash flows (used in) investing activities:
Capital expenditures (5,703,000) (2,415,000) (992,000)
------------ ------------ -------------
Net cash (used in) investing activities (5,703,000) (2,415,000) (992,000)
------------ ------------ -------------
Cash flows from financing activities:
Principal payments under capital leases -0- (94,000) (103,000)
Proceeds from issuance of short-term debt 980,000 200,000 709,000
Principal payments on short-term debt (200,000) (422,000) (287,000)
Proceeds from the exercise of stock options 2,071,000 594,000 519,000
Tax benefit of non-qualified options exercised 600,000 150,000 ---
------------ ------------ -------------
Net cash provided by financing activities 3,451,000 428,000 838,000
------------ ------------ -------------
Effect of exchange rates on cash and cash equivalents (175,000) 62,000 36,000
------------ ------------ -------------
Net increase/(decrease) in cash and cash equivalents (518,000) 7,401,000 4,470,000
Cash and cash equivalents, beginning of year 15,442,000 8,041,000 3,571,000
------------ ------------ -------------
Cash and cash equivalents, end of year $ 14,924,000 $ 15,442,000 $ 8,041,000
============ ============ =============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest expense $ 24,000 $ 45,000 $ 30,000
============ ============ =============
Cash paid during the year for income taxes $ 2,711,000 $ 318,000 $ 213,000
============ ============ =============
Non-cash transactions:
Equipment acquired under capital leases $ 0 $ 128,000 $ 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
Trident Systems Inc. ("Trident") and Nanoose Systems Corporation ("Nanoose")
which acquisition was consummated on April 30, 1997. The acquisitions are
being accounted for as poolings-of-interest. 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.
On February 3, 1997, 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. The transaction was
accounted for as a pooling of interests. As of and for the year ended December
31, 1996, Autospect's revenues, net income and net assets were approximately
$4 million, $.5 million and $1.3 million respectively.
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.
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<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 $ 4,627,000 $ 3,419,000
Work in process 1,829,000 1,044,000
Finished goods 720,000 575,000
------------- -------------
Total $ 7,176,000 $ 5,038,000
============= =============
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation related to
machinery and equipment and furniture and fixtures is primarily computed on a
straight-line basis over estimated useful lives ranging from three to ten
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
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 $5.8 million U.S. and 1.0 million DM. These facilities may be used to
finance working capital needs and equipment purchases or capital leases. Under
the principal facility, 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 Company's principal 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. In June 1997, the Company renewed the Company's principal credit
facilities. At December 31, 1996, borrowings under a portion of the
facilities, by Autospect and Trident, were collateralized by substantially all
of the assets of Autospect and Trident, in the amounts of $830,000 and
$150,000.
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 Capital
---- ---------- ----------
<S> <C> <C>
1997 $ 278,000 $ 44,000
1998 244,000 27,000
1999 129,000 12,000
2000 123,000 2,000
2001 124,000 ---
---------- ----------
Total minimum lease payments $ 898,000 $ 85,000
========== ==========
Less amount representing interest $ 8,000
----------
Present value of net minimum lease payments $ 77,000
==========
</TABLE>
Rental expense for operating leases in 1996,1995 and 1994 was
$480,000, $484,000 and $466,000, respectively.
Depreciation of the assets recorded under capital assets is included
in depreciation expense. The net book value of the leased assets included in
property and equipment at December 31, 1996 was $72,000.
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.
10
<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> <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.
11
<PAGE> 12
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>
$ 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>
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> <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 $ 7,150,000 $ 8,491,000
..Pro forma 4,051,000 7,625,000
Primary earnings per share ..As reported $ .86 $ 1.07
..Pro forma $ .49 $ .96
</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
$292,000, $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 $ 1,184,000 $ 272,000
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 3,095,000 (264,000)
========= ==========
</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 465,000 ---
--------- ---------
Subtotal 1,565,000 2,400,000
Valuation reserve 0 (200,000)
--------- ---------
Deferred tax asset $1,565,000 $ 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 2% (37%)
Net effect of taxes on foreign activities (4%) 20%
Change in valuation allowance (2%) (20%)
---- ----
30% (3%)
==== ====
</TABLE>
As a result of available net operating losses, there was no provision
for income tax in 1994.
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 46% 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, 16% 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 12% of the Company's net sales. During 1995, 34% of
total net sales was derived from three domestic automotive companies, and 26%
from sales by integrators to such companies. In 1995, sales by the Company to
each of these three customers exceeded 7% of the Company's net sales. During
1994, 32% of net sales were derived from three automotive companies and 44%
from sales by integrators to such companies. In 1994, sales by the Company to
each of these three companies exceeded 9% 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.
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* $ 53,217 $ 32,762 $ 30,730
Europe and Asia 12,744 13,049 3,606
Intercompany Sales (6,986) (2,657) (1,112)
---------- ---------- ----------
Total Net Sales $ 58,975 $ 43,154 $ 33,224
========== ========== ==========
Income from operations:
North America* $ 4,905 $ 1,945 $ 5,839
Europe and Asia 4,597 5,754 207
---------- ---------- ----------
Total Income from Operations $ 9,502 $ 7,699 $ 6,046
========== ========== ==========
Identifiable assets at December 31:
North America* $ 48,959 $ 34,244 $ 23,543
Europe and Asia 12,497 7,773 2,298
---------- ---------- ----------
Total Assets $ 61,456 $ 42,017 $ 25,841
========== ========== ==========
</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 $ 10,117 $ 13,823 $ 15,008 $ 20,027
Gross profit 5,948 8,242 9,390 11,787
Net income 755 964 1,541 3,890
Earnings per share $ .09 $ .12 $ .18 $ .46
Weighted average shares 8,165 8,374 8,377 8,403
<CAPTION>
3-31 6-30 9-30 12-31
--------- --------- --------- ---------
1995
- ----
Net sales $ 7,181 $ 10,885 $ 10,229 $ 14,859
Gross profit 4,375 6,420 6,305 9,084
Net income 902 2,262 1,246 4,081
Earnings per share $ .12 $ .29 $ .16 $ .50
Weighted average shares 7,784 7,824 8,007 8,088
</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.
16
<PAGE> 17
ITEM 7 EXHIBITS
11. Computation of per share earnings
23. Consent of Experts
27. Financial Data Schedule
17
<PAGE> 18
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: July 17, 1997
18
<PAGE> 19
INDEX TO EXHIBITS
11 Computation of per share earnings
23 Consent of Experts
27 Financial Data Schedule
19
<PAGE> 1
PERCEPTRON, INC. AND SUBSIDIARIES
EXHIBIT 11, 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 $ 7,150,000 $ 8,491,000 $ 6,179,000
------------ ----------- -----------
Weighted average number of common shares outstanding 7,661,153 7,251,320 6,826,847
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 8,333,171 7,954,659 7,695,255
------------ ----------- -----------
Weighted average number of common shares outstanding 7,661,153 7,251,320 6,826,847
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 8,401,382 8,123,153 7,867,013
------------ ----------- -----------
Primary earnings per share (A/B) $ .86 $ 1.07 $ .80
============ =========== ===========
Fully diluted earnings per share (A/C) $ .85 $ 1.05 $ .79
============ =========== ===========
</TABLE>
20
<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, 333-29263 and 333-24239) of our report dated January 31, 1996, 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 8K.
/s/ Coopers & Lybrand LLP
Detroit, Michigan
July 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS 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> 14,924,000
<SECURITIES> 0
<RECEIVABLES> 23,032,000
<ALLOWANCES> (60,000)
<INVENTORY> 7,176,000
<CURRENT-ASSETS> 49,675,000
<PP&E> 11,576,000
<DEPRECIATION> (1,925,000)
<TOTAL-ASSETS> 61,678,000
<CURRENT-LIABILITIES> 15,231,000
<BONDS> 0
0
0
<COMMON> 80,000
<OTHER-SE> 46,367,000
<TOTAL-LIABILITY-AND-EQUITY> 61,678,000
<SALES> 58,975,000
<TOTAL-REVENUES> 58,975,000
<CGS> 23,608,000
<TOTAL-COSTS> 22,663,000
<OTHER-EXPENSES> 3,202,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (743,000)
<INCOME-PRETAX> 10,245,000
<INCOME-TAX> 3,095,000
<INCOME-CONTINUING> 7,150,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,150,000
<EPS-PRIMARY> .86
<EPS-DILUTED> .85
</TABLE>
