<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended December 31, 1999.
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)
(734) 414-6100
(Registrant's 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 February 3, 2000, was:
Common Stock, $0.01 par value 8,170,208
----------------------------- --------------------------
Class Number of shares
<PAGE> 2
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
COVER 1
INDEX 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE> 3
PERCEPTRON, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
(IN THOUSANDS) 1999 1999
--------------------- ----------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,990 $ 4,205
Receivables:
Billed receivables, net of allowance for doubtful accounts 26,851 21,128
of $310,000 and $218,000, respectively
Unbilled and other receivables 4,555 4,611
Inventories, net of reserves of $946,000 and $600,000, respectively 12,471 12,323
Deferred taxes and other current assets 1,194 1,307
--------------------- ----------------------
Total current assets 51,061 43,574
--------------------- ----------------------
PROPERTY AND EQUIPMENT
Building and land 5,990 5,990
Machinery and equipment 9,518 9,774
Furniture and fixtures 1,469 1,469
--------------------- ----------------------
16,977 17,233
Less - Accumulated depreciation and amortization (6,309) (6,121)
--------------------- ----------------------
Net property and equipment 10,668 11,112
--------------------- ----------------------
OTHER ASSETS
Intangible assets, net of accumulated amortization 1,496 1,692
of $471,000 and $279,000, respectively
Deferred tax asset 2,732 4,956
--------------------- ----------------------
Total other assets 4,228 6,648
--------------------- ----------------------
TOTAL ASSETS $ 65,957 $ 61,334
===================== ======================
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,336 $ 3,550
Accrued liabilities and expenses 4,749 4,619
Income taxes payable 776 633
Accrued compensation 1,748 203
--------------------- ----------------------
Total current liabilities 10,609 9,005
--------------------- ----------------------
LONG-TERM LIABILITIES
Notes payable 5,425 4,265
--------------------- ----------------------
Total long-term liabilities 5,425 4,265
--------------------- ----------------------
Total liabilities 16,034 13,270
--------------------- ----------------------
SHAREHOLDERS' EQUITY
Preferred stock - no par value, authorized 1,000,000 shares, issued none - -
Common stock, $0.01 par value, authorized 19,000,000 shares, issued
and outstanding 8,169,000 at December 31, 1999 and
June 30, 1999, respectively 82 82
Accumulated other comprehensive income (loss) (3,568) (3,340)
Additonal paid-in capital 40,979 40,979
Retained earnings 12,430 10,343
--------------------- ----------------------
Total shareholders' equity 49,923 48,064
--------------------- ----------------------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 65,957 $ 61,334
===================== ======================
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
3
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PERCEPTRON, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31,
(In Thousands, Except Per Share Amounts) 1999 1998 1999 1998
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 18,533 $ 16,843 $ 37,004 $ 31,325
COST OF SALES 8,263 7,151 16,352 13,590
-------- -------- -------- --------
GROSS PROFIT 10,270 9,692 20,652 17,735
-------- -------- -------- --------
OPERATING EXPENSES
Selling, general and administrative 5,078 5,809 10,423 10,831
Engineering, research and development 3,482 3,509 6,469 6,051
Non-cash intangible asset write-off -- 1,472 -- 1,472
-------- -------- -------- --------
Total operating expenses 8,560 10,790 16,892 18,354
-------- -------- -------- --------
OPERATING INCOME (LOSS) 1,710 (1,098) 3,760 (619)
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest income (expense), net (96) 147 (178) 238
Foreign currency and other 12 (8) (69) 6
-------- -------- -------- --------
Total other income and (deductions) (84) 139 (247) 244
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 1,626 (959) 3,513 (375)
INCOME TAX EXPENSE (BENEFIT) 667 (402) 1,426 (207)
-------- -------- -------- --------
NET INCOME (LOSS) $ 959 $ (557) $ 2,087 $ (168)
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE
BASIC $ 0.12 ($ 0.07) $ 0.26 ($ 0.02)
DILUTED $ 0.12 ($ 0.07) $ 0.26 ($ 0.02)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 8,169 8,219 8,169 8,234
DILUTED 8,174 8,219 8,183 8,234
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
4
<PAGE> 5
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
(In Thousands) 1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,087 $ (168)
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Depreciation and amortization 1,232 1,359
Deferred income taxes 1,778 (1,120)
Other 202 1,472
Changes in assets and liabilities, exclusive of changes shown
separately (3,704) (4,657)
-------- --------
Net cash provided from (used for) operating activities 1,595 (3,114)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit borrowings 11,025 --
Revolving credit repayments (9,865) --
Repurchase of company stock -- (202)
Proceeds from the exercise of stock options -- 266
-------- --------
Net cash provided from financing activities 1,160 64
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (703) (1,005)
Purchase of Sonic assets -- (1,114)
-------- --------
Net cash used for investing activities (703) (2,119)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (267) 223
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,785 (4,946)
CASH AND CASH EQUIVALENTS, JULY 1 4,205 10,699
-------- --------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 5,990 $ 5,753
======== ========
CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables, net $ (5,759) $ (6,549)
Inventories (109) (628)
Accounts payable (214) 436
Other current assets and liabilities 2,378 2,084
-------- --------
$ (3,704) $ (4,657)
======== ========
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
5
<PAGE> 6
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements should be read in conjunction
with Perceptron's 1999 Transition Report on Form 10-K. As a result of the fiscal
year change, any references herein to the six-month period ended June 30, 1999,
represent audited amounts. Certain reclassifications may have been made to the
prior year's financial statements to conform with the fiscal year 2000
presentation. In the opinion of management, the unaudited information furnished
herein reflects all adjustments necessary, consisting of normal recurring
adjustments, for a fair presentation of the financial statements for the periods
presented. The results of operations for any interim period are not necessarily
indicative of the results of operations for a full year.
2. 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 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 1999
---------------- ----------------
<S> <C> <C>
Component Parts $ 7,506 $ 6,553
Work In Process 1,453 1,683
Finished Goods 3,512 4,087
---------------- ----------------
Total $ 12,471 $ 12,323
================ ================
</TABLE>
3. CREDIT FACILITIES
The Company's principal bank has agreed to provide short-term unsecured credit
facilities of 1.0 million Deutsche marks and $1.0 million Canadian dollars. The
facilities may be used to finance working capital needs and equipment purchases
or capital leases. Any borrowings will bear interest at the bank's prime rate
(8.75% as of February 3, 2000). The credit facilities expire on May 31, 2000,
unless canceled earlier by the Company or the bank. The Company had no
borrowings outstanding under these credit facilities at December 31, 1999.
The Company has a long-term $15.0 million unsecured Revolving Credit Agreement
(Revolver) that expires on May 31, 2001. Proceeds under the Revolver may be used
for general corporate purposes and can be designated as a Floating Rate Loan or
as a Eurodollar Rate Loan. Interest on Floating Rate borrowings is calculated
daily at 1/2% below the bank's prime rate (8.75% as of February 3, 2000) and is
payable on the last day of each month. Interest on Eurodollar Rate borrowings is
calculated at a Eurodollar Rate for the period chosen (approximately 7.5% as of
February 3, 2000) and is payable on the last day of the applicable period.
Quarterly, the Company pays a commitment fee of 1/4% per annum on the daily
unused portion of the Revolver. The Revolver prohibits the Company from paying
dividends.
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<PAGE> 7
In addition, the Revolver contains various financial covenants that, among other
things, restrict dividend payments by requiring the Company to maintain a Fixed
Charge Coverage Ratio and a Total Liabilities to Tangible Net Worth Ratio and
require the Company to maintain certain levels of earnings before interest,
depreciation and amortization, and taxes. The Company had $4.4 million
outstanding under the Revolver at December 31, 1999.
4. FOREIGN EXCHANGE CONTRACTS
The Company may use, from time to time, a limited hedging program to minimize
the impact of foreign currency fluctuations. As the Company exports products, it
may enter into limited hedging transactions relating to the accounts receivable
arising as a result of such shipments. These transactions involve the use of
forward contracts. At December 31, 1999 and 1998, the Company had no forward
contracts outstanding.
5. COMPREHENSIVE INCOME
Comprehensive income is defined as the change in common shareholder's equity
during a period from transactions and events from non-owner sources, including
net income. Other items of comprehensive income include revenues, expenses,
gains and losses that are excluded from net income. Total comprehensive income
for the applicable periods is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1999 1998
--------------- ---------------
<S> <C> <C>
Net Income $ 959 $ (557)
Other Comprehensive Income:
Foreign currency translation adjustments (682) (169)
--------------- ---------------
Total Comprehensive Income $ 277 $ (726)
=============== ===============
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1999 1998
--------------- ---------------
<S> <C> <C>
Net Income $ 2,087 $ (168)
Other Comprehensive Income:
Foreign currency translation adjustments (228) 833
--------------- ---------------
Total Comprehensive Income $ 1,859 $ 665
=============== ===============
</TABLE>
7
<PAGE> 8
6. EARNINGS PER SHARE
Basic earnings per share ("EPS") is calculated by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Other obligations, such as stock options and warrants, are
considered to be potentially dilutive common shares. Diluted EPS assumes the
issuance of potential dilutive common shares outstanding during the period and
adjusts for any changes in income and the repurchase of common shares that would
have occurred from the assumed issuance. A reconciliation of both calculations
is shown below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
WEIGHTED AVG. EARNINGS
NET INCOME COMMON SHARES PER SHARE
THREE MONTHS ENDED DEC. 31, 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 959 $ (557) 8,169 8,219 $ .12 $ (.07)
Effect of Dilutive Securities:
Stock options and warrants - - 5 -
------------ ------------ ------------ ------------
Diluted EPS $ 959 $ (557) 8,174 8,219 $ .12 $ (.07)
============ ============ ============ ============
<CAPTION>
WEIGHTED AVG. EARNINGS
NET INCOME COMMON SHARES PER SHARE
SIX MONTHS ENDED DEC. 31, 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 2,087 $ (168) 8,169 8,234 $ .26 $ (.02)
Effect of Dilutive Securities:
Stock options and warrants - - 14 -
------------ ------------ ------------ ------------
Diluted EPS $ 2,087 $ (168) 8,183 8,234 $ .26 $ (.02)
============ ============ ============ ============
</TABLE>
During the three and six month periods ended December 31, 1999, options to
purchase 1,502,000 and 1,218,000 shares of common stock, respectively, were
outstanding and were not included in the computation of diluted EPS because the
effect would have been anti-dilutive. For the comparable three and six month
periods ended December 31, 1998, options to purchase 1,237,000 and 1,059,000
shares of common stock, respectively, were outstanding and were not included in
the computation of diluted EPS because the effect would have been anti-dilutive.
7. 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 matters
discussed in the Company's 1999 Transition Report on Form 10-K.
8
<PAGE> 9
8. SEGMENT INFORMATION
The Company has two reportable segments: Automotive and Industrial Businesses.
The Automotive segment designs, manufactures, and markets information-based
process measurement and guidance systems within the automotive industry. The
Industrial Businesses segment employs the same technology, providing products
and services primarily to the forest and wood products industry and, to a lesser
extent, the aerospace and steel industries. The Company evaluates performance
based on operating income. Segment detail is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED
------------------------ -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Revenues $ 13,413 $ 5,120 $ 18,533
Operating Income (Loss) 1,187 523 1,710
Total Assets 56,773 9,184 65,957
DECEMBER 31, 1998
Revenues $ 13,217 $ 3,626 $ 16,843
Operating Income (Loss) (1,124) 26 (1,098)
Total Assets 58,654 7,754 66,408
<CAPTION>
SIX MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED
------------------------ -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Revenues $ 29,596 $ 7,408 $ 37,004
Operating Income (Loss) 4,704 (944) 3,760
Total Assets 56,773 9,184 65,957
DECEMBER 31, 1998
Revenues $ 24,800 $ 6,525 $ 31,325
Operating Income (Loss) (699) 80 (619)
Total Assets 58,654 7,754 66,408
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended December 31, 1999, Compared to Three Months
Ended December 31, 1998
Overview - The Company reported net income of $959,000, or $0.12 per share, for
the second quarter of fiscal 2000, compared to a net loss of $557,000, or $0.07
per share, in the quarter ended December 31, 1998. Net sales of $18.5 million
for the three months ended December 31, 1999, were up $1.7 million, or 10%, over
the prior year's sales of $16.8 million. Automotive sales accounted for 72% of
total sales during the second quarter of fiscal 2000 compared to 79% in the
quarter ended December 31, 1998. Industrial Businesses sales represented 28% of
total sales for the quarter ended December 31, 1999, compared to 21% in the same
quarter of 1998. Gross profit for the second quarter of fiscal 2000 was 55.4%
compared to 57.5% in the quarter ended December 31, 1998. The decrease in gross
profit was primarily due to product mix and lower margins earned on the
Company's P-1000 product that related to the configuration of systems sold.
Operating expenses were down $2.2 million in the second quarter of fiscal 2000
compared to the quarter ended December 31, 1998. The favorable comparison in
operating expenses was due to higher expenses for a $1.5 million non-cash
write-off of an intangible asset in the quarter ended December 31, 1998, and the
benefit derived from cost reduction programs initiated during 1999.
Automotive - Sales in the second quarter of fiscal 2000 of $13.4 million were up
slightly over sales of $13.2 million in the quarter ended December 31, 1998.
P-1000 sales accounted for approximately 50% of net automotive sales in the
second quarter of fiscal 2000 compared to approximately 76% in the same period a
year ago. The percentage sales decrease reflected our customers migration to the
Company's IPNet(TM) product and the mature nature of the P-1000 product. Sales
of the Company's new IPNet(TM) product totaled approximately 16% of net
automotive sales in the second quarter of fiscal 2000. RGS and NCA systems sales
accounted for 30% of net sales in the quarter ended December 31, 1999, compared
to 10% one year ago. The variance in RGS and NCA sales was a function of the
timing of orders by the Company's customers. Other product sales and training
and service accounted for the remainder of net sales in both years.
Industrial Businesses - At the present time, the Industrial Businesses segment's
principal market is the Forest Products industry. Sales in the second quarter of
fiscal 2000 were $5.1 million, of which $4.6 million was delivered by the Forest
Products business unit. Sales in the quarter ended December 31, 1998, of $3.6
million were all delivered by the Forest Products business unit. The increase in
sales of $1.5 million from the same period last year was primarily due to a
strengthening in the forest products marketplace and new sales in the steel and
aerospace industries.
Bookings & Backlog - New order bookings for the three months ended December 31,
1999, were $14.0 million compared to $12.3 million in 1998. Automotive bookings
totaled $10.3 million in the fiscal 2000 quarter compared to $9.4 million a year
ago. During the quarter ended December 31, 1999, automotive bookings were for:
37% P-1000, 37% IPNet(TM) and 18% RGS and NCA, as compared with 77% P-1000, 12%
paint inspection products and 7% service and training for the quarter ended
December 31, 1998. Industrial Businesses bookings were $3.7 million in the
quarter ended December 31, 1999, compared to $2.9 million a year ago, of which
Forest Product bookings represented 78% and 100%, respectively. Backlog at
December 31, 1999, was $21.9 million compared to $23.5 million at December
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31, 1998. The Company expects to be able to fill substantially all of the
orders in backlog by the end of calendar year 2000. During January 2000, the
Company received new order bookings in excess of $4.0 million. The amount of new
order bookings and the level of backlog during any particular period are not
necessarily indicative of the future operating performance of the Company.
Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased
$731,000 from $5.8 million in the quarter ended December 31, 1998, to $5.1
million in the comparable 1999 quarter. The decrease was primarily due to cost
reductions in personnel and other operating expenses that reflected the benefit
derived from cost reduction programs initiated during 1999.
Engineering, Research and Development Expenses (R&D) - Engineering and R&D
expenses remained constant at $3.5 million in both 1999 and 1998 quarters ending
December 31. The Company continues to invest in new product development. In the
Automotive segment, the first phase of the Wet Film Thickness Measurement System
has been installed and is undergoing testing at an alpha site. The second phase
of this system is currently being installed at the same customer site. The
Company's enhanced PaintScan(TM) system is being evaluated by a customer in its
paint line on a real-time full production basis. PaintScan(TM) is a paint defect
inspection system that was formerly known as Industrial Dirt Counter. The
Company's first installation of its new DriScan(TM) product at an alpha site is
currently undergoing testing. DriScan(TM) detects imperfections on bare metal
prior to the paint process. DriScan(TM) was formerly known as the Bare Metal
product. In the Forest Products division, the ultrasound cant grading system
completed beta testing and will be a released product. The grade sawing,
carriage optimizer system was installed successfully at a customer site and was
released as a new product in the quarter ended December 31, 1999.
Interest Income (Expense), net - The decrease in interest income (expense), net
reflected a reduction in interest income from lower average cash balances in the
current quarter as compared to the quarter ended December 31, 1998. The decrease
was also attributable to higher interest expense from borrowings under the
Company's revolving credit line in the quarter ended December 31, 1999.
Outlook - Based on customer shipment schedules, the Company expects sales in the
second half of the fiscal year to be seasonally lower than the first half of the
fiscal year. The Company continues to expect its overall operating results for
the balance of fiscal 2000 to compare favorably with the same period one year
ago. The foregoing statement is a "forward looking statement" within the meaning
of the Securities Exchange Act of 1934, as amended. See Item 2 "Management's
Discussion and Analysis of Financial Condition and Results of Operations Safe
Harbor Statement" for a discussion of a number of uncertainties which could
cause actual results to differ materially from those set forth in the forward
looking statement.
Six Months Ended December 31, 1999, Compared to Six Months Ended
December 31, 1998
Overview - The Company reported net income of $2.1 million, or $0.26 per share,
for the first six months of fiscal 2000, compared to a net loss of $168,000, or
$0.02 per share, in the six months ended December 31, 1998. Net sales of $37.0
million for the six months ended December 31, 1999, were up $5.7 million, or
18%, over the prior year's sales of $31.3 million. Automotive sales accounted
for approximately 80% of total sales during both six-month periods ended
December 31, 1999 and 1998. Industrial Businesses sales represented the balance
of approximately 20% in both periods. Gross profit for the first six months of
fiscal 2000 was 55.8% compared to 56.6% in the six months ended December 31,
1998. The decrease in gross profit was primarily due to product mix and lower
margins earned on the Company's P-1000 product that related to the configuration
of systems sold. Operating expenses were down $1.5 million in the first six
months of fiscal 2000 compared to the six months ended December 31, 1998. The
favorable
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comparison in operating expenses was primarily due to a $1.5 million non-cash
write-off of an intangible asset in the six months ended December 31, 1998.
Lower selling, general and administrative expenses of $408,000 were offset by
higher engineering, research and development expenses in the comparable
six-month periods.
Automotive - Sales in the first six months of fiscal 2000 increased $4.8 million
to $29.6 million compared to $24.8 million in the six months ended December 31,
1998. P-1000 sales accounted for approximately 49% of net automotive sales in
the first six months of fiscal 2000 compared to approximately 79% in the same
period a year ago. The percentage sales decrease reflected our customers'
migration to the Company's IPNet(TM) product and the mature nature of the P-1000
product. Sales of the Company's new IPNet(TM) product totaled approximately 22%
of net automotive sales in the first six months of fiscal 2000. RGS and NCA
systems sales accounted for 23% of net sales in the six months ended December
31, 1999, compared to 10% one year ago. The variance in RGS and NCA sales was a
function of the timing of orders by the Company's customers. Other product sales
and training and service accounted for the remainder of net sales in both years.
Industrial Businesses - At the present time, the Industrial Businesses segment's
principal market is the Forest Products industry. Sales in the first six months
of fiscal 2000 were $7.4 million, of which $6.7 million was delivered by the
Forest Products business unit. Sales for the same period last year of $6.5
million were all delivered by the Forest Products business unit. Sales were up
$900,000 from the same period last year primarily due to new sales in the steel
and aerospace industries.
Bookings & Backlog - New order bookings for the six months ended December 31,
1999, were $31.0 million compared to $30.2 million for the same period one year
ago. Automotive bookings totaled $24.9 million in the fiscal 2000 six months
compared to $24.5 million a year ago. During the six months ended December 31,
1999, automotive bookings were primarily for: 52% P-1000, 24% IPNet(TM) and 17%
RGS and NCA as compared with 78% P-1000, 10% paint inspection products and 6%
RGS and NCA in the six months ended December 31, 1998. Industrial Businesses
bookings were $6.1 million in the six months ended December 31, 1999, compared
to $5.7 million a year ago. Forest Product bookings represented 87% and 100% of
the Industrial Businesses bookings in the six months ended December 31, 1999 and
1998, respectively. Backlog at December 31, 1999, was $21.9 million compared to
$23.5 million at December 31, 1998. The Company expects to be able to fill
substantially all of the orders in backlog by the end of calendar year 2000.
During January 2000, the Company received new order bookings in excess of $4.0
million. The amount of new order bookings and the level of backlog during any
particular period are not necessarily indicative of the future operating
performance of the Company.
Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased
$408,000 from $10.8 million in the six months ended December 31, 1998, to $10.4
million in the comparable 1999 six-month period. The decrease was primarily due
to cost reductions in personnel and other operating expenses that reflected the
benefit derived from cost reduction programs initiated during 1999. Mitigating
the favorable decrease in expenses was six months of Sonic related expenses in
the current period compared to only three months in the period ended December
31, 1998.
Engineering, Research and Development Expenses (R&D) - Engineering and R&D
expenses increased from $6.1 million in the six months ended December 31, 1998,
to $6.5 million in the first six months of fiscal 2000. The increase in expenses
was primarily due to six months of expenses related to Sonic in the current
period as compared to only three months of expenses in the period a year ago.
During the six months ended December 31, 1999, the Company started to realize
returns on its past investments in new product development, principally from
sales of the Company's new IPNet(TM) product. In the Automotive segment,
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<PAGE> 13
the first phase of the Wet Film Thickness Measurement System has been installed
and is undergoing testing at an alpha site. The second phase of this system is
currently being installed at the same customer site. The Company's enhanced
PaintScan(TM) system is being evaluated by a customer in its paint line on a
real-time full production basis. PaintScan(TM) is a paint defect inspection
system that was formerly known as Industrial Dirt Counter. The Company's first
installation of its new DriScan(TM) product at an alpha site is currently
undergoing testing. DriScan(TM) detects imperfections on bare metal prior to the
paint process. DriScan(TM) was formerly known as the Bare Metal product. In the
Forest Products division, the ultrasound cant grading system completed beta
testing and will be a released product. The grade sawing, carriage optimizer
system was installed successfully at a customer site and was released as a new
product during the six months ended December 31, 1999.
Interest Income (Expense), net - The decrease in interest income (expense), net
reflected a reduction in interest income from lower average cash balances in the
six months ended December 31, 1999, as compared to December 31, 1998. The
decrease was also attributable to higher interest expense from borrowings under
the Company's revolving credit line in the six months ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $6.0 million at December 31, 1999,
compared to $4.2 million at June 30, 1999. The increase of $1.8 million in cash
for the six months resulted from $1.6 million of cash provided from operations
and $1.2 million of cash provided from financing activities that were partially
offset by $703,000 of cash used for capital spending.
The $1.6 million of cash provided from operations reflected the Company's net
income for the period and $1.8 million of cash received for the carry-back of
tax losses, which offset other uses in working capital of $3.7 million.
Receivables, net of foreign translation adjustments, increased $5.8 million
primarily as a result of the high level of sales during the six months.
Inventory increased $109,000 to support near-term delivery requirements.
Offsetting these increases in working capital was a $2.0 million increase in
current liabilities, primarily representing an increase in payroll and tax
liabilities.
Financing activities during the six months reflected $1.2 million in net
borrowings of the Company's revolving line of credit. The Company believes that
available cash on hand and existing credit facilities will be sufficient to fund
its currently anticipated fiscal 2000 cash flow requirements.
The Company does not believe that inflation has significantly impacted
historical operations and does not expect any significant near-term inflationary
impact.
EURO CONVERSION
A single currency called the "euro" was introduced in Europe on January 1, 1999.
Eleven of the fifteen member countries of the European Union agreed to adopt the
euro as their common legal currency on that date. Fixed conversion rates between
these participating countries' existing currencies (the "legacy currencies") and
the euro were established as of that date. The legacy currencies are scheduled
to remain legal tender as denominations of the euro until at least January 1,
2002 (but not later than July 1, 2002). During this transition period, parties
may settle transactions using either the euro or a participating country's
legacy currency.
Conversion to the euro may reduce the amount of the Company's exposure to
changes in foreign exchange rates, due to the netting effect of having assets
and liabilities denominated in a single currency
13
<PAGE> 14
as opposed to the various legacy currencies. Conversely, because there will be
less diversity in the Company's exposure to foreign currencies, movements in the
euro's value in U.S. dollars could have a more pronounced effect, whether
positive or negative, on the Company.
YEAR 2000 READINESS DISCLOSURE
YEAR 2000 OVERVIEW
An issue affecting the Company is the potential inability of many computer
systems and applications to process information in the Year 2000 and beyond.
This could result in system failures or miscalculations leading to disruptions
in the Company's activities and operations (the "Year 2000" capability issue).
Programs that will operate in the Year 2000 unaffected by the change in year
from 1999 to 2000 are referred to herein as "Year 2000 compliant". It is
possible some Year 2000 issues may not be discovered until well after January 1,
2000. The disclosure below is intended to summarize the Company's actions to
minimize the risks. Certain portions of the discussion set forth below contain
"forward looking statements" within the meaning of the Securities Exchange Act
of 1934, as amended, including, but not limited to, those relating to the
compliance of the Company's products and systems to operate under the Year 2000
issue, future costs to remediate Year 2000 issues, the Company's requirements
and the impact on the Company of an inability of it or its key suppliers and
customers to fully address Year 2000 issues. Actual results could differ
materially from those in the forward looking statement due to a number of
uncertainties set forth below.
YEAR 2000 STATE OF READINESS
The Company tested the current version of its principal products and believes
that the current versions, and all versions currently under warranty, are
capable of operating in the Year 2000. The Company's products operate on
computers and operating systems supplied by third party vendors. The Company's
customers have been advised to conduct their own forward-date tests on such
systems and to contact the third party vendors regarding available upgrades or
other remediation efforts. To date, the Company is not aware of any significant
Year 2000 issues directly affecting the current version of its products.
The Company's principal customers are automotive companies and forest and wood
product processors and system integrators who sell to such customers. To date,
the Company is not aware of any significant Year 2000 issues affecting its
principal customers.
Prior to Year 2000, the Company contacted its principal suppliers and utilities
(all of which are referred to as "Third Party Suppliers") to determine if they
were Year 2000 capable. The failure of one or more critical Third Party
Suppliers (including utility and similar providers) to be Year 2000 capable such
that its supply of needed products or services is interrupted could result in
the Company not being able to produce one or more of its systems for a period of
time, which in turn could result in lost sales and profits. To date, the Company
is not aware of any significant Year 2000 issues affecting its Third Party
Suppliers.
The Company established a project team to identify internal systems, which are
not Year 2000 capable and complete the work required to mitigate the Year 2000
issue. Remediation of the Company's and its subsidiaries principal information
technology ("IT") systems and personal computer networks was completed prior to
Year 2000. These systems tested compliant and are believed to be Year 2000
capable. A failure because of an undiscovered problem of one or more of the
Company's internal systems to be
14
<PAGE> 15
Year 2000 capable, particularly the Company's principal IT systems, could
require the Company to manually process information or could prevent or limit
access to mission critical information. To date, the Company has not experienced
any significant Year 2000 issues associated with its IT and personal computer
networks.
The Company's non-IT systems consist principally of security, climate control,
telephone and data communication systems. The Company has contacted the vendors
that support these systems at the Company's headquarter, each of which believes
its system to be Year 2000 compliant. To date, the Company has not experienced
any significant Year 2000 issues associated with its non-IT systems.
YEAR 2000 COSTS
Most of the costs incurred by the Company to date on Year 2000 compliance issues
have been internal staff costs and costs relating to normal product upgrades,
which the Company has not separately tracked.
As a result, the Company is not able to reasonably estimate the amount of such
expenditures, although the Company believes it has spent less than $100,000 on
such expenditures. The Company does not believe that it will incur future costs
relating to Year 2000 compliance issues. These cost estimates are subject to a
number of uncertainties, which could result in actual costs exceeding the
estimated amounts described above. Costs related to the Year 2000 issue are
funded through operating cash flow. The Year 2000 costs have not caused the
Company to defer any other significant information technology programs.
YEAR 2000 RISKS
The Company's Year 2000 project team has evaluated business disruption
scenarios, principally related to the Company's internal systems for processing
information and the purchase of goods and services to maintain timely
production. The team has developed and implemented the plans disclosed
previously under "Year 2000 State of Readiness". Estimates of time, costs and
risks associated with the Year 2000 issue are based on currently available
information. Developments that could affect estimates include, but are not
limited to, the ability to locate and correct all relevant computer code and
systems; cooperation and remediation success of the Company's suppliers and
customers (and their suppliers and customers); the ability to correctly
anticipate risks and implement suitable contingency plans in the event of system
failures at the Company or its suppliers or customers (and their suppliers and
customers); unanticipated difficulties with the assessment or remediation
process resulting in the need to replace more systems or hire more personnel or
third party firms to assist in the process than expected and the Company being
required to assist any of its Third Party Suppliers to become Year 2000
compliant.
Some commentators have stated that a significant amount of litigation will arise
out of Year 2000 compliance issues. In addition, it is possible that there will
be undetected errors or defects associated with Year 2000 date functions in the
Company's current products or internal systems or those of its Third Party
Suppliers (and their suppliers and customers). Because of the unprecedented
nature of litigation in this area, it is uncertain how the Company may be
affected by it. In the event of such litigation or the occurrence of production
disruptions related to Third Party Suppliers, internal issues or customers, it
is possible the Company's revenues, net income or financial condition could be
materially adversely affected.
15
<PAGE> 16
MARKET RISK INFORMATION
Perceptron's primary market risk is related to foreign exchange rates. This risk
is derived from sales by its international operations, which are primarily
located in Germany and The Netherlands and for which products are produced in
the U.S. The Company is also subject to interest rate risk in connection with
its borrowings. At December 31, 1999, the Company did not have any market risk
instruments for trading purposes.
FOREIGN CURRENCY RISK
The Company has limited foreign currency exchange risk in its international
operations due to the percentage of contracts entered into in U.S. dollars and
the short time period between sales commitment and delivery for contracts in the
non-U.S. currencies. The Company's percentage of sales commitments in U.S.
dollars at December 31, 1999, was 76%. For sales commitments entered into in the
non-U.S. currencies, the currency rate risk exposure is predominantly less than
one year with the majority in the 120 to 150 day range. See also "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Euro
Conversion".
The Company may use, from time to time, a limited hedging program to minimize
the impact of foreign currency fluctuations. As the Company exports products, it
may enter 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, 1999, the Company had no forward contracts
outstanding.
INTEREST RATE RISK
The Company is subject to interest rate risk in connection with borrowings under
its variable rate revolving line of credit and from fixed rate debt assumed in
conjunction with the purchase of ultrasound intellectual property in October
1998. However, this risk is limited due to the limited level of debt the Company
has outstanding. The Company's exposure to interest rate risk arises primarily
from changes in the prime rate and changes in Eurodollar rates in the London
interbank market. See Note 3 of "Notes to Consolidated Statements" for a
description of the Company's outstanding debt.
SAFE HARBOR STATEMENT
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operation may be "forward looking statements" within
the meaning of the Securities Exchange Act of 1934, including the Company's
expectation as to fiscal 2000 and future revenue and earnings levels, the timing
of new product releases and the expansion of the Company into new markets.
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 and shipments which can cause the
Company to experience significant fluctuations in its quarterly and annual
revenue and operating results, timely receipt of required supplies and
components which could result in delays in anticipated shipments, 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
16
<PAGE> 17
may have in new products and technologies generally, rapid or unexpected
technological changes, the impact of undetected errors or defects associated
with the Year 2000 date functions on the Company and its suppliers, and the
effect of economic conditions, particularly economic conditions in the domestic
and worldwide Automotive and Forest Products industries, both of which have from
time to time been subject to cyclical downturns due to the level of demand for,
or supply of, the products produced by companies in these industries.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required pursuant to this item is incorporated by reference herein
from Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk Information".
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a suit filed by Analog Technologies, Inc. ("Analog")
on October 8, 1999 in the Circuit Court for the County of Oakland, Michigan. The
suit alleges that the Company breached a non-disclosure agreement and
misappropriated Analog's confidential information and trade secrets in
connection with the Company's development of a potential new product. The
potential new product involved is one of a number of new products under
development by the Company, which have not been discussed in the Company's
filings with the Securities and Exchange Commission. Analog seeks equitable
relief and unspecified compensatory damages in excess of $25,000. The Company
believes that Analog's claims are without merit and intends to vigorously defend
Analog's claims.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.32 Forms of Non-Qualified Stock Option Agreements
under the Director Stock Option Plan after
September 1, 1999.
27. Financial Data Schedule
(B) Reports on Form 8-K
None
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)
Date: February 9, 2000 By: /S/ Alfred A. Pease
-------------------------------------------
Alfred A. Pease
President and Chief Executive Officer
Date: February 9, 2000 By: /S/ John J. Garber
-------------------------------------------
John J. Garber
Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: February 9, 2000 By: /S/ Sylvia M. Smith
-------------------------------------------
Sylvia M. Smith
Controller and Chief Accounting Officer
(Principal Accounting Officer)
19
<PAGE> 20
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
10.32 Forms of Non-Qualified Stock Option Agreements
under the Director Stock Option Plan after
September 1, 1999.
27. Financial Data Schedule
<PAGE> 1
USAGE: 9/1/99 EXHIBIT 10.32
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT is made this ____ day of _____, ___, by and
between Perceptron, Inc., a Michigan corporation (the "Company"), and
__________, (the "Optionee"). The Optionee is now serving as an Eligible
Director of the Company, and the Company desires to provide additional incentive
to the Optionee to encourage the Optionee to remain as an Eligible Director of
the Company, and as an inducement thereto, the Company has determined to grant
to the Optionee a non-qualified stock option pursuant to the Company's Directors
Stock Option Plan (the "Plan").
NOW, THEREFORE, it is agreed between the parties as follows:
1. Grant of Option. Subject to the terms and conditions hereof,
the Company hereby grants to the Optionee the right and option to purchase from
the Company up to, but not exceeding in the aggregate, _____ shares of the
Company's Common Stock, at a price of $___ per share. This option is not
intended to meet the requirements of an incentive stock option under Section 422
of the Internal Revenue Code (the "Code"). Certain capitalized terms used in
this Agreement shall have the same meaning as defined in the Plan.
2. Accrual or Right to Exercise Option. The option hereby
granted may not be exercised prior to ______. The Optionee may purchase from the
Company on and after _________, the first anniversary of the date of grant,
33 1/3% of the shares covered by this option, and on each succeeding one year
anniversary thereof may exercise an additional 33 1/3% of the shares covered by
the option, so that on the third anniversary of the date of grant this option
shall be fully exercisable. To the extent not exercised, installments shall
accumulate and the Optionee may exercise them in whole or in part in any
subsequent period. Any provision of this Agreement notwithstanding, this option
shall not be exercisable on or after the date ten years from the date of grant
of this option (the "Expiration Date").
Notwithstanding the foregoing, (i) in the event of a
termination by the Company of the Optionee's membership on the Board or failure
to renominate the Participant for election to the Board, or voluntary
resignation by the Optionee from the Board at the request of the Board,
following a Change in Control of the Company, or (ii), in the event of a Change
in Control, if one of the corporations surviving the Change in Control or the
person purchasing the Company's assets in the Change in Control does not assume
this option, any portion of this option that is then not exercisable shall
become immediately exercisable. For purposes hereof, a "Change in Control" shall
be deemed to have occurred in the event of (i) a merger involving the Company in
which the Company is not the surviving corporation (other than a merger with a
wholly-owned subsidiary of the Company formed for the purpose of changing the
Company's corporate domicile); (ii) a share exchange in which the shareholders
of the Company exchange their stock in the Company for stock of another
corporation (other than a share exchange in which all or substantially all of
the holders of the voting stock of the Company, immediately prior to the
transaction, exchange, on a pro rata basis, their voting stock of the Company
for more than 50% of the voting stock of such other corporation); (iii) the sale
of all or substantially all of the assets of the Company; or (iv) any person or
group of persons (as defined by Section 13(d) of the Exchange Act) (other than
any employee benefit plan or employee benefit trust benefitting the employees of
the Company) becoming a beneficial owner, directly or indirectly, of securities
of the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock, or the combined voting power of the Company's then
outstanding voting securities.
<PAGE> 2
3. Termination. Subject to certain change in control provisions
set forth in Section 2 above, if the Optionee's term of office as an Eligible
Director is terminated for any reason (including the Optionee becoming an
Employee), other than the Optionee's election or appointment as Chairman, prior
to the date that this option or a portion thereof first becomes exercisable,
such option or portion thereof which is not then exercisable shall terminate and
all rights thereunder shall cease. If the Optionee's term of office as an
Eligible Director terminates due to the Optionee's election or appointment as
Chairman (and the Optionee is not an Employee or does not become an Employee as
a result of such election or appointment), this Option shall not terminate and
shall continue to become exercisable as provided in Section 2 above. If
thereafter such Chairman becomes an Employee, or ceases to be a Director, prior
to the date this option or a portion thereof first becomes exercisable, such
option or portion thereof which is then not exercisable shall terminate and all
rights hereunder relating thereto shall cease.
To the extent this option or any portion thereof is
exercisable and unexercised on the date the Optionee's term of office as an
Eligible Director is terminated for any reason (including the Optionee becoming
an Employee), other than the Optionee's election or appointment as Chairman,
this option shall terminate on the earlier of (i) the Expiration Date of this
option, and (ii) three months after such termination; provided, however, that
the exercise period in clause (ii) shall be extended to one year after
termination if the termination is due to the Optionee's death or Disability. To
the extent an Option or any portion thereof is exercisable and unexercised on
the date of the Optionee's term of office as an Eligible Director is terminated
due to the Optionee's election or appointment as the Chairman (and the Optionee
is not an Employee or does not become an Employee as a result of such election
or appointment), this option shall terminate on the earlier of (i) the
Expiration Date of this option, and (ii) three months after the Optionee becomes
an Employee or ceases to be a Director; provided, however, that the exercise
period in clause (ii) shall be extended to one year after the Optionee ceases to
be a Director if such termination is due to the Optionee's death or Disability.
Notwithstanding the foregoing two sentences, in the event this option would
otherwise expire during any period during which affiliates of the Company are
prohibited from disposing of Common Stock in order to comply with applicable
accounting and Securities and Exchange Commission rules, regulations, policies,
guidelines or other similar requirements so as to permit the Company to account
for a then completed or contemplated business combination under pooling of
interest, the exercise period in clause (ii) of the foregoing two sentences
shall be extended to the tenth business day following the expiration of any such
period in which such dispositions are prohibited.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in
this Agreement, the Optionee may exercise any portion of this option which is
then exercisable, in whole or in part, by delivery to the Company of a written
notice, in the form attached hereto, signed by the Optionee.
(b) In addition, the Optionee shall deliver, on the date of
exercise:
(i) cash equal to the purchase price of the shares being
purchased,
(ii) such documents as are or may be required under the
terms of Section 2.6 of the Plan to effect a cashless exercise; or
(iii) Permitted Shares with a value (determined as of the
date of exercise of the option) equal to the purchase price of the shares being
purchased (the "Delivered Shares Method").
2
<PAGE> 3
After receipt of the foregoing, and subject to Section 5 below, the
Company shall issue the shares in the name of the Optionee and deliver the
certificates therefor to the Optionee.
(c) "Permitted Shares" are shares of Company Common Stock to be
delivered to pay the exercise price of the option (the "Delivered Shares):
(i) which have been owned by the Optionee for at least six
months prior to the date of delivery, or
(ii) if they have not been owned by the Optionee for at
least six months prior to the date of delivery, the Optionee then owns, and has
owned for at least six months prior thereto, a number of shares of Company
Common Stock at least equal in number to the Delivered Shares.
(d) Shares which have been counted during the prior six months as
owned by the Optionee for purposes of determining whether the Optionee may
exercise options to purchase Common Stock pursuant to the Delivered Shares
Method:
(i) may not be used as Delivered Shares and
(ii) may not be counted as owned by the Optionee for
purposes of making calculations under the Delivered Shares Method.
5. Compliance With Securities Laws. Anything to the contrary
herein notwithstanding, the Company's obligation to sell and deliver stock under
this Option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as the
Company deems necessary or advisable. The Company shall not be required to sell
and deliver stock pursuant hereto unless and until it receives satisfactory
proof that the issuance or transfer of such shares will not violate any of the
provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934
or the rules and regulations of the Securities Exchange Commission promulgated
thereunder or the provisions of any state law governing the sale of securities,
or that there has been compliance with the provisions of such acts, rules,
regulations and state laws. If the Optionee fails to accept delivery and pay for
all or any part of the number of shares specified by such notice upon tender of
delivery thereof the Optionee's right to exercise this option with respect to
such undelivered shares may be terminated by the Company.
6. Non-Assignability. The option hereby granted shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and the option may be exercised during the Optionee's lifetime
only by the Optionee. Any transferee of the option shall take the same subject
to the terms and conditions of this Agreement. No such transfer of the Option
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of the will and/or such other
evidence as the Company may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this Option, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise, except a transfer by the Optionee by will or by the laws of
descent and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. Disputes. As a condition to the granting of the option granted
hereby, the Optionee and the Optionee's successors and assigns agree that any
dispute or disagreement which shall arise under or as a result of this Agreement
shall be determined by the Board in its sole discretion and judgment and that
any such
3
<PAGE> 4
determination and any interpretation by the Board of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. Adjustments. In the event of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, combination, exchange
or other relevant change in the capital structure of the Company affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 4.1 of the Plan.
9. Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. Notices. Every notice relating to this Agreement shall be in
writing and if given by mail shall be given by registered or certified mail with
return receipt requested. All notices to the Company shall be delivered to the
Company's Chief Executive Officer, at the principal office of the Company. All
notices by the Company to the Optionee shall be delivered to the Optionee
personally or addressed to the Optionee at the Optionee's last residence address
as then contained in the records of the Company or such other address as the
Optionee may designate. Either party by notice to the other may designate a
different address to which notices shall be addressed. Any notice given by the
Company to the Optionee at the Optionee's last designated address shall be
effective to bind any other person who shall acquire rights hereunder.
11. "Optionee" to Include Certain Transferees. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. Governing Law. This Agreement has been made in and shall be
construed in accordance with the laws of the State of Michigan.
13. Provisions of Plan Controlling. The provisions hereof are
subject to the terms and provisions of the Plan. In the event of any conflict
between the provisions of this option and the provisions of the Plan, the
provisions of the Plan shall control, except to the extent that the provisions
of this option limit or restrict the rights of the Optionee to a greater extent
than set forth in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PERCEPTRON, INC.
By:
--------------------------------
---------------------
Its:
-------------------------------
-----------------------------------
--------------, Optionee
4
<PAGE> 5
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
A non-qualified stock option was granted to me on , , to
purchase shares of Perceptron, Inc. Common Stock at a price of $ per
share.
I hereby elect to exercise my non-qualified stock option with respect to
shares for an aggregate purchase price of $ . I hereby elect
to pay for such shares as follows:
<TABLE>
<S> <C>
$
Personal Check --------
$
Cash --------
$
Bank Draft --------
$
Money Order --------
$
Cashless Exercise --------
$
Perceptron Common Stock --------
$
Total ========
</TABLE>
[A personal check [or cash, bank draft or money order] for the purchase
price is enclosed herewith].
[Documents as are required to effect a cashless exercise are enclosed.]
[I hereby elect to exercise my stock option with respect to shares
through a combination of cash payments and shares of Perceptron, Inc. Common
Stock, as described on the attached Exhibit A. A personal check for the purchase
price to be paid in cash is enclosed herewith. Certificates for shares
of Perceptron, Inc. Common Stock are enclosed herewith, along with a duly
executed stock power in proper form for transfer, with all signatures properly
guaranteed by a national bank or member firm of the NYSE or AMEX. [I represent
that the shares of Perceptron, Inc. Common Stock enclosed herewith have been
owned by me for more than six months.] or [I currently own more than
shares of Perceptron, Inc. Common Stock which have been owned by me for more
than six months.] Such shares have not been counted during the prior six months
as owned by me for purposes of determining whether I may exercise options to
purchase Common Stock pursuant to the Delivered Shares Method.]
Dated:
------------ -----------------------------------
-------------
Optionee
1
<PAGE> 6
USAGE: 9/1/99
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT is made this ___ day of ____, ____ by and
between Perceptron, Inc., a Michigan corporation (the "Company"), and _________,
(the "Optionee"). The Optionee is now serving as an Eligible Director of the
Company, and the Company desires to provide additional incentive to the Optionee
to encourage the Optionee to remain as an Eligible Director of the Company, and
as an inducement thereto, the Company has determined to grant to the Optionee a
non-qualified stock option pursuant to the Company's Directors Stock Option Plan
(the "Plan").
NOW, THEREFORE, it is agreed between the parties as follows:
1. Grant of Option. Subject to the terms and conditions hereof,
the Company hereby grants to the Optionee the right and option to purchase from
the Company up to, but not exceeding in the aggregate, 15,000 shares of the
Company's Common Stock, at a price of $____ per share. This option is not
intended to meet the requirements of an incentive stock option under Section 422
of the Internal Revenue Code (the "Code"). Certain capitalized terms used in
this Agreement shall have the same meaning as defined in the Plan.
2. Accrual or Right to Exercise Option. The option hereby
granted may not be exercised prior to ___________. On [one year from date of
grant], this option shall be fully exercisable. Any provision of this Agreement
notwithstanding, this option shall not be exercisable on or after the date ten
years from the date of grant of this option (the "Expiration Date").
Notwithstanding the foregoing, (i) in the event of a
termination by the Company of the Optionee's membership on the Board or failure
to renominate the Participant for election to the Board, or voluntary
resignation by the Optionee from the Board at the request of the Board,
following a Change in Control of the Company, or (ii), in the event of a Change
in Control, if one of the corporations surviving the Change in Control or the
person purchasing the Company's assets in the Change in Control does not assume
this option, any portion of this option that is then not exercisable shall
become immediately exercisable. For purposes hereof, a "Change in Control" shall
be deemed to have occurred in the event of (i) a merger involving the Company in
which the Company is not the surviving corporation (other than a merger with a
wholly-owned subsidiary of the Company formed for the purpose of changing the
Company's corporate domicile); (ii) a share exchange in which the shareholders
of the Company exchange their stock in the Company for stock of another
corporation (other than a share exchange in which all or substantially all of
the holders of the voting stock of the Company, immediately prior to the
transaction, exchange, on a pro rata basis, their voting stock of the Company
for more than 50% of the voting stock of such other corporation); (iii) the sale
of all or substantially all of the assets of the Company; or (iv) any person or
group of persons (as defined by Section 13(d) of the Exchange Act) (other than
any employee benefit plan or employee benefit trust benefitting the employees of
the Company) becoming a beneficial owner, directly or indirectly, of securities
of the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock, or the combined voting power of the Company's then
outstanding voting securities.
3. Termination. Subject to certain change in control provisions
set forth in Section 2 above, if the Optionee's term of office as an Eligible
Director is terminated for any reason (including the Optionee
1
<PAGE> 7
becoming an Employee), other than the Optionee's election or appointment as
Chairman, prior to the date that this option or a portion thereof first becomes
exercisable, such option or portion thereof which is not then exercisable shall
terminate and all rights thereunder shall cease. If the Optionee's term of
office as an Eligible Director terminates due to the Optionee's election or
appointment as Chairman (and the Optionee is not an Employee or does not become
an Employee as a result of such election or appointment), this Option shall not
terminate and shall continue to become exercisable as provided in Section 2
above. If thereafter such Chairman becomes an Employee, or ceases to be a
Director, prior to the date this option or a portion thereof first becomes
exercisable, such option or portion thereof which is then not exercisable shall
terminate and all rights hereunder relating thereto shall cease.
To the extent this option or any portion thereof is
exercisable and unexercised on the date the Optionee's term of office as an
Eligible Director is terminated for any reason (including the Optionee becoming
an Employee), other than the Optionee's election or appointment as Chairman,
this option shall terminate on the earlier of (i) the Expiration Date of this
option, and (ii) three months after such termination; provided, however, that
the exercise period in clause (ii) shall be extended to one year after
termination if the termination is due to the Optionee's death or Disability. To
the extent an Option or any portion thereof is exercisable and unexercised on
the date of the Optionee's term of office as an Eligible Director is terminated
due to the Optionee's election or appointment as the Chairman (and the Optionee
is not an Employee or does not become an Employee as a result of such election
or appointment), this option shall terminate on the earlier of (i) the
Expiration Date of this option, and (ii) three months after the Optionee becomes
an Employee or ceases to be a Director; provided, however, that the exercise
period in clause (ii) shall be extended to one year after the Optionee ceases to
be a Director if such termination is due to the Optionee's death or Disability.
Notwithstanding the foregoing two sentences, in the event this option would
otherwise expire during any period during which affiliates of the Company are
prohibited from disposing of Common Stock in order to comply with applicable
accounting and Securities and Exchange Commission rules, regulations, policies,
guidelines or other similar requirements so as to permit the Company to account
for a then completed or contemplated business combination under pooling of
interest, the exercise period in clause (ii) of the foregoing two sentences
shall be extended to the tenth business day following the expiration of any such
period in which such dispositions are prohibited.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in this
Agreement, the Optionee may exercise any portion of this option which is then
exercisable, in whole or in part, by delivery to the Company of a written
notice, in the form attached hereto, signed by the Optionee.
(b) In addition, the Optionee shall deliver, on the date of exercise:
(i) cash equal to the purchase price of the shares being
purchased,
(ii) such documents as are or may be required under the
terms of Section 2.6 of the Plan to effect a cashless exercise; or
(iii) Permitted Shares with a value (determined as of the
date of exercise of the option) equal to the purchase price of the shares being
purchased (the "Delivered Shares Method").
After receipt of the foregoing, and subject to Section 5 below, the
Company shall issue the shares in
2
<PAGE> 8
the name of the Optionee and deliver the certificates therefor to the Optionee.
(c) "Permitted Shares" are shares of Company Common Stock to be
delivered to pay the exercise price of the option (the "Delivered Shares):
(i) which have been owned by the Optionee for at least six
months prior to the date of delivery, or
(ii) if they have not been owned by the Optionee for at
least six months prior to the date of delivery, the Optionee then owns, and has
owned for at least six months prior thereto, a number of shares of Company
Common Stock at least equal in number to the Delivered Shares.
(d) Shares which have been counted during the prior six months as
owned by the Optionee for purposes of determining whether the Optionee may
exercise options to purchase Common Stock pursuant to the Delivered Shares
Method:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the Optionee for
purposes of making calculations under the Delivered Shares Method.
5. Compliance With Securities Laws. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
Option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as the
Company deems necessary or advisable. The Company shall not be required to sell
and deliver stock pursuant hereto unless and until it receives satisfactory
proof that the issuance or transfer of such shares will not violate any of the
provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934
or the rules and regulations of the Securities Exchange Commission promulgated
thereunder or the provisions of any state law governing the sale of securities,
or that there has been compliance with the provisions of such acts, rules,
regulations and state laws. If the Optionee fails to accept delivery and pay for
all or any part of the number of shares specified by such notice upon tender of
delivery thereof the Optionee's right to exercise this option with respect to
such undelivered shares may be terminated by the Company.
6. Non-Assignability. The option hereby granted shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and the option may be exercised during the Optionee's lifetime
only by the Optionee. Any transferee of the option shall take the same subject
to the terms and conditions of this Agreement. No such transfer of the Option
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of the will and/or such other
evidence as the Company may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this Option, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise, except a transfer by the Optionee by will or by the laws of
descent and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. Disputes. As a condition to the granting of the option granted
hereby, the Optionee and the Optionee's successors and assigns agree that any
dispute or disagreement which shall arise under or as a result of this Agreement
shall be determined by the Board in its sole discretion and judgment and that
any such
3
<PAGE> 9
determination and any interpretation by the Board of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. Adjustments. In the event of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, combination, exchange
or other relevant change in the capital structure of the Company affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 4.1 of the Plan.
9. Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. Notices. Every notice relating to this Agreement shall be in
writing and if given by mail shall be given by registered or certified mail with
return receipt requested. All notices to the Company shall be delivered to the
Company's Chief Executive Officer at the principal office of the Company. All
notices by the Company to the Optionee shall be delivered to the Optionee
personally or addressed to the Optionee at the Optionee's last residence address
as then contained in the records of the Company or such other address as the
Optionee may designate. Either party by notice to the other may designate a
different address to which notices shall be addressed. Any notice given by the
Company to the Optionee at the Optionee's last designated address shall be
effective to bind any other person who shall acquire rights hereunder.
11. "Optionee" to Include Certain Transferees. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. Governing Law. This Agreement has been made in and shall be
construed in accordance with the laws of the State of Michigan.
13. Provisions of Plan Controlling. The provisions hereof are subject
to the terms and provisions of the Plan. In the event of any conflict between
the provisions of this option and the provisions of the Plan, the provisions of
the Plan shall control, except to the extent that the provisions of this option
limit or restrict the rights of the Optionee to a greater extent than set forth
in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PERCEPTRON, INC.
By:
---------------------------------------
-------------------------------
Its:
------------------------------
------------------------------------------
------------------------,Optionee
4
<PAGE> 10
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
A non-qualified stock option was granted to me on ,
to purchase 15,000 shares of Perceptron, Inc. Common Stock at a price of $
per share.
I hereby elect to exercise my non-qualified stock option with
respect to shares for an aggregate purchase price of $ . I
hereby elect to pay for such shares as follows:
<TABLE>
<S> <C>
$
Personal Check ---------
$
Cash ---------
$
Bank Draft ---------
$
Money Order ---------
$
Cashless Exercise ---------
$
Perceptron Common Stock ---------
$
Total =========
</TABLE>
[A personal check [or cash, bank draft or money order] for the
purchase price is enclosed herewith].
[Documents as are required to effect a cashless exercise are
enclosed.]
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a duly
executed stock power in proper form for transfer, with all signatures properly
guaranteed by a national bank or member firm of the NYSE or AMEX. [I represent
that the shares of Perceptron, Inc. Common Stock enclosed herewith have been
owned by me for more than six months.] or [I currently own more than
shares of Perceptron, Inc. Common Stock which have been owned by me for more
than six months.] Such shares have not been counted during the prior six months
as owned by me for purposes of determining whether I may exercise options to
purchase Common Stock pursuant to the Delivered Shares Method.]
Dated:
----------------- ----------------------------------
---------------------, Optionee
1
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,990,000
<SECURITIES> 0
<RECEIVABLES> 31,716,000
<ALLOWANCES> (310,000)
<INVENTORY> 12,471,000
<CURRENT-ASSETS> 51,061,000
<PP&E> 16,997,000
<DEPRECIATION> (6,309,000)
<TOTAL-ASSETS> 65,957,000
<CURRENT-LIABILITIES> 10,609,000
<BONDS> 5,425,000
0
0
<COMMON> 82,000
<OTHER-SE> 49,841,000
<TOTAL-LIABILITY-AND-EQUITY> 65,957,000
<SALES> 37,004,000
<TOTAL-REVENUES> 37,004,000
<CGS> 16,352,000
<TOTAL-COSTS> 16,352,000
<OTHER-EXPENSES> 16,892,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,000
<INCOME-PRETAX> 3,513,000
<INCOME-TAX> 1,426,000
<INCOME-CONTINUING> 2,087,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,087,000
<EPS-BASIC> .26
<EPS-DILUTED> .26
</TABLE>
