<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 March 31, 2000.
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 May 10, 2000, was:
Common Stock, $0.01 par value 8,170,208
----------------------------- --------------------------
Class Number of shares
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PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <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 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2
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PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
(In Thousands) 2000 1999
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,684 $ 4,205
Receivables:
Billed receivables, net of allowance for doubtful accounts
of $276,000 and $218,000, respectively 19,503 21,128
Unbilled and other receivables 6,105 4,611
Inventory, net of reserves of $945,000 and $600,000, respectively 12,996 12,323
Deferred taxes and other current assets 1,035 1,307
------------ -------------
Total current assets 45,323 43,574
------------ -------------
PROPERTY AND EQUIPMENT
Building and land 5,990 5,990
Machinery and equipment 9,141 9,774
Furniture and fixtures 1,427 1,469
------------ -------------
16,558 17,233
Less - Accumulated depreciation and amortization (5,766) (6,121)
------------ -------------
Net property and equipment 10,792 11,112
------------ -------------
OTHER ASSETS
Intangible assets, net of accumulated amortization
of $566,000 and $279,000, respectively 1,407 1,692
Deferred tax asset 2,553 4,956
------------ -------------
Total other assets 3,960 6,648
------------ -------------
TOTAL ASSETS $ 60,075 $ 61,334
============ =============
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,728 $ 3,550
Accrued liabilities and expenses 3,276 4,619
Income taxes payable 1,610 633
Accrued compensation 1,706 203
------------ -------------
Total current liabilities 10,320 9,005
------------ -------------
LONG-TERM LIABILITIES
Notes payable 1,040 4,265
------------ -------------
Total long-term liabilities 1,040 4,265
------------ -------------
Total liabilities 11,360 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 8,170,000 at March 31, 2000 and 8,169,000 at
June 30, 1999, respectively 82 82
Accumulated other comprehensive income (loss) (4,360) (3,340)
Additional paid-in capital 41,010 40,979
Retained earnings 11,983 10,343
------------ -------------
Total shareholders' equity 48,715 48,064
------------ -------------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 60,075 $ 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 MARCH 31 NINE MONTHS ENDED MARCH 31,
(In Thousands, Except Per Share Amounts) 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 13,721 $ 8,934 $ 50,725 $ 40,259
COST OF SALES 6,218 4,697 22,570 18,287
-------- -------- -------- --------
GROSS PROFIT 7,503 4,237 28,155 21,972
-------- -------- -------- --------
OPERATING EXPENSES
Selling, general and administrative 4,981 5,064 15,404 15,895
Engineering, research and development 2,896 3,233 9,365 9,284
Non-cash intangible asset write-off -- -- -- 1,472
-------- -------- -------- --------
Total operating expenses 7,877 8,297 24,769 26,651
-------- -------- -------- --------
OPERATING INCOME (LOSS) (374) (4,060) 3,386 (4,679)
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest income (expense), net (63) (8) (241) 230
Foreign currency and other (25) 82 (94) 88
-------- -------- -------- --------
Total other income and (deductions) (88) 74 (335) 318
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (462) (3,986) 3,051 (4,361)
INCOME TAX EXPENSE (BENEFIT) (15) (1,355) 1,411 (1,562)
-------- -------- -------- --------
NET INCOME (LOSS) $ (447) $ (2,631) $ 1,640 $ (2,799)
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE
BASIC ($0.05) ($0.32) $ 0.20 ($0.34)
DILUTED ($0.05) ($0.32) $ 0.20 ($0.34)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 8,170 8,200 8,170 8,228
DILUTED 8,170 8,200 8,201 8,228
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
4
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PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
(In Thousands) 2000 1999
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,640 $ (2,799)
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Depreciation and amortization 1,748 2,019
Deferred income taxes 1,906 (2,818)
Other 169 1,459
Changes in assets and liabilities, exclusive of changes shown
separately 713 (1,515)
-------------- -------------
Net cash provided from (used for) operating activities 6,176 (3,654)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit borrowings 12,790 1,972
Revolving credit repayments (16,015) (1,573)
Repurchase of company stock - (459)
Proceeds from stock plans 30 266
-------------- -------------
Net cash provided from (used for) financing activities (3,195) 206
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,255) (1,636)
Purchase of Sonic assets - (1,114)
------------- -------------
Net cash used for investing activities (1,255) (2,750)
-------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (247) (99)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,479 (6,297)
CASH AND CASH EQUIVALENTS, JULY 1 4,205 10,699
-------------- -------------
CASH AND CASH EQUIVALENTS, MARCH 31 $ 5,684 $ 4,402
============== =============
CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables, net $ (737) $ (291)
Inventories (634) (1,212)
Accounts payable 178 (312)
Other current assets and liabilities 1,906 300
-------------- -------------
$ 713 $ (1,515)
============== =============
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
5
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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 amounts derived from audited financial statements. 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,
including 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>
MARCH 31, JUNE 30,
2000 1999
---------------- ----------------
<S> <C> <C>
Component Parts $ 8,083 $ 6,553
Work In Process 1,483 1,683
Finished Goods 3,430 4,087
---------------- ----------------
Total $ 12,996 $ 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
(9% as of May 1, 2000). The credit facilities expire on May 31, 2000, unless
canceled earlier by the Company or the bank. The Company expects to renew these
credit facilities prior to May 31, 2000. The Company had no borrowings
outstanding under these credit facilities at March 31, 2000.
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 (9% as of May 1, 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 8.1% as of
May 1, 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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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 no borrowings
outstanding under the Revolver at March 31, 2000.
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 March 31, 2000 and 1999, 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 MARCH 31, 2000 1999
--------------- ---------------
<S> <C> <C>
Net Income $ (447) $ (2,631)
Other Comprehensive Income:
Foreign currency translation adjustments (792) (1,191)
--------------- ---------------
Total Comprehensive Income $ (1,239) $ (3,822)
=============== ===============
<CAPTION>
NINE MONTHS ENDED MARCH 31, 2000 1999
--------------- ---------------
<S> <C> <C>
Net Income $ 1,640 $ (2,799)
Other Comprehensive Income:
Foreign currency translation adjustments (1,020) (358)
--------------- ---------------
Total Comprehensive Income $ 620 $ (3,157)
=============== ===============
</TABLE>
7
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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 MAR. 31, 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ (447) $ (2,631) 8,170 8,200 $ (.05) $ (.32)
Effect of Dilutive Securities:
Stock options and warrants - - - -
------------ ------------ ------------ ------------
Diluted EPS $ (447) $ (2,631) 8,170 8,200 $ (.05) $ (.32)
============ ============ ============ ============
<CAPTION>
WEIGHTED AVG. EARNINGS
NET INCOME COMMON SHARES PER SHARE
NINE MONTHS ENDED MAR. 31, 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 1,640 $ (2,799) 8,170 8,228 $ .20 $ (.34)
Effect of Dilutive Securities:
Stock options and warrants - - 31 -
------------ ------------ ------------ ------------
Diluted EPS $ 1,640 $ (2,799) 8,201 8,228 $ .20 $ (.34)
============ ============ ============ ============
</TABLE>
During the three and nine month periods ended March 31, 2000, options to
purchase 1,165,000 and 1,194,000 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 nine month
periods ended March 31, 1999, options to purchase 1,209,000 and 1,044,000 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 and this Form
10-Q.
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>
MARCH 31, 2000
Revenues $ 9,986 $ 3,735 $ 13,721
Operating Income (Loss) 347 (721) (374)
Total Assets 51,610 8,465 60,075
MARCH 31, 1999
Revenues $ 8,136 $ 798 $ 8,934
Operating (Loss) (1,899) (2,161) (4,060)
Total Assets 52,739 7,506 60,245
<CAPTION>
NINE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED
- ------------------------ -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
MARCH 31, 2000
Revenues $ 39,582 $ 11,143 $ 50,725
Operating Income (Loss) 5,051 (1,665) 3,386
Total Assets 51,610 8,465 60,075
MARCH 31, 1999
Revenues $ 32,936 $ 7,323 $ 40,259
Operating (Loss) (2,598) (2,081) (4,679)
Total Assets 52,739 7,506 60,245
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000, Compared to Three Months Ended March 31, 1999
Overview - The Company reported a net loss of $447,000, or $0.05 per share, for
the third quarter of fiscal 2000, compared to a net loss of $2.6 million, or
$0.32 per share, in the quarter ended March 31, 1999. Net sales of $13.7 million
for the three months ended March 31, 2000, were up $4.8 million, or 53.6%, over
the prior year's sales of $8.9 million. Automotive sales accounted for 73% of
total sales during the third quarter of fiscal 2000 compared to 91% in the
quarter ended March 31, 1999. Industrial Businesses sales represented 27% of
total sales for the quarter ended March 31, 2000, compared to 9% in the same
quarter of 1999. Gross profit for the third quarter of fiscal 2000 was 54.7%
compared to 47.4% in the quarter ended March 31, 1999. The increase in gross
profit was primarily due to the higher level of sales in the current quarter
versus the level one year ago and product mix. Operating expenses were down
$420,000 in the third quarter of fiscal 2000 compared to the quarter ended March
31, 1999. The favorable comparison in operating expenses was due to the benefit
derived from cost reduction programs initiated during 1999.
Automotive - Sales in the third quarter of fiscal 2000 of $10.0 million were up
$1.9 million over sales of $8.1 million in the quarter ended March 31, 1999.
P-1000 sales accounted for approximately 44% of net automotive sales in the
third quarter of fiscal 2000 compared to approximately 66% 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 20% of net
automotive sales in the third quarter of fiscal 2000. RGS and NCA systems sales
accounted for 22% of net sales in the quarter ended March 31, 2000, compared to
17% 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 third quarter of
fiscal 2000 were $3.7 million, of which $2.8 million was delivered by the Forest
Products business unit. Sales of $798,000 in the quarter ended March 31, 1999,
were all delivered by the Forest Products business unit. The increase in sales
of $2.9 million from the same period last year was primarily due to a
strengthening in the forest products marketplace coupled with sales of newly
introduced products to the forest products industry and new sales in the steel
and aerospace industries.
Bookings & Backlog - New order bookings for the three months ended March 31,
2000, were $16.2 million compared to $16.4 million in the same quarter of 1999.
Automotive bookings totaled $11.8 million in the fiscal 2000 quarter compared to
$14.7 million a year ago. During the quarter ended March 31, 2000, automotive
bookings represented: 55% P-1000, 27% IPNet(TM) and 12% RGS and NCA, as compared
with 28% P-1000, 36% IPNet(TM) and 36% RGS and NCA for the quarter ended March
31, 1999. Industrial Businesses bookings were $4.4 million in the quarter ended
March 31, 2000, compared to $1.7 million a year ago, of which Forest Product
bookings represented 86% and 71%, respectively. Backlog at March 31, 2000, was
$24.4 million compared to $30.9 million at March 31, 1999. The Company expects
to be able to fill substantially all of the orders in backlog during the next
twelve
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months. 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
$83,000 from $5.1 million in the quarter ended March 31, 1999, to $5.0 million
in the comparable current quarter. The decrease was primarily due to cost
reduction programs initiated during 1999 that more than offset the impact of
annual inflation.
Engineering, Research and Development Expenses (R&D) - Engineering and R&D
expenses decreased $337,000 from $3.2 million in the quarter ended March 31,
1999, to $2.9 million in the quarter ended March 31, 2000. The decrease was
primarily due to lower expenditures for engineering materials and contract
services during the comparable periods. The Company continues to invest in new
product development. In the Automotive segment, the first phase of the Wet Film
Thickness Measurement System which is for inspecting the primer in line at a
production plant, continues in testing mode at an alpha site. The installation
of the second phase of the Wet Film Thickness Measurement System which is for
measuring the wet paint base coat, is nearing completion. The Company's enhanced
PaintScan(TM) system continues to be 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 also continues to
undergo 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 was installed
successfully at a customer site and was released as a new product during the
quarter ended March 31, 2000.
Interest Income (Expense), net - The increase in interest income (expense), net
reflected higher average borrowings on the Company's revolving line of credit
during the quarter ended March 31, 2000 compared to the quarter a year ago.
Outlook - The Company continues to expect its overall operating results for the
fourth quarter 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.
Nine Months Ended March 31, 2000, Compared to Nine Months Ended March 31, 1999
Overview - The Company reported net income of $1.6 million, or $0.20 per share,
for the first nine months of fiscal 2000, compared to a net loss of $2.8 million
or $0.34 per share, in the nine months ended March 31, 1999. Net sales of $50.7
million for the nine months ended March 31, 2000, were up $10.5 million, or 26%,
over the prior year's sales of $40.3 million. Automotive sales accounted for
approximately 78% and 82% of total sales during the nine-month periods ended
March 31, 2000 and 1999, respectively. Industrial Businesses sales represented
the balance of approximately 22% and 18% in both periods, respectively. Gross
profit for the first nine months of fiscal 2000 was 55.5% compared to 54.6% in
the nine months ended March 31, 1999. The increase in gross profit was primarily
due to product mix and the higher level of sales in the current period when
compared to the same nine-month period ended March 31, 1999. Operating expenses
were down $1.9 million in the first nine months of fiscal 2000 compared to the
nine months ended March 31, 1999. The favorable comparison in operating expenses
was primarily due to a $1.5 million non-cash write-off of an intangible asset in
the nine months
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ended March 31, 1999. Lower selling, general and administrative expenses of
$491,000 were partially offset by higher engineering, research and development
expenses in the comparable nine-month periods.
Automotive - Sales in the first nine months of fiscal 2000 increased $6.6
million to $39.6 million compared to $33.0 million in the nine months ended
March 31, 1999. P-1000 sales accounted for approximately 48% of net automotive
sales in the first nine months of fiscal 2000 compared to approximately 75% 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 nine months of fiscal
2000. RGS and NCA systems sales accounted for 23% of net sales in the nine
months ended March 31, 2000, compared to 12% 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 nine months
of fiscal 2000 were $11.1 million, of which $9.5 million was delivered by the
Forest Products business unit. Sales of $7.3 million for the same period last
year were all delivered by the Forest Products business unit. Sales were up $3.8
million from the same period last year primarily due to a strengthening in the
forest products marketplace coupled with sales of newly introduced products to
the forest products industry and new sales in the steel and aerospace
industries.
Bookings & Backlog - New order bookings for the nine months ended March 31,
2000, were $47.2 million compared to $46.6 million for the same period one year
ago. Automotive bookings totaled $36.7 million in the fiscal 2000 nine-month
period compared to $39.2 million a year ago. During the nine months ended March
31, 2000, automotive bookings were primarily for: 53% P-1000, 25% IPNet(TM) and
16% RGS and NCA as compared with 59% P-1000, 17% RGS and NCA, 14% IPNet(TM) and
7% paint inspection products in the nine months ended March 31, 1999. Industrial
Businesses bookings were $10.5 million in the nine months ended March 31, 2000,
compared to $7.4 million a year ago. Forest Product bookings represented 87% and
93% of the Industrial Businesses bookings in the nine months ended March 31,
2000 and 1999, respectively.
Selling, General and Administrative Expenses (SG&A) - SG&A expenses decreased
$491,000 from $15.9 million in the nine months ended March 31, 1999, to $15.4
million in the comparable fiscal 2000 nine-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 nine months of Sonic
related expenses in the current period compared to only six months in the period
ended March 31, 1999.
Engineering, Research and Development Expenses (R&D) - Engineering and R&D
expenses increased slightly from $9.3 million in the nine months ended March 31,
1999, to $9.4 million in the first nine months of fiscal 2000. The increase in
expenses was primarily due to nine months of expenses related to Sonic in the
current period as compared to only six months of expenses in the period a year
ago, offset partially by lower expenditures for engineering materials and
contract services. During the nine months ended March 31, 2000, 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.
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<PAGE> 13
Interest Income (Expense), net - The decrease in interest income (expense), net
reflected a reduction in interest income from lower average cash balances in the
nine months ended March 31, 2000, as compared to the same period ended March 31,
1999. The decrease was also attributable to higher interest expense from higher
borrowings under the Company's revolving credit line in the nine months ended
March 31, 2000, as compared to the same period ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $5.7 million at March 31, 2000,
compared to $4.2 million at June 30, 1999. The increase of $1.5 million in cash
resulted from $6.2 million of cash provided from operations that were partially
offset by $3.2 million of cash used to repay net revolving credit borrowings and
$1.3 million of cash used for capital spending.
The $6.2 million of cash provided from operations principally reflected the
Company's net income for the period and $1.8 million of cash received for the
carry-back of tax losses. Receivables, net of foreign translation adjustments,
increased $737,000, which reflected collections from previous period sales,
almost offsetting current period sales. Inventory increased $634,000 to support
near-term delivery requirements. Offsetting these increases in working capital
was a $1.9 million increase in other current assets and liabilities, primarily
representing an increase in accrued incentive compensation and tax liabilities.
Financing activities during the nine-month period reflected $3.2 million in net
repayments on the Company's revolving line of credit. At March 31, 2000, the
Company did not have any borrowings outstanding on its revolving line of credit.
The Company believes that available cash on hand and existing credit facilities
will be sufficient to fund its currently anticipated requirements over the next
twelve months.
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 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
As of December 31, 1999, the current version of the Company's principal products
and critical business systems had been remediated and tested to determine their
ability to process the year 2000 date change.
13
<PAGE> 14
The remediation and testing included contacting principal suppliers and
utilities and non-IT system vendors. To date, the Company is not aware of any
significant Year 2000 issues directly affecting the current version of its
products. The Company is also not aware of any significant Year 2000 issues
affecting its principal customers or suppliers. Based on operations since the
date change, the Company does not expect any significant impact to its business
as a result of the year 2000 date change.
Most of the costs incurred by the Company 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.
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 March 31, 2000, the Company did not have any market risk
instruments for trading purposes.
FOREIGN CURRENCY RISK
The Company has limited foreign currency exchange risk 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 March 31, 2000, was 88%. 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 March 31, 2000, 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, order booking levels and
earnings levels, the timing of new product releases and the expansion of the
Company into new markets.
14
<PAGE> 15
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 may have
in new products and technologies generally, rapid or unexpected technological
changes 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".
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in the Company's Form 10-Q for the quarter ended
December 31, 1999, 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. On February 15, 2000, the Oakland County Circuit
Court denied Analog's motion for preliminary injunction against the Company.
Analog also seeks 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
10.33 Second Amendment to the Perceptron, Inc. Directors
Stock Option Plan (Amended and Restated October 31,
1996).
27. Financial Data Schedule
(B) Reports on Form 8-K
None
16
<PAGE> 17
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: May 10, 2000 By: /S/ Alfred A. Pease
-------------------------------------
Alfred A. Pease
President and Chief Executive Officer
Date: May 10, 2000 By: /S/ John J. Garber
------------------------------------------
John J. Garber
Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 10, 2000 By: /S/ Sylvia M. Smith
-----------------------------------------
Sylvia M. Smith
Controller and Chief Accounting Officer
(Principal Accounting Officer)
17
<PAGE> 18
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.33 Second Amendment to the Perceptron, Inc.
Directors Stock Option Plan (Amended and Restated
October 31, 1996).
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.33
SECOND AMENDMENT TO THE
PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
(AMENDED AND RESTATED OCTOBER 31, 1996)
Pursuant to the Amendment provisions in Section 5.6 of the Perceptron, Inc.
Directors Stock Option Plan, as amended and restated October 31, 1996 (the
"Plan"), and subject to the approval of the shareholders at the Company's next
Annual Meeting, effective as of December 1, 1999, the Plan is hereby amended as
set forth below.
1. Section 1.1 of the Plan entitled "Purpose" shall be amended with the
addition of a new sentence at the end of the Section to read as follows:
Effective as of December 1, 1999, Directors of the Company may
purchase Common Stock under the Plan in lieu of receiving all or a
portion of their directors fees paid in cash. Stock purchases by
Directors shall not constitute purchases under Code Section 423.
2. Section 1.2(s) of the Plan entitled "Participant" shall be amended by
the addition of a new sentence at the end of the Section to read as follows:
Directors of the Company also may participate in the Plan for purposes
of purchasing Common Stock in accordance with Article VI; provided,
however, that such purchases shall not constitute purchases under Code
Section 423.
3. Section 1.4 of the Plan entitled "Stock" shall be amended to read as
follows:
1.4 Stock. The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed 325,500
shares of Common Stock, after taking into account the Company's stock
split effective November 30, 1995, as adjusted from time to time in
accordance with Article IV. Shares subject to any unexercised portion
of a terminated, forfeited, cancelled or expired Option granted
hereunder shall be available for subsequent grants or purchases under
the Plan. In the event that an option granted under the Plan is
exercised by the delivery of shares of Common Stock previously
acquired upon the exercise of Options issued under the Plan or through
the retention of options procedure as described in Section 2.6 below,
the shares of Common Stock so
<PAGE> 2
delivered to the Company or underlying such retained options shall be
available for subsequent grants or purchases under this Plan.
4. Section 4.1 of the Plan entitled "Adjustments and Change in Control"
shall be amended to read as follows:
4.1 Adjustments and Change in Control. In the event of changes in the
outstanding Common Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in the capital
structure of the Company, an appropriate adjustment shall be made by
the Board in the number of shares and kind of stock or other
securities for which Options may be or may have been granted under the
Plan, and the Option price related thereto, and for which purchases
may be made or may have been elected to be made, but for which share
certificates have not been delivered, under Article VI, to the end
that the proportionate interests shall be maintained as before the
occurrence of such an event.
Any of the foregoing adjustments may provide for the elimination of
any fractional share which might otherwise become subject to any
Option or purchase right and no adjustment shall be made to the extent
such adjustment would cause the Director to no longer be deemed
"disinterested" for purposes of Rule 16b-3.
5. Sections 5.6(a) and 5.6(c) entitled "Termination and Amendment" shall
be amended to read as follows:
(a) The Board may terminate the Plan, the granting of Options under
the Plan, or purchases under Article VI of the Plan at any time. No
new grants of Options under the Plan or purchases of Common Stock
under Article VI of the Plan shall be made after February 9, 2005.
(c) No amendment, modification or termination of the Plan shall
adversely affect any Option granted under the Plan or purchase rights
under Article VI relating to a Director Fee Payment Date occurring
prior to such amendment, modification or termination without the
consent of the Participant holding the Option or purchase right.
-2-
<PAGE> 3
6. A new Article VI, entitled "Director Stock Purchases" shall be added
to the Plan as set forth below.
VI. DIRECTOR STOCK PURCHASES
6.1 Eligibility. A Director of the Company may elect to purchase
shares of Common Stock under the Plan using all or a portion of his or her
cash fees received for services as a director of the Company for which the
Director has not yet received payment (including but not limited to,
quarterly retainer and Board/Committee meeting fees).
6.2 Elections. Elections to purchase Common Stock under the Plan in
lieu of cash compensation may be submitted to the Company annually, prior
to the end of December of each calendar year or such other period
established by the Committee. An election shall cover director cash
compensation payable in the next calendar year. Notwithstanding the
foregoing, elections to purchase Common Stock under the Plan for the 1999
and 2000 calendar years must be made by March 17, 2000.
6.3 Purchase Price. Common Stock purchased by a Director hereunder
shall have a purchase price equal to 100% of the fair market value of the
Company's Common Stock on the first day of the month in which the quarterly
Director Fee Payment Date falls. For purposes of this Article VI, "Director
Fee Payment Date" shall mean each March 1, June 1, September 1 and December
1. For purposes of the Director Fee Payment Date occurring in December
1999, the Director Fee Payment Date shall be March 1, 2000.
6.4 Termination of Services. If a Director ceases to remain on the
Board for any reason, including but not limited to, voluntary or forced
resignation, removal, failure to be re-elected as a director, death,
Disability or retirement, the Director (or executor, administrator or legal
representative, if applicable) shall receive share certificates for all
cash director fees earned prior to the Director's departure from the Board
for which the Director elected to receive Common Stock pursuant to this
Article VI, but for which the Director has not yet received a share
certificate. Such share certificates shall be issued following the next
quarterly Director Fee Payment Date.
6.5 Non-Assignability. Any Common Stock purchase right granted
hereunder shall be exercised by the Director only and is nontransferable.
Upon the death of a Director, any earned, but unpaid cash director fees for
which the Director elected to receive Common Stock pursuant to this Article
VI, shall be paid in the form of share certificates to the Director's
executor, administrator or legal representative in accordance with Section
6.4 above.
-3-
<PAGE> 4
6.6 Adjustments. The total amount of Common Stock to be received by a
Director at the time of any issuance of a share certificate shall be
appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from stock dividends, stock
splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in the capital structure
of the Company occurring from the Director Fee Payment Date on which such
shares of Common Stock were earned to the date of issuance of the share
certificate for such shares. The foregoing adjustments and the manner of
application of the foregoing provisions shall be determined by the Board in
its sole discretion.
6.7 Rule 16b-3 Requirements. Notwithstanding any provision of the
Plan, the Committee may impose such conditions on the purchase of shares of
Common Stock hereunder as may be required to satisfy the requirements of
Rule 16b-3 of the Exchange Act, as amended from time to time (or any
successor rule). Notwithstanding any provision in the Plan to the contrary,
the Committee shall have no discretion with respect to the terms of
purchase made pursuant to this Article VI, except to the extent such
discretion would not result in the purchase or the Plan failing to qualify
for the exemption provided under Rule 16b-3.
6.8 Delivery of Shares; Rights Prior to Delivery of Shares. By
December 15th of each year, Directors electing to receive Common Stock will
receive share certificates for shares earned during the year. A Director
may request to receive Common Stock at any or each quarterly Director Fee
Payment Date. No Participant shall have any rights as a shareholder with
respect to shares of Common Stock covered by a purchase right until the
issuance of a stock certificate. No adjustment shall be made for dividends
or other rights with respect to such shares for which the record date is
prior to the date the certificate is issued.
6.9 Securities Laws. (a) Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock
pursuant to a purchase right hereunder 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 unless and until it receives satisfactory assurance that the
issuance or transfer of such shares shall not violate any of the provisions
of the Securities Act of 1933 or the Securities Exchange Act of 1934, the
rules and regulations of the Securities Exchange Commission promulgated
thereunder or those of any stock exchange on which the stock may be listed
or the provisions of any state laws governing the sale of securities, or
that there has been compliance with the provisions of such acts, rules,
regulations and laws.
(b) The Committee may impose such restrictions on any shares of Common
Stock acquired pursuant to this Article VI as it may deem advisable,
including, without limitation, restrictions (i) under applicable federal
securities
-4-
<PAGE> 5
laws, (ii) required by The Nasdaq Stock Market, Inc. ("NASDAQ Stock
Market") (including, without limitation, with respect to securities traded
on the NASDAQ Stock Market National Market or the NASDAQ Stock Market Small
Cap Market) or any stock exchange or other recognized trading market upon
which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No
shares shall be issued until counsel for the Company has determined that
the Company has complied with all requirements under appropriate securities
laws.
6.10 Approval. Article VI shall be subject to the approval of the
holders of at least a majority of the shares of Common Stock present and
entitled to vote at a meeting of Stockholders of the Company held before
January 10, 2001. Any election to purchase Common Stock under Article VI
prior to such stockholder approval, shall be conditioned upon receipt of
such approval, and shall not be effective in whole or in part unless this
Article VI has been approved by the stockholders as provided herein. If not
approved by stockholders before January 10, 2001, this Article VI shall be
rescinded, elections to purchase Common Stock under this Article VI shall
be void and the Director shall be paid in cash at the next Director Fee
Payment Date an amount equal to the cash directors fees the Director
elected to use to purchase Common Stock under this Article VI which were
otherwise payable prior to such Director Fee Payment Date.
THIS SECOND AMENDMENT to the Perceptron, Inc. Directors Stock Option Plan,
as amended and restated October 31, 1996, is hereby executed effective as of
December 1, 1999.
PERCEPTRON, INC.
By:/s/ Alfred A. Pease
--------------------------
Alfred A. Pease
Chairman, President and
Chief Executive Officer
-5-
<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> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 5,684,000
<SECURITIES> 0
<RECEIVABLES> 25,884,000
<ALLOWANCES> (276,000)
<INVENTORY> 12,996,000
<CURRENT-ASSETS> 45,323,000
<PP&E> 16,558,000
<DEPRECIATION> (5,766,000)
<TOTAL-ASSETS> 60,075,000
<CURRENT-LIABILITIES> 10,320,000
<BONDS> 1,040,000
0
0
<COMMON> 82,000
<OTHER-SE> 48,633,000
<TOTAL-LIABILITY-AND-EQUITY> 60,075,000
<SALES> 50,725,000
<TOTAL-REVENUES> 50,725,000
<CGS> 22,570,000
<TOTAL-COSTS> 22,570,000
<OTHER-EXPENSES> 24,769,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,000
<INCOME-PRETAX> 3,051,000
<INCOME-TAX> 1,411,000
<INCOME-CONTINUING> 1,640,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,640,000
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
