<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 September 30, 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 November 6, 2000, was:
Common Stock, $0.01 par value 8,173,001
----------------------------- -----------------------
Class Number of shares
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PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
<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 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
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PERCEPTRON, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(In Thousands, Except Per Share Amounts) 2000 1999
-------- --------
<S> <C> <C>
NET SALES $ 8,011 $ 18,471
COST OF SALES 4,494 8,089
-------- --------
GROSS PROFIT 3,517 10,382
-------- --------
OPERATING EXPENSES
Selling, general and administrative 4,761 5,345
Engineering, research and development 3,078 2,987
-------- --------
Total operating expenses 7,839 8,332
-------- --------
OPERATING INCOME (LOSS) (4,322) 2,050
-------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest expense (116) (118)
Interest income 46 36
Foreign currency and other (43) (81)
-------- --------
Total other income and (deductions) (113) (163)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,435) 1,887
INCOME TAX EXPENSE (BENEFIT) (1,722) 759
-------- --------
NET INCOME (LOSS) $ (2,713) $ 1,128
======== ========
EARNINGS (LOSS) PER SHARE
BASIC ($0.33) $0.14
DILUTED ($0.33) $0.14
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 8,173 8,169
DILUTED 8,173 8,181
</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 BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
(In Thousands) 2000 2000
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,441 $ 5,947
Receivables:
Billed receivables, net of allowance for doubtful accounts 19,568 26,507
of $355 and $268, respectively
Unbilled and other receivables 4,574 6,126
Inventories, net of reserves of $1,200 and $1,200, respectively 14,469 12,582
Deferred taxes and other current assets 1,501 1,564
-------- --------
Total current assets 46,553 52,726
-------- --------
PROPERTY AND EQUIPMENT
Building and land 6,035 6,004
Machinery and equipment 9,717 9,598
Furniture and fixtures 1,199 1,195
-------- --------
16,951 16,797
Less - Accumulated depreciation and amortization (6,507) (6,125)
-------- --------
Net property and equipment 10,444 10,672
-------- --------
OTHER ASSETS
Intangible assets, net of accumulated amortization 1,237 1,313
of $758 and $660, respectively
Deferred tax asset 3,198 1,516
-------- --------
Total other assets 4,435 2,829
-------- --------
TOTAL ASSETS $ 61,432 $ 66,227
======== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,595 $ 4,549
Accrued liabilities and expenses 3,821 4,642
Notes payable (Note 3) 5,915 --
Income taxes payable 406 87
Accrued compensation 809 2,785
-------- --------
Total current liabilities 14,546 12,063
-------- --------
LONG-TERM LIABILITIES
Notes payable (Note 3) 1,040 4,595
-------- --------
Total long-term liabilities 1,040 4,595
-------- --------
Total liabilities 15,586 16,658
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock - no par value, authorized 1,000
shares, issued none -- --
Common stock, $0.01 par value, authorized 19,000
shares, issued and outstanding 8,173 and 8,170 at
September 30, 2000 and June 30, 2000, respectively 82 82
Accumulated other comprehensive income (loss) (Note 5) (4,742) (3,723)
Additional paid-in capital 41,019 41,010
Retained earnings 9,487 12,200
-------- --------
Total shareholders' equity 45,846 49,569
-------- --------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $ 61,432 $ 66,227
======== ========
</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>
THREE MONTHS ENDED
SEPTEMBER 30,
(In Thousands) 2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(2,713) $ 1,128
Adjustments to reconcile net income (loss) to net cash provided from
(used for) operating activities:
Depreciation and amortization 526 595
Deferred income taxes (1,540) (83)
Other 55 168
Changes in assets and liabilities, exclusive of changes shown
separately 2,392 (3,218)
------- -------
Net cash used for operating activities (1,280) (1,410)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit borrowings 8,520 7,535
Revolving credit repayments (6,160) (4,460)
Proceeds from stock plans 10 --
------- -------
Net cash provided from financing activities 2,370 3,075
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (190) (317)
------- -------
Net cash used for investing activities (190) (317)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (406) (9)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 494 1,329
CASH AND CASH EQUIVALENTS, JULY 1 5,947 4,205
------- -------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $ 6,441 $ 5,534
======= =======
CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Receivables, net $ 7,789 $(4,003)
Inventories (1,886) (959)
Accounts payable (954) 461
Other current assets and liabilities (2,557) 1,283
------- -------
$ 2,392 $(3,218)
======= =======
</TABLE>
The notes to the consolidated financial statements are an integral part of these
statements.
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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 2000 Annual Report on Form 10-K. Certain reclassifications may
have been made to the prior year's financial statements to conform with the
fiscal year 2001 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>
SEPTEMBER 30, JUNE 30,
2000 2000
---------------- ----------------
<S> <C> <C>
Component Parts $ 7,196 $ 7,214
Work In Process 1,560 1,204
Finished Goods 5,713 4,164
------- -------
Total $14,469 $12,582
======= =======
</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
(9.5% as of November 1, 2000). The credit facilities expire on July 31, 2001,
unless canceled earlier by the Company or the bank. The Company had no
borrowings outstanding under these credit facilities at September 30, 2000.
The Company has a $15 million unsecured Revolving Credit Agreement
(Revolver) that expires on July 31, 2002. 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 (9.5% as of November 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 7.88% as of November 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. 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
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amortization, and taxes ("EBITDA"). Effective September 30, 2000, the Revolver
was amended to revise the EBITDA covenant test for the first quarter of fiscal
2001. The Company and its principal bank have agreed that another amendment
will be required to account for the effect of the first quarter's EBITDA result
on the EBITDA covenant test for the remaining quarters of fiscal 2001.
The Revolver has been classified as current until the amendment is completed.
The Company had $5.9 million outstanding under the Revolver at September 30,
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 September 30, 2000 and 1999, the Company had no forward
contracts outstanding.
In the first quarter of fiscal 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS No. 133 requires recognition of all derivative
financial instruments as either assets or liabilities in the consolidated
balance sheet, measured at fair value and sets forth conditions in which a
derivative instrument may be designated as a hedge. The statement requires that
changes in the fair value of derivatives be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to be recorded to other
comprehensive income or to offset related results on the hedged item in
earnings. Adoption of SFAS No. 133 did not have a material effect on the
Company's consolidated financial statements.
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 SEPTEMBER 30, 2000 1999
--------- ---------
<S> <C> <C>
Net Income (Loss) $(2,713) $ 1,128
Other Comprehensive Income (Loss):
Foreign currency translation adjustments (1,019) 454
------- -------
Total Comprehensive Income (Loss) $(3,732) $ 1,582
======= =======
</TABLE>
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
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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 SEPT. 30, 2000 1999 2000 1999 2000 1999
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ (2,713) $ 1,128 8,173 8,169 $ (.33) $ .14
Effect of Dilutive Securities:
Stock options and warrants - - - 12 - -
----------- ----------- ----------- ----------- ----------- -----------
Diluted EPS $ (2,713) $ 1,128 8,173 8,181 $ (.33) $ .14
=========== =========== =========== =========== =========== ===========
</TABLE>
Options to purchase 1,317,000 and 1,244,000 shares of common stock were
outstanding in the three months ended September 30, 2000 and 1999 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 2000 Annual Report on Form 10-K.
8. SEGMENT INFORMATION
The Company has two reportable segments: Automotive and Industrial Businesses.
The Automotive segment designs, manufactures, and markets information-based
measurement and inspection focused solutions for process improvements within the
automotive industry. The Industrial Businesses segment employs the same
technology providing products and services to the markets served by the Forest
Products business unit and the Emerging Markets business unit. The Company
evaluates performance based on operating income. Company-wide costs are
allocated between the segments based on revenues and/or labor as deemed
appropriate. Segment detail is summarized as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUTOMOTIVE INDUSTRIAL BUSINESSES CONSOLIDATED
------------------------ ---------------- --------------------- ----------------------
<S> <C> <C> <C>
SEPTEMBER 30, 2000
Revenues $ 6,210 $ 1,801 $ 8,011
Operating Income (Loss) (1,945) (2,377) (4,322)
Total Assets 52,858 8,574 61,432
SEPTEMBER 30, 1999
Revenues $ 16,183 $ 2,288 $ 18,471
Operating Income (Loss) 3,517 (1,467) 2,050
Total Assets 60,770 6,828 67,598
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Overview - The Company reported a net loss of $2.7 million, or $0.33 per share,
for the first quarter of fiscal 2001, compared to net income of $1.1 million or
$0.14 per share, in the quarter ended September 30, 1999. Net sales of $8.0
million for the three months ended September 30, 2000, were down $10.5 million,
or 57%, compared to the prior year's sales of $18.5 million. Most of the sales
decrease was attributable to the Automotive segment as explained below.
Automotive sales accounted for 78% of total sales during the first quarter of
fiscal 2001 compared to 88% in the quarter ended September 30, 1999. Industrial
Businesses sales represented 22% of total sales for the quarter ended September
30, 2000, compared to 12% in the same quarter of 1999. Gross profit for the
first quarter of fiscal 2001 was 43.9% compared to 56.2% in the quarter ended
September 30, 1999. The reduction in the gross profit percentage primarily
reflected unfavorable fixed overhead absorption due to the low sales level in
fiscal 2001 and to a lesser extent foreign currency effects from the weak euro.
Operating expenses were down $493,000 in the first quarter of fiscal 2001
compared to the quarter ended September 30, 1999, primarily as a result of lower
personnel related expenses.
Automotive - Sales in the first quarter of fiscal 2001 decreased $10.0 million
to $6.2 million compared to $16.2 million for the quarter ended September 30,
1999. The sales decline in the first quarter of fiscal 2001 was primarily the
result of the following factors; i) fewer domestic new tooling programs this
year compared to last year at this time, ii) temporary delays in shipments
caused by shortages in electronic parts, and iii) delays in committed orders not
yet released by the European customer's assembly line builders. P-1000 sales
accounted for approximately 23% of net automotive sales in the first quarter of
fiscal 2001 compared to approximately 48% in the same period a year ago. The
percentage sales decrease reflected customers' migration to the Company's web
based IPNet(TM) product. Sales of the Company's IPNet(TM) product totaled
approximately 32% of net automotive sales in the first quarter of fiscal 2001
compared to 27% in the first quarter of fiscal 2000. RGS and NCA systems sales
accounted for 21% of net sales in the quarter ended September 30, 2000, compared
to 17% one year ago. 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 quarter of
fiscal 2001 were $1.8 million, of which $1.7 million was delivered by the Forest
Products business unit. Sales were down $500,000 from the same period last year
primarily due to the postponement of capital spending by some forest products
customers that were affected by the continued decline in the price of softwood.
Bookings & Backlog - New order bookings for the three months ended September 30,
2000, were $10.0 million compared to $17.0 million in 1999. Automotive bookings
totaled $6.9 million in the fiscal 2001 quarter compared to $14.6 million a year
ago. During the quarter ended September 30, 2000, automotive bookings primarily
represented 36% P-1000, 22% RGS and NCA and 22% IPNet(TM). Automotive bookings
for the comparable 1999 period primarily represented 62% P-1000 and 17% RGS and
NCA and 15% IPNet(TM). Industrial Businesses bookings were $3.1 million in the
quarter ended September 30, 2000, compared to $2.4 million a year ago, of which
Forest Product bookings represented 100%. Backlog at September 30, 2000, was
$25.1 million compared to $26.4 million at September 30, 1999. The Company
expects to be able to fill substantially all of the orders in backlog during the
following twelve 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.
9
<PAGE> 10
Selling, General and Administrative (SG&A) Expenses - SG&A expenses decreased
$584,000 to $4.8 million in the quarter ended September 30, 2000, from $5.3
million in the comparable 1999 quarter. The decrease was primarily due to
reductions in personnel related costs.
Engineering, Research and Development (R&D) Expenses - Engineering and R&D
expenses increased slightly from $3.0 million in the quarter ended September 30,
1999, to $3.1 million in the first quarter of fiscal 2001. The increase in
expenses reflected continued investments the Company made in new product
development including increases in labor, contract design services and
engineering supplies.
Outlook - Based on customer shipment schedules, the Company expects reasonably
strong sales in subsequent quarters of fiscal 2001, with sales approaching
levels achieved in fiscal 2000. Total new orders for the second quarter of
fiscal 2001 are expected to be $20.0 million based on new orders booked in
October and the Company's expectations related to orders being actively pursued.
The outlook for new orders for the second half of fiscal 2001 is also good;
however, if lumber prices do not improve, Forest Products customers could
continue to postpone capital spending plans. The foregoing statements are
"forward looking statements" 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 statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $6.4 million at September 30, 2000,
compared to $5.9 million at June 30, 2000. The increase of $500,000 in cash for
the quarter resulted from $2.4 million of cash provided from financing
activities mitigating $1.3 million of cash used in operations; and $190,000 used
for capital spending. The foreign currency effects of the euro reduced cash
$406,000 for the quarter.
The use of cash for operations reflected the loss for the period adjusted for
non-cash items, reduced by decreased working capital requirements of $2.4
million. Receivables, net of foreign translation adjustments, decreased $7.8
million primarily as a result of cash collections exceeding the low level of
sales during the quarter. Offsetting the decrease in receivables was an increase
of $1.9 million in inventory primarily related to delays in planned shipments
caused by shortages in electronic parts and for support of near-term delivery
requirements, a decrease of $2.6 million in other current assets and liabilities
that primarily reflected payments for incentive compensation and liabilities
accrued at June 30, 2000 and a decrease of $954,000 in accounts payable.
Financing activities during the quarter reflected net working capital borrowings
of $2.4 million. The Company has a $15 million unsecured Revolving Credit
Agreement (Revolver) that expires on July 31, 2002. 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 ("EBITDA"). Effective September 30, 2000, the Revolver was amended to
revise the EBITDA covenant test for the first quarter of fiscal 2001. The
Company and its principal bank have agreed that another amendment will be
required to account for the effect of the first quarter's EBITDA result on the
EBITDA covenant test for the remaining quarters of fiscal 2001. This amendment
is expected to be completed during the second quarter of fiscal 2001. The
Revolver has been classified as current until the amendment is completed. The
Company had $5.9 million outstanding under the Revolver at September 30, 2000.
The foregoing statements are "forward looking statements" within the meaning of
the Securities Exchange Act of 1934, as amended. See Item 2
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"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 statements.
The Company believes that available cash on hand and existing credit facilities
will be sufficient to fund its currently anticipated fiscal 2001 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 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.
MARKET RISK INFORMATION
Perceptron's primary market risks are related to foreign exchange rates and
interest rate risk in connection with its borrowings. The foreign exchange 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. At September 30, 2000, the Company did not have any market risk
instruments for trading purposes.
FOREIGN CURRENCY RISK
The Company has foreign currency exchange risk in its international operations
arising from the time period between sales commitment and delivery for contracts
in non-U.S. currencies. 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. At September 30, 2000, the
Company's percentage of sales commitments in non-U.S. currencies was 26.7% or
$6.7 million. 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 September 30, 2000, the Company had no forward contracts
outstanding.
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<PAGE> 12
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.
NEW ACCOUNTING PRONOUNCEMENTS
In the first quarter of fiscal 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS No. 133 requires recognition of all derivative
financial instruments as either assets or liabilities in the consolidated
balance sheet, measured at fair value and sets forth conditions in which a
derivative instrument may be designated as a hedge. The statement requires that
changes in the fair value of derivatives be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to be recorded to other
comprehensive income or to offset related results on the hedged item in
earnings. Adoption of SFAS No. 133 did not have a material effect on the
Company's consolidated financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views on applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company is required to adopt SAB 101 by the fourth quarter of fiscal 2001
(retroactive to July 1, 2000) and is currently reviewing interpretive guidance
issued recently by the SEC to complete its assessment of the impact that SAB 101
may have on the Company's financial statements.
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 2001 and future revenue, order booking levels and
earnings levels, the timing of new product releases, the expansion of the
Company into new markets, and the execution of an amendment to the Company's
revolving credit agreement. 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 ability of the Company to attract and retain key personnel, especially
technical personnel, 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, a determination by the Company's bank
not to execute the expected amendment to its revolving credit agreement as a
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result of changes in economic conditions, the Company's financial position or
other concerns 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. The Company's expectations regarding second
quarter bookings are based upon oral discussions with customers and are subject
to change based upon a wide variety of factors, including economic conditions
and system implementation delays. Certain of these new orders have been delayed
in the past and could be delayed in the future. Because the Company's products
are typically integrated into larger systems or lines, the timing of new orders
are dependent on the timing of completion of the overall system or line. In
addition, because the Company's products have shorter lead times than other
components and are required later in the process, orders for the Company's
products tend to be given later in the integration process.
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".
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.7 Third Amendment to Credit Agreement, dated
May 28, 1999, between Perceptron, Inc. and
Bank One, Michigan dated November 9, 2000.
27. Financial Data Schedule.
(B) Reports on Form 8-K:
The Company's current report on Form 8-K, dated July
25, 2000, which disclosed information under Item 5
concerning the Company's selection of Monday,
December 4, 2000, as the date for the Annual Meeting
of Shareholders.
The Company's current report on Form 8-K, dated
October 10, 2000, which disclosed information under
Item 5 concerning the Company's expected sales level
for the quarter ended September 30, 2000 and the
factors contributing to that sales level.
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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: November 09, 2000 By: /S/ Alfred A. Pease
------------------------------------------
Alfred A. Pease
President and Chief Executive Officer
Date: November 09, 2000 By: /S/ John J. Garber
------------------------------------------
John J. Garber
Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: November 09, 2000 By: /S/ Sylvia M. Smith
------------------------------------------
Sylvia M. Smith
Controller and Chief Accounting Officer
(Principal Accounting Officer)
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Exhibit Index
-------------
Exhibit No. Description
----------- -----------
4.7 Third Amendment to Credit Agreement, dated May 28, 1999,
between Perceptron, Inc. and Bank One, Michigan dated
November 9, 2000.
27. Financial Data Schedule.
